Julie Hyman, Brian Sozzi and Myles Udland break down some of Wednesday's pre-market earnings movers, including HP Inc., Dell, Gap and Deere.
JULIE HYMAN: Let's focus in on the markets though and specifically on some companies that reported earnings either after the bell yesterday or before the bell this morning and the moves that they are making. Now as people have been working from home, there's been a big surge in sales of PCs-- not all PCs but some kinds of PCs, notebooks in particular. Brian Sozzi, you are looking at the numbers from HP well as Dell.
BRIAN SOZZI: Yeah, Julie, both numbers within the consumer business, notebooks and printers at home, at least for HP, were very-- were quite good and an improvement relative, I think, to a lot of expectations on the Street. Same thing for Dell. Saw strong growth in Chromebooks, notebooks, you name it. They saw strength there.
Where both did see weakness again is those commercial lines of business. Those businesses tied to the office. You're still hearing a lot of those customers that would otherwise upgrade their giant printers or their desktop computers just pushing out orders.
Now, I did talk to HP CEO Enrique Lores. We'll show that video a little later on in the show. But while with Dell, Dell's CFO Tom Sweet telling me that cautious consumers, at least when it comes to commercial, those enterprises, those corporations, remains the name of the game.
MYLES UDLAND: You know, it's been so interesting to see. This, you know, pandemic really served as a renaissance for the personal computer. We saw it with Apple's results a couple weeks back. They had their best quarter ever for the Mac business. Their iPad business has also been quite strong.
And I think it also plays into a broader economic theme that we've talked about here and one that is worth keeping in mind as we get towards the holidays, which is that this is the goods recovery. People are buying stuff. That's really all we can do, right? We can do some things. We can go to some restaurants or leave the house for some things, but the services economy-- which, of course, was the entire story of the 2010s-- has pretty much been put on pause, broadly speaking.
And so we still have income. The aggregate national income is up because of, you know, things they've done with the CARES Act and enhanced unemployment benefits. And so all people really are able to do is stay home and buy things. They can buy goods, not the services.
Now, that's probably good for the holiday season. We'll kind of talk about that a bit more later on in the show. But it's been such an interesting dynamic to play out across sectors. You know, we just-- we're back a good, old-fashioned America. Buy cheap stuff. Fill your home with it because that's kind of the only thing we can do today.
JULIE HYMAN: Well, what's interesting, Myles, is that this morning we learned that not only were people buying stuff but maybe some companies are buying stuff too, or at least farmers and farming companies perhaps because we got Deere numbers also. And this has been one of the other areas of strength, which is kind of maybe counterintuitive, is that manufacturing's also been doing well, maybe because they're manufacturing all the stuff that we're buying at home but also companies that service other companies. So Deere is an example of that.
Sales did fall by 2%, which was just shy of estimates. However, earnings really beat estimates, $2.39 is what they reported. $1.49 was what analysts had predicted.
What's also interesting is the company is now more sanguine about what 2021 is going to look like, its fiscal year 2021. Worldwide agriculture and equipment sales are going to rise between 10% and 15% compared with 2020. And it just had updated that forecast back in August, and it was not as strong at that time.
Construction and forestry-equipment sales are going to rise between 5% and 10%. So it's interesting here that there too we are seeing some strength. Maybe-- who knows? Maybe it has to do with food production, which we've also seen a lot of demand for. At-home food consumption certainly has been doing well. So we are watching that one this morning as well.
And then finally I do want to turn it back to other stuff that we are buying at home, clothing, although maybe we're not buying it from this company. Gap came out with its earnings after the close of trading yesterday. I got to say on a personal level, Brian, I'm a Gap fan from way back and an Athleta fan still in particular. And Athleta doing really well last quarter, its best quarter ever, I think, in terms of comparable sales. The rest of the Gap, however, maybe not as much.
BRIAN SOZZI: Julie, I have a lot of thoughts on this. Unfortunately, that would be about a seven-hour show, and we don't have a lot of time here.
But let me just distill it down to why you're seeing the stock down about 10% in the premarket here. There is concerns on that they set-- the new Gap management team set expectations very high at a key late October investor event, and it's unclear how they will regrow sales at Banana Republic. Same-store sales down about 30% in the third quarter. Sales also too at Gap were down. It's good that they want to close stores, hundreds of stores by 2023, 50 Gap and Banana Republic stores, but they're going to have to grow the top line.
Now, I did catch up with Gap's new CFO Katrina O'Donnell after the earnings call last night, and she said she's going to get time to build out her model and prove out her model to Wall Street. They've assembled and she's very much part of a dream team of new executives at Gap. And I think they're going to really try to trim expenses and hope that the sales turn around. It's unclear.
I mean, this is a brand, guys-- Julie and Myles, you know this. The Gap brand has disappointed shoppers for well over a decade. Size, fit, product quality, you name it. They have their work cut out for them.
MYLES UDLAND: Yeah, a decade at least.
I would ask, Sozzi-- you flagged the Banana Republic line within the portfolio. And we should mention the stock was at $7 back in the lows in the spring, and so it has tripled from there. But you and I have talked about the need for Gap to close stores for several years now. Do they need to think once again about trying to get rid of the Banana Republic brand? Is there someone out there who might want that, or is the Gap we see today basically the collection of brands that this management team is going to ride with and try to figure it out with?
BRIAN SOZZI: This is their ride-or-die operating model here, Myles. You're going to have a Gap business where they're focused on cutting stores and growing profits. At least that was my takeaway from talking to O'Donnell. They're also looking to probably partner with the likes of other partners like Yeezy and that line and Kanye West. Old Navy, they'll try to open up stores, grow sales there. And Banana Republic, they'll try to change the business model from wear to work to wear from home.
JULIE HYMAN: And remember too there was talk about an Old Navy spin-off at one point, but that plan seems to have gone by the wayside as we we've seen some executive changes there.