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Embattled Abbott Labs comes through with a strong quarter, buyback announcement

Harsh — Wed, 16 Oct 2024 16:23:28 +0000

Medical device maker Abbott Laboratories on Wednesday delivered better-than-expected quarterly results and upped its earnings guidance for the third straight quarter. Shares rose more than 1%, shaking off an initially subdued reaction. Revenue in the three months ended Sept. 30 rose 4.9% to $10.64 billion, topping estimates of $10.55 billion, according to data provider LSEG. Organic sales, which exclude Covid testing, were up 8.2% from the year-ago period. It’s unclear whether analyst estimates are comparable. Adjusted earnings per share (EPS) of $1.21 beat LSEG expectations by a penny and increased 6.14% on an annual basis. ABT YTD mountain Abbott Labs’ year-to-date stock performance. Abbott shares are extending their period of outperformance versus the market and health-care peers. The stock entered Wednesday’s session up a little more than 10% since the July 26 close — after the closing bell that day, the company was ordered to pay $495 million in damages in a court case over its premature infant formula, which has been a major overhang on the stock since mid-March. That advance is ahead of the S & P 500 , a closely followed health-care exchange-traded fund , which gained 6.5% and 1.9%, respectively, over the same stretch. Bottom line In its third quarter, Abbott Labs demonstrated why we wanted to stick with the stock in the face of legal battles that emerged earlier this year and spooked investors. We’re reiterating our price target of $130 and 2 rating, meaning we’d wait for a pullback before adding to our position. At its lows of 2024 in July, Abbott’s market cap stood at $174.1 billion, roughly $32 billion below where it was in March before its competitor in the premature infant formula market lost a court case and put Abbott’s own case load in the spotlight. We battled the stock in the months that followed, arguing the selling was overblown, especially considering the scientific community backed Abbott’s view that the formulas were medically necessary for premature infants and did not cause an intestinal illness commonly abbreviated as NEC. A trio of U.S. agencies earlier this month threw more support behind use of the formulas . At its highs of Wednesday’s session, Abbott had clawed back all of its market cap losses since March 14. “Abbott really came through,” Jim Cramer said Wednesday. “There’s just a lot to like with the Abbott quarter.” Commentary The place to start is Abbott’s medical devices segment, which saw a roughly 12% increase in revenues to a better-than-expected $4.75 billion, as seen in the chart below. On an organic basis, which strips out the impact of foreign exchange fluctuations and divestitures, medical device sales rose 13.3%. It’s nice when a company’s largest segment by sales is the one with the fastest growth rate — and that’s the case with Abbott. FreeStyle Libre, a continuous glucose monitor (CGM) for people with diabetes, continued its impressive growth in the quarter, with organic sales up 21%, a slight acceleration from the prior three-month period. While Abbott has benefited from the struggles of CGM competitor Dexcom , CEO Robert Ford maintained an upbeat view on the market in the near and long terms. “This is a mass market opportunity that we have,” he said, noting there’s about 10 million CGM users worldwide right now but over 100 million diabetics in developed countries. Abbott and its peers are increasingly targeting CGMs to non-diabetics, hoping that health-conscious people would want to use biosensors to learn about their body’s response to factors like food, stress and exercise. Abbott launched its over-the-counter CGM called Lingo in the U.S. in early September , and Ford said the product is “off to a very good start.” People can purchase a one-sensor pack for $49, two for $89 or six for $249. The two-sensor pack is the most popular version, he said. The sensors last about two weeks, and Ford said he was positively surprised by the reorder rates so far. Abbott has targeted $10 billion in sales of CGMs by 2028, and Lingo represents a “great opportunity” to add to that goal over time, Ford said. Another highlight: Abbott Labs announced its board authorized a new $7 billion share purchase program. Its prior authorization from 2021 was getting low, Ford said. In the third quarter, Abbott bought back $750 million worth of stock, with Ford saying executives believed there was a disconnect between the stock’s valuation and the company’s business fundamentals. Indeed, Abbott usually prioritizes investing in its product pipeline over share repurchases, so the fact that management stepped up its buyback program really shows how they feel about the current stock price. Abbott’s nutrition business — home to brands such as Ensure protein powder and PediaSure drinks for kids — was a weak spot, just as it was in the second quarter. Sales were down about 0.3% year over year to $2.07 billion, short of the $2.17 billion expected by analysts, according to FactSet. On an organic basis, revenue was up 3.4% in the segment. Ford said the international pediatric business was the biggest drag on nutrition in the quarter, blaming that on Abbott’s own “commercial execution” early in the quarter. The company quickly recognized the softness and took steps to fix it, Ford said, including personnel changes followed by inventory adjustments to distributors. Ford said early indications show that Abbott took the right corrective actions and that growth in that division and the segment overall should improve in the current quarter. On the lawsuits, specifically, Ford once again issued a strong defense of the premature infant formula. He said the statement from the three U.S. health agencies — the Food and Drug Administration, Centers for Disease Control and Prevention, and National Institutes of Health — “says a lot.” “It was a very strong statement,” Ford said, though he noted that the judge in an ongoing trial in Missouri has yet to allow it to be submitted as evidence in the case. He said he expects that in future cases, the statement and an accompanying report on NEC and formulas will be included as evidence for juries to consider. Abbott’s recent stock performance suggests investors are getting more comfortable with the litigation risk, but it’s still too early to declare complete victory. That’s why we’re generally holding off on adding to our position. Nevertheless, there’s little doubt about the strength of Abbott’s underlying fundamentals. In due time that should occupy more and more of the spotlight. Abbott Laboratories Why we own it : Abbott is a high-quality medtech company growing at a fast clip. The stock has been dealing with two overhangs: falling Covid testing sales and concerns that GLP-1 adoption will disrupt its leading continuous glucose monitor. As Abbott’s organic sales growth continues to shine, the market will realize both concerns are overblown. Competitors : Dexcom and Edwards Lifesciences Weight in Club portfolio : 2.89% Most recent buy : 5/29/2024 Initiated : Jan. 29, 2024 Guidance Abbott Labs now projects adjusted EPS in the range of $4.64 to $4.70, which at the midpoint is up a penny versus its prior guidance of $4.61 to $4.71. It’s the third consecutive quarter that Abbott has upped the middle of its EPS forecast. The company reiterated its full-year organic sales growth outlook of 9.5% to 10%. (Jim Cramer’s Charitable Trust is long ABT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Attendees walk by the Abbott booth during CES 2024 at the Las Vegas Convention Center on January 10, 2024 in Las Vegas, Nevada.

