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Earnings: Applied Materials hit with supply chain woes, Intuit beats, Sweetgreen retreats after IPO, Foot Locker sinks

Yahoo Finance's Julie Hyman and Brian Sozzi discuss the mixed earnings reports moving stocks on Friday morning.

Video Transcript

JULIE HYMAN: Let's run through some of the individual stocks that we are watching right now. And we've been focusing so much on the chip business. I want to start with Applied Materials, which is a chip equipment maker. In other words, chip makers use this company's equipment to make their chips. The stock is down almost 4% here this morning.

A couple of reasons behind that. First of all, the company's profit came in below estimates. Sales were up 31%, but they, too, missed estimates. And Applied Materials is out with a forecast for sales in its fiscal first quarter of $6.16 billion. $6.45 billion is what analysts had been predicting. Profit forecast also coming short of estimates.

There's one reason and one reason only, it seems, for what is going on here. According to the president and CEO in a statement, Gary Dickerson saying, currently, our supply chain cannot keep up. And he says it's going to look that way, at least partially, Brian, going through fiscal 2022.

BRIAN SOZZI: Yeah, I'm not surprised. I'm not too emotionally connected to all things Applied Materials. I think the real trade is here that we continue to see time and time again, if you want to play semiconductors, it's AMD, it's NVIDIA. And I would even add GlobalFoundries to the mix here, too. Look what we saw yesterday, that big tie-up between GlobalFoundries and Ford. GlobalFoundries shares absolutely ripped higher here. That is a good-- that Ford business is a good business for GlobalFoundries to have.

JULIE HYMAN: Yeah, I guess so. I mean, at the same time, though, it is interesting to me because this has implications for the likes of a GlobalFoundries or some of the other foundries, right? If they can't get the equipment to make the chips, you know, are they going to be able to-- are they going to miss out on some of the revenue that they otherwise would have?

In the case of Applied Materials, they say that because of these supply shortages, the revenue would have been at least $300 million higher. So that's a lot of money. It's not necessarily that these guys are going to be hamstrung-- set back or damaged in some way. It's just a sort of lost potential, if you will, leaving money on the table because of not being able to fulfill these orders.

Moving on to one of the other movers that we're watching, Intuit, the tax software company, that company coming out, beating estimates. And those shares are moving higher, Sozz. You've been digging into those numbers.

BRIAN SOZZI: Yeah, you just have to give a hat tip here, I think, to Intuit CEO Sasan Goodarzi. And this guy is getting it done. Perhaps one of the most underrated CEOs out there, especially at least amongst that I've talked to here, about that Credit Karma business, fresh off the deal with Mailchimp.

And just in terms of raw performance of this business, you look at the QuickBooks online accounting business, sales up 32%. Credit Karma, record levels of sales. Now they're coming out here for their new fiscal year that's just begun. And I think resetting investor expectations higher yet again because of all these acquisitions. They have bought Credit Karma, Mailchimp here. I mean, the accompany is on a roll.

JULIE HYMAN: Yeah, on a roll, indeed. Look at that year-to-date performance of 86%. Obviously, pretty impressive here, and it looks-- is that a record for those Intuit shares? It certainly is a 52-week high, Sozz. I don't know if it's also a record, but my guess is that it is.

BRIAN SOZZI: Yeah., and I suspect it is a record. We'll double check that. But it's very well deserved. I mean, you're getting a company here that has a lot of momentum behind that QuickBooks business. And they are now just adding new layers of more profitable revenue with Credit Karma and the Mailchimp business. I believe Mailchimp, that deal closed on November 1 here. And now the Street has to catch up to the story.

JULIE HYMAN: Yeah, it looks like they're working on doing that.

BRIAN SOZZI: Working on it.

JULIE HYMAN: Yes, I want to check on one of the trending tickers from yahoofinance.com that, of course, was the big IPO of the day yesterday, talking about sweetgreen, the salad chain. We saw those shares pop by 77% yesterday. They raised $364 million. And as of the close yesterday, the value of the company was about $6 billion, including the value of employee stock options. Today, they're coming back down to Earth a little bit.

And a little bit of context I saw this morning-- this is the 14th IPO this year by US food and beverage companies. Of course, Chobani is going to be one. If it happens before the end of the year, that will make it number 15. Nine of those 14 are trading below their offering price. So maybe a cautionary tale for people who piled into that sweetgreen IPO yesterday.

