CCO’s Q2 results were mixed – revenue was relatively in-line with stronger than expected Americas offsetting weaker Europe & Other. EBITDA was slightly better than our Street low estimate but missed the Street by $56MM. The release notes there is sequential improvement thus far in Q3 (as the market expects), with Europe coming back more than Americas thus far. We expect the stock to mostly react regarding any more detailed forward-looking guidance provided on the call – particularly if quantified.
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Shares of FOUR outperformed following its first earnings as a public company yesterday (up ~11% vs. the S&P up ~1%), highlighted by net revenue and adj. EBITDA coming in well-ahead of consensus and 2H20 adj. EBITDA guidance ~$10mm above Street estimates. We came away incrementally constructive on the resiliency of FOUR’s offerings, particularly as end-to-end volume declined 23% for the quarter versus restaurant and hospitality industry average volumes down 60+%. We also highlight sequentially improving trends (Y/Y end-to-end volume growth of -51%, -25%, +4%, and +14% in April, May, June, and July, respectively) indicating a more favorable setup into the remainder of the year.
CHOW – Two actionable earnings standouts in an otherwise unexciting OFS landscape. EBITDA ests largely moved higher across the sector on cost capture, but upside from here is limited until better visibility is achieved on topline normalization. To be clear, we aren’t calling for OFS to grow L-T, but the next leg higher for the group will have to be driven by higher “normalized” activity levels (at which point upstream rebalancing could see company-specific growth/margin expansion in int’l markets). That said, there were two earnings standouts that we think are both tactically & structurally positioned to outperform not only OFS peers, but also the broader energy landscape (especially in light of US election risk, or just slowing growth in shale generally).
Fresh look. We are updating estimates for BA, SPR, TDG, and HXL after earnings season and another update from BA on Wed (8/5) at a conference. Our concerns on aerospace are fairly generic, underpinned by weak NB demand but weaker WB demand. We expect global airlines to rethink their networks via partnerships enabling “risk sharing” of long-haul flights. WB aircraft tend to exacerbate seasonality for airlines while diluting ROIC. Good times are great with WBs, but bad times are worse.
Providing the message that the market wants to hear . AES’ stock popped yesterday, finishing up 7.5% and outpacing the UTY by 700bps. Management crafted a great message around what is most in-vogue for the sector right now – renewables/ESG. Q2 results were also solid as AES posted EPS of $0.25 which was ahead of consensus at $0.23 (WRe $0.24). AES reaffirmed its 2020 guidance of $1.32-1.42 and its 7-9% EPS/parent FCF growth target through 2022. AES noted that the negative COVID impact on demand during Q2 was $0.02, but better than the $0.03-0.04 it had projected. Management conveyed high confidence in AES’ ability to hit its guidance for 2020.
DXC reported F4Q results after yesterday’s close, delivering a top and bottom-line beat coupled with bookings momentum heading into F2Q . We are encouraged by the print, 1.2x book-to-bill in F1Q, and mgmt commentary suggesting a ~1.0x book-to-bill in F2Q driven by a healthy balance between GBS/GIS and recovering trends within the ITO business. We also highlight that the Company remains on track to realize $550mm in cost savings in FY21, primarily in 2H, which should support sequential margin expansion going forward.
U. S. airlines still deal with heavy regulations. A Trump loss likely means the regulations may be even more onerous. Biden hasn’t been vocal on potential airline policy outside of climate-related issues, but he was part of an Obama administration that introduced many “pro-consumer” rules opposed by the airlines. The CARES Act gives the government even more ammunition.
FLT reported revenue in-line with Street expectations (ahead of our model) and an EPS beat. The Company reported a 17% organic revenue decline, with additional disclosures/commentary suggesting that July trends improved across all core segments, albeit at a slower pace than the M/M change in June. Notably, the Company announced CFO Eric Dey would be departing the Company, with his replacement being former EVP of Strategy Charles Freund as his replacement effective September 1st.
FLT’s general exposure to macro trends was well understood among most investors heading into 2Q, particularly given the granular April trends provided last quarter. These results illustrated a business in a macro holding pattern, eager to deploy investments to accelerate growth when prudent to do so. What was less understood among investors was how management would navigate these challenges and what levers could be pulled to protect earnings and cash flow while maintaining the ability to capitalize growth opportunities post crisis. On the macro, headwinds came in largely in-line with expectations, with KPI’s on average up 50% off the April trough in June and July. That said, consistent with the industry, FLT also illustrated that the pace of recovery slowed in June and July, as regions with rising cases pulled back on reopening plans, and international volumes lagged (see page exhibit 2 on page 2 for further detail).