Earningspalooza 2019: Round 4

In this episode of Motley Fool Money, host Chris Hill and analysts Emily Flippen, Ron Gross, and Jason Moser discuss some recent earnings news, and boy, is there a lot of earnings to go around. Shares of Microsoft (MSFT -0.66%) were up a few percent, which doesn't reflect the massive growth the tech giant keeps putting up. Biogen (BIIB -1.53%) has big news for the company and, hopefully, humanity in general. Southwest Airlines (LUV 2.60%) was hit pretty hard by the 737 Max groundings, but is still managing to put up some nice numbers. Plus, updates from Amazon (AMZN -1.11%), Tesla (TSLA -1.06%), Visa (V 0.49%), eBay (EBAY -1.59%), Hasbro (HAS -0.38%), Twitter (TWTR), Hershey (HSY -0.47%), and more. And, as always, the analysts share some stocks on their radar.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Oct. 25, 2019.

Chris Hill: Earnings season in full swing. We're going to begin with Amazon. The e-commerce giant sold $70 billion worth of stuff, Jason, in the third quarter. But profits were lower than expected due to all the investments that Amazon's been making. Interesting to see, you look at the stock after hours, it was down nearly 10%. When the trading day opened, it basically stabilized.

Jason Moser: Having gone through the report and the call, I appreciate that the market has come to its senses. Maybe it's not an ugly quarter, if you mean to do it --

Ron Gross: [laughs] I'm going to write that down and use that one.

Moser: [laughs] Come on! Listen, you said it, revenue grew 24% for the quarter. $70 billion in sales. This is a behemoth. We know what they're capable of. Given the market opportunity, I don't understand how you can justify not owning this stock. I do understand the knee jerk reaction from the market when you look at the profitability picture. To compare margins from 2018 to 2019, and I keep track of these operating margins, operating margins in the North American segment fell from 5.9% to 3%. Operating margins internationally improved slightly. But Amazon Web Services were down from 31.1% to 25.1%. So, while they're bringing more on the revenue side, they're spending more on the investment side. That makes a lot of sense. They made this move to one-day shipping, they said it's resulting in more orders and more spending. We like to see that. We're seeing another lever coming to light here in the advertising. In line with that advertising, I was really impressed to see that the Fire TV franchise here, all of these devices that support this Fire TV platform, they've got more than 37 million active users worldwide. It's the No. 1 selling streaming media player family in the U.S., U.K., Germany, Japan and India. I had to double check this with Emily because it sounded like -- I don't use Roku, I have Amazon, but I know that there are a lot of people out there that use Roku. It's something to the tune of about 30 million active accounts. But it really speaks to the strength in Amazon's media platform. As we know, when you have all of those different levers, you can survive even the toughest of times.

Emily Flippen: Does anyone else feel like Amazon maybe played themselves a little bit with the two-day shipping thing and then one-day shipping, and now it's like, everybody is shipping for free in two days. Amazon's like, "Ugh, now we have to up the ante again!" I'm not surprised to see this come out of Amazon. Still a great company, like Jason mentioned, they have so many different businesses that are all extremely popular. But I think it's hilarious to see them spending so much money on shipping when we see big competitors, like Shopify, coming out and offering free two-day shipping to their customers. Obviously not retail customers, their customers are businesses. But fact being that, hey, this is something that we now expect. As consumers, we expect to get our products really quickly, and man, is that expensive!

Gross: No one ever talks about Amazon valuation. Is there ever going to be a price, ever, in the history of the human race, where someone's like, "Amazon's a little pricey, I think I'll pass right here"?

Moser: It's a fair point. We've been having that discussion ever since it was $100 a share. It is one of those unique companies. We could say the same thing about Netflix to an extent. I think that's where there are certain businesses where the future transcends any present-day valuation --

Gross: If you use the word optionality, I'm walking right out of here.

Moser: I didn't say it!

Hill: But if you go back to last week's show, when we talked about retail, and some of the concerns going into the holiday season, a quarter like this from Amazon, where they're warning a little bit on their holiday quarter, which is so important, that has a ripple effect throughout the industry.

Moser: There's no question. But by the same token, we say this quarter in and quarter out, this is really seeing the forest for the trees. Like Emily was saying, they set the standard. Now they're having to set a new standard that costs a lot of money. I would imagine in five to 10 years, we'll be having this discussion again. But investors seem to be winning all along the way.

