Stocks moved up as investors waited for news on trade talks with China and looked forward to third-quarter earnings reports coming out next week. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) had moderate gains, with energy and financial shares in the lead; utilities were the only declining sector.
As for individual stocks, Delta Air Lines (NYSE:DAL) reported strong profits, and HEXO (NYSE:HEXO) delivered bad news about marijuana sales.
Delta beats profit expectations
Delta reported third-quarter profits that topped expectations but gave weak short-term guidance, and shares slipped 1.5%. Adjusted revenue grew 6.5% to $12.6 billion and adjusted earnings per share increased 29% to $2.32.
Revenue for the quarter was right on the number that the company gave in an investor update eight days ago, but EPS was above the company’s forecast of $2.20 to $2.30. The average fuel price was $1.96 per gallon, compared with the range of $1.95 to $2.05 the company said to expect, and non-fuel unit costs grew 2.4%, below guidance of 2.5%.
Delta expanded its capacity by 3.9% year over year and is filling its planes. The passenger load factor hit a record 88.3%, up from 86.9% in Q3 last year.
Delta guided to EPS between $1.20 to $1.50 in Q4, below the $1.51 analyst consensus. The company has warned about short-term cost headwinds from pension funding, wages, and maintenance timing, but management continues to be upbeat about the company’s growth prospects and cost reduction opportunities.
HEXO stumbles
Canadian marijuana producer HEXO announced that revenue will come in significantly below prior guidance for last quarter and for the full year 2020, and shares plummeted 22.6%.
HEXO said that it expects revenue for the quarter ended July 31 to land between 14.5 million and 16.5 million Canadian dollars ($10.9 million to $12.4 million) after having predicted it would double sequentially to about $32 million. The company also withdrew its guidance for 2020 revenue of CA$400 million, saying, “Slower than expected store rollouts, a delay in government approval for cannabis derivative products and early signs of pricing pressure are being felt nationally.” That comment sent a chill through virtually all marijuana stocks today.
CEO Sebastien St-Louis had doubled down on his revenue-doubling forecast in the conference call last quarter, saying:
If you ever hear me say something and not deliver, you have to call me out. And in reverse, I would tell you today, nobody has ever called me out on anything because HEXO has always delivered what we said we would. We’re delivering a double this quarter.
That statement was made halfway through the quarter in question. The company’s CFO, who had been on the job since May, abruptly left last week, saying the travel demands of the job meant that he could not meet his obligations to his family.
