>>> AT&T beats by $0.03, reports revs in-line; guides FY24 EPS in-line

AT&T beats by $0.03, reports revs in-line; guides FY24 EPS in-line
  • Reports Q3 (Sep) earnings of $0.60 per share, excluding non-recurring items, $0.03 better than the FactSet Consensus of $0.57; revenues fell 0.5% year/year to $30.2 bln vs the $30.5 bln FactSet Consensus.
    • 403,000 postpaid phone net adds with an expected industry-leading postpaid phone churn of 0.78%.
    • 226,000 AT&T Fiber net adds; 200,000+ net adds for 19 consecutive quarters.
  • Co issues in-line guidance for FY24, sees EPS of $2.15-2.25, excluding non-recurring items, vs. $2.20 FactSet Consensus.
    • Wireless service revenue growth in the 3% range.
    • Broadband revenue growth of 7%+.
    • Adjusted EBITDA growth in the 3% range.
    • Free cash flow in the $17-$18 billion range.
  • The Company continues to expect to achieve net debt-to-adjusted EBITDA in the 2.5x range in the first half of 2025.
  • On track to pass 30 million-plus consumer and business locations with fiber by the end of 2025.

>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • LRN +24.4%, VICR +11.2%, ENVA +5.7%, SEIC +5%, JBT +4.6%, VBTX +4.2%, PKG +3.9%, WPP +3.7%, DOUG +3.5%, TXN +3.4%, WFRD +3.4%, WEN +2.7%, QSR +2.6%, MTX +1.3%, RRC +1.2%, CX +0.9%
  • Gapping down:
    • ANRO -60.8%, ENPH -14.5%, VLRS -12.7%, MCD -7.5%, EDU -6.8%, VRT -6%, SEDG -5.3%, STX -5%, SBUX -4.9%, CSGP -4.6%, MMYT -3.6%, CSTM -3.5%, MANH -3.4%, HLT -3.4%, RHI -3%, EWBC -3%, TMHC -2.8%, LW -2.7%, DB -2.4%, HRTG -2.2%, CAPR -2.1%, RVMD -2.1%, BKR -1.7%, TSN -1.6%, RUN -1.6%, RPTX -1.4%, PRQR -1.1%, CMA -1%, VMI -1%

The Information : OpenAI, in Duel With Anthropic, Doubles Down on AI That Writes

OpenAI, in Duel With Anthropic, Doubles Down on AI That Writes Software

The Takeaway
• Anthropic’s AI recently showed it had an edge in coding over OpenAI’s by some measures
• OpenAI’s coding products could threaten GitHub Copilot, Cursor and other startups
• OpenAI has developed a tool to help its AI researchers, including by generating code

OpenAI’s ChatGPT has become a multibillion-dollar business in large part because programmers use it to write and check their code, fix bugs and translate code into different programming languages.

Now, facing competition from rival artificial intelligence startup Anthropic, OpenAI is putting more effort into improving the tools it offers for software programming. Some products or features under development aim to make it easier to use OpenAI’s AI for coding tasks inside major code-editing programs like Microsoft’s Visual Studio Code, while others aim to take on bigger software development tasks.

For instance, OpenAI has worked on a product to handle software engineering tasks that might take a human hours or days, and to automatically write and execute code for complex applications based on customers’ instructions, said a person who has heard from OpenAI leaders about it.

It isn’t clear when OpenAI would launch such a product.

Coding tasks became an early application of large language models developed by OpenAI, in part because AI-generated code can quickly be tested to see if it works or not. Microsoft’s GitHub unit used OpenAI’s LLMs to power an AI Copilot product, starting in 2021, that gives code suggestions to programmers while they type.

But the launch of ChatGPT in late 2022 provided a more widely accessible and free alternative that quickly gained popularity. OpenAI then convinced millions of programmers to pay for an upgraded version of ChatGPT—and get access to upgraded LLMs before GitHub Copilot did—that could respond to conversational requests for handling such tasks. Those capabilities powered what is now a subscription product on pace to generate about $3 billion annually.

AI firms also believe models that can generate good code also can generate better answers to other types of queries.

Now OpenAI is somewhat on its back foot in AI coding because rival AI startup Anthropic has become a formidable competitor. On Tuesday, Anthropic announced new software that can use computers the way humans do to take actions on behalf of people, such as moving a cursor, clicking buttons and typing text.

The Anthropic software can theoretically help programmers with tasks like building a website and improving the way it looks. OpenAI has been developing a similar product, known as a computer-using agent, for months but hasn’t launched it.

