By Silvano Grimaldi, CEO of the independent asset management firm Grimaldi & Partners AG.
Monthly Review
International equity markets ended October 2024 with slight losses.
Factors Supporting Markets
- Profit-taking: Investors took profits following a generally strong corporate reporting season for the third quarter.
- Uncertainty surrounding the US presidential election: The close race between Democratic candidate Kamala Harris and Republican candidate Donald Trump created uncertainty ahead of the 2024 US presidential election.
- Escalating conflict in the Middle East: The risk of further escalation in the Middle East continued to hang over financial markets like a sword of Damocles.
Stock in Focus
Schindler Reports Higher Profit After Nine Months Despite Lower Revenue
Lift and escalator manufacturer Schindler faced headwinds during the first nine months of the year.
Revenue and order intake declined, while profit increased.
Between January and September, revenue fell by 1.8% to CHF 8.38 billion.
The strong Swiss franc weighed on revenue, with foreign-exchange effects reducing sales by CHF 307 million.
Excluding currency effects, revenue would have increased by 1.8%.
Revenue from new installations declined, but Schindler compensated for this through growth in its modernisation and service businesses.
Revenue in local currencies increased across all regions except China.
Higher Profit
Adjusted operating profit, or EBIT, increased by 7.6% to CHF 987 million.
The operating margin improved from 10.7% to 11.8%.
This development was supported by:
- Improved operational efficiency
- Price increases
- A more favourable product mix
The adjusted figures exclude certain items, including restructuring costs and expenses related to the Building Minds programme.
Including these items, EBIT increased by 5.9% to CHF 945 million.
Net profit rose by 8.2% to CHF 748 million.
Tesla’s Profit Margin Exceeds Expectations and Shares Rise Sharply
US electric-vehicle manufacturer Tesla achieved a higher-than-expected profit margin, partly due to lower material costs.
Its gross margin reached 19.8% in the third quarter.
Analysts had expected a margin of only 17.3%, compared with 18% in the second quarter.
Adjusted earnings amounted to USD 0.72 per share, exceeding forecasts by USD 0.14.
Revenue for the period from July to September reached USD 25.18 billion, slightly below the expected USD 25.37 billion.
For the full year, Tesla forecast vehicle deliveries slightly above the previous year’s level.
Tesla stated that despite continuing macroeconomic headwinds and reduced investment in electric vehicles by other companies, it remained focused on:
- Expanding its vehicle and energy-product portfolio
- Reducing costs
- Investing in artificial intelligence projects
- Expanding production capacity
Labour and material costs per vehicle fell to approximately USD 35,100, their lowest level on record.
Tesla had previously stated that the prices of materials required for battery production had declined.
To stimulate vehicle demand, Tesla repeatedly reduced prices, placing pressure on profit margins.
Although Tesla’s margins remain higher than those of many traditional vehicle manufacturers, they are now significantly lower than at the beginning of 2022.
Several weeks earlier, Tesla presented its Cybercab robotaxi and a self-driving van with 20 seats.
These products form part of the company’s continued development of autonomous technology, including the Optimus humanoid robot.
Outlook – November 2024
Opportunities
- Resilient US economy: Despite signs of slowing growth, overall US economic conditions remain solid.
- Artificial-intelligence potential: Expectations that artificial intelligence could improve corporate productivity and create new business opportunities may support markets.
- Gradual interest-rate cuts: Markets expect central banks to continue lowering interest rates gradually.
- Positive seasonality: Historically favourable months for equity markets are approaching.
Risks
- Close US presidential-election result: A narrow or disputed result could increase political and market uncertainty.
- Escalation in the Middle East: The conflict could intensify between Iran and Israel.
- Rising long-term US Treasury yields: Higher bond yields could place pressure on equity valuations.
Performance Expectations
For November 2024, we expect a sideways trend in international equity markets.
Stock Recommendation: Schindler
This publication is provided for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument. Past performance is not indicative of future results.
