P&G, IBM post earnings beat; United stock falls on sales miss

Yahoo Finance’s Brian Sozzi, Myles Udland, and Julie Hyman break down the earnings reports for Procter & Gamble, IBM, United Airlines, and Philip Morris.

Video Transcript

MYLES UDLAND: And we begin this morning's show there. Brian Sozzi, a very interesting quarter out of Procter & Gamble. I know you talked to a company a little bit earlier today. We're going to play that tape for our viewers in the next hour.

But really flagging right at the end of that press release in a number of categories. They're planning price increases in September. A few interesting angles here, not the least of which is that they are giving a two quarter lead time basically on when prices are going up, and saying that they cannot manage and they do not see these pricing pressures, or these cost pressures, as anything like transitory.

BRIAN SOZZI: Well, Myles, that gives you time to stock your covers with lower priced P&G products in advance of those price increases. So, thank you P&G for doing that. But yes, to your point, I talked to P&G's COO and Vice Chairman, Jon Moeller, this morning. Big earnings and sales beat out of the company this morning.

Really saw continued strength in fabric care and a lot of baby products. But the headline here is, to your point, they are, in fact, raising prices by mid to high single digit percentages across several categories starting in mid-September. But I did want to take a step back with Moeller here, guys, and also ask him what type of changes he's seeing in US shoppers as people get vaccinated. Take a listen.

JON MOELLER: We're seeing a return to higher levels of consumption in categories that suffered as a result of the pandemic. For example, dry shaving. As people stayed home, they didn't shave as much. Certainly our away from home business that serves hotels and restaurants is starting to see a little bit more life. And you know, some of the beauty businesses, like deodorant, for example, the market had declined a little bit and that's beginning to pick up.

BRIAN SOZZI: So, Julie, great to see deodorant coming back. I don't know what people have been wearing the past year of the pandemic. Maybe walking around their house all stank and smelling not good, but deodorant sales coming back to P&G.

JULIE HYMAN: Maybe deodorant is overrated, Brian Sozzi, especially when you're in a solo environment. Eh, we'll discuss that offline, but yeah. It is quite interesting what we're seeing from P&G in terms of that price increase, and certainly that's going to feed into the inflation debate. And also speaks to Myles's morning brief this morning about cost pressures, which we're going to talk about in the next hour as well.

I want to take you to IBM also, because this company reported, after the close yesterday, had its biggest revenue gain in 11 quarters, and it's a measure of just how lackluster the company's performance has been, that it's the biggest revenue gain in 11 quarters and the sales were up about 1%. So, that tells you how IBM has been doing. It did beat estimates, as you see there. And it also saw three of its five business segments seeing growth, including its Cloud business.

So, basically, this seems to be an indication that CEO, Arvind Krishna, took over about a year ago now from Ginni Rometty, that his turnaround plan is starting to show some early signs of success. Krishna, by the way, also said, he's confident that IBM is going to see revenue growth in the second quarter as well and in the rest of the year. So, perhaps an end here to the growth drought that IBM has been seeing, but really we're going to have to see here, Brian, if they can keep this going indeed for the rest of the year.

BRIAN SOZZI: Yeah, a bit of a snoozy quarter out of IBM, Julie. To me, my biggest takeaway was on the earnings call, Krishna noting that orders are improving, order rates are improving, which tells me that as economies are starting to reopen, mostly in the US, you're seeing a lot of corporate clients place, really, orders for those enterprise sales that have really got hit hard at the height of the pandemic. So, that's good for an IBM, but also a lot of other key players that compete with an IBM.

MYLES UDLAND: Yeah, and it's really been--

BRIAN SOZZI: Myles. Fire away.

MYLES UDLAND: I mean-- yeah, Sozzi, I mean, the IBM story, one that I think we're all familiar with and sort of how lackluster that's been for some time. Let's turn our attention to another company out with its quarter last night, that's United Airlines. Stock taking a little bit of a hit here in the free market, coming in with a steeper than expected loss for the latest quarter out of United. Obviously, the airlines have all been a big part of this reopening trade, and so, we've seen a lot of enthusiasm in the name just within the market.

And so, we've talked a little bit about that story with United. And I think from a stock perspective, the story has been told to some extent, but an example here I think, guys, when you come in, you miss on the top and the bottom line posting a steeper than expected loss, even after the company had given some indications last month of where the business was headed.

I think some questions here for investors, again, stock has basically doubled over the last year. And so, I think, you know, another name to keep on our radar. Brian Sozzi, another name that I know we're talking about, what's happening over in the cigarette space this morning.

BRIAN SOZZI: Yeah, Philip Morris out with a pretty good earnings report, Myles. But again, all eyes I think are on what the "Wall Street Journal" was reporting last night, of US regulators potentially looking to pull back on how much nicotine is in cigarettes. Also worth noting here, buried at the bottom of this Philip Morris earnings release. They said, they are seeing an impact from the chip shortage.

They sell these little electronic devices where you can obviously burn tobacco almost like a Jewel type of product, but they too are being impacted by the chip supply shortage because those devices use chips. So, just a little interesting nugget worth there mentioning. Really, so many companies being impacted by this chip shortage.

JULIE HYMAN: Well, and that's the only area of growth for the company, right? Philip Morris saw those icos, or heated tobacco unit shipments overall, up 30%. That's the only area that's rising, right? Cigarette shipments of all types for the company were in decline. So, that's the place where it has staked its growth potential. That's been the hedge for not only Philip Morris, but the other cigarette companies as well.

And so, the bet has been, we talked to the Altria CEO earlier in the year, and there is definitely an acknowledgment there that cigarettes are going away. That they're not good for you. That people shouldn't use them.

And so, the companies have been trying to find other sources of revenue, and heated tobacco and other types of tobacco consumption products are what they've been looking to because it's almost as though they were expecting, at some point, this type of action on the part of regulators. We'll see if it actually happens, but you can't say that these companies weren't sort of maybe keeping their eye on this kind of thing.