What You Need To Know For May 1st

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Welcome back!

The Stock market has been holding onto recent highs as the prospect of newly announced trade deals feel on the horizon - as well as due to strong earnings from titans such as Microsoft and Meta.

We still have our worries (especially with a negative GDP print from before liberation day even happened) but let’s get right into this strong earnings season below:

Earnings Corner 📜 

Trending Up 📈 

Meta Platforms (META): Meta posted a strong 1Q beat, with revenue of $42.3B (+16% y/y) vs. $41.1B expected and EPS of $6.43 (+37% y/y) ahead of consensus of $6.19. Ad impressions rose 5% while average ad prices increased 10%, driving a 16% increase in advertising revenue to $41.4B. Operating income grew 27% y/y to $17.6B, with margins expanding to 41% vs. 38% y/y. The Family of Apps segment carried the quarter with $21.8B in operating income. In contrast, Reality Labs widened its operating loss to $4.2B. Meta returned $14.7B to shareholders via repurchases and dividends. Management raised full-year capex guidance to $64–72B from $60–65B to support AI infrastructure. Shares rose 5.3% after hours.

Microsoft (MSFT): Microsoft beat across the board with 1Q revenue +13% y/y and EPS of $3.46 vs. $2.83 expected. Microsoft Cloud revenue rose 20% y/y to $42.4B, led by Azure +33% y/y, which continues to benefit from corporate AI adoption. Intelligent Cloud revenue was up 21%, while Productivity & Business Processes rose 10% on Microsoft 365 and Dynamics strength. More Personal Computing grew by 6% as Xbox and Search rebounded. The company also returned $9.7B to shareholders during the quarter. Shares are up 6.9% after hours.

American Tower (AMT): Revenue up 2% y/y was a slight beat, but impacted by slower new tower growth, while AFFO rose 6.6% when adjusted for divestitures, and the company raised its full-year outlook. Shares closed up 1.84% on Wednesday.

Booking Holdings (BKNG): Booking beat on revenue and EPS, with room nights and gross bookings both up 7% y/y. Despite the macro environment, revenue is expected to increase 10%-12% next quarter, with mid-to-high-single-digit revenue growth in FY25. Shares were up 7.8% on Wednesday.

Caterpillar (CAT): Caterpillar missed with Q1 revenue down 10% y/y to $14.2B and EPS falling to $4.25 from $5.60 y/y. Margins compressed over 400bps and the Company expects $250-$350mm in short-term tariff related costs this quarter. Shares were up slightly despite the warnings.

Coca-Cola (KO): Coca-Cola sales and EPS beat slightly. However, FY EPS growth guidance was trimmed to 7%–9% from 8%–10% due to the macro environment. Shares were up slightly yesterday.

Mondelez (MDLZ): Mondelez held guidance and posted solid pricing gains, but EPS declined on cocoa inflation and FX headwinds. Shares were +3.8% on Wednesday.

Pfizer (PFE): Pfizer EPS beat ($0.92 vs. expectations of $0.66), but revenue missed and fell 8% y/y on a steep Paxlovid decline. The company noted that they are still on track to meet full-year targets, but are expanding their cost cutting efforts. Shares were +6% since earnings.

Robinhood (HOOD): Robinhood had a nice beat due to a rise in trading volumes due to the market volatility. The Company also expanded its share buyback program by $500mm. Shares were up slightly after hours.

Spotify (SPOT): Spotify beat on EPS and margin, with revenue up 15% y/y to €4.19B. Premium revenue grew 16% on 12% subscriber growth, while ad-supported revenue rose 8% y/y but fell 22% q/q on seasonality. Free cash flow hit €534M. Shares rose 6.4%.

Visa (V): Visa beat with EPS of $2.76 as revenue grew 9% on strong cross-border volume. The board authorized a new $30B buyback. Shares were +1.2% on Wednesday.

Yum! Brands (YUM): Revenue up 12% y/y was a slight miss, but EPS of $1.30 slightly beat. Same-store sales were up 3%, with Taco Bell comps up 9%, but Pizza Hut same-store sales down -3% y/y. Shares were up 1.9%.

Trending Down 📉 

Starbucks (SBUX): The coffee giant missed expectations, with Revenue of $8.76B (+2% y/y) slightly below expectations, with comparable store sales down 1% (down 2% in the U.S.) and transactions down 2% (down 4% in the U.S.). EPS of $0.41 missed ($0.49 expected and vs. $0.68 y/y). Operating margins contracting 590bps from 12.8% to 6.9% due to turn-around plan spend that includes staffing locations with more baristas. The Company is expected to deal with coffee bean tariff headwinds, as 10-15% of their product & distribution costs come from unroasted beans. Starbucks was down -5.6% on Wednesday.

Snapchat (SNAP): Snapchat results were a slight beat, but mgmt. called out preliminary 2Q advertising headwinds and pulled 2Q guidance. Shares were -12.4% on Wednesday.

