Rent the Runway Inc. on Wednesday said it expected breakeven free cash flow this year, following cost cuts and signs of a revival in shoppers’ enthusiasm.
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AT&T Inc. topped free-cash-flow expectations during its latest quarter, and the company is raising its full-year outlook on the closely watched metric.
The telecommunications giant posted $5.2 billion in free cash flow for the third quarter in its Thursday morning report, exceeding the consensus view, which called for $4.8 billion. The company now expects about $16.5 billion in free cash flow for the full year, while it previously called for at least $16 billion.
Free cash flow is of key importance to AT&T
T,
investors given the company’s sizable dividend, and while management has expressed confidence in the 2023 target all year long, Wall Street had been showing a bit more caution, especially earlier in 2023 when AT&T fell short on the metric for the first quarter in a development it owed to misaligned timing expectations.
AT&T logged revenue of $30.4 billion for the latest quarter, up from $30.0 billion a year before. The FactSet consensus was for $30.2 billion.
The company posted net income attributable to common stock of $3.4 billion, or 48 cents a share, down from $6.0 billion, or 79 cents a share, in the year-earlier period. Results from the latest period reflected $600 million in severance charges and an 8-cent per-share negative impact from lower pension credits, among other factors.
Adjusted earnings per share came in at 64 cents, down from 68 cents a year before but above the 62 cents that analysts tracked by FactSet were projecting.
AT&T also recorded third-quarter adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $11.2 billion, up from $10.7 billion a year before and above the $11.0 billion FactSet consensus. The company now expects at least 4% growth in adjusted Ebitda for the year, versus an earlier projection of at least 3%.
The company posted 550,000 total postpaid net additions for the quarter, and it pointed to 468,000 postpaid phone net additions. Phone average revenue per user inched up 0.6% to $55.99, reflecting “pricing actions, higher international roaming and a mix shift to higher-priced unlimited plans,” according to the earnings release.
AT&T added a net of 296,000 fiber subscribers to bring its total above 8 million.
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Johnson & Johnson Benadryl brand allergy medication is now a part of Kenvue.
Daniel Acker/Bloomberg
Johnson & Johnson
plans to maintain its quarterly dividend at $1.19 a share even after separating its
Kenvue
over-the-counter drug and personal care business.
It didn’t have to do that to keep its status as a Dividend Aristocrat. It did it because it can and because shareholders will like it.
On Wednesday, J&J (ticker: JNJ) updated its financial guidance following the completion of the exchange offer for
Kenvue
(KVUE) stock. J&J took about 191 million of its own shares for 1.5 billion shares of Kenvue stock it held. Kenvue raised money in an initial public offering in early May.
J&J is a Dividend Aristocrat, in the S&P 500 Dividend Aristocrats Index, which includes companies that have raised their payouts for at least 25 consecutive years. When an aristocrat separates a business,
S&P Global
(SPGI) looks at the payouts from the combined entities for a period of two years to make sure payouts are still rising.
Kenvue has already declared its first dividend of 20 cents a share. That means, theoretically, JNJ could have reduced its quarterly payout a little bit and maintained its Dividend Aristocrat status.
Investors didn’t have to participate in the exchange offer. So it was possible a non-participator could have seen a reduced dividend payout on their J&J holdings. They might not care about Aristocrat status if payouts fell by a nickel or so per quarter.
But it wasn’t a mistake for an investor not participate in the exchange, even if J&J adjusted the dividend. Someone who didn’t participate in the exchange now owns a slightly larger percentage of J&J. The company reduced its share count, taking in J&J stock and passing out Kenvue stock held. What is more, J&J still holds some Kenvue stock because not everyone participated in the exchange offer.
J&J holders, however, don’t have to worry about any of that. J&J is simply going to keep paying $1.19 a quarter for now. That will cost the company between $11 billion and $12 billion annually. No sweat. Wall Street projects J&J will generate roughly $26 billion in free cash flow in 2024, according to FactSet.
