July special edition 

Earnings season reactions:

As current and future earning seasons dawn on us, I make sure to catch up on my stocks and listen to earning reports on key investments for my portfolio. Most investors don’t have the time to listen to every earnings report. That’s why buying high-quality assets with high-moat businesses is key for investors. Thus, you won’t need to be worried when earnings are released, as you know that even if they fall short, you own a high-quality business that produces great results.

Below, I will list some of my favorite stocks that I own, and talk about their earnings so far. I will preface by stating I do own most of these stocks, so I may be bullish or exact forward-looking guidance that may not be fully accurate to what actually occurs. **

American Express Company (AXP): AMEX reported its Q2 earnings on July 21st, 2023. While the company had a mixed bag of earnings, it achieved record revenue. AMEX reported an EPS of $2.57 and revenue of 15.05Bn, slightly missing the estimated 15.48Bn. However, international card services revenue grew impressively at 14% YoY, indicating strong growth in recovering international markets. US consumer services and commercial services grew at 17% and 7%, respectively, while card member spending increased by 8%. Although AMEX missed revenue expectations, they maintained guidance of 15-17% revenue growth for the rest of 2023, which is reassuring. Furthermore, they expect total 2023 revenue expected of 61.57Bn. They also expect 2023 tmm EPS of $11.00-$11.40. However, during the earnings call, AMEX announced they had 1.2Bn in provisional credit card losses. Compared to 410M a year ago. Showing higher net write-offs and consumers defaulting on their credit cards. This is surprising as AMEX targets the top 10% of Americans. Definitely, something to keep an eye on. I have a price target of $205 for the firm and will consider acquiring more shares if they fall below $165.

Bank of New York Mellon Co (BK): While I don't currently own BK, I've been eyeing the firm. On the 15th of July 2023, they reported Q2 2023 earnings. They reported one of their strongest quarters ever, passing the Fed's stress test and increasing dividends by 14%. Revenue came in at 4.5Bn, beating estimates by 2%, and they crushed EPS with $1.38 compared to the expected $1.22, a pleasant surprise of 13.3%. Their revenue streams, including securities services, market and wealth services, and investment & wealth management, performed well, with some segments seeing double-digit growth. Considering their steady growth and diverse revenue streams, I believe BK has a bright future. I have a price target of $51.64, with a max buy of $41, indicating a potential upside of 20%.

International Business Machines (IBM): IBM reported Q2 earnings on July 18th, 2023. Although they fell short on revenue, reporting 15.48Bn against the expected 15.58Bn, they beat on EPS with $2.18 compared to the estimated $2.01, a positive surprise of 8%. IBM's growth segments, including AI, cloud, security, and automation, performed well, except for security, which saw a decline of -1%. Overall, I'm content with IBM's Q2 earnings as they're executing their plans and showing slow but positive growth. IBM’s forward-looking guidance is 3-5% growth for the rest of 2023. Growing free cash flow (FCF) to 10.5Bn (up 1Bn YoY). IBM currently sits on 16.5Bn in cash, and 50Bn in debt. Debt grew at 6% this quarter, as their recent acquisition of Apptio. I expect IBM to reach 65Bn in revenue by 2024 and 70Bn by 2030. I have a target price of $152. I typically acquire shares anytime it dips below $130.

Lam Research Corporation (LRCX): Lam Research Corporation (LRCX): Lam Research reported earnings on July 27th, 2023, delivering a strong EPS of $5.98, surpassing estimates by 18%. Revenue reached 3.21Bn, exceeding the estimated 3.12Bn. However, earnings and revenue saw a decrease YoY due to a down cycle in the semiconductor industry. Despite this, Lam Research remains strong, given its significance in the semiconductor market and its impressive client base, including major players like Intel, Samsung, Micron, and TSM. As a cyclical business, Lam relies on the growth of other semiconductor firms. I'm particularly bullish on LRCX, with a value of $808 and a max buy price of $640. I target this stock for purchase whenever it falls under $600.

Stock I’m watching:

• CHDN

• CP

• SPGI

NEW Question of the edition: 

What is the PE ratio and EPS for a new investor?

This a great question, so let’s break it down into easier-to-understand chunks.

PE Ratio (Price-to-Earnings Ratio): The PE ratio is a valuation metric that compares a company's stock price to its earnings per share (EPS). It helps investors gauge whether a stock is overvalued or undervalued. A higher PE ratio suggests the stock may be relatively expensive, while a lower PE ratio may indicate it is undervalued.

EPS (Earnings Per Share): EPS is a financial metric that shows a company's net profit divided by its outstanding shares. It reveals how much profit is generated for each share of stock. Higher EPS values generally indicate better earnings performance.

PE Ratio = Current Stock Price / Earnings Per Share (EPS)

Both the PE ratio and EPS are important for assessing potential investments, but it's crucial to consider other factors and do thorough research before making investment decisions. I typically try to target low PE companies, as it’s an indicator of a value that can be targeted for higher returns. I typically avoid stocks over a 25 PE, unless they provide a high moat business and have little to no competition.

Have a question or comment? Email me:

[email protected]

//See you in the next edition

EBS Invests 2023//

NOT A FINANCIAL ADVISOR.

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