Ethan Miller | Getty Images

Goldman Sachs to report third-quarter earnings

suimt — Tue, 15 Oct 2024 04:01:01 +0000

David Solomon, Chairman & CEO Goldman Sachs, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 17th, 2024.

Adam Galici | CNBC

Goldman Sachs is scheduled to report third-quarter earnings before the opening bell Tuesday.

Here’s what Wall Street expects:

Earnings: $6.89 per share, according to LSEG
Revenue: $11.8 billion, according to LSEG
Trading Revenue: Fixed Income of $2.91 billion, Equities of $2.96 billion, per StreetAccount
Investing Banking Revenue: $1.62 billion, per StreetAccount
Asset & Wealth Management: $3.58 billion, per StreetAccount

How much will falling interest rates help Goldman Sachs?

Over the past two years, the Federal Reserve’s tightening campaign has made for a less-than-ideal environment for investment banks like Goldman.

Now that the Fed is easing rates, that positions Goldman to benefit as corporations that have waited on the sidelines to acquire competitors or raise funds begin to take action.

Goldman’s asset and wealth management division is also positioned to benefit from rising asset values across markets as rates decline.

Last week, rival JPMorgan Chase set expectations high with better-than-anticipated results from trading and investment banking, factors that helped the bank top earnings estimates.

