Motley Fool analyst Maria Gallagher analyzes some stock market news and shares why Niall Ferguson's The Ascent of Money is her investing discovery of 2021.
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This video was recorded on Dec. 16, 2021.
Chris Hill: It's Thursday, December 16th. Welcome to Market Foolery, I'm Chris Hill. With me from the financial capital of the United States of America, Maria Gallagher. Thanks for being here.
Maria Gallagher: Thanks for having me.
Chris Hill: We've got some airline news, we've got another preview of this week's Motley Fool Money year-end review special. We're going to start with, maybe it's an overstatement to call it the stock of the day, but it is doing well and its Accenture. First quarter profits and revenue came in higher than expected for the consulting firm. Accenture also raised guidance for the full fiscal year and the stock up seven percent today. This is about as good as it gets I think, if you're an Accenture shareholder.
Maria Gallagher: Yeah. The quarter was pretty much as good as it gets, you have total revenue up 27 percent. You had growth in all areas; 26 percent growth in North America, 28 percent growth in Europe, 30 percent growth in their growing markets. They increased their quarterly dividend up 10 percent to 97 cents a share, they repurchased 2.4 million shares, they raised their business outlook, and they added 50,000 people to their workforce this quarter to a total of 674,000 people. I just think the growth that Accenture has is so impressive with the size. It's one of those companies where you think it can't keep growing at this very steady, very strong pace, and it keeps proving that it can. It was really just a knock out of the park, as they say.
Chris Hill: I'm still reeling from how many people work at Accenture.
Maria Gallagher: So many people work at Accenture.
Chris Hill: Because this is a 250 billion-dollar company. I don't know. I just wouldn't have guessed it was that many. Going back to Motley Fool Money on last week show, this was Ron Gross' radar stock. When you look at 2022 and beyond, what stands out to you in terms of what Accenture is attempting to do that you find impressive as an analyst?
Maria Gallagher: I think that their business model is really impressive, I think their CEO is really impressive, and all of those types of business statistics. But one of the other things that I'd want to talk about too with Accenture is their sustainability is one of the leading in the industry. I think they have really concrete goals. They have pledges to help keep global warming below 1.5 degree Celsius, reducing greenhouse gas emissions. They've reduced 65 percent of their total emissions from 2016. They're working on being powered by 100 percent renewable electricity. They do pay equity every year. They're really transparent about it. In 2021, dollar for dollar there was 100 percent pay equity between genders, between races. They're moving toward zero waste, and they're talking about things like committing to eliminating single-use plastic in all locations. When you think about how many people work there, how many offices they have, those moves really matter. I think as well as being a leader in the industry for so many different reasons, I think that their sustainability is something I really admire about them.
Chris Hill: Who's competing with them? When I think about global consulting firms, I guess Deloitte is there as well, but I don't know. It just seems like Accenture is such a behemoth.
Maria Gallagher: Yeah, it's in a league of its own in terms of competition. I think a lot of times that's the one you think of, you have Deloitte, you have BCG, you have these other global consulting firms. But I think Accenture does it in a really sustainable way, I think they do it in a really compassionate way in terms of what I've heard in the way that they talk to their businesses. They are just really a leader in the field and continue to be, and so I think that's what's really impressive. It's one of those companies really like where it can get bigger, it can get better, and they continue to outperform themselves.
Chris Hill: Delta Air Lines is a month away from its next earnings report, but the company is now projecting a fourth quarter profit of $200 million, which is nice, because analysts had been expecting a loss. Delta says it is seeing higher demand this holiday season. Shares were up earlier in the morning, but by early afternoon, they're slightly negative. There are couple different things I want to get to with Delta. But in terms of the projection here, I'm a little [laughs] surprised that the bloom got off the rose that quickly. Not that I was expecting the stock to pop 10, 15 percent or something like that, but this seems like legitimately good news from a business in, let's just call it a challenge industry.
Maria Gallagher: Yeah. I would say I'm not too surprised based on all the news we're having in the past couple days, with Omicron and continued variance and the stagnation in boosters and the rise of cases globally. I think so much of these airline stocks, it's just really tied to this macroeconomic news. While it's good news that they can make a profit, then people are saying, "Well, what's going to happen the quarter after, what's going to happen in the next three weeks, what's going to happen in the month, how many people are going to cancel their holiday plans or their New Year's plans?" They are saying that they have new assumptions for 2024 to get them back to pre-pandemic profit levels. They're hoping for operating margins in the mid-teens, operating cash flow of over nine billion, liquidity between five and six billion. They're working on trying to get back to those pre-pandemic levels, but I think so much of it ends up being macroeconomic focus. International travel searches were up 155 percent year-over-year, domestic travel searches were up 211 percent year-over-year in the past couple of weeks. But they're still down 50 and 40 percent from 2019 levels. We're continuing to see that surge in domestic traveling, which is much more rental cars and much less planes. The demand for rental cars in the US is up 229 percent compared to 2019 alone, and so they're thinking there's probably going to another rental car shortage this holiday season. If anyone else has seen that episode of Seinfeld, where they get to the rental car place and they say that he has actually just rented the idea of a car, feels like that might happen to a lot of people. It's good news, but I just think the macroeconomic environment is one such that I am interested to see how it shakes out over the next year, because I think it's going to continue to be a bumpy ride.