Gross: One more quick question. Are drones still a thing here? Are they serious about it?

Moser: Yeah. They're getting ready to launch.

Flippen: We had a member event not too long ago, and for a reckless prediction for what's going to happen in six months, I said, "We're going to start seeing drone deliveries get rolled out." And there was an audible [groan]. [laughs]

Gross: That's a bold prediction. 

Flippen: It was admittedly a bold prediction. But we see a lot of companies making headways into it. I think the question is not a matter of if, it's a matter of when. Maybe six months is being aggressive. But look, Amazon's been trying to do this for a long time now. I really do think Amazon's going to be the first ones to roll out with a nationwide drone delivery.

Hill: Shares of Microsoft up a bit this week after first quarter profits and revenue came in higher than expected. Ron, Microsoft's cloud division continues to get it done. The trillion-dollar business just got a little bit bigger.

Gross: Up 37% this year. The company keeps on impressing me. Better than expected results. Revenue up 14%. Intelligent cloud revenue up 27%. But the Azure business in particular up 59%, as you said. Now, to some, that's not good enough because growth is decelerating from the 60s, it was in the 75% range. But for a business this size, 59% is still extremely robust. Nothing for them to hang their heads about. Even their personal computing business was up 4%. Remember that little division of theirs? The Office business with LinkedIn was up 13%. Really strong. Profits all up 24%, as you said, for this approaching $1.1 trillion company.

Flippen: I noticed Ron didn't mention gaming in there at all. What happened to Xbox? I remember for a long time, that was Microsoft's thing, right? It feels like, they have all these other great businesses. Xbox has been really been kind of dragging down as we've seen especially Nintendo Switch come out, all these different ways to play. I think it's interesting. For a long time, it seemed like Microsoft was really innovative with Xbox, and that's just really died. 

Gross: Yeah, I think that's fair. It wasn't working to the extent that they wanted it to work, so they emphasized the more important part of it, which is now cloud. 

Flippen: [laughs] How dare you? 

Hill: I don't think I heard anything you said after you said the word Azure. [pronunciation discussion]

Gross: Azure?

Hill: Azure.

Gross: Alright, come on! We'll cut that out in post-production.

Hill: [laughs] Tesla delivered a profit in the third quarter and shares rose 22% this week. Emily, Tesla also said their new factory in Shanghai is ahead of schedule.

Flippen: That's the first time we've ever heard Tesla say anything's ahead of schedule, so I think that's probably news to investors ears to justify the jump itself. But yeah, the stock shot up more than 20% last time I checked, at least, because they posted a surprise profit, a profit of over $300 million when they were expected to lose over $70 million. That's wonderful for Tesla's shareholders. More importantly, in my opinion, they expect positive quarterly free cash flow from here on out, which is telling because that company has obviously had big issues with cash crunches in the past. Lots of investor excitement, mostly over their new semi-truck, which is supposed to roll out in 2020. I won't get into that again, but it's rumored to be able to hold the weight of 20 T-Rexes. Still hanging on there.

Gross: They're dead, aren't they?

Hill: Wait, we're measuring in T-Rex these days?

Flippen: You have to get up to speed, Chris! It's a lot. I think the most popular truck right now can haul one T-Rex. So, 20 T-Rexes, for context, is a lot of weight. We'll see if Tesla really gets there. But this quarter is definitely a good quarter. There are still lots of bears who are saying it's not sunshine and rainbows for Tesla anymore. Revenues were down quarter over quarter and year over year. Same with operating cash flow. So, it's fair to say that their increase in sales is actually not as profitable for them as they're selling more of their lower-end models, less of the really expensive models. But it'll be fun to see what they do in China. 

Gross: They pull off a good quarter, and it still doesn't resonate with me because Musk has such little credibility in my mind that I always picture --

Flippen: We're going to get some hate there.

Gross: -- some behind the scenes thing going on here, where he's like, "We have to pull back on expenses just for the next month because we've got to show Wall Street a profit." That's not the kind of CEO I would want running my companies that I'm invested in. So, for me, they can sell as many cars as they want, it's past.

Moser: Ron's essentially saying less hyperbole, more Hyperloop, right?

Gross: There you go!

Hill: Visa closed out the fiscal year in strong form. Fourth quarter revenue was higher than expected. Jason, Visa also increased its dividend to the tune of 20%.