Wells Fargo also exceeded estimates on Friday on the back of its investment banking division.

This story is developing. Please check back for updates.

Health-care costs hit a post-pandemic high. These moves during open enrollment can help

Harsh — Mon, 14 Oct 2024 17:03:55 +0000

About 165 million Americans get their health insurance through work, and yet most don’t spend much time considering what their employer is offering in the way of benefits and what it will cost.

In fact, employees only spent about 45 minutes a year, on average, deciding which benefit options suit them best, a report from Aon found.

Open enrollment season, which typically runs through early December, is an opportunity to take a closer look at what’s at stake.

And, for starters, costs are going way up.

post-pandemic high, according to WTW, a consulting firm formerly known as Willis Towers Watson. U.S. employers project their health-care costs will increase by 7.7% in 2025, compared with 6.9% in 2024 and 6.5% in 2023, the firm said.

Because of higher costs, employers are considering new ways to adjust their plan offerings, WTW found.

To that point, 52% of companies said they plan to implement programs that will reduce total costs, and just as many intend to steer to lower-cost providers and sites of care, which may mean a narrower network of doctors from which to choose.

Currently, employers subsidize about 81% of health-care plan costs, on average, while employees pay the remainder, according to professional services firm Aon.

However, some of the higher costs will also inevitably get passed on to employees.

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Roughly one-third, or 34%, of employers expect to shift some of the expense to employees through higher premiums or by raising co-pays on high-deductible health plans in the year ahead, the WTW report found.

The cost per employee is expected to jump 5.8% on average in 2025, marking the third consecutive year of health benefit cost increases above 5%, after a decade of averaging only around 3%, according to a separate report by consulting firm Mercer.

“These are changes employees will feel,” said Beth Umland, Mercer’s research director of health and benefits.

For workers, health-care expenses are already high: Family premiums for employer-sponsored health insurance rose 7% this year to an average of $25,572, KFF’s 2024 benchmark employer health survey found. Workers are responsible for more than $6,200 of that amount, while employers pick up the rest.

“With cost increases reaching a post-pandemic high, companies are concerned about the burden it’s putting on their workforces, especially since it affects decisions about insurance coverage and care,” Tim Stawicki, WTW’s chief actuary of health and benefits, said in a statement.

health savings account, or HSA, which can help with additional health-care costs.

To be able to use an HSA, you must have an eligible high-deductible health plan. The IRS defines “high-deductible” as at least $1,650 for self-only plans or $3,300 for family coverage for 2025.

The IRS also determines the maximum allowed contribution each year: The new HSA contribution limit for 2025 will be $4,300 for individuals, up from $4,150 in 2024, and $8,550 for families, up from $8,300 in 2024. Employees 55 or older can make an additional $1,000 catch-up contribution over the IRS annual limits.

HSA contributions then grow on a tax-free basis, and the funds can cover out-of-pocket expenses, including doctor visits and prescription drugs, including expensive weight-loss medications.

As costs continue to go up, HSAs are a key safety net for managing these out-of-pocket expenses, WTW’s Ihrke said. Any money you don’t use can be rolled over year to year.

“Make sure you are considering how to put some money into that savings account so you can use it to pay for a doctor’s bill or save it for future years,” Ihrke explained.

policy, a move many advisors recommend.

Gallagher.

“More so than ever we are seeing employers looking to address the broadening needs in their workforce,” said Tom Kelly, principal in the Gallagher health and benefits practice, and “today’s employees are looking for more holistic wellbeing support.”

Trump or Harris? Here are the 2024 stakes for airlines, banks, EVs, health care and more

suimt — Sun, 13 Oct 2024 13:36:31 +0000

Former President Donald Trump and Vice President Kamala Harris face off in the ABC presidential debate on Sept. 10, 2024.

Getty Images

With the U.S. election less than a month away, the country and its corporations are staring down two drastically different options.

