Goldman and Morgan Stanley's Impressive Earnings, Chipotle's Weird-Tasting One, and GE Misses NBC

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Market Snacks
Jack Kramer and Nick Martell
Apr 18, 2014 at 6:00AM
Because the stock market is closed for Good Friday, we've already started stuffing our faces with marshmallow Peeps. Wall Street continued its sugar rush to end the holiday-shortened week, as the S&P 500 rose for the fourth straight day, and the Dow (DJINDICES:^DJI) slipped 16 points on a big Thursday of major corporate earnings reports.

1. Goldman's and Morgan Stanley's earnings impress
Two all-star banks rocked Wall Street's socks with surprising earnings reports. Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) love to battle for the title of New York's sleekest, sexiest bank. Goldman's rep is second to none, but Morgan Stanley has better initials (we call it "MS No. 2" around the MarketSnacks offices). Both investment banks announced first-quarter earnings Thursday that beat expectations, but Morgan Stanley enjoyed the handsome 2.9% stock boost.
Wealth Management has been the major focus for Morgan Stanley's CEO James Gorman since he took over in 2010. Handling people's money is the steady business to offset the freakishly volatile trading business Wall Street is famous for. The plan seems to be working -- Wealth Management earnings were up 65% this quarter compared to last year.
But trading was awesome, too, for Morgan Stanley. Securities trading on Wall Street has dropped steadily since 2009, when a whopping 40% of Goldman's revenues were from trading bonds, currencies, and commodities. But the one exception to the drop this past quarter was Morgan Stanley, whose revenues were boosted by 9%. Goldman's first quarter wasn't as fun, though, as their trading revenues fell 11%.
Investors were pumped that Morgan Stanley's profits grew a whopping 65% overall for the quarter. Expectations for Goldman, though, were low because they're so dependent on trading revenues; so the 10% drop in Goldman's earnings, to $2.03 billion, was actually better than anticipated. Both stocks gained Thursday, but Morgan Stanley employees will carry their ubiquitous blue corporate "I'm an I-Banker" gym bags with more pride than Goldman's heading into the weekend.
2. Chipotle's sales jump, but below expectations
Our multiple weekly burrito bowls take full credit for Chipotle's (NYSE:CMG) impressive sales figures from the first quarter -- the Tex-Mex giant wrapped up $904 million in revenues, a 25% spike from the same period last year, as same-store sales increased by 13%. But investors felt like they weren't served enough meat, sending the stock down nearly 6% Thursday because the earnings missed Wall Street's expectations.

What's taking the bite out Chipotle's financials? Food inflation. The cost of ingredients devoured more than a third of Chipotle's revenues during the last three months. Beef prices have hit all-time highs from two-years of drought, cheese prices are expected to rise 10% this year, and dry weather in Cali is killing avocado supplies.

The takeaway is that Chipotle announced it plans to deal with the rapidly rising food costs by passing them onto you (and us); for the first time in three years, they'll be raising prices. We know. We're not happy about that either, just like how we hate paying extra for guac. But at least Chipotle is still hungry for its major expansion plans to open 195 new stores by the end of this year.

3. GE stock gains despite NBC withdrawal
You don't need a GE-made light bulb to see the not-so-hot numbers from conglomerate General Electric (NYSE:GE). Its hefty $32.4 billion in revenues in the first quarter of 2014 were down 2% from the same time last year, just barely in line with Wall Street's expectations. And the fact that little Union College just won the NCAA D1 men's ice hockey championship -- GE was once based in beautiful Schenectady, NY -- didn't seem to help the company's bottom line.

The problem is that GE's missing Matt Lauer and the folks over at NBC. Even though GE told the world that it was selling NBCUniversal to Comcast back in early 2013, the company's profits fell 15% compared to the first quarter of last year as a result of the deal. Sounds like they shouldn't have ended 30 Rock, either.

So why did GE stock rise 1.7% Thursday? Industrials. GE's industrial segment, which includes classic hot business divisions like oil, gas, power, and aviation, saw revenues jump 8%, to nearly $25 billion, during the quarter. Plus, according to CEO Jeffrey Immelt, the company is still "in good shape."

  • New York Stock Exchange Closed for Good Friday

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