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Economic Advice From A Caterpillar, McDonald’s Golden Earnings

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Yo dawg heard you like Cat Caterpillar stock meme

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Yo dawg heard you like the same Cat Caterpillar stock

CAT came out of the bag

Why do I have to hunt CAT?

And how the hell does this cat always manage to land on its paws? Something to do with those nine lives, I imagine. In any event…

All the market atomic dogs chasing Big Tech stocks this week would probably want to stick with chasing Caterpillar (NYSE: CAT) In place.

What I would miss, keeping Greatness meme flowing

Last quarter, the heavy-equipment maker shrugged off supply chain issues… took rising raw material costs in stride… and spat in the face of all this economic uncertainty everyone blames. Patouey!

Caterpillar raised prices for its recognizable bright yellow machines, and equipment sales still took off like a bang. Revenue rose from $12.4 billion to $15 billion, beating analysts’ expectations of $14.4 billion in sales.

Earnings were no slouch either: earnings per share totaled $3.95 per share, comfortably beating the consensus of $3.16.

As Caterpillar notes:

The increase in sales volume is explained by the impact of changes in dealer inventories, the increase in equipment sales to end users and the increase in services.

Let’s talk about those end users, shall we?

Caterpillar Dealers — my mother warned me about them – stock up on “dozers and diggers by the dozen”. These machines will work in all industries, from construction to mining to petroleum.

You have a cat at your job Caterpillar meme

In other words: if industrial companies expect more work…they will need more machines…from Caterpillar dealers, in particular. There’s a reason the CAT stock is often thought of as an economic indicator – a gauge of industrial health on a national scale.

So while virtually every other economic indicator is flashing red and sounding the alarm…industrial customers and investors are still chasing the CAT. Do whatever you want with it.

CAT stock jumped 10% on the news in its biggest post-earnings rally in decades.

Of course, Caterpillar was far from the only stock report today…we have literally hundreds and hundreds of companies on the ledger today.

Oh shit, hundreds? I better go grab a snack.

We’re not going to dive into every report today, but you might still want to grab a snack as we unpack the earnings action.

What can I say ? It’s the most wonderful time of the year – er, earnings season.

Don’t start singing yet, Great stuff. Let me have Halloween first.

Now let’s see what else CAT has brought… after a little word from our sponsors, of course.

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Thursday's releases

Best Western Digital

Western Digital redundant backup Vader disturbing meme

Seagate (Nasdaq: STX) earnings warning in August was the tick-tic-tic start of destruction for hard drive manufacturers… and Western Digital (Nasdaq: WDC) report shouted in the revenue confessional as a way out of hell.

I can hear it already now… the dreadful sound of data loss. Oh, and investors are crying.

It’s true: Western Digital’s revenue fell 26% last quarter to $3.74 billion, but it still beat analysts’ target of $3.59 billion. Have you ever seen deja vu?

Western Digital hasn’t been so lucky on the earnings front: Earnings per share fell from $2.49 last year to $0.20, far missing estimates of $0.38.

But could things get worse? Why, yes, of course they can: Western Digital expects earnings and revenue to decline this quarter…and you think the company’s guidance is well below Wall Street’s own expectations.

So what about Western Digital’s endless pessimism today? Which give?

The company specifically pointed to a “consumer-induced downturn” for the decline in hard drive sales.

Additionally, Seagate had reported a drop in purchases by commercial cloud operators, which doesn’t bode well for Western Digital either…After all, that “cloud” you upload your junk to is just the someone else’s hard drive.

WDC shares fell 2% on the news.

Let me get Uhhhhhhhh

McDonald's action against McDonald's carries the meme

Double beat report? With cheese? And the fries?

Probably a McFlurry too if the ice cream maker isn’t broken…

For what it’s worth, more than a few McDonald’s (NYSE: MCD) customers must have had better luck than yours getting their Macca sundae this quarter. (Damn you, Ronald, and your creepy clown smile.)

Golden Arches posted a 9.5% rise in global sales, well above the 5.8% growth analysts expected. Total revenue reached $5.87 billion and far exceeded expectations of $5.7 billion.

