Worried about the state of the economy? Stop now and look at industrial company earnings.
Four industrial titans reported Tuesday morning, and all four offered results and guidance that should get investors excited about where the economy is going.
for starters, reported better-than-expected free cash flow, and said it’s targeting about $3.5 billion in free cash flow from industrial operations in 2021, much better than Wall Street expected. Its stock has jumped 7%.
meanwhile, cruised by estimates and gave 2021 guidance in line with Street expectations and about 75 cents better than the $8.74 in per-share earnings generated during 2020. More improvement. Its stock was up 1.4%.
And it didn’t stop there.
beat fourth-quarter earnings estimates, while
topped earnings estimates, and increased its fiscal year 2021 sales and profit guidance. The stocks are up 2.8% and 1.2%, respectively.
The moves are just as important as the numbers. So far this earnings season, about 85% of
companies have beaten Wall Street estimates, but stocks have dropped an average of 1.4% after numbers were released.
Today’s industrial reporters look set to buck that trend, and that’s good news for the stocks—and for the U.S. economy.
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Moderna Tests Booster Shot for Covid Variant as Merck Halts Vaccine Efforts
In a big day for vaccine news,
said its vaccine is less effective against a worrying new strain of the coronavirus, while
said it’s pivoting from vaccine candidates to treatments.
- Moderna said its Covid-19 vaccine appears less effective against a new strain of the virus first detected in South Africa, and the company is working on an experimental booster shot to see if it will induce a stronger immune response against it.
- On Monday, President Joe Biden banned travelers from South Africa from entering the U.S. Although the variant has not been detected in the U.S., it appears to be more transmissible, which in and of itself can lead to more deaths as it infects a larger number of people.
- Merck is scrapping its two experimental Covid-19 vaccines, the company said Monday, because early trials showed that neither appeared effective enough at inducing an immune response.
Merck is well-known for its vaccine development, but the decision is a reminder of how difficult that process can be. Previously, in December,
dropped their joint efforts to develop a vaccine after early trials showed poor results.
What’s Next: The shortage of vaccine supply and worries over more transmissible variants has put increased weight on the results of
Johnson & Johnson’s
single-shot vaccine candidate. Data from Phase 3 trials is expected within days and, if approved, it could be shipped as soon as late February.
Tensions Rise in Europe on AstraZeneca Vaccine Woes
With vaccination campaigns hindered by logistical blunders and industrial shortages, the blame game has started among European governments and industrialists over who is to blame for the delays and how to cope with them.
- European Union officials said Monday that pharmaceutical companies producing Covid vaccines on EU territory would be required to register in advance exports of doses to third countries.
The decision would notably apply to UK.-based
and U.S. pharma group
the makers of the first two vaccines currently in use in the UK.
- It comes after AstraZeneca warned the EU last week that it would not be able to fulfill its contractual obligations with the bloc and deliver the 100 million doses promised by the end of March, due to problems at a manufacturing site.
- Discussions with AstraZeneca Monday “resulted in dissatisfaction with the lack of clarity and insufficient explanations,” EU Commissioner for Health Stella Kyriakides tweeted after a phone call between Commission President Ursula von der Leyen and AstraZeneca Chief Executive Pascal Soriot.
- German Health Minister Jens Spahn said today that the EU move would enable it to control and potentially block exports of the vaccine if its own supplies were threatened.
- AstraZeneca said Tuesday that reports in German newspapers that its vaccine hadn’t shown efficacy in the over-65 population were “completely incorrect.” It has yet to be approved by the EU regulator.
What’s Next: Nervousness is mounting in Europe, where the slow start of the vaccination campaigns and industrial bottlenecks threaten the much-delayed economic recovery. And governments’ confidence that the pandemic can be tamed before summer is beginning to crumble.
Xi Warns U.S. as Biden Pushes Ahead With Buy American Initiative
Facing a shifting-consensus in Washington, D.C., Chinese President Xi Jinping sent an indirect but clear warning to the Biden administration, which is preparing to enlist allies in efforts to contain China’s economic and diplomatic influence.
- “To build small circles or start a new Cold War, to reject, threaten or intimidate others, to willfully impose decoupling, supply disruption or sanctions, to create isolation or estrangement, will only push the world into division and even confrontation,” Xi said at a virtual World Economic Forum event.
- While not as directly confrontational as the Trump administration, Biden is expected to continue some of the work done by his predecessor to blunt China’s rise, marking a continued departure from several decades of U.S. policy that favored increased ties and an overall friendly relationship with Beijing.
