Income, Spending Up in September; Plus CVX, HON & More

Mark Vickery
·3-min read

Friday, October 30, 2020

Along with a deluge this week of quarterly earnings results — Big Tech, most of FAANG, and Twitter TWTR, which is down in early market trading after top- and bottom-line beats but disappointing net subscriber adds — we also have a fresh economic read. This comes a day after the best-ever GDP figure: +33.1% in Q3.

Personal Income in September rose a better-than-expected 0.9%, following a slight improvement on August’s revision to -2.5%. Consumer Spending was +1.4%, an improvement on the +1.1% estimate. The Personal Consumption Expenditure (PCE) came in at +1.4%, though only +0.2% when we strip out volatile food and energy costs.

Real PCE,” an important metric for consideration by the Fed when new monetary policy is addressed, reached +1.2% last month: $110 billion in Goods and $61 billion in Services. This kind of flips what we know of the U.S. economy on its head a bit — look at jobs gains of late, and see how Service-based employment weighs against Goods-based. Census workers still made up more than $9 million in earnings in September, but those numbers will burn off as 2020 winds to a close.

Consumer Sentiment for October registered a gradual improvement: 81.2 follows September’s 80.4, now up to the highest level since the start of the pandemic. March of this year posted an 89.1, just when the economy started to feel the initial effect of coronavirus hitting the U.S. Watch this space — a further steady increase would be a strong sign for economic growth overall.

Chevron CVX performed better than expected in its Q3 earnings report, swinging to +11 cents per share from a consensus estimate of -29 cents (thought well off the $1.59 per share a year ago). Revenues of $24.45 billion missed expectations by 5.85%, and down from last year’s $36.12 billion. Oil and gas prices have been put through the ringer in the past quarter, and this report shows it. But the company always performs on earnings day: only one miss going back to late 2018, with a trailing 4-quarter average beat of 10%. Shares are still down 43% year to date. For more on CVX’s earnings, click here.

Honeywell HON, another Zacks Rank #4 (Sell) stock prior to its latest earnings release, has outperformed on both top and bottom lines. Earnings of $1.56 per share eclipsed the Zacks consensus by 7 cents per share, on $7.8 billion that outpaced the $7.7 billion anticipated, though -14% year over year. Aerospace sales dropping by 25% had something to do with this. However, Q4 guidance rose to a range of $1.97-2.02 per share, well ahead of the previous $1.88 consensus.

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