By some metrics OpenAI uses to evaluate models’ coding abilities, Anthropic’s models recently had an edge, according to a person who has talked to senior OpenAI leaders about the issue.

Anthropic co-founder Daniela Amodei recently told The Information that AI coding can’t fully replace engineers yet and needs “some coaching,” but its Claude chatbot has boosted its developers’ productivity to the point where Anthropic might alter its hiring plans. Anthropic has projected that by the end of 2024, it would generate revenue at a pace of $1 billion annually, or $83 million per month. That’s 25% higher than its original projection at the start of the year, though Anthropic shares a bigger portion of its revenue with sales and cloud partners like Amazon Web Services than OpenAI does with its cloud partner Microsoft.

Internal Research Assistant

OpenAI’s internal tools show the broad potential of its AI for coding-related tasks. The company has developed an internal research assistant tool to help AI researchers work faster, including by generating code for their experiments related to AI models, according to an employee. The product is popular internally, this person said, but it’s unclear whether the company would ever release it publicly.

The internal tool appears to be a step toward the development of AI that can conduct AI research on its own—a skill that requires far more than coding, including generating ideas for new experiments, and that OpenAI leaders have publicly said was likely to happen in the coming years.

A spokesperson for OpenAI declined to comment.

OpenAI employees have also considered developing a version of the company’s Canvas product—a new ChatGPT interface making it easier for users to draft documents and code—that can integrate with developers’ code repositories, according to a person who has spoken to OpenAI managers about the idea.

Such a feature would provide the AI with a better understanding of a user’s existing code base and the types of projects they’re working on, but users would likely still need to undergo the arduous task of copying and pasting their code in and out of the chatbot.

Eventually, OpenAI hopes to offer more general-purpose computer-using agents that can control customers’ computers to handle a broader range of tasks beyond writing code, similar to the one Anthropic announced on Tuesday. OpenAI has internally demonstrated a preliminary version of an agent that would use the user’s computer to do tasks like order food for delivery, according to a person who has seen the demonstration. An autonomous agent tasked with a coding or app development assignment might be able to consult web-based sources for help if it runs into issues.

Competing With Customers

The OpenAI products under development could threaten customers of its application programming interface business who sell coding assistants. Among them is Cursor, which uses OpenAI models for its product and has taken venture capital from OpenAI.

OpenAI’s future coding products may overlap with open-source coding assistants such as Continue or SWE-agent, which use LLMs to help users write code and fix bugs.

The new products also could compete with GitHub Copilot. Microsoft’s financial disclosures in July implied that GitHub Copilot was on track to generate $300 million annually from subscriptions. The company has used the tool’s popularity to sell customers on its other AI products, such as its suite of Copilot features for Office 365 apps like Word, Outlook, Excel and PowerPoint. In cases where customers buy multiple products, Microsoft has discounted the price of GitHub Copilot and other products.

Spokespeople for Microsoft and Cursor didn’t immediately respond to a request for comment.

LYST : Q3 2024 : LYST Index

The Lyst Index is a quarterly ranking of fashion’s hottest brands and products compiled by Lyst, the world's biggest and most intelligent fashion shopping platform. With 200m shoppers a year and the biggest data set in fashion, Lyst is a unique source of global fashion intelligence. The formula behind The Lyst Index takes into account Lyst shoppers’ behavior, including searches on and off platform, product views and sales. To track brand and product heat, the formula also incorporates social media mentions, activity and engagement statistics worldwide, over a three month period

FT : WPP returns to sales growth but warns over economic uncertainty

WPP returns to sales growth but warns over economic uncertainty
Advertising agency’s revenues rise in US and Europe but fall more than a fifth in China

WPP returned to net sales growth in the third quarter but the advertising agency warned of continued economic uncertainty and a tougher end to the year.

The London-based marketing group said like-for-like revenue when removing pass-through costs — the fees paid to external suppliers — was up slightly in the third quarter by 0.5 per cent to £2.8bn. 

However, WPP said this measure for the full year would be between 1 per cent lower to flat, warning that recent client wins would only start to benefit the company next year. Shares in the group rose almost 4 per cent to 804p, taking its market capitalisation to £8.7bn.

Revenue growth in the US and western Europe was offset by a fall of more than a fifth in China, which WPP blamed on client losses and “persistent macroeconomic pressures impacting both our media and creative businesses”.

