To The Moon

(Mint)

• The oil giant Exxon Mobil had a top and bottom line beat, and we like how this holding diversifies our portfolio.

• Sempra’s earnings were affected by the drop in natural gas prices, but we like the company’s investment in Texas as it looks to capitalize on the demand for AI data centers.

• Novo Nordisk was priced for perfection going into the earnings print, and the outlook adjustment gave a buying opportunity to those looking to add to their position.

• Pizza Pizza Royalty had a tough quarter, reporting some declining same-store sales, but it still has a good dividend payout.

• Pembina Pipeline Corporation’s strategic acquisitions helped the company report solid earnings.

$Exxon Mobil(XOM)$ : ExxonMobil reported a significant increase in net income for Q2 2024, with a figure of $9.24 billion, marking a 17.2% rise from the previous year. The company’s earnings per share (EPS) were $2.14, surpassing the forecasted EPS of $2.01. Total revenue for the quarter was $93.06 billion, which exceeded analyst expectations of $89.68 billion. Exxon Mobil reported substantially strong headline numbers despite oil being reasonably weak during the quarter. This is a relatively new position in our portfolio, as we received the shares after the company acquired our holding in Pioneer Natural Resources. Exxon Mobil reported 12.2% revenue growth as the growth in revenue and net income is attributed to higher sales and operating revenue, as well as record production in Guyana and the Permian Basin.

Exxon Mobil's cash flow numbers were good: The company generated $25.2 billion in operating cash flow and $15 billion in free cash flow. Management is looking to produce close to $5 billion in M&A synergies by the end of 2027. Despite the impressive second-quarter results, ExxonMobil's first-half profits declined 9% compared to 2023 due to lower refining margins and natural gas prices. Exxon shares have seen a nearly 17% increase since the beginning of 2024, reflecting investor confidence in the company’s performance. We like our stock position, and if it sells off, we will add to it as it diversifies our stock holdings with its strong dividend yield of 3.25%.

$Sempra(SRE)$ : Sempra Energy (SRE) reported its second-quarter earnings for 2024 with GAAP earnings of $713 million, or $1.12 per diluted share. The adjusted earnings were $567 million, or $0.89 (missed Wall Street estimates by $0.04) per diluted share, missing our fund estimate of $1.06. Compared to the same quarter in the previous year, the GAAP earnings increased from $603 million, or $0.95 per diluted share. However, the adjusted earnings decreased from the previous year’s $594 million, or $0.94 per diluted share. Total revenue for Q2 2024 was reported at $3.01 billion (missing Wall Street estimates by $444 million), which did not meet our forecasted $3.48 billion. The company reported a revenue decline of 9.7% as the Natural Gas segment underperformed with a revenue decline of 10%.

The decline in the commodity has been detrimental to the company's earning ability on the revenue side. However, on the cost of goods, the low gas prices reduced the cost by 56% due to lower prices. The company was approved for a $3 billion investment plan in Texas through its Oncor Subsidiary as the utility company looks to capture the demand for AI data centers. Progress is being made on its LNG project, which will be completed in 2025 as part of the Phase I plan. The net profit margin of the utility company was up to 23.7%, up from 18.1%. However, the free cash flow has been reporting cash burns as it invests in its LNG push and goes into Texas. Year-to-date on free cash flow, the company has burned $1.31 billion, much worse than $545 million last year. The company returned $781 million to shareholders through dividends and sharebuybacks up from $765 million.

Sempra reiterated its full-year earnings outlook, expecting earnings from $4.60 to $4.90 per diluted share. The company’s financial performance is well-positioned for continued growth, benefiting from ongoing electrification, economic development, and demand for safe, reliable, and cleaner energy. Outside of the Natural Gas segment, the quarter was alright. We like how management increased profitability despite the revenue decline. We added to our position as the stock declined 2%; we like the defensive qualities it adds to our portfolio, especially with its good % dividend yield of 3.20%.

$Novo-Nordisk A/S(NVO)$ : - Novo Nordisk A/S reported its Q2 2024 earnings on August 7, 2024. The company posted a net income of $2.89 billion, with a per-share net income of 0.66 cents (missed Wall Street estimates by $0.03).
This quarter’s financial results were below market expectations, decreasing the company’s stock value. The biotechnology company generated $9.97 billion (missing Wall Street estimates by $30 million). These headline numbers came below our fund estimates of $0.80 per share on earnings from a revenue base of $10 billion. The strong U.S. dollar vs the Danish Knor was a headwind for the company, but we thought high demand for Wegovy would still allow it to increase its numbers.