- President Biden has pointedly said he would not remove tariffs on Chinese goods put in place by his predecessor. He also signed an executive order Monday aimed at strengthening American manufacturing. While not a direct blow to China, the implication of a preference for American goods over Chinese ones is clear.
- The order tightens the rules for federal government procurement to increase purchases of American-made products. As part of the order, how the American-made portion of a product is calculated and what portion must be made in the U.S. to qualify as American-made will be changed to benefit domestic producers.
What’s Next: In his effort to enlist allies in taking concerted action against China, Biden appears to have the backing of at least some corporate groups. On Monday, semiconductor equipment manufacturers called on the Biden administration to involve U.S. allies in banning the sale of certain technologies to China.
DOJ Watchdog to Investigate Reported Attempts to Contest November’s Election
The Justice Department’s internal watchdog will investigate DOJ officials “engaged in an improper attempt” to overturn President Biden’s November election victory.
- DOJ Inspector General Michael Horowitz said Monday that his investigation will “encompass all allegations that may arise that are within the scope” of his office. Democrats indicated that reports that President Donald Trump considered removing the acting attorney general will play a role in his coming impeachment trial.
- The announcement follows a Wall Street Journal report that Trump pressured the Justice Department to ask the Supreme Court to overturn the November election results. Trump didn’t pursue it after senior DOJ officials threatened to resign en masse if Trump fired the acting Attorney General for refusing to do so.
- Rep. Eric Swalwell (D., Calif.), a House impeachment manager, said Monday that the reports could be brought up at Trump’s trial. “This is powerful motive evidence,” Swalwell noted. Republican Sen. Marco Rubio of Florida has called the trial “stupid” and said he would vote to dismiss the article of impeachment.
- The House’s article of impeachment was officially delivered to the Senate Monday, but the trial will be delayed by two weeks to give Trump’s legal team the time to prepare his defense.
- Vermont Sen. Patrick Leahy, the chamber’s longest-serving Democrat, will preside over the trial, instead of John Roberts, the Chief Justice of the Supreme Court, who presided over Trump’s first impeachment.
What’s Next: The trial itself could be conducted in as little as three days. While there is worry that impeachment could bog down the Senate agenda, Majority Leader Chuck Schumer indicated Monday that he is ready to forge ahead with Democrats’ top legislative priority—another round of stimulus—without GOP votes.
Apollo CEO Leon Black to Step Down
Apollo Global Management
said Leon Black will step down as chief executive later this year. The announcement followed an independent review of Black’s professional ties to disgraced financier Jeffrey Epstein.
- The firm said Black will retire from his CEO role on or before July 31, but will remain Apollo’s chairman. He’ll be succeeded by Apollo co-founder Marc Rowan.
- “Marc started his Apollo career in our private equity business and for the past decade plus has made significant contributions to the firm through the development of our yield and insurance platforms,” Black said in a news release. “Marc is well equipped to continue driving innovation across our opportunistic and yield businesses to deliver industry leading results.”
- In a separate announcement, the firm said an independent review found Black was not involved in Epstein’s criminal activities. Apollo never retained Epstein for any services, nor did he ever invest in Apollo-managed funds. Epstein was indicted in 2019 on sex-trafficking charges involving underage girls, and he killed himself in a New York City jail cell.
What’s Next: Apollo shares ticked higher in after-hours trading following the announcement. As Barron’swrote in November, the firm is well positioned with or without Black as chief executive.
COMMENTARY: ‘Rotting from the Inside’ — How a New Biden Official Saw the Pre-Covid Economy
“The coronavirus exposed an American economy that appeared strong from some perspectives but is actually deeply flawed, structurally unsound, and in dire need of reform.”
That’s how Janelle Jones described the economy in a March 2020 Barron’s commentary, as a member of the Groundwork Collective, a progressive policy institution. Now she’s the U.S. Department of Labor’s new chief economist.
The affluent were seizing more wealth, Jones wrote, while the costs of housing, health care, and child care were making the country ever more unaffordable for working families.
“Policymakers shouldn’t allow this moment to pass without an honest conversation about the deep-seated problems in the U.S. economy that the coronavirus crisis has revealed,” she wrote. Now, less than a year later, she can lead that conversation.
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—Newsletter edited by Matt Bemer, Anita Hamilton, Ben Levisohn, Stacy Ozol, Mary Romano