UK revenues were flat for the quarter. Mark Read, WPP chief executive, said consumers were being cautious ahead of next week’s UK Budget, which had caused a similar slowdown in marketing activity. He said the long wait for a Budget widely expected to bring tax rises had “not helped”.

“It has been a little bit wait and see,” he said, adding that while “people are expecting tougher times ahead financially”, clarity on the Budget “will make things easier to see”.

Read said US consumers were also feeling pressure, especially in the lower income brackets, but that the country’s economy remained strong ahead of the election next month.

WPP this summer was forced to downgrade its revenue forecasts for the rest of the year, but Read said the “momentum” behind the company was better given recent successes in gaining and retaining clients.

“It’s an important first step to demonstrate the competitiveness of our offer,” he said, pointing to the adoption of AI in its businesses and services offered to clients.

He predicted that using AI tools would make WPP staff “20 per cent more productive”, but said the impact of the technology on job numbers was not clear as he expected that AI would also “make more work”.

“We are encouraged by progress during the quarter, but with recent new business wins primarily impacting 2025 and continuing macroeconomic pressures, our expectations for the full year remain unchanged.”

Analysts at Shore said the company had shown “a positive revenue performance, progress against strategic goals, client wins and retentions and a reiteration of full-year guidance”.

But they added that “WPP’s performance, although improved, remains some way below best in class” rivals such as Publicis.

The planned disposal of a majority stake in corporate public relations firm FSG Global to KKR is on track to close in the fourth quarter, with expected net proceeds of about £604mn

WPP, with its partner Bain Capital, is also looking to sell Kantar Media, a division of the Kantar market research group that runs the UK’s TV audience measurement system. The sale has attracted interest from a number of private equity groups, according to people close to the talks.

>>> Europe : Brokers Upgrades & Downgrades - 23rd of October 2024 V2(+)

>>> Up
* Adecco Raised to Buy at Deutsche Bank (+)
* Banca Mediolanum PT Raised to 13.10 euros at Banca Akros (+)
* Forterra Raised to Buy at Jefferies; PT 235 pence
* Freelance.com Raised to Buy at Stifel; PT 3.80 euros
* Lloyds PT Raised to 83 pence from 64 pence at Deutsche Bank (+)
* Munters Raised to Buy at Nordea
* Porsche Raised to Buy at Citi; PT 85 euros
* Scatec Raised to Hold at DNB Markets; PT 80 kroner (+)
* Tele2 Raised to Buy at DNB Markets; PT 120 kronor (+)
* Texas Instruments Raised to Buy at Summit Insights
* Tomra Raised to Buy at Danske Bank Markets; PT 165 kroner (+)

>>> Down
* Adidas Cut to Hold at HSBC; PT 260 euros
* Corticeira Amorim Cut to Neutral at Grupo Santander
* DNB Bank Cut to Hold at Arctic Securities; PT 250 kroner
* Gjensidige Cut to Hold at DNB Markets; PT 206 kroner (+)
* JM Cut to Sell at SEB Equities; PT 167 kronor
* Kempower Cut to Sell at SEB Equities; PT 9.50 euros
* KGHM Cut to Sell at Erste Group; PT 122.40 zloty
* Klepierre Cut to Reduce at Bank Degroof Petercam; PT 28 euros (+)
* McDonald's Cut to Neutral at Baird; PT $290
* Munters PT Cut to 160 kronor from 200 kronor at Carnegie (+)
* Pierer Mobility Cut to Sell at Stifel; PT 12.81 euros
* Starbucks Cut to Hold at Punto Casa de Bolsa; PT $98
* Volution Cut to Neutral at Davy (+)

>>> Initiation
* Comet Rated New Buy at Berenberg; PT 400 Swiss francs
* LISI Rated New Hold at TP ICAP Midcap; PT 25 euros (+)
* Meta Platforms Rated New Buy at Founder Securities; PT $640
* Oracle Rated New Sector Perform at RBC; PT $165
* SAP Rated New Outperform at CICC; PT 230 euros

>>> Call
* Akzo Nobel’s 3Q Miss Disappointing, Morgan Stanley Says (+)
* Trump Tariff Risk Priced Into European Equities: Barclays’ Cau (+)
* Comet Set for Strong Margin Expansion, New Buy at Berenberg
* Porsche Offers Positive Earnings Story, Raised to Buy at Citi

FT : Deutsche Bank to resume share buybacks after record third-quarter profit

Deutsche Bank to resume share buybacks after record third-quarter profit
Investment bank revenues rise 11% on strong fixed-income trading

Deutsche Bank is resuming share buybacks after the financial hit from a long-running shareholder litigation case proved smaller than feared and as the lender reported higher than expected profits in the three months to the end of September.

