Earnings roundup: Caterpillar, Ford, & eBay beat estimates - here's what this means for the stocks

Yahoo Finance's Brian Sozzi, Julie Hyman, and Brian Cheung break down the latest earnings from Caterpillar, Ford, and eBay.

Video Transcript

JULIE HYMAN: But let's talk about the earnings that we are getting as well as what we're hearing from those companies in terms of inflation. Let's start with Ford here. The company's earnings coming in, well, above what analysts have been anticipating as did revenue-- at 30. Revenue coming in ahead of estimates as well.

The company restoring its dividend. Now it's going to be paying out $0.10. It had suspended that dividend in March of 2020. And importantly, is raising its profit forecast for the second time for the full-year. And is now looking for operating profit of $10.5 billion to 11 and 1/2 billion dollars.

And boy, are we seeing a different reaction these shares than we did from General Motors yesterday with that almost 9% increases.

BRIAN SOZZI: Yeah, I wrote a story yesterday on GM. It's appropriately headlined-- GM shares got run over after earnings. I think the optics of these two quarters are very different. GM just didn't do a good job selling investors that their 2022 will look a lot different than this year in terms of inflation, and supply chain bottlenecks, the chip shortage, you name it.

On the other hand, you have Ford out here raising its outlook for this year. As you mentioned, Julie, its operating profit outlook now pegged to about 10 and 1/2 to 11 and 1/2 billion dollars this year. Previously, it was about $9 to $10 billion. You have CEO Jim Farley hopping on an earnings call last night, saying they have 200,000 orders or products that already delivered in terms of the new Mach-E electric vehicle, sounding a strong note about their 2022 line up, which will include the F-150 electric Lightning pickup truck.

Also too noting that they're sitting on a $900 million gain in Rivian. Ford has invested in Rivian. Rivian is supposed to come public very soon or reportedly. So that is a good potential cash infusion into Ford should they divest that, should they get out of that Rivian stake. Nonetheless, I mean, the optics of these two quarters couldn't be any different. That's why I think you just have to brand Ford right now a market darling.

I mean, the stock has gone through the roof. The change in tone of the company is noticeable. They're talking about improved culture. They're talking about getting products from design out to dealer floors quicker. I mean, these are not things you normally would hear from Ford. You're hearing from them now. They're showing up in the financials. And that's why you're seeing the stock move.

BRIAN CHEUNG: Yeah, I mean, raising just the EV guidance despite the supply chain issues is obviously positive. But when you look at the underlying story that's going to help them in the medium to long-term, people are just excited about their products.

You talk about the Mach-E getting 200,000 orders. But also consider the Lightning F-150. I mean, that has had 160,000 orders than the E Transit, which is just kind of a car that we're already familiar with. It's a big vehicle that's used by contractors because of its utility. It's kind of got a narrow body but a pretty high ceiling. That's completely sold out-- the electric version of that vehicle.

So obviously, then you also have their traditional cars. People love the Bronco and the three variants that they have out there. I can't wait for our autos reporter Pras Subramanian to take me out for a spin on that one. But again, stock's up 76%. So investors know this already. But it's interesting to see how there's still upside even when they do report these earnings with the bump that we're seeing pre-market today.

So it would be very interesting to see how the company can deliver because, of course, supply chain-- it's going to affect the ability to deliver on all these orders and the massive backlog that they have here. So execution is probably going to be key in the quarters to come.

JULIE HYMAN: Yeah, and I just want to comment on that supply chain and the chip shortage in particular. We did get some comments from the CFO John Lawler who said the chip shortages is already starting to ease and it will ease further. But he said it could still extend into 2023 and Ford factories will not be able to operate at full capacity until the end of next year. So that's something to continue to watch, definitely as this unfolds-- the continuing chip shortage.

Let's move on to Caterpillar, another company that makes stuff. Big equipment, of course, in this case. Adjusted earnings per share for CAT coming in at $2.66. That is versus the $2.19. That was estimated revenue also coming in ahead of estimates here. A couple of things going on here. They are also seeing higher costs, and they also talked about the chip shortage.