For airlines, banks, electric vehicle makers, health-care companies, media firms, restaurants and tech giants, the outcome of the presidential contest could result in stark differences in the rules they’ll face, the mergers they’ll be allowed to pursue, and the taxes they’ll pay.

During his last time in power, former President Donald Trump slashed the corporate tax rate, imposed tariffs on Chinese goods, and sought to cut regulation and red tape and discourage immigration, ideas he’s expected to push again if he wins a second term.

In contrast, Vice President Kamala Harris has endorsed hiking the tax rate on corporations to 28% from the 21% rate enacted under Trump, a move that would require congressional approval. Most business executives expect Harris to broadly continue President Joe Biden‘s policies, including his war on so-called junk fees across industries.

Personnel is policy, as the saying goes, so the ramifications of the presidential race won’t become clear until the winner begins appointments for as many as a dozen key bodies, including the Treasury, Justice Department, Federal Trade Commission, and Consumer Financial Protection Bureau.

CNBC examined the stakes of the 2024 presidential election for some of corporate America’s biggest sectors. Here’s what a Harris or Trump administration could mean for business:

American Airlines and JetBlue Airways in the Northeast and JetBlue’s now-scuttled plan to buy budget carrier Spirit Airlines.

The previous Trump administration didn’t pursue those types of consumer protections. Industry members say that under Trump, they would expect a more favorable environment for mergers, though four airlines already control more than three-quarters of the U.S. market.

On the aerospace side, Boeing and the hundreds of suppliers that support it are seeking stability more than anything else.

Trump has said on the campaign trail that he supports additional tariffs of 10% or 20% and higher duties on goods from China. That could drive up the cost of producing aircraft and other components for aerospace companies, just as a labor and skills shortage after the pandemic drives up expenses.

Tariffs could also challenge the industry, if they spark retaliatory taxes or trade barriers to China and other countries, which are major buyers of aircraft from Boeing, a top U.S. exporter.

— Leslie Josephs

JPMorgan Chase faced an onslaught of new rules this year as Biden appointees pursued the most significant slate of regulations since the aftermath of the 2008 financial crisis.

Those efforts threaten tens of billions of dollars in industry revenue by slashing fees that banks impose on credit cards and overdrafts and radically revising the capital and risk framework they operate in. The fate of all of those measures is at risk if Trump is elected.

Trump is expected to nominate appointees for key financial regulators, including the CFPB, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation that could result in a weakening or killing off completely of the myriad rules in play.

“The Biden administration’s regulatory agenda across sectors has been very ambitious, especially in finance, and large swaths of it stand to be rolled back by Trump appointees if he wins,” said Tobin Marcus, head of U.S. policy at Wolfe Research.

Bank CEOs and consultants say it would be a relief if aspects of the Biden era — an aggressive CFPB, regulators who discouraged most mergers and elongated times for deal approvals — were dialed back.

“It certainly helps if the president is Republican, and the odds tilt more favorably for the industry if it’s a Republican sweep” in Congress, said the CEO of a bank with nearly $100 billion in assets who declined to be identified speaking about regulators.

Still, some observers point out that Trump 2.0 might not be as friendly to the industry as his first time in office.

Trump’s vice presidential pick, Sen. JD Vance, of Ohio, has often criticized Wall Street banks, and Trump last month began pushing an idea to cap credit card interest rates at 10%, a move that if enacted would have seismic implications for the industry.

Bankers also say that Harris won’t necessarily cater to traditional Democratic Party ideas that have made life tougher for banks. Unless Democrats seize both chambers of Congress as well as the presidency, it may be difficult to get agency heads approved if they’re considered partisan picks, experts note.

“I would not write off the vice president as someone who’s automatically going to go more progressive,” said Lindsey Johnson, head of the Consumer Bankers Association, a trade group for big U.S. retail banks.

— Hugh Son

Inflation Reduction Act.

