We just made it through the busiest week of the third-quarter earnings season, which saw 30% of S & P 500 companies report. That deluge included 10 stocks in Jim Cramer’s Charitable Trust, which is the portfolio we use for the CNBC Investing Club. Here’s a quick recap of what each Club name delivered last week and our updated view on each stock. Tuesday, Oct. 24 DHR YTD mountain Danaher YTD Danaher (DHR): The bioprocessing and life sciences company reported an earnings beat but management’s commentary was more important than the numbers given the inventory destocking challenges the company has faced. Overall, management’s tone was mixed. But, we thought it tilted more positively than negatively. What stood out to us was Danaher’s ability to meet its Bioprocessing expectations and put an end to the string of outlook cuts that have plagued the company. The order trend — which is a sign of future revenue — didn’t exactly bottom yet, but management expressed confidence that this year will be the bottom. The Life Sciences guide down was a new wrinkle and something to monitor, but the main driver of the stock should be bioprocessing. As orders inflect sometime in the first half of 2024, we expect the stock will rebound and start working again. We were early to pull the trigger into Danaher’s post-earnings decline but still think the stock has come down too much given its quality. We’re reiterating our buy-equivalent 1 rating on the stock. MSFT YTD mountain Microsoft YTD Microsoft (MSFT): This was a fantastic quarter and the company proved itself to be the primary monetizer of artificial intelligence out of the mega-cap tech stocks. We were hoping for stable revenue growth at Azure, but the cloud computing business surprised everyone by accelerating to 29% year over year thanks to a three percentage point benefit from AI services. We were also pleased to see the More Personal Computing segment return to revenue growth after a stretch of weakness in the personal computer market. Usually, it’s a point of contention during the conference call, but management’s guidance was clean and above expectations despite calling for a gradual ramp-up of revenue from Microsoft 365 Copilot, which officially launches on Wednesday. We’re reiterating our 1 rating . GOOGL YTD mountain Alphabet YTD Alphabet (GOOGL): The quarter from the Google parent was mixed . On one hand, we were pleased to see revenue growth acceleration and beats at Search and YouTube. But on the other hand, the miss on the Google Cloud and lack of margin improvement at the unit was a cause for concern. We always thought of Google Cloud as the upstart name in the Big 3, but Alphabet management’s lack of explanation about what went wrong made it clear to us that the business ceded share to Microsoft’s Azure and Amazon Web Services (AWS). For Alphabet to catch up in the AI race, it might be forced to invest more aggressively, creating an imbalance between revenue growth and expense growth. For this reason, we are looking to trim back this large position as it recoups some of its post-earnings losses. We’re reiterating 2 rating. Wednesday, Oct. 25 META YTD mountain Meta Platforms YTD Meta Platforms (META): The social media giant delivered an impressive quarter as the application of AI tools led to better engagement and monetization rates, translating to accelerating revenue growth. On the cost side, CEO Mark Zuckerberg’s “year of efficiency” led to discipline on expenses. Even though the quarter was great, the market placed all its focus on revenue guidance, which was wider than usual due to some volatility at the start of the current quarter. We thought management’s commentary was conservative and the post-earnings selloff was excessive, which is why we upgraded the stock to our 1 rating on Oct. 26. We’re reiterating 1 rating. VLTO YTD mountain Veralto YTD Veralto (VLTO): This quarter was fine and the company’s guidance was actually a little better than expected despite some headwinds in China and on consumer goods volumes. As we explained last Thursday, the debate we face is whether to move on from this small position with a limited track record of operating as a public company to have extra cash to purchase other stocks we have more confidence in. Earlier this month, Danaher completed the spinoff of Veralto, a water quality and packaging quality company. As DHR shareholders, we received some VLTO shares. We’re reiterating 2 rating on Veralto. Thursday, Oct. 27 LIN YTD mountain Linde YTD Linde (LIN): The industrial gas and engineering company’s earnings report showcased how it is a consistent, double-digit percent earnings-per-share (EPS) grower with yet another beat and raise. Linde’s model is pretty straightforward. Each year its profits grow from new projects coming online, pricing gains, cost, and productivity initiatives as the outstanding share count shrinks from buybacks. We reiterate our 2 rating but would be more opportunistic in the $360s. HON YTD mountain Honeywell YTD Honeywell (HON): We thought Honeywell’s quarter was a little misunderstood. Was it perfect? No. Ongoing strength in its Aerospace business continues to be overshadowed by tepid growth in the Building Technologies and Performance Materials & Technologies units, as well as weakness in the Safety & Productivity Solutions division. The reasons why we are more upbeat about Honeywell’s future than what the market is giving it credit for are because of the backlog, which ended the quarter at a new record, and the double-digit percentage growth in orders. We figured Aerospace orders would be robust, and it was up 30% year over year. But what stood out to us more was how Safety & Productivity Solutions and Building Technologies orders were flat year over year, a sign that these end markets have finally started to stabilize. We’re reiterating 1 rating. AMZN YTD mountain Amazon YTD Amazon (AMZN): This was a fantastic quarter that checked a lot of boxes for us. Improving profitability was on display with operating margins in North America, expanding for its sixth straight quarter to its highest level since the third quarter of 2018. Meanwhile, the international retail business almost got back to breakeven. While AWS cloud revenue growth may not have accelerated as some optimistic bulls had hoped for, it stabilized. We were also impressed by how the cloud business added an incremental $919 million of revenue quarter to quarter with overall margins expanding to 30% for the first time in six quarters. We’re reiterating 1 rating. F YTD mountain Ford YTD Ford (F): This was our most disappointing earnings report of the week as profits missed the market due to lower volumes and a $1.2 billion increase in warranty expenses. Furthermore, Ford’s transition to electric vehicles has become more complicated due to waning demand and Tesla -induced pricing pressure. Due to the challenges that lie ahead, including much higher labor costs that were extracted during the UAW strike, this is one pullback we won’t be buying and therefore. We’re downgrading the stock to our 2 rating. Friday, Oct. 27 SWK YTD mountain Stanley Black & Decker YTD Stanley Black & Decker (SWK): This tool maker delivered a solid upside surprise as it continued to make progress on its inventory reduction and cost savings initiatives. The quarter gave us more confidence in the company’s ability to drive its adjusted gross margins back to pre-Covid pandemic levels of about 35% from the current 28%. We’re reiterating 1 rating. 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We just made it through the busiest week of the third-quarter earnings season, which saw 30% of S&P 500 companies report. That deluge included 10 stocks in Jim Cramer’s Charitable Trust, which is the portfolio we use for the CNBC Investing Club. Here’s a quick recap of what each Club name delivered last week and our updated view on each stock.
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