And in fact, the CFO there, Andrew Bonfield, telling Bloomberg in a phone interview that they might not meet full end-user demand this year because of the chip shortage. That's already something they had said. But now he's saying it's going to be even worse, Brian Sozzi.

BRIAN SOZZI: Yeah, it always amaze me. Caterpillar's CFO always makes very interesting comments during earnings season that catches the market's attention as they apparently did again today. But the only thing I care about in this quarter from Caterpillar-- and I think the Street's starting to pick up on this, according to notes that are now hitting my box-- sales in the construction industries business for Caterpillar out of the Asia-Pacific region, that is mostly China, for CAT down 13%. That was the only region that fell in terms of sales for that construction industries business.

And you are now just continuing, I think, that concern, whether it's evergrande, you name it, about the China economic slowdown, China real estate slowdown. It appears to have infiltrated Caterpillar in the most recent quarter. Now if you are trading earnings or you're just looking at the overall market, now you have to start thinking, is that China real estate problem going to start blowing back on US companies, and if so, to what extent?

And I think, this is a major red flag in this report, and a major red flag for a lot of other companies as they report the rest of this earnings season. Should also note, China sales about 5% to 10% of Caterpillar sales depending on what quarter it is.

JULIE HYMAN: Right, definitely something. And that's something by the way the CFO also flagged-- those weak China sales. And he said it's going to keep going. It's going to weaken to the final quarter of the year as well. And then let's talk about eBay for a moment as well. That company reported its numbers after the close yesterday. And the indications do not seem to be good for the holiday season. They beat in the third quarter on both the bottom and top line.

But for the current quarter, eBay is saying, at most, its sales will be $2.62 billion. $2.65 billion is what analysts had been predicting. And so it seems like that this is one of the things that is putting pressure on the stock, is that forecast and the implications about what we're going to see over the holiday strong.

BRIAN CHEUNG: I mean, first of all, I love it just because, if you pull up the PDF of their earnings release, it says, eBay Inc reports better than expected third quarter of 2021 results, which kind of weird to be blowing the horn on expectations in a report. Obviously, that might kind of signal that they were trying to graze over the issues that they have with their guidance here, with the holiday season that should be hot for effectively every e-commerce retailer. But apparently, not so with eBay.

A 3% to 5% organic FX neutral year over year growth that they're projecting for the fourth quarter. I guess, that's just not good enough when you see some of the other guidance comps that we've gotten from the others that have reported so far in this third quarter season. But look, with eBay, their strategy is really on these focus categories. They're trying to pivot just from becoming some marketplace to becoming an authorized reseller as well. Consider their luxury watches, the luxury handbags, verticals that they're trying to unveil, and of course, their sneakers business.

But there's some argument that these types of focus points for them are a little bit late to the game. The RealReal and the likes of StockX and GOAT, for some of these categories, have already been in the game for a while. And eBay is trying to muscle themselves into that space. Whether or not that's a strategy that can kind of help them with this holiday season remains to be seen.

I mean, for me, personally, I've bought sneakers on eBay before. It's a very clunky experience even with their new reselling platform. It's difficult to tell which listings are part of their authorization process and which ones are not. That's going to be a strategic issue for them going forward.

BRIAN SOZZI: Thanks for picking up my listing, Brian. I appreciate you paying me for those sneakers.

BRIAN CHEUNG: I got you, man.

BRIAN SOZZI: It was interesting to see eBay shares rise about 11% into this earnings report under the thesis that eBay would benefit because other retailers couldn't get supply, and suddenly that would send more people onto eBay buying used stuff mostly-- didn't pan out. And you're seeing now, I think, a re-rating of eBay shares to the reality they now face. They continue to be and also run. And here are two metrics worth calling out.

Active buyers for eBay in the most recent quarter down 5%. They were down 2% in the prior quarter or the second quarter here. So that is a worsening trend. You do not want to see declines in active buyers if you are an eBay. Major red flag here, especially into the holiday shopping season.

JULIE HYMAN: Yeah, and gross merchandise volume. Also the value of everything sold on the site down 10%. So that kind of going hand in hand with what you are talking about and flagging their stock.

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