Dang, that’s a lot of McNuggets. Hope they didn’t forget the sauce this time…

The secret sauce? “Strategic menu price increases” that boosted sales numbers and helped McDonald’s stay competitive in the quarter. (Like that…wasn’t going to stay competitive? Come on, it’s McDonald’s.)

Earnings were $2.68 per share, beating estimates of $2.58 per share. And that’s probably the last time we’ll call anything McDonald’s “healthy.”

Wall Street was prepared to ignore the fact that profits and revenue are down year over year, instead sending MCD shares up 3% today. But that’s lucky, given how Mr. Market has treated other stocks that have signaled their own beats…

Sleep is a numbers game

Sleep Number Limmy Investors Wake Up Meme

And sleep number (Nasdaq: SNBR) investors are unlikely to get any winks tonight after the company’s nightmarish report.

The mattress maker just showed that, yes, you can beat expectations on all fronts… but that doesn’t mean Wall Street has to As this.

Earnings came in at $0.22 per share, well ahead of the consensus estimate of $0.06 per share. Still, compared to the $2.22 per share that Sleep Number earned this time last year, that pace doesn’t look all that impressive.

Things get even worse when you look at revenue, which fell from $640.4 million last year to $540.6 million last quarter. Wall Street low-ballers were only expecting $529.3 million…but if the market were to send SNBR shares down 25% on those numbers…maybe they should have expected a little more Sleep Number, that’s all I’m saying.

So you have a double beat report? That doesn’t impress me much…

Lots of Shania Twain in these pages lately. You’re right, great stuff?

Oh, I’m fine… but SNBR investors? Well, I guess they probably weren’t expecting the ugly return of everyone’s favorite income excuse from last year. It’s true: the flea shortage is alive and well! And it rips Sleep Number’s high income and pillow comparisons.

As for why a mattress maker would ever need chips to make their mattresses, well, that’s what you get for building “smart beds.” Aren’t they so smart now, huh?

Let me play you the smallest virtual violin in the world

stop spending on the metaverse no don't think i will meme

And now, our niche of shame…

You knew this was coming. Everybody knew it was coming. (Especially if you read your great stuff this week. Of course, you.)

Meta’s (Nasdaq: META) revenue is on the books, and oh, what revenue that revenue was… Let’s take a look at destruction by the numbers, shall we?

Thanks to deteriorating ad spend, revenue fell for the second straight quarter — down 4% to $27.7 billion, but still below estimates of $27.4 billion. Earnings per share totaled $1.64, missing estimates for $1.87.

Digging deeper, we can see that parent company Facebook’s profits fell 52%, thanks to higher headcount spending and mounting losses in virtual/augmented/meta-biz reality.

You know…the metaverse projects that Zuckerberg and co. already spent $9.8 billion this year? Metaverse projects that Meta didn’t even update investors on, instead “silence” active user account for Horizon Worlds?

Though institutional investors have begged Meta to spend less on the metaverse, cut headcount spending, and focus on its struggling social media platforms… Zuckerberg continues to steamroll into the big meta beyond .

Advice for the next quarter? More of the same.

Pssh, do you think Zuckerberg would admit defeat in the Metaverse as long as Meta is still solvent? After literally renaming the company after his metaverse fantasies? Oh, Zuck can’t do that. Nooooo. Can’t do.

And then came the downgrades.

Morgan Stanley analyst Brian Nowak downgraded META stock, reducing its price target from $205 to $105, all because of Zuck’s unsustainable spending spree.

John Blackledge at Cowen also downgraded the stock, lowering his price target from $205 to $135…slightly more bullish than Morgan Stanley.

(Side note: “John Blackledge” totally sounds like a spy’s name, and nothing can convince me otherwise. It’s awesome. Blackledge, John Blackledge… with a license to downgrade.)

Either way… META stock crashed 24% on the news, bringing stocks back to 2016 levels. Phew.

Have you been listening to Big Tech reports this week, Great? Did you expect Meta to sell as much as it did? What income are you most looking forward to?

Write to us whenever the face of the market calls you! GreatStuffToday@BanyanHill.com is the best place to reach us.

In the meantime, here’s where you can find our other trash – uh, I mean where you can find some more Size:

Until next time, stay Great!

The Great Stuff Team

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