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Adobe stock drops on Q4 earnings miss and weak guidance; revenues beat

Shares of Adobe Systems (ADBE) slipped Thursday after the software solutions provider reported weaker than expected earnings for the fourth quarter, despite a marked increase in revenues. Investor sentiment was also dampened by the company’s unimpressive guidance for the first quarter and fiscal 2019.

Adobe Q4 earnings rise
Adobe Q4 2018 earnings Infographic

Adjusted earnings jumped 45% year-on-year to $1.83 per share but missed the consensus estimate of Wall Street analysts. Reported profit was $678.2 million or $1.37 per share, sharply higher than $501.5 million or $1.00 per share recorded in the fourth quarter of 2017.

Revenues of the San Jose, California-based firm climbed 23% to $2.46 billion in the fourth quarter, beating estimates. The company closed the acquisition of Marketo during the quarter, which contributed significantly to the overall performance. The topline growth was broad-based, with both the key business segments – Digital Media and Digital Experience – and all the geographical segments registering double-digit growth.

The topline growth was broad-based, with the key business segments and all the geographical segments registering double-digit growth

“In 2018 we made significant investments across our product portfolio, entered new markets, and made strategic acquisitions which we believe will fuel continued top and bottom-line performance,” said CEO Shantanu Narayen.

During the October quarter, the management repurchased around 1.6 million shares, returning $397 million of cash to stockholders.

Adobe to buy Marketo, defying Salesforce dominance

For the first quarter of 2019, Adobe expects adjusted and unadjusted earnings of $1.60 per share and $1.14 per share, respectively, on revenues of $2.54 billion. It is looking for revenues of $11.15 billion and adjusted earnings of $7.75 per share in fiscal 2019. Full-year unadjusted earnings are estimated to be $5.54 per share. Meanwhile, the outlook fell short of analysts’ forecast.

Adobe’s stock, which was one of the top gainers in the recent tech rally, hit an all-time high in October. The shares closed Thursday’s regular trading session higher but dropped in the after-hours following the earnings report.

 

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text

Costco Q1 profit jumps 20% but misses estimates

Costco Wholesale Corporation (COST) reported a 20% jump in earnings for the first quarter helped by higher sales from stores and online. However, the results missed analysts’ expectations. Following this, the stock inched down over 2% in the after-market session.

Net income climbed 20% to $767 million and earnings jumped 19.3% to $1.73 per share. The results were driven by a tax benefit related to stock-based compensation and to the implementation of the 2017 tax act. Also, the quarter included a charge for an adjustment to its estimate of breakage on rewards earned prior to the fiscal year 2019 for the Citi/Visa co-branded credit card program.

Total revenue increased 10.2% to $35.07 billion helped by an 8.8% rise in comp sales. Sales rose 10.3% to $34.31 billion and membership revenue moved up 9.5% to $758 million. The United States comp sales grew 11% while comp sales for Canada and other international locations rose 2.4% and 4% respectively.

Costco Wholesale Q1 2019 earnings snapshot

Monthly-wise, November comp sales rose 9.2% while it grew 8.6% in October and 8.4% in September. Costco’s comp sales growth was higher than competitors including 3.2% rise at Sam’s Club, 3.4% increase at Walmart (WMT), 5.1% growth at Target (TGT), and 4.3% jump at Best Buy (BBY).

Though e-commerce sales climbed 32.3%, the growth rate fell short of expectations due to the mounting competition from Walmart (WMT) and Amazon (AMZN). Costco risked its name on cheaper prices than rivals Walmart or Target as annual membership revenue are enabling the company to keep the prices down.

Costco Q4 sales beat; stock falls amid warning of ‘weakness’ in financial reporting

The retail markets tend to change the trend according to better employment prospects, rising disposable income, and positive sentiment. The company has been positively benefited by its growth strategies and quality of the merchandise as the primary strength over the years.

At the end of the quarter, the company operated a total of 768 warehouses. This includes 533 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, two in Spain, one in Iceland, and one in France.

Shares of Costco ended Thursday’s regular session down 0.57% at $226.51 on the Nasdaq. The stock has risen over 21% in the year so far while it has fallen over 6% in the past three months.

 

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