The dividend will consume less than half of the free cash flow. That isn’t a heavy burden. The average payout ratio for all dividend payers in the S&P 500 is about 50%.
Kenvue stock is up about 4% since its IPO in early May. J&J shares are down about 2% over the same span. The
S&P 500
and
Dow Jones Industrial Average
are up about 10% and 4%.
Dividend payers have been out of favor lately. The
ProShares S&P 500 Dividend Aristocrats ETF
(NOBL) is up about 5% year to date, trailing the S&P 500 by about 12 percentage points.
Write to Al Root at allen.root@dowjones.com
Insufficient earnings on Twitter suggest that the platform’s advertising revenue may not have rebounded as quickly as previously anticipated.
Elon Musk, the CEO of Tesla and SpaceX, who also holds the position of CTO at Twitter, recently revealed the social media platform’s ongoing negative cash flow and the weight of its debt burden. Musk cited a 50% drop in advertising revenue and a significant debt burden as the reasons behind Twitter’s ongoing cash flow challenges.
Responding to a tweet about potential recapitalization options, the billionaire entrepreneur emphasized the need for Twitter to achieve positive cash flow before pursuing other endeavors. He further revealed that the popular social media platform he acquired for $44 billion did not witness the expected increase in advertising revenue in June but expressed some optimism for July.
We’re still negative cash flow, due to ~50% drop in advertising revenue plus heavy debt load. Need to reach positive cash flow before we have the luxury of anything else.
— Elon Musk (@elonmusk) July 15, 2023
Musk also said that July showed more promise in advertising revenue while acknowledging that Twitter Spaces and the audio chat feature are currently generating costs without bringing revenue to the company.
The new development highlights the ongoing struggle to achieve positive cash flow at Twitter, despite aggressive cost-cutting measures implemented since Musk’s acquisition of the company in October.
Twitter Faces Annual Interest Payments of $1.5 Billion
Since taking over Twitter, the Tesla CEO has implemented significant changes, including staff reductions and adjustments to content moderation policies. The billionaire wasted no time implementing a substantial workforce reduction, cutting 75% of Twitter’s global employees following the deal’s completion.
The move aimed to streamline operations and reduce costs. In addition to the workforce reduction, Musk revealed that Twitter has successfully slashed its projected non-debt expenditures from $4.5 billion to $1.5 billion for 2023. Moreover, the acquisition deal came with a substantial debt burden for Twitter. Due to the debt, the platform now faces annual interest payments of approximately $1.5 billion, adding further strain to its financial situation.
A New York Times report also disclosed that Musk failed to settle hundreds of thousands of dollars in outstanding bills owed to travel vendors. The company’s executives accumulated these expenses before the official acquisition in 2022.
Despite the cost-cutting measures and workforce restructuring, Twitter continues to grapple with negative cash flow. The social media platform has faced challenges with advertisers reducing or halting their ad spending due to concerns relating to content moderation and uncertainty about Twitter’s future.
Elon Musk Anticipates Twitter to Become Cash Flow Positive
Insufficient earnings on Twitter suggest that the platform’s advertising revenue may not have rebounded as quickly as previously anticipated. In an interview with the BBC in April, Musk indicated that most advertisers had returned to the platform, and he expected Twitter to become cash flow positive within the second quarter.
To address the issues of poor advertising revenue and other financial challenges at Twitter, Musk appointed Linda Yaccarino, a former NBCUniversal marketing executive, as Twitter’s new CEO. Yaccarino’s background in advertising is expected to prioritize the revitalization of Twitter’s ad business.
As such, the new CEO has outlined plans to focus on video, creator, and commerce partnerships and has engaged in early discussions with various entities, including political and entertainment figures, payments services, and news and media publishers.
Last week, Twitter announced a revenue-sharing program for selected content creators. However, some users expressed disappointment at the program’s limited scope, which is currently only available to Twitter Blue verified subscribers who meet certain criteria.
The program distributes a portion of the ad revenue generated from ads placed in replies to tweets. Several influencers and creators, including controversial figures like Andrew Tate, have revealed that they received payments through this program.
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Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.