Moser: Well, steady as she goes, right? I think it is difficult to find the barricades for owning this stock. This was another quarter that reemphasizes that point as far as I can see it. From a numbers perspective, revenue was up 13% for the quarter. They, as you mentioned, raised the dividend 20%. They returned $2.7 billion to shareholders in the quarter in repurchases and dividends. The total transactions number, these are Apple balance sheet style numbers, 36.4 billion total transactions, up 11% from a year ago. Payments volume up 9%. Cross-border up 7%. They continue to make some small bolt-on acquisitions. Remember, we talked about this earlier on in the year, this acquisition of Earthport, which is giving them more exposure to that cross-border payments industry, which is a tremendous opportunity. We're seeing investments from Visa and MasterCard, and even PayPal, for that matter. A lot of reasons to like what's going on with Visa. Obviously, that toll booth model we love so much.

The regulatory risk is always there capping those fees that they might be able to collect. But as we move more and more toward a society that depends less on cash, this is one of the businesses that's poised to win. 

Hill: Increasingly, as we look at these companies, and we focus on payment volume, is there any concern that if we do have a recession at some point in 2020, that dramatically scales back for, whether it's Visa and MasterCard, or someone else?

Moser: I think a time ago, perhaps that could be a concern. I think that that volume has gone up considerably in a short period of time. So I think they're able to make up for a little bit on the volume side. But really, that's just where you look to the leaders in the space as the companies that will be more protected. Whether it's Visa or MasterCard, I would even lump PayPal in there at this point as well, they should be well-insulated. 

Hill: Shares of Biogen up 30% this week. The biotech company posted some good third quarter results, but it was Biogen's separate announcement about a potential treatment for Alzheimer's disease that had the stock on the rise. Ron, what's the story?

Gross: So interesting! Drug comes back from the dead. Potentially huge for Biogen. But really, huge for the world. In March, the company said a major trial for the drug -- let's all pronounce this together, ready? -- Aducanumab had been a failure, but they kept collecting data. And as the data rolled in, they saw a positive signal from the group that was getting the highest dose of the drug, which is potentially really exciting. It helps patients with cognitive function and their ability to perform basic tasks. Now, Biogen is going to actually ask the drug regulators to approve the drug. That's going to take some time. It takes a year, two years plus. But they're pretty sure that the signals that they're getting are going to be the first drug to really help Alzheimer's patients. Very huge for Biogen. Huge for sufferers all over the world. Could be potentially very exciting. Let's temper our enthusiasm just a bit because they've got some hurdles to go through here. These approvals are not so easy. But if this goes through, it's really a humongous thing. 

Hill: I want to come back to the stock in a second. But first, I'll preface this by saying, Ron, I know you're not an expert when it comes to biotech companies. 

Gross: Thank you for that!

Hill: But I'm curious, how unusual is this procedure? The idea that any company, whether it's Biogen or someone else, would essentially shut down a trial, but still collect data, and then come back and say, "Actually, we want to give this another shot"?

Gross: I think it's relatively common that they do keep collecting the data, for sure, as it comes in. And they do analyze it as well. It's rare, however, that what they see subsequent is different from what they saw initially. I should say, it's really because the people getting the highest dose of the drug is where they saw the signal here. And perhaps the initial data was not of those people. This is pretty rare. I think that's why the regulators will probably actually scrutinize this even more than normal. But maybe, because it's so important, because it's Alzheimer's related, we'll actually get a fast track of some sort.

Hill: Shares of Biogen had been down for the year. This week erased that loss completely. When you look at shares of Biogen, is this an expensive stock? Or does this still have room to run?

Gross: Even though it's a biotech or a pharmaceutical drug company, you can't think of it as one of these early stage biotechs that are pre-revenue. 

Hill: It's a $50 billion company.

Gross: Extremely profitable company. Now, companies like this actually don't trade at very high multiples. Biogen is around 9X earnings right now. The average company trades around 11X. So, maybe it's a little cheap relative to the peers. But these companies don't get the high multiples. 

Hill: eBay's third quarter profits came in higher than expected. So did overall revenue. Emily, you tell me. If the headline for eBay's quarter was so good, how come eBay's stock fell 10% this week?

Flippen: eBay is no Aducanumab. 