Despite the lower-than-expected earnings, Novo Nordisk experienced a surge in sales for its weight loss drug, Wegovy, showing a 55% increase compared to the same period in the previous year. This helped to increase the Obesity Care segment by 37% as the main revenue driver. The Rare Diseases segment had a revenue decline of 3%, and the highest demand was from North America, up 36%. Overall, the company experienced revenue growth of 24% year over year. The operating profit was up 19% on a constant currency basis, but operating margins took a ding as they declined from 45.4% to 43.3%. The margin erosion is due to increased costs to supply WeGovy in the United States as competition heats up with Eli Lilly. We like the management R&D spending, which increased by 79%. They want to return to the Rare Diseases segment to bolster its pipeline.

The company has adjusted its full-year operating profit outlook, anticipating growth between 20% and 28%. This was cut, and it spooked investors, but it's a good move for management as they look to ramp up production of WeGovy since it got approval to sell into China. Novo Nordisk remains confident in its growth prospects for the year's second half, expecting to scale up supply and effectively meet patient demand. The stock sold off 8% on the earnings news; we took advantage of the sell-off and added to our stock position.

$Invesco National AMT-Free Municipal Bond ETF(PZA)$ : Pizza Pizza Royalty Corp. reported its financial results for the second quarter of 2024. The company saw a decrease in same-store sales by 3.9% and royalty pool sales by 2.0%. Adjusted earnings per share decreased by 3.3% to $0.24 per share. Despite the decrease, the restaurant network expanded by five net locations during the quarter. Year-to-date highlights include a 1.3% decrease in same-store sales but a 1.0% increase in royalty pool sales. The adjusted earnings per share remained consistent with the comparable period from the previous year. The royalty pool of restaurants increased by 31 locations on January 1, 2024. The smaller segment, Pizza 73, had same-store sales that were up 3.3%, but the biggest revenue contributor, Pizza Pizza, had a decline of 5.1%.

CEO Paul Goddard commented on the company’s resilience and growth strategy, emphasizing the opening of over 25 new restaurants in Canada and two in Mexico. Royalty Pool System Sales for the quarter decreased to $155.4 million from $158.5 million in the same quarter last year. Sales from Pizza Pizza restaurants in the Royalty Pool decreased by 2.8%, while Pizza 73 restaurants saw a 3.3% increase in sales. For the six months, Royalty Pool System Sales increased by 1.0% to $304.3 million. The cracks in the consumer for Canada are starting to show from these results, which will prompt additional rate cuts from the Bank of Canada. The company’s stock crossed below its two-hundred-day moving average, trading as low as C$13.27.

The company is a royalty vehicle; we hold the stock for its passive income nature and how it churns out a monthly dividend of over 7%. The company reported a dividend above 100%, up from the high nineties in the same period a year ago. We will be looking to increase our hold as we average down our buying price in the stock.

$PPL Corp(PPL)$ : Pembina Pipeline Corporation reported record financial results for the second quarter of 2024. The company reported revenue of C$1.86 billion, reflecting growth of 30.5% thanks to the acquisitions made of the Aux Sable Assets. The company announced earnings of $479 million, which resulted in a per-share. equivalent of C$0.75. Adjusted EBITDA reached a record $1,091 million. The gross margins took a slight hit, declining from 46.3% to 43.9%, and management will get some of its acquisition synergies to improve its margins. The company’s net income margins were up 30 basis points to 25.8%.

Pembina Pipeline’s volume was up 11.4%, and we think it will be bolstered further as the company bolstered its Gas Infrastructure segment by purchasing 50% interest in WhiteCap Resources for C$420 million. Adjusted cash flow from operating activities was reported at $837 million, or $1.44 per share. Notable developments include closing a $3.1 billion acquisition and a final investment decision on the US$4 billion Cedar LNG Project. The Phase VIII Peace Pipeline Expansion was completed on time and under budget, marking the end of a multi-phase expansion to meet customer demand in the Western Canadian Sedimentary Basin. Pembina generated $872 million in free cash flow, up from $642 million. Pembina raised its full-year adjusted EBITDA guidance range to $4.20 billion to $4.35 billion, from the previous $4.05 billion to $4.30 billion. The 2024 capital investment program has been revised to $1.3 billion.

The company reported a solid quarter, and due to its consistent predictive earnings profile, it does well in an economic slowdown. The stock is part of Canada’s oil infrastructure, which will benefit from Vancouver's increased oil output to Asia.

Disclosure: Cresco Investments is long Exxon Mobil Corporation (XOM), Sempra Energy (SRE), Novo Nordisk A/S (NVO), Pizza Pizza Royalty Corp (PZA.TO) and Pembina Pipeline Corporation (PPL.TO).

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is intended for information, engagement & entertainment purposes only and is not to be construed as investment advice or direction. Investors are strongly encouraged to perform due diligence and consult with their financial advisor(s).