Harris hasn’t been as vocal a supporter of EVs lately amid slower-than-expected consumer adoption of the vehicles and consumer pushback. She has said she does not support an EV mandate such as the Zero-Emission Vehicles Act of 2019, which she cosponsored during her time as a senator, that would have required automakers to sell only electrified vehicles by 2040. Still, auto industry executives and officials expect a Harris presidency would be largely a continuation, though not a copy, of the past four years of Biden’s EV policy.

They expect some potential leniency on federal fuel economy regulations but minimal changes to the billions of dollars in incentives under the IRA.

— Mike Wayland

more than $4 trillion a year.

Despite spending more on health care than any other wealthy country, the U.S. has the lowest life expectancy at birth, the highest rate of people with multiple chronic diseases and the highest maternal and infant death rates, according to the Commonwealth Fund, an independent research group.

Meanwhile, roughly half of American adults say it is difficult to afford health-care costs, which can drive some into debt or lead them to put off necessary care, according to a May poll conducted by health policy research organization KFF.

Both Harris and Trump have taken aim at the pharmaceutical industry and proposed efforts to lower prescription drug prices in the U.S., which are nearly three times higher than those seen in other countries.

But many of Trump’s efforts to lower costs have been temporary or not immediately effective, health policy experts said. Meanwhile, Harris, if elected, can build on existing efforts of the Biden administration to deliver savings to more patients, they said.

Harris specifically plans to expand certain provisions of the IRA, part of which aims to lower health-care costs for seniors enrolled in Medicare. Harris cast the tie-breaking Senate vote to pass the law in 2022.

Her campaign says she plans to extend two provisions to all Americans, not just seniors: a $2,000 annual cap on out-of-pocket drug spending and a $35 limit on monthly insulin costs.

Harris also intends to accelerate and expand a provision allowing Medicare to directly negotiate drug prices with manufacturers for the first time. Drugmakers fiercely oppose those price talks, with some challenging the effort’s constitutionality in court.

Trump hasn’t publicly indicated what he intends to do about IRA provisions.

Some of Trump’s prior efforts to lower drug prices “didn’t really come into fruition” during his presidency, according to Dr. Mariana Socal, a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.

For example, he planned to use executive action to have Medicare pay no more than the lowest price that select other developed countries pay for drugs, a proposal that was blocked by court action and later rescinded.

Trump also led multiple efforts to repeal the Affordable Care Act, including its expansion of Medicaid to low-income adults. In a campaign video in April, Trump said he was not running on terminating the ACA and would rather make it “much, much better and far less money,” though he has provided no specific plans.

He reiterated his belief that the ACA was “lousy health care” during his Sept. 10 debate with Harris. But when asked he did not offer a replacement proposal, saying only that he has “concepts of a plan.”

— Annika Kim Constantino

Paramount Global and Skydance Media is set to move forward, with plans to close in the first half of 2025, many in media have said the Biden administration has broadly chilled deal-making.

“We just need an opportunity for deregulation, so companies can consolidate and do what we need to do even better,” Warner Bros. Discovery CEO David Zaslav said in July at Allen & Co.’s annual Sun Valley conference.

Media mogul John Malone recently told MoffettNathanson analysts that some deals are a nonstarter with this current Justice Department, including mergers between companies in the telecommunications and cable broadband space.

Still, it’s unclear how the regulatory environment could or would change depending on which party is in office. Disney was allowed to acquire Fox Corp.’s assets when Trump was in office, but his administration sued to block AT&T’s merger with Time Warner. Meanwhile, under Biden’s presidency, a federal judge blocked the sale of Simon & Schuster to Penguin Random House, but Amazon’s acquisition of MGM was approved.

“My sense is, regardless of the election outcome, we are likely to remain in a similar tighter regulatory environment when looking at media industry dealmaking,” said Marc DeBevoise, CEO and board director of Brightcove, a streaming technology company.

When major media, and even tech, assets change hands, it could also mean increased scrutiny on those in control and whether it creates bias on the platforms.

