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Another wave of quarterly numbers has brought us more good news to digest. Some of the biggest and best companies around are feeling no pressure from global economic conditions. And there's more to come. 

 

Counting last night's after-hours moves, BMR companies that have already released their 3Q19 earnings reports are now up more than an aggregate 1%, well ahead of the market as a whole since the season started early last week. While response hasn't been uniformly positive, every single one of these companies has beaten our most recent forecast, so the fundamentals are on our side even if sentiment is confused.

 

Take Eli Lilly (LLY: $107, down 1% this week) as an illustration. On the whole, yesterday's report was better than expected, with nearly $5.5 billion in revenue translating into $1.48 per share in profit. That's healthy 10% bottom-line growth, double the rate we projected. And while the revenue trend isn't steep, it's accelerating again after bottoming out at a lowly 1% last quarter . . . even after factoring in challenging exchange rates.

 

Furthermore, the company's drug portfolio has turned a critical corner. While the biggest Eli Lilly products are still fading quarter to quarter as patents expire and competitors step up, newer ones are now coming up fast enough to fill the hole. That's why we're not convinced by the rumbling about how the stock is down because anti-inflammation drug Taltz didn't show any sales momentum despite being approved for new indications recently. Taltz has been on the market since 2016 and isn't likely to become a mega-blockbuster in the time it has left. New drugs will do that.

 

Likewise, Apollo Commercial Finance (ARI: $18.96, flat this week but then down 1% overnight) hit its marks with $0.47 per share in profit, just enough to cover the dividend and maintain what is now a 9.9% yield. Revenue was a tiny bit weak at $85 million but the real story here is the way the company managed to hold up despite a miserable interest rate environment and $35 million in loan losses. With the Fed providing relief, we're cautiously optimistic that this is as bad as it gets, which means the dividend is safe for the foreseeable future.

 

Then there are more straightforward wins. The Blackstone Group (BX: $52, up 6%) started the day with a bang after reporting $1.15 per share in income ($0.58 of it distributable to investors) on a strong quarter for Real Estate in particular. We don't mind. We were ready to accept as little as $0.53 per share in distributable income, but this demonstrates that profit is back on the upswing at this stage in the Private Equity cycle. We love it.

 

Microsoft (MSFT: $137, flat) was huge and did everything it needed to demonstrate that it can get even bigger. Everything is running well. Cloud Computing came in closer to $12 billion than what management led us to expect three months ago. Revenue from Office is above $11 billion. Even Gaming and Hardware are moving in the right direction, contributing to total revenue of $33 billion, a little above our target. All that cash turned into $1.38 per share in profit, up a solid 21% from last year. And guidance keeps climbing.

 

But yesterday's real star was PayPal (PYPL: $97, down 5% this week but rebounding 8% to $104 overnight). Never mind the impact of writing down weak investments on Uber and other companies: revenue surged 19% to nearly $440 billion, a little better than our target, while profit edged up to $0.61 per share after all. We were willing to tolerate a significant year-over-year decline. Instead, the operations are as vibrant as ever. There's no global recession here. The future keeps getting better than the past.

 

With the reviews out of the way, don't forget Twitter (TWTR) this morning. But let's get ahead of the next 24 hours of reports we're expecting before of the weekend. At least one or two will move the market.

 

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Earnings Preview: Amazon (AMZN: $1,762, flat this week)

Earnings Date: Thursday, 5:00 PM ET

Expectations: 3Q19
Revenue: $68.8 billion
Net Profit: $2.3 billion
EPS: $4.58

Year Ago Quarter Results
Revenue: $56.6 billion

Net Profit: $2.9 billion
EPS: $5.75

Implied Revenue Growth: 22%
Implied EPS Decline: 20%

Target: $2,200
Sell Price: We would not sell Amazon.
Date Added: October 18, 2016
BMR Performance: 132%

 

Key Things To Watch For in the Quarter

 

From giant to giant, Microsoft's triumph set the stage for a strong quarter here. Admittedly, Jeff Bezos has once again pivoted to focus on revenue over profit, which means the top line will soar while the bottom line sags. That's all part of the long-term cycle Amazon has given us over and over.

 

Watch the Amazon Web Services number for signs of more intense competition (from Microsoft and others) taking the edge off both growth and profitability. Otherwise, it's all about seeing how fast the third-party Marketplace is expanding the company's already massive Electronic Retail footprint. If merchandise volume is accelerating and the closely watched Advertising business is getting traction, Bezos will win applause tomorrow night.

 

He's proved himself to be a master of financial engineering. Whatever result he thinks Wall Street wants, he'll provide. The only real question is whether he guessed the mood right. As long as he remembers his hedge fund origins, the odds are quite good.

 

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Earnings Preview: Visa (V: $171, down 2%)

Earnings Date: Thursday, 5:00 PM ET

Expectations: 3Q19
Revenue: $6.1 billion
Net Profit: $3.2 billion
EPS: $1.43

Year Ago Quarter Results
Revenue: $5.4 billion

Net Profit: $2.8 billion
EPS: $1.21

Implied Revenue Growth: 13%
Implied EPS Growth: 18%

Target: $200
Sell Price: We would not sell Visa.
Date Added: February 12, 2016
BMR Performance: 153%

 

Key Things To Watch For in the Quarter

 

Visa is always one of our best gauges of the continued health of the world economy. After all, credit card payment is a global phenomenon and for Visa in particular, overseas opportunities are where the growth is. Last year was a revelation with such a surge in earnings: 32% due to the acquisition of the European operations. Even now, with tougher comparisons, we're looking for robust growth.

 

Margins are everything here. As long as Visa kept ramping up transaction volume as fast as it has in recent quarters, there's going to be $700 million more revenue here than there was a year ago. The rule of thumb with this company is that a little better than 50% of incremental fee income will turn into profit. That's a spectacularly attractive business model. And since this is the time of year management likes to raise the dividend, we could get an additional surprise here.

 

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Earnings Preview: Ventas (VTR: $73, flat)

 

Earnings Date: Friday, 8:00 AM ET

Expectations: 3Q19
Revenue: $945 million
Net Profit: $119 million
EPS: $0.32
FFO: $0.94

Year Ago Quarter Results
Revenue: $936 million

Net Profit: $102 million
EPS: $0.28
FFO: $0.99

Implied Revenue Growth: 1%
Implied EPS Growth: 14%
Implied FFO Decline: 5%

Target: $72
Sell Price: $43
Date Added: November 11, 2016
BMR Performance: 37%

 

Key Things To Watch For in the Quarter

 

As always with Real Estate, Funds From Operations is what matters because that's the cash that drives the dividend. With Ventas, anything above $0.79 per share will ensure that management can make their quarterly commitment without dipping into reserves. While there may be a bit of year-over-year sluggishness there, we aren't worried here at all. If anything, we're eager to see how much year-over-growth shines through after the accountants do their best to take as much profit as they can off the table.