Chris Hill: It seems like on some level, investors collectively are saying to Delta Air Lines, "We don't believe you." Like, "No offense, but we don't think you're going to get there." Because it's still a month till their earnings report, and any enthusiasm that they might have seen, any increase in demand that they might have seen, it's not that we don't believe you've seen that to this point, it's that we don't think you're going to get there over the next 3-4 weeks.
Maria Gallagher: Yeah. I think that's a fair assumption in saying, well, we think that maybe you had the idea of all these people coming and then in reality, it's going to be very different because of all of the news that you have no control over. I think that's always what's frustrating for a lot of these companies. It's like, well, we're doing everything we can and there's this other thing that's happening. These third-party forces that are completely out of our control, and especially I think with so many people leaning more into domestic travels and more into using trains and cars and buses, as opposed to getting on a plane. I think that that's still something that people are very nervous about. I think that I am one of those people saying, I think that that would be nice, but I don't know. We'll see.
Chris Hill: Yeah. Not to pick on Delta Air Lines, because we could be talking about any airline. As an industry, it just seems like for investors, at this point in time, there's not really a great reason to jump in on any of these stocks. Or if there is, I'm not seeing it. As you said, there are so many uncertainties, so many things that are out of control of the airlines themselves that, I don't know, why would you jump in on Delta or Southwest or JetBlue or any of these?
Maria Gallagher: Yeah. I also think sometimes they're talking about, "Here's the growth we're looking for," and it's still not getting back to 2019 levels. So they're still trying to fight an uphill battle to break-even to what they were doing two years ago. I feel like that's something else that people are thinking about. I will say it's interesting just as a fun fact, I was looking at research for this, and a lot of people when they are choosing to travel in the next six months, are really planning for beach vacations because of the top 10 travel destinations, I think, six of them are all beach destinations. So that's a travel trend to look for.
Chris Hill: That makes sense to me.
Maria Gallagher: Yeah. I mean, it's the winter.
Chris Hill: It's the winter and most [laughs] people don't live near a beach. So yeah, that makes sense.
Maria Gallagher: I'm just one of the few people who's trying to go to a colder place for vacation in the winter.
Chris Hill: Are you looking for a ski vacation? Because I'm assuming, at least here in the United States where we've started winter, that maybe the other four on the list are more sort of ski vacations.
Maria Gallagher: No. Personally, I was hoping to go to Finland and meet some reindeer. Not ski, but just hang out with some reindeer. That was my goal.
Chris Hill: All right. I do want to get to the last thing, but now I need to talk about reindeer. So when you say meet reindeer, you were planning on going out in the woods, or is this a tour or something like that? I'm all for getting out in nature, but it seems like if you run into the wrong pack of reindeer, what was the plan?
Maria Gallagher: No, there is a national park outside of Helsinki where you can go and you can feed the reindeer carrots.
Chris Hill: Okay.
Maria Gallagher: Then you can also do dog sledding. I wouldn't just be walking around hoping to run into a reindeer. I would have a plan to meet a reindeer.
Chris Hill: Okay, and food?
Maria Gallagher: Yeah, and the reindeer would know I was coming. I wouldn't startle or scare them.
Chris Hill: Smart move for everyone involved, that's a smart move. On Motley Fool Money this weekend, we're going to be doing our year-end review and part of that is one of the questions I'm going to be asking people is about their investing discovery for 2021, and that can be a stock that you bought for the first time. It could be a book you read. It could be an investor that you started following on Twitter or something like that. So what's your investing discovery of 2021?
Maria Gallagher: I'm going to go book I read, and I just finished this yesterday, the book is called The Ascent of Money by Niall Ferguson. It goes through the history of money and it goes through banks, the stock market, the bond market, the insurance market, the housing market, and international growth. It's super fascinating. It has a lot of Shakespeare references talking about the banks and the Merchant of Venice, it has a lot of really interesting political history, as well as just understanding how often history repeats itself and how often in financial services, the people who are making decisions are just a little too young to remember it from the last time around. But how important it is to understand history. He goes through long-term capital management. He goes through Solomon Brothers in 2008, 2009. The book was written in 2008, so it's a really fascinating way to think about it. So I think understanding the monetary system as it exists is so important, especially right now as people are talking about the changing monetary system and inflation. One of the things I learned is that the highest inflation rate in history was four quintillion, and that was in Hungary in 1918. So understanding inflation, understanding interest rates, I was a big fan. I really learned a lot, I would really recommend it to anybody.
Chris Hill: Maria Gallagher, great talking to you. Thanks for being here.
Maria Gallagher: Thanks so much for having me.
Chris Hill: As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of Market Foolery. The show's mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you on Monday.