“Overall, the government and FCC have always been most concerned with having a diversity of voices,” said Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investment.
“But then [Elon Musk’s purchase of Twitter] happened, and it’s clearly showing you can skew a platform to not just what the business needs, but to maybe your personal approach and whims,” he said.

Since Musk acquired the social media platform in 2022, changing its name to X, he has implemented sweeping changes including cutting staff and giving “amnesty” to previously suspended accounts, including Trump’s, which had been suspended following the Jan. 6, 2021, Capitol insurrection. Musk has also faced widespread criticism from civil rights groups for the amplification of bigotry on the platform.

Musk has publicly endorsed Trump, and was recently on the campaign trail with the former president. “As you can see, I’m not just MAGA, I’m Dark MAGA,” Musk said at a recent event. The billionaire has raised funds for Republican causes, and Trump has suggested Musk could eventually play a role in his administration if the Republican candidate were to be reelected.

During his first term, Trump took a particularly hard stance against journalists, and pursued investigations into leaks from his administration to news organizations. Under Biden, the White House has been notably more amenable to journalists.

Also top of mind for media executives — and government officials — is TikTok.

Lawmakers have argued that TikTok’s Chinese ownership could be a national security risk.

Earlier this year, Biden signed legislation that gives Chinese parent ByteDance until January to find a new owner for the platform or face a U.S. ban. TikTok has said the bill, the Protecting Americans From Foreign Adversary Controlled Applications Act, which passed with bipartisan support, violates the First Amendment. The platform has sued the government to stop a potential ban.

While Trump was in office, he attempted to ban TikTok through an executive order, but the effort failed. However, he has more recently switched to supporting the platform, arguing that without it there’s less competition against Meta’s Facebook and other social media.

— Lillian Rizzo and Alex Sherman

Washington Post previously reported.

In keeping with the campaign’s more labor-friendly approach, Harris is also pledging to eliminate the tip credit: In 37 states, employers only have to pay tipped workers the minimum wage as long as that hourly wage and tips add up to the area’s pay floor. Since 1991, the federal pay floor for tipped wages has been stuck at $2.13.

“In the short term, if [restaurants] have to pay higher wages to their waiters, they’re going to have to raise menu prices, which is going to lower demand,” said Michael Lynn, a tipping expert and Cornell University professor.

— Amelia Lucas

has said she and Biden “reject the false choice that suggests we can either protect the public or advance innovation.” Last year, the White House issued an executive order that led to the formation of the Commerce Department’s U.S. AI Safety Institute, which is evaluating AI models from OpenAI and Anthropic.

Trump has committed to repealing the executive order.

A second Trump administration might also attempt to challenge a Securities and Exchange Commission rule that requires companies to disclose cybersecurity incidents. The White House said in January that more transparency “will incentivize corporate executives to invest in cybersecurity and cyber risk management.”

Trump’s running mate, Vance, co-sponsored a bill designed to end the rule. Andrew Garbarino, the House Republican who introduced an identical bill, has said the SEC rule increases cybersecurity risk and overlaps with existing law on incident reporting.

Also at stake in the election is the fate of dealmaking for tech investors and executives.

With Lina Khan helming the FTC, the top tech companies have been largely thwarted from making big acquisitions, though the Justice Department and European regulators have also created hurdles.

Tech transaction volume peaked at $1.5 trillion in 2021, then plummeted to $544 billion last year and $465 billion in 2024 as of September, according to Dealogic.

Many in the tech industry are critical of Khan and want her to be replaced should Harris win in November. Meanwhile, Vance, who worked in venture capital before entering politics, said as recently as February — before he was chosen as Trump’s running mate — that Khan was “doing a pretty good job.”

Khan, whom Biden nominated in 2021, has challenged Amazon and Meta on antitrust grounds and has said the FTC will investigate AI investments at Alphabet, Amazon and Microsoft.

— Jordan Novet

Jamie Dimon says geopolitical risks are surging: 'Conditions are treacherous and getting worse'

suimt — Fri, 11 Oct 2