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🇺🇸 Trump wins

🇺🇸 Trump wins

and stocks go higher

Michael Wight, Jason Phillips & Trajan King
November 06, 2024

Good morning investors! Big tech and some other names had a great day yesterday as we prepare for election results.

Today we cover:

Restaurant earnings
SMCI is in a mess
Best dividend stock

📊 Economy and News

Republican presidential candidate Donald Trump has claimed victory over his Democratic opponent, Kamala Harris, after projections indicated he would secure critical battleground states: Pennsylvania, North Carolina, and Georgia. In addition to the presidential win, the Associated Press has projected a Republican regain of control in the Senate.

With polls now closed nationwide following the November 5 election, voting proceeded without major issues. The presidency requires a minimum of 270 Electoral College votes, and although Trump is about to reach this threshold, Harris has yet to formally concede.

Global hits:

Economic impact of floods in Spain could rise to over 10 billion euros.
Italy unlikely to reach its 2024-2025 GDP goals.
Australia's central bank holds the line on rates even as others ease.

This is from yesterday’s poll. It’s evident that our audience is a true indicator of the American voice.

📈 Stocks

S&P 500 5,782.76 (+1.23%)
DJIA 42,221.88 (+1.02%)
NASDAQ 18,439.17 (+1.43%)
BRENT CRUDE 75.53 (+0.50%)
* Prices as of Nov 6th, 12:20 AM UTC

Top Restaurant Brands Announce Earnings

Yum Brands reported quarterly earnings and revenue below Wall Street expectations due to a sharper-than-expected decline in same-store sales for KFC and Pizza Hut.

Key results vs. analyst forecasts (LSEG survey):

Earnings per share: $1.37 adjusted vs. $1.41 expected
Revenue: $1.83 billion vs. $1.90 billion expected

For the third quarter, Yum’s net income fell to $382 million ($1.35 per share) from $416 million ($1.46 per share) a year ago. Excluding items, earnings were $1.37 per share, while net sales rose 7% to $1.83 billion.

However, global same-store sales dropped 2%, with KFC and Pizza Hut each reporting 4% declines.

Restaurant Brands International reported quarterly earnings and revenue below analyst expectations as domestic same-store sales growth for its four chains lagged Wall Street estimates.

Third-quarter results vs. analyst forecasts (LSEG survey):

Earnings per share: 93 cents adjusted vs. 95 cents expected
Revenue: $2.29 billion vs. $2.31 billion expected

Worldwide, same-store sales grew just 0.3%, with Burger King, Firehouse Subs, and Popeyes reporting declines in their U.S. markets. However, same-store sales have shown improvement in the fourth quarter so far.

Good News: Ford’s U.S. vehicle sales rose 15.2% in October, boosting its market share to 12.6%. Hybrid sales jumped 38.5%, while EV sales fell 8.3% from October 2023.

In a separate development, Boeing machinists ended their strike after approving a labor contract with 38% raises.

Lastly, Nvidia passed Apple in market cap to become the most valuable publicly traded company in the world..

Super Micro Updates: Super Micro reported unaudited Q1 results, with shares dropping -16% after revenue and future guidance missed estimates. The server maker, at risk of Nasdaq delisting due to delayed annual filings, faced further issues after Ernst & Young resigned as its auditor, citing accounting concerns.

Super Micro’s Q1 sales were $5.9–$6 billion, below analyst expectations but up 181% annually due to strong demand for servers with Nvidia AI processors. December quarter forecasts also fell short.

A board investigation found no evidence of fraud following Ernst & Young’s resignation.

Do you trust SMCI?

Bad news: AstraZeneca shares suffered their steepest drop (-8%) since March 2020 on Tuesday after reports emerged that several top executives in China might be linked to a major insurance fraud case in the country's pharmaceutical sector.

Nintendo on Tuesday lowered its forecast for Switch sales for the fiscal year ending March 2025, citing waning demand for the aging console. With the Switch now over seven years old, investors are eagerly awaiting news of a successor to boost Nintendo's gaming business.

💵 Personal Finance

This Stock Pays Well with over 5% Dividend Yield

Realty Income, a retail real estate investment trust (REIT), stands as one of the top high-octane dividend stocks. With a history of increasing its dividend for 107 consecutive quarters, the company has become a consistent source of reliable income for investors.

Realty Income's portfolio includes over 15,000 properties, 90% of which are resilient to economic downturns and unaffected by e-commerce disruptions. Its tenants mainly operate essential services like grocery stores, drugstores, and automotive services, ensuring steady demand.

One of Realty Income's key strengths is its long-term lease agreements with well-established businesses. Its impressive 98.2% occupancy rate outperforms the average 94.2% occupancy for REITs in the S&P 500. Additionally, Realty Income has been diversifying beyond retail into areas like gaming and data centers, providing more growth opportunities for the future.

Growth and numbers: Realty Income reported adjusted funds from operations (AFFO) of $1.06 per share in the recent quarter, while distributing $0.777 per share in dividends. The AFFO payout ratio improved to 73.3%, down from 76.5% the previous year. This indicates that the company's cash flow comfortably covers its dividend obligations, leaving ample room for potential future dividend increases.

Despite recent challenges faced by some of Realty Income's tenants, including Walgreens and Red Lobster, the REIT's dividend remains secure. This is supported by its strong payout ratio and high occupancy levels. Additionally, the company has strengthened its position through its successful diversification efforts.

The company maintained its full-year guidance, which it last updated in June. Realty Income expects to invest about $3 billion in property acquisitions, achieve a 1% increase in same-store rental revenue, and sustain an occupancy rate above 98%. Additionally, it reiterated its forecast for full-year AFFO per share in the range of $4.15 to $4.21, a slight increase from its earlier guidance.

Valuation: Investors can purchase Realty Income at 12.4 times its forecasted cash flow in 2025, which means you get it at a 28% discount compared to its average multiple over the past five years.

Interested in more such names? Don’t forget to check Dividend Download, the newsletter with all things dividend.

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