UPS (UPS): Results beat - with Revenue of $21.5B, beating estimates of $21B and EPS of $1.49 vs. $1.43 y/y and vs. est. of $1.38, while . However, full-year guidance was removed due to economic uncertainty and the tariffs. Shares were –1.5% on Wednesday.

Qualcomm (QCOM): Revenue and EPS beat, but the chipmaker’s light guidance concerned the street. Qualcomm is currently exempt from tariffs, but their ~46% revenue from China adds a geopolitical risk element here. Shares are down -5.6% after hours

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Today’s Headlines 🍿 

• U.S. economic data came in weaker than expected. Inflation-adjusted GDP fell by 0.3% y/y. Meanwhile, the ADP employment report showed private payrolls increased by just 62k in April - well below the expected 115k. In response, former President Trump criticized President Biden, blaming him for the decline in Q1 GDP and predicting he would also be responsible for a potential Q2 downturn

• Scott Bessent says the “onus is on China” to do a deal. The Treasury Secretary told reporters that China could lose 10 million jobs “very quickly” with current tariffs, and even if Trump scales back the levies, 5 million layoffs would still be a real possibility

• Elon moves on from DOGE - but Tesla might want to move on from him. The SpaceX and Tesla chief, is moving towards spending just 1-2 days a week on his efficiency agenda. Musk claimed the agency has so far saved $160B, far lower than the “at least $2 Trillion” projections from last year

  • However, the WSJ broke last night that Tesla’s board opened a CEO search to potentially replace Elon around a month ago. This is a developing story and it’s unclear if Elon was aware of this succession planning

• Amazon’s tariff spat: The e-commerce behemoth was allegedly going to add a tariff line item to show consumers how much tariffs are adding to costs. The company quickly denied they had plans to do this. Before executives released a statement, the White House called this move political, with Trump personally complaining to Jeff Bezos

• Inside why Margin Call stands the test of time: Semafor sat down with Margin Call’s writer and director on why everyone turns to this movie during a market downturn

• A warning from Airbus. The CEO of the world’s biggest plane maker said there will be “only losers” in aerospace in a trade war, especially in the US. American aerospace executives have been lobbying to bring back a 1979 agreement that, until Trump launched his tariffs, allowed for tariff-free trading of aircraft and parts

• A mysterious outage in Portugal and Spain. One of Europe’s most severe blackouts grounded flights, paralyzed transit, disrupted mobile communications, and shut down ATMs overnight on Tuesday — in Spain, authorities have yet to explain how 60% of the country’s power disappeared in five seconds

• Ukraine is reportedly ready to sign a resources deal with the U.S. A draft agreement would set up a joint fund to manage investment in Ukraine. The Ukrainian Economy Minister is heading to D.C. for the signing

• UPS is cutting 4% of its workforce. The package giant announced that it is cutting 20k jobs, not because of tariffs, but because of reduced business with Amazon

• Eli Manning is back to save the Giants. The former New York quarterback is putting together an investment group to bid for a minority share in the NFL team. Back in February, a pair of Giants owners retained Moelis to explore a sale of their stake

• The Trump Administration has cut 20k clean energy jobs. A new report revealed that the White House has canceled, delayed, or threatened almost 100 projects in the space and put $70B in investment at risk. 40k more manufacturing jobs are also under threat due to the policy shift against renewables

• Duolingo is doubling down on AI. The language-learning app announced that it is launching 148 new courses (2x its current catalog) with the help of generative AI. The Company will also “gradually stop using contractors to do work that AI can handle”

• Ares is reportedly leading a $5.5B financing package for Clearlake Capital’s LBO of Dun & Bradstreet. The $5B unitranche debt is being discussed at S+525-550 @ 99. While this is a big coup for private credit, there was reportedly limited interest from the broadly syndicated loan market due to prior Clearlake LMEs

• The latest Private Credit restructuring: A group of lenders to International Data Group, including GSAM, Oak Hill, and Blackstone, will convert some of their debt into equity and PIK debt

• Silver Lake and P2 Capital are exploring a >$5B sale of Blackhawk Network, a prepaid gift card provider that they took private for $3.5B in 2018

• Acrisure’s new potential owner. The PE firm’s special-situations arm is in talks to invest as much as $2B of preferred equity in Acrisure, an insurance broker. This would take some money off the table for BDT & MSD Partners, who are part of the group that wrote a $3B preferred equity check in 2021

• Shein explores cost-cutting: The ultimate fast-fashion house is reportedly considering a reorganization of its US business (which accounts for 1/3 of its $38B in annual revenue) out of concerns over tariffs on Chinese imports

• Him and Hers pops. Novo Nordisk announced that it will distribute its Ozempic-rival Wegovy via telehealth providers like Hims, Ro, and LifeMD. Hims shares are up 17% from when the news broke

• Deloitte is moving to Hudson Yards. The consulting firm is relocating its North American headquarters to an 80k square foot space in Hudson Yards.