Gross: [laughs] Aducanumab!

Flippen: Aducanumab! So, to say that they beat expectations, well, expectations were pretty low. Revenue growth was actually flat year over year. I think the stock's down largely because earnings per share was down 50% year over year, net income's down 57% year over year. And the only reason it's not more is because the company's spending money on share buybacks. The core marketplace platform has been lingering for a while now. What's interesting with eBay is that they have really strong activist investors on their board, representatives from Elliott Management and Starboard Value, they've ousted the CEO recently, put in a new CEO. It looks like they're pushing to divest this StubHub and classifieds businesses. Those are the only businesses that are growing within eBay. They think they can get eBay... I don't want to say back to its glory days. I'm not sure if it's ever going to be back to glory days. But they're thinking that they can extract more shareholder value with those businesses divested. It's going to be interesting to watch to see if that happens in the near future.

Hill: As we head into the holiday quarter, it's interesting to me that eBay, at least from an advertising and promotional standpoint, is positioning itself as almost like Etsy. They're positioning themselves as, "This is the place where you can get stuff that you can't get on Amazon or Walmart, Target," that sort of thing. I'm assuming that's not working so far, if the other parts of the business are the ones that are actually growing.

Flippen: Yeah, it's actually really interesting you draw that comparison, because a lot of people who were selling on eBay have actually moved over to Etsy. That's part of what's contributed to Etsy's amazing growth. It's not to say that eBay is dead in the water, but it's definitely not had the type of growth that Etsy has seen. Even their GMV on the eBay platform has fallen 5% year over year. They need to go back to those days of getting growth. The problem is, all their sellers and most of their customers have left for bluer pastures --

Moser: Greener.

Flippen: Greener pastures. 

Gross: Bluer skies and greener pastures.

Hill: I think at this point, eBay would settle for even just bluer pastures. Speaking of eBay's glory days, PayPal. Third quarter profits and revenue came in higher than expected. PayPal's stock down a bit from its highs, Jason, but payment volume is growing. The Venmo division, also growing nicely.

Moser: There are probably a lot of folks out there wondering if they missed the boat on this one. I would say no. 

Hill: [laughs] Part of me was hoping you'd say, "Yeah, you have. Sorry, everybody."

Moser: I'm going to be a little bit more glass-half-full here for you folks out there. We like businesses that generate those repeat purchases, repeat transactions. Clearly, this is one of them. They have what could be a massive potential tailwind forming here in the coming decade. But let's look at some of the numbers here that matter most for the company. Added 9.8 million new active accounts. Total active accounts now up to 295 million. That was up 16% for the quarter. 3.1 billion payment transactions, up 25%. Total payment volume up $179 billion flowing through that network. That was up 27%. To your question on Venmo, that part of the business drove more than $27 billion in total payment volume, up 64%, on a $400 million annual revenue run rate. So that is becoming an actual part of the business now, which is exciting. 

Back to that tailwind. If you remember, we talked about this a little bit ago, the GOPAY acquisition that they recently made. That's the Chinese payment processor. That is going to open them up to the Chinese market and processing payments and transactions in China, which has been a very difficult hurdle for a lot of these payments companies to clear. There are a number of reasons why PayPal was considered. They certainly have made a lot of innovation in the space in a short amount of time. Spent a lot on compliance and risk management. I think the benefits were seen there and consequently, PayPal appears to be moving in a very similar direction as Visa, which is good. 

Hill: It's 4X the size of eBay. It's been only four years since it was spun out from eBay. 

Moser: It's pretty amazing! When you look at the performance -- we'll talk more as these other companies announce -- the payment sector is so nice. It's just an attractive space. 

Hill: Third quarter profits for Southwest Airlines came in higher than expected. Emily, Southwest getting it done despite the fact that it is the largest operator in the U.S. Boeing's 737 Max, and those grounded planes cost them more than $200 million in revenue this quarter.

Flippen: Not only are they the largest operator of Boeing 737s in the world, but they're a launch customer for Boeing 737 Max. So Southwest has definitely been hit the hardest out of all the airlines given this fiasco we're seeing with the 737 Max. But despite all of this, and despite having to cancel all of their Max flights through January 2020, they actually had a pretty great quarter. Costs were up thanks to that grounding, but fuel costs were lower than expected, and more importantly, their revenue per available seat -- the RASM -- was up 4% quarter over quarter.