BRIAN SOZZI: Yeah, hashtag #goodstat. Nice stuff there, Julie. I think sweetgreen, the response we saw yesterday, I think the Street can care less that sweetgreen is an actual restaurant company, and they sell really flavorful food. I think the Street is looking at them, at least initially, as a tech play that perhaps could license its new technology out to other restaurant chains.

Ahead of their IPO, Julie, remember, they went out and bought a company called Spyce Co, which is really doing some interesting things on automation of restaurant operations here that, theoretically, sweetgreen could license out for big bucks to other chains. And we asked the company's co-founder and CEO Jonathan Neman all about it.

JONATHAN NEMAN: I hearken it back to when the dishwasher came out. You know, that is automation inside of a restaurant that we could not live without. We believe that it's just going to go further and further into the kitchen and not replace humans, but elevate the job of our incredible team members in our restaurants.

BRIAN SOZZI: And Julie, I'm all for robots in quick service restaurants here. Give me my food, give it to me quick. I know it's probably inflationary to my wallet-- don't care. I love sweetgreen food. And if I have to use a robot to get it, I'm all for it.

JULIE HYMAN: Well, and something else about robots I think we should point out is that, you know, when there are complaints, for example, about automating certain jobs away, right, people don't want these jobs. Let's be clear about that, right? Like, this is one of the sectors that is having the most trouble finding people to fill those jobs. They're not great jobs. Like, can we just say that?

They tend to be among the lowest paid in the United States, not necessarily sweetgreen, but fast food jobs in general. And-- I don't know-- when's the last time you went to a fast food restaurant that did not have a Help Wanted sign hanging up on the front door, Sozz?

BRIAN SOZZI: Yeah, and the pay is sporadic and depending on what locale you're in. I know there are a lot of folks are now moving to $15 an hour, but the way a lot of these restaurant chains get around it, they just cut your hours. So maybe you're only working 25 to 30 hours a week here. And to your point, yes, they are tough jobs, tough jobs.

JULIE HYMAN: Yeah, so that's one maybe where automation is not necessarily a bad thing. And hopefully, those folks could migrate to other types of jobs. Let's talk Foot Locker as well, because that company reported its numbers. And those Foot Locker shares have been sinking. They're down 9% right now. The comp sales numbers really stood out to me. Comparable sales up 2.2%. Last year, at this time, it was a 7.7% gain. And the estimate was for 2.9%. You see there, it looks like that sort of the top and bottom line came in above estimates, but that comp number looks to be a disappointment.

BRIAN SOZZI: Yeah, and I think that's initially what the market is trading off here, that comp disappointment here and that slowdown. But there was a lot to like in this quarter. I mean, Foot Locker exited the quarter with a very significant and impressive cash balance. They, too, have been making acquisitions to boost their business ahead of next year. Also, too, in this inflationary environment, their gross profit margins were up 380 basis points over year over year.

Despite price increases from a Nike, despite price increases from an Adidas and other sneaker players, Foot Locker out here able to raise its profit margins. That's a good thing. I would be surprised if you see the Street come out here in the next week and downgrade Foot Locker shares, because the company, to me, looks fundamentally solid. And we'll ask Foot Locker CEO Dick Johnson all about this. We have a retail special next week. Looking forward to catching up with him.

JULIE HYMAN: Yeah, that is coming up on the 23rd at 4:00 PM Eastern. And I know you're going to be a big part of that. So that should be an interesting conversation. Just a quick point on the margin part of what you were saying, just to put some specific numbers on that, gross margin last quarter, 34.7%. That's better than the 33% estimated and up 4.7 basis points year over year. So that's percentage points, I should say. So that's an impressive number that they are expanding that, to your point. So we'll see what Dick has to say about all of that.

And finally, a quick check on the travel industry this morning. There has been some heightened attention this morning on a lockdown that has been proposed in Austria, as we are seeing COVID-19 cases tick up in Europe. We are seeing more countries reintroduce some more stringent regulations around that. So that is exerting some negative pressure on the travel industry this morning pretty much across the board.

We are also, by the way, starting to see cases tick up here in the United States, although we have not seen reintroduction, really, of restrictions here. But it may be sort of self restrictions, right, if people are not going to be traveling as much if we start to see the numbers go up. But we'll see how that plays out, even as the US is now authorizing boosters from Moderna and Pfizer for Americans.