M&A Transactions💭 

Rover, a Blackstone portfolio company, is acquiring Gudog, a Dublin-based pet-care marketplace as the Company pushes into Europe.

Mandalay Resources (TSE: MND), a gold and antimony producer, has reached a definitive agreement to be acquired for $349.86M by Alkane Resources (ASX: ALK). EV/EBITDA was 3.29x and EV/Revenue was 1.45x. Haywood Securities and GenCap Mining Advisory advised on the sale.

The Signature Management & Power Business Unit of Ultra Electronics (GREY: UEHPF) was acquired for $550.0M by ESCO Technologies (NYS: ESE). Lazard advised on the sale.

Straits Apex, a subsidiary of Apex Healthcare and a provider of consumer wellness services, was acquired for $240.0M by Quadria Capital.

SpringWorks Therapeutics (NAS: SWTX), a clinical-stage biopharmaceutical company, has reached a definitive agreement to be acquired for $3.9B by Merck (ETR: MRK). EV/Revenue was 20.36x. Centerview Partners, J.P. Morgan, and Goldman Sachs advised on the sale.

ProFrac GDM, provider of hydraulic fracturing, was acquired for $105.0M by Flotek Industries (NYS: FTK). Lazard Australia and Piper Sandler advised on the sale.

The Water Filter Business of LG Chem entered into a definitive agreement to be acquired for $689.77M by Glenwood Private Equity.

CitizenM, owner and operator of a chain or hotels, has reached a definitive agreement to be acquired for $465.0M by Marriott International (NAS: MAR). Eastdil Secured and Morgan Stanley advised on the sale.

Bolt Medical, developer of laser-based intravascular lithotripsy, was acquired for $664.0M by Boston Scientific (NYS: BSX). Centerview Partners advised on the sale.

TerraSource Global, manufacturer of material processing and handling equipment, has reached a definitive agreement to be acquired for $245.0M by Astec Industries (NAS: ASTE). EV/Revenue was 1.63x.

Preedlife, provider of funeral and wedding services, has reached a definitive agreement to be acquired for $609.43M by Woongjing (KRX: 016880). EV/Net Income was 11.0x.

Liberty TripAvisor (PINX: LTRPA), provides online travel site services, was acquired by TripAdvisor (NAS: TRIP) for $430.0M. EV/Revenue was 0.23x. Centerview Partners and Citigroup advised on the sale.

Beacon Roofing Supply, manufactures and sells roofing and building materials, was officially acquired for $11.0B by QXO (NYS: QXO). EV/EBITDA was 13.63x and EV/Revenue was 1.13x. J.P. Morgan, Lazard, and Innisfree advised on the sale.

Regulus Therapeutics (NAS: RGLS), a biotechnology company, has reached a definitive agreement to be acquired for $1.7B by Novartis (SWX: NOVN). EV/Cash Flow was 115.17x.

Micromine, developer of modular data management, was acquired for $694.16M by The Weir Group (LON: WEIR).

DB Schenker, provider of freight management and contract logistics services, was acquired for $15.91B by DSV (CSE: DSV). Morgan Stanley and Goldman Sachs advised on the sale.

DartPoints, operator of a network of data centers, was acquired for $250.0M by NOVA Infrastructure and Orion Infrastructure Capital. Bank Street Group and Houlihan Lokey advised on the sale.

Private Placement Transactions💭 

Thunes, developer of a cross-border payment network, raised $150.0M of Series D venture funding from Visa, EDBI, and Apis Partners.

Loas, developer of an AI-based inspection system, raised $4.0B of Seed Funding from IBK Venture Investment, MobyDick Ventures, and Shinbo.

Display., developer of a social platform, raised $350.0M of venture funding from undisclosed investors.

BigHat Biosciences, developer of an antibodies experimental platform, raised $124.11M of Series B venture funding led by S32 at a pre-money valuation of $180.0M.

Northern Re, provider of data-driven portfolios of property and casualty risk, raised $150.0M of venture funding from undisclosed investors.

Apex, developer of standardized satellite buses, raised $200.0M of Series C venture funding led by Point72 Ventures and 8VC.

True Anomaly, operator of a fully integrated technology platform, raised $260.0M of Series C venture funding through a combination of equity and debt. The equity portion was an undisclosed amount led by Accel. The debt portion was provided by Stifel Bank & Trust.

Preferred Networks, developer of a decision intelligence platform, raised JPY 24.0B of venture funding through a combination of debt and equity led by SBI Holdings.

CAST AI, developer of a cloud management platform, raised $108.0M of Series C venture funding led by SoftBank Investment Advisers and G2 Venture Partners at a pre-money valuation of $792.0M.

Odds of the Day 🍒 

Recession Odds have spiked

Kalshi traders are pricing in a 69% chance of a recession

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Noteworthy Chart 🧭

Meme Cleanser 😆 

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