Gross: [laughs] RASM, I love that!

Hill: Gary Kelly, the CEO at Southwest, he just came out and said in an interview this week he is not happy with what's happening at Boeing. You mentioned the fact that this is going to continue at least until January of 2020. Then, once the 737 Max planes are cleared, it's still going to take a couple of months to get all of the pilots and crews trained up on them. Are we going to be sitting here six months from now talking about this issue continuing for Boeing? If we are, I'm starting to believe that for all the talk that we've had of, "It's really hard to switch planes," with every passing quarter like this, Airbus gets closer and closer to supplying planes for businesses like Southwest.

Flippen: Let's not forget that there's some political reasons why Boeing is better positioned in the U.S., at least with U.S. operators vs. Airbus. A lot of those geopolitical concerns, Airbus having a lawsuit recently against Boeing because of the fact that both the E.U. and the U.S. were illegally subsidizing both Airbus and Boeing. That competition has been fueled for a while. 

I think Gary Kelly is more upset because it's derailed what is Southwest's growth strategy. Before all this happened, we saw Southwest making aggressive expansion plays, moving into areas like Hawaii, spending a lot of money to expand their fleet, to expand their areas of service. After this, they're canceling flights. They've canceled Newark recently as a location that they're going to be flying to. So, it almost feels like they've been stifled by this. Meanwhile, Delta is coming out and they're expanding to Latin America. They have no Boeing 737 Max planes in their fleet at all. So, I wonder if the concern is really just the fact that Gary Kelly's over here like, "Gosh, I laid this great plan, and then Boeing's going to come along and ruin it for me!"

Gross: Does Southwest have recourse in terms of a lawsuit for Boeing, or business interruption insurance? Are they going to recapture some of this?

Flippen: Yes. It's likely that Boeing will have to pay something to Southwest. We don't know what, but it's likely that they'll see some windfall from this.

Hill: Rough week for Hasbro. The toy maker's third quarter profits and revenue both came in lower than expected. Shares falling close to 25% this week. Ron, was it that bad? 

Gross: Not that bad, but the stock is still up 16% this year, so that tells you how Hasbro had been doing prior to this. Weaker than expected third quarter profit, largely blamed on tariffs that haven't even happened yet, which is interesting. Uncertainty over the tariffs forced retailers to cancel or delay orders. Shipping and warehouse costs jumped as a result. Revenue was down as well. The company sources more than two-thirds of its products from China. They tried to calm folks down by saying they have a plan in place to reduce that to 50% by 2020. But still, it was a quarter that was interrupted by the unknown. Right now, 10% tariff on toys set to take place on December 1st. If that does occur, the company has warned that price hikes will ensue. It's an interruption in Hasbro's strategy. They've been making some nice acquisitions, and their partnership with movies like Star Wars, Avengers, all those folks, had been going quite well. So, once again, we see macro-economic factors here.

Hill: I was going to say, normally when we look at the toy makers, we look at their individual divisions. How are the board games doing, how are the toys? As you said, their partner sales division, when you look at the partnerships with Marvel, the partnership they established a few years ago with Disney, taking that from Mattel, continues to pay dividends for them.

Gross: Real strong. Partner brands up 40%. That's really strong. The bread and butter, the Monopoly, the Nerf, the Play-Doh, not so strong, down 8%. Their gaming revenue, Dungeons & Dragons was strong, but the rest were weak, down 17%. So, it's really the partner brands and their licensing division that are the stronger pieces of the business. 

Moser: And don't forget, this Disney+ product I think is going to give them the opportunity to really capitalize on a lot of that new content that's coming out there. It's a bit further down the road perhaps. But no question there's an opportunity there.

Hill: Shares of Twitter down more than 20% this week after disappointing third quarter results. Jason, Twitter's management basic came out and said, "Don't expect things to get any better in the next three to six months." That's how I interpreted what they said.

Moser: Well, yeah, it was close to that. Technically, it's still been a decent enough year for the stock, even after the sell-off. The reaction was a double whammy of a stock that was clearly overvalued, now that we know it was based on an incorrect set of assumptions, and then missing all of those different expectations. The market's never going to receive that very well.

My question with Twitter, and this is becoming more and more a concern for me quarter in and quarter out, is what's the next act for these guys? We know what they do, and we know how they make their money. This is an ad play at this point. But what's next? What are they trying to do? They tried to make investments in video and entertainment. For all of its problems, you can look at something like Snap, for example, and say, well, augmented reality, that is their NorthStar, that's what's next for them, whether they can pull it off is another question entirely. What is next for Twitter? I don't know yet. I don't think many of us do. And that's becoming a problem.

On the user side, they're doing OK. They grow users, they're engaging. But to your point there about going into the following year here with some problems still, there was noteworthy language in the letter. In one paragraph, they talked about the successes in product improvements. In the very next paragraph, they talk about all of these challenges and profit issues. They sort of conflicted with one another. I think it's all boiling down to a decent user experience, but they had some bugs in the system that were not helping them utilize their advertising technology very well. That results in less return on the advertising. And that's a problem for Twitter because it's just an advertising play.

I think, until they can answer that question, what's next, we likely see Twitter trade in this range. At least now, there's a fundamental business that underlies everything, we can value the stock. But until they answer that question, it's hard to understand why it goes to that next level.

Hill: And it's a good point because there are different businesses that we look at from time to time, and we see companies making investments, and when they don't pay off in the first couple of years, we start to ask, "Well, should they still keep throwing money at that?" As you mentioned, Twitter made a pretty decent investment into Periscope and video. It seemed like maybe that was the next big thing for them. Maybe we give them partial credit for stopping that. But at the end of the day, as you said, we're left with this business that seems to be doing just fine, but that's all that it's doing, is just fine. Unless they come up with a second act, it's hard to make the case that this is a stock worth buying.

Moser: Yeah. At the right price, probably everything's worth a look. But to the video point, yeah, that was the buzzword for a long time. It's not to say that they've just cut off video. They've done good things with video. It's created more engagement. That's ultimately what you need for platforms like this. But yeah, I wonder, maybe we've seen the heyday for social here. It seems like these companies are coming under a lot of scrutiny. We're asking that question, is the world better off with them or without them? It seemed, early on, it was clearly better with. Now, I think we could sit here and debate this one all day long. I'm not so sure the world is better off with all of these social companies. It seems to ruffle a lot of feathers. But, hey!

Flippen: At the same time, the reason why we're seeing them come under pressure is because they're so pervasive, and they're so popular. So, it causes us to have conversations about what that means in terms of data, privacy, protection, security, all of these conversations that we didn't have to have before. Sure, they're hard conversations, but they're necessary conversations, because these products have increased transparency. And to the extent that we hate things like Facebook and Twitter, the world's a lot more accessible today than it was 10 years ago. There's something to be said for being a pervasive platform that increases accessibility, responsibility, and transparency.

Moser: Yep. Just because we know something's bad for us doesn't mean we're not going to do it. The world's still full of hundreds of millions of smokers.

Hill: Last thing and then we'll move on. You mentioned Snap. Are you surprised at all at the rise of Snap over the past year or so? It's now at the point where Snap's market cap is only a few billion dollars lower than Twitter's.

Moser: I don't know that I would say surprised. I think they still have a lot to prove in actually becoming a fundamentally sound and sustainable business. But Spiegel talks a pretty good game. I think he's starting to learn, at least, how to run a public company. It's also coming off of a very low base.

Hill: Shout out not just to our man behind the glass, Steve Broido, but joining him this week, Ken Renicky. 

[all clap]

Longtime listener. Stock Advisor member. And he brought peanut butter whiskey from California! 

Moser: Hey, now!

Gross: Love it!

Hill: Which is a thing I did not know existed. I can't be more excited for the end of this show. [laughs] 

Moser: We're going to find out about it.

Hill: Also, shout out to Daniel Shelton, longtime listener in Sacramento, California who writes, "My wife loves your show. Could you wish her a happy birthday?" Rachel, Happy birthday!

Gross: Happy birthday! 

Flippen: Happy birthday!

Moser: Happy birthday indeed!

Gross: All the best!

Hill: Thanks for listening to the show! 

One more earning story we get to the Halloween candy, but it ties in nicely because we're talking about Hershey. Hershey's stock, a little less sweet this week, Ron, after third quarter profits came in lower than Wall Street was expecting. Still, shares of Hershey up around 40% over the past year.