“We have now sought authorisation for further share repurchases,” chief executive Christian Sewing said in a statement on Wednesday morning, when Germany’s largest lender announced the highest third-quarter pre-tax profit in its 154-year history and confirmed it was on track to meet its guidance for 2024 revenues of “around €30bn”.

But Deutsche disclosed that credit losses in 2024 would be worse than it had warned in July, when it said provisions for sour loans for the full year would be “slightly above” 30 basis points of its loan book. It warned on Wednesday that loan loss provisions would rise to €1.8bn in 2024, compared with €1.5bn last year and equivalent to almost 38bp of its current loan book.

Deutsche in July halted plans for more share buybacks after taking a €1.3bn litigation charge tied to its botched acquisition of German retail lender Postbank more than a decade ago.

That move created temporary doubts among investors over the bank’s ability to meet a long-standing promise to pay out at least €8bn through dividends and buybacks between 2022 and 2026, 41 per cent of which has been delivered so far.

But after settling the case with 60 per cent of claimants over the summer, the bank disclosed on Wednesday that it had cut the Postbank litigation charges by €440mn. Sewing stressed that the lender remained confident it could “exceed” its €8bn capital redistribution goal.

Pre-tax profits in the third quarter surged 31 per cent year on year to €2.3bn. Investment bank revenue was up 11 per cent, driven by strong fixed-income trading operations and a 24 per cent jump in origination and advisory revenues.

Deutsche’s post-tax return on average tangible shareholders’ equity in the third quarter rose 0.3 percentage points to 7.6 per cent when excluding the one-off cut to the Postbank hit, still below its medium target of more than 10 per cent.

Excluding one-offs, Deutsche’s cost to income ratio stood at 69 per cent in the third quarter, against 72 per cent last year. The lender wants to bring down that ratio to below 62.5 per cent by 2025.

The bank’s common equity tier 1 ratio — a key benchmark for its balance sheet strength — was 13.8 per cent, up from 13.5 per cent in the previous quarter and well above the lender’s target of more than 12.5 per cent.

>>> Stoxx 600 Pre-Market Indications

  • DSV (DS81 TH) +3.1%
    • DSV Maintains FY Ebit Before Significant Items Forecast
  • Porsche (P911 TH) +1.6%
    • Porsche Offers Positive Earnings Story, Raised to Buy at Citi
  • Infineon (IFX TH) +1.4%
  • Evolution (E3G1 TH) +1.2%
  • STMicroelectronics (SGM TH) +1.1%
  • Wolters Kluwer (WOSB TH) +1%
  • Beiersdorf (BEI TH) -1%
  • Heineken (HNK1 TH) -1%
    • Heineken Third-Quarter Beer Volume Hit by Weak Americas Sales
  • Boliden (BWJ TH) -1.1%
  • Nokia (NOA3 TH) -1.1%
  • Frontline PLC (HF6 TH) -1.3%
  • Italgas (I10 TH) -1.7%
  • Deutsche Boerse (DB1 TH) -2.1%
  • L’Oreal (LOR TH) -3.6%

>>> TradeGate Pre-Market Indications

DAX:
  • Porsche (P911 TH) +1.6%
    • Porsche Offers Positive Earnings Story, Raised to Buy at Citi
  • Infineon (IFX TH) +1.2%
  • Porsche SE (PAH3 TH) +1.2%
  • Deutsche Boerse (DB1 TH) -2.1%
    • Deutsche Boerse FY Net Revenue Forecast Meets Estimates
MDAX:
  • Stabilus (STM TH) +1.9%
SDAX:
  • Evotec SE (EVT TH) +4.3%
    • Evotec and Bristol Myers Squibb Expand Proteomics Partnership
  • Mutares (MUX TH) +2.4%
    • Mutares Buys Business of Buderus Edelstahl From Voestalpine
  • Atoss Software SE (AOF TH) +2.1%
    • Atoss Software SE 9M Ebit EU45.7M Vs. EU36.7M Y/y
  • Schaeffler (SHA0 TH) +1.6%
  • SUSS MicroTec (SMHN TH) +1.4%
  • MLP (MLP TH) -1.1%
  • SMA Solar (S92 TH) -1.6%
  • flatexDEGIRO (FTK TH) -3%
    • FlatexDEGIRO’s Guidance Sits Below Consensus: Street Wrap