British American Tobacco (BTI, Financial) experienced a sharp decline in early trading after announcing a significant reduction in the value of some U.S. cigarette brands. The company's CEO referred to the adjustment as aligning accounting with the reality that these brands will not retain an indefinite value of approximately $80 billion on the balance sheet. BAT recognized a $31.5 billion non-cash impairment charge and plans to begin amortizing the remaining value of its U.S. combustible brands in 2024. Despite this, BAT anticipates revenue growth at the lower end of its 3% to 5% forecast for 2023 and aims for a progressive improvement to mid-single digit adjusted profit growth by 2026.
Chief executives from the largest Wall Street banks are set to challenge the "Basel III endgame" proposal before lawmakers, arguing that increased capital requirements could harm the economy and restrict lending. The CEOs from Wells Fargo (WFC, Financial), Bank of America (BAC, Financial), JPMorgan (JPM, Financial), Citigroup (C, Financial), State Street (STT, Financial), BNY Mellon (BK, Financial), Goldman Sachs (GS, Financial), and Morgan Stanley (MS, Financial) will testify against the proposal, which they claim could unjustifiably raise capital requirements by 20%-25% for major banks.
Payment processors Toast (TOST, Financial) and PayPal Holdings (PYPL, Financial) saw their stock prices dip following downgrades from Bank of America, which shifted its outlook for the payment stocks to Neutral from Buy. The bank also upgraded Capital One Financial (COF, Financial), Discover Financial Services (DFS, Financial), and Jack Henry & Associates (JKHY, Financial) to Buy from Neutral, citing a favorable position for a re-rating as peak losses become more apparent.
Private sector employment growth slowed in November, with the ADP National Employment report showing an increase of 103K jobs, below the expected 123K. The report also indicated a deceleration in wage growth, with annual pay rising at the slowest pace since September 2021. The service-providing sector added jobs, while the goods-producing sector saw a decline. Notably, the leisure and hospitality sector, a significant contributor to post-pandemic recovery, contracted, suggesting a more moderate hiring and wage growth outlook for the economy.
Nonfarm productivity for Q3 was revised upward to a three-year high, while unit labor costs saw a decline, reflecting a combination of higher productivity and increased hourly compensation. The manufacturing sector, however, experienced a slight drop in productivity, with a corresponding rise in unit labor costs.
Inmode (INMD, Financial) shares tumbled after the company reduced its full-year 2023 guidance, citing macroeconomic challenges leading to a slowdown in platform sales, primarily in North America. The revised revenue and adjusted earnings per share projections fell short of previous estimates and analyst expectations.
Exxon Mobil (XOM, Financial) announced an increase in its share repurchase program to $20 billion per year, starting from the closure of its Pioneer Natural Resources acquisition through 2025. The company also outlined plans to grow annual earnings and cash flow, as well as achieve additional structural cost savings by the end of 2027. Exxon forecasts production growth driven by developments in Guyana and the Permian Basin.
Chinese electric vehicle manufacturer NIO (NIO, Financial) is reportedly planning to spin off its battery manufacturing unit as part of a broader strategy to achieve profitability. The spinoff is expected to occur by the end of the year, with the new entity seeking external investors to support the initiative.
Brown-Forman Corporation (BF.A) (BF.B) reported modest sales growth and an increase in operating income for Q2, with EPS in line with consensus estimates. Despite a challenging operating environment, the company remains optimistic about its growth prospects for the upcoming fiscal year, albeit with tempered expectations.
Alto Ingredients (ALTO, Financial) amended its senior secured term loan facility, extending the commitment period for undrawn capital by one year to November 2024. The amendment reflects continued cooperation with Orion Infrastructure Capital and confidence in the company's strategic direction.
Energy prices continue to decline, with West Texas Intermediate crude oil and gasoline prices falling significantly in the fourth quarter. The U.S. is producing oil at a record rate, surpassing Russia and Saudi Arabia, which has had a positive impact on consumers and the Federal Reserve's efforts to control inflation. OPEC members, particularly Saudi Arabia, have responded by cutting production, but the strategy has not been effective in boosting oil prices.