Gross: Not bad at all. Now, his isn't a high-growth company. This is Hershey. We have sales up about 2.5%, adjusted earnings up about 4%. It's a steady grower. But it's doing a fine job. As you mentioned, stock really strong this year. Most of the goodness came from their move into healthier snacks, and they were able to put forth some price increases. That led to a doubling of earnings relative to sales. That was nice to see. Company continually pays a dividend, 2.1%. They're on an acquisition spree. They bought things like SkinnyPop popcorn, the Pirate's Booty folks, ONE Brands, which is a company that makes healthier snacks. So, the company's doing a great job. It's just not that exciting in terms of a growth story.

Hill: They're buying healthy snacks? What are they doing? Talk about throwing bad money at something. You're Hershey's! Be proud!

Gross: ONE Brand makes low-sugar, high-protein nutrition bars in flavors such as chocolate chips and peanut butter pie.

Moser: I had some Pirate's Booty a couple of weeks back.

Gross: It's good!

Moser: It's still pretty good. 

Gross: It holds up.

Moser: I think they could go a little bit heavier on the cheese, but all in all, it was a nice snack.

Hill: According to the National Retail Federation, Americans will spend an estimated $2.6 billion on candy this Halloween. And let's face it, not all of it is going to be money well spent. Before we get to the stocks on our radar, overrated/ underrated Halloween candy. Start with the overrated. Ron, what's overrated in terms of Halloween candy?

Gross: I'm pretty sure I'm right here: Three Musketeers. Nougat and just nougat and just nougat. Enough with the nougat.

Moser: [laughs] Emily's head is shaking --

Hill: Emily is shaking her head vigorously.

Gross: I don't care if you put in the freezer, I don't care if you like it warm, enough with the nougat!

Hill: Emily Flippen, rebuttal.

Flippen: If I could exclusively eat one sort of candy, it would probably be nougat! [laughs] I love that stuff! You know what I think is overrated? Any non-chocolate candy, in particular Skittles. Get rid of the Skittles. I hate them. They're low-class M&M's.

Gross: Wow!

Hill: Straight fire, Jason. What do you think? Overrated?

Moser: You know what, I love Snickers, but if I get one more frickin' almond Snickers, I am going to write a letter to someone venting my frustrations. You just don't mess with a good thing! And I feel like that's what people have done here.

Hill: I have to agree with Emily on the Skittles there, absolutely. Underrated candy? Because, let's face it, some of it is underrated. Ron, what do you think?

Gross: I want to say Fun Dip just because I want to talk about Fun Dip, but I'm not going to do that, because it's not underrated. Baby Ruth, for sure. It's the finest candy --

Moser: What?!

Gross: -- except for maybe Take Five, with the pretzel. But, Baby Ruth is delicious.

Moser: Are you kidding me?

Hill: Baby Ruth, in my opinion, is the reason we have the quote-unquote fun size candy. I like Baby Ruth if it's in a smaller size. If you give me a regular --

Gross: A big, honkin' Baby Ruth? No good.

Hill: Not interested.

Moser: The best thing we've gotten from Baby Ruth is Caddyshack. That's it.

Hill: Emily?

Flippen: I was going to say Butterfingers, but now that Ron brought up Fun Dip, I remember when I was a kid, my parents used to bribe me to go to soccer practice by promising me Fun Dip. And man, as an adult, I still love that stuff!

Hill: Wow!

Gross: With the Lick a Stick?

Flippen: With a Lick a Stick, or I use my finger. 

Hill: Jason Moser?

Moser: I really wanted to go with Charleston Chew here. Those bite-size Halloween candies are delightful. But in our production meeting, I feel like Sugar Daddies. I have to go with Sugar Daddies. I like the caramel sweet nature of a Sugar Daddy. You don't see them that often. Don't eat them with braces. Have your dentist's number on hand. But, yeah, Sugar Daddies are good.

Hill: By the way, I don't know who makes that candy, but you have to like the fact that they're leaning. They're like, "No, it's sugar."

Gross: Sugar Babies.

Moser: And they've got Sugar Babies! 

Hill: You wouldn't catch them going the healthy route. Let's go to our man behind the glass, Steve Broido. Steve, before we get to the radar stocks, you have thoughts on candy, right? 

Steve Broido: Of course. Strong thoughts. 

Hill: Underrated, overrated?

Broido: Overrated, I'm going Milky Way. Given the choice, I always go Snickers.

Gross: Correct.

Broido: Underrated is Chuckles.

Gross: Chuckles? Are you from the 1930s?

Moser: Are they like Mike and Ike?

Broido: Yeah, it's a gumdrop kind of candy.

Gross: Yeah, it's drops. Little dots.

Broido: They sell them at Cracker Barrel.

Hill: OK, you just answered my question. I was going to ask you, have you ever seen Chuckles outside of a movie theater?

Broido: I see them at Cracker Barrel. Chuckles are a good time.

Hill: Alright, let's get to the stocks on our radar. Ron Gross, you're up first. What are you looking at this week?

Gross: I'm going to go with a stock we talked about earlier this week on YouTube Live. Plug for YouTube Live. It's Rollins, ROL. Provide pest and termite control. Stock has not done much this year, but it did have a strong week. But since it was weak earlier in the year, there's plenty of room here, I think. Steady performer. Increased revenue and earnings every quarter over the past decade. They grow organically and through acquisitions. More than 80% of sales are recurring. Raised their dividend every year for the past 17 years.

Hill: Steve, question about Rollins?

Broido: Do we really need these people? Can we just do this stuff ourselves? It seems like they're spraying chemicals. I can get chemicals. What's the value here?

Gross: I don't know, you can't be messing around with chemicals. That's a lot of work. Setting traps, spraying in the house, out of the house. Hire somebody.

Hill: Emily Flippen, what are you looking at?

Flippen: I'm looking at an Australian company called Afterpay Touch. It's traded on the ASX, the ticker's APT. It's a fintech company that essentially operates of a small scale lender. Any listeners here in the U.S., if you go to a website, say, Urban Outfitters, you purchase some clothes, you check out, you have the option to check out with Afterpay Touch. It lets you pay in installments, interest-free. Just spreads it out over a longer period of time. They get the majority of their revenue not from people who end up not paying them, but actually from, like, Urban Outfitters themselves, who pay for that option.

Hill: Steve, question about Afterpay Touch?

Broido: What sort of yield do you think they're getting on these if they're not collecting interest? What's the yield on this?

Flippen: The way they're getting paid is by charging the company themselves to offer the services to them. The company's paid them a flat fee just to offer that to their customers when they check out.

Hill: Ron, you gave a shout out to The Motley Fool's YouTube channel. I want to give a quick shout out, since Emily's mentioning a company in Australia. Quick shout out to Motley Fool Money Australia, the Australian version. Worth checking out. You can find it anywhere you find podcasts. It's Motley Fool Money, but with much better accents.

Gross: [laughs] Nice.

Hill: Jason Moser, what are you looking at this week?

Moser: This may be a new one for Motley Fool Money. It's a company called Instructure, ticker INST. Their business is best summed up by the mission statement, which is to help people learn and develop from their first day of school to their last day of work. The actual business itself, it is a software-as-a-service that provides applications for learning assessment, performance management. They do this through two platforms -- Canvas, which is their learning management platform for kindergarten through 12th grade and higher education, and then Bridge, which is basically employer-based. They have over 4,000 customers, representing colleges, universities, school districts. 30 million-plus people learning on their platforms today. Looking at it for the augmented reality service. Really neat business.

Hill: Steve, question about Instructure?

Broido: How do they compete with LinkedIn learning, which seems like it dominates that space right now?

Moser: LinkedIn is a bit more professional-oriented, but Blackboard is the company that Instructure is trying to disrupt, and I think they're doing a pretty good job of it.

Hill: All these years, my kids in high school are going on Canvas. I didn't realize there was a public company behind it the whole time. 

Moser: You just click a button. 

Hill: Steve, we've got Instructure, we've got Afterpay Touch, and we've got --

Gross: Rollins.

Hill: -- we've got basically a pest business. Do you have one you want to add your watch list?

Broido: Well, I don't like the name, I think it's a little creepy, but I will go with Afterpay Touch.

Hill: Is it safe to assume, given your questioning of Ron, that you actually are a hands-on person at home when it comes to getting rid of pests?

Broido: Well, if you have ants, you just spray. It's not that big of a deal. I don't need to hire somebody. But, maybe if I've got raccoons or squirrels in my attic, I'm probably not getting involved.

Hill: Ron Gross, Emily Flippen, Jason Moser, thanks for being here! That's going to do it for this week's edition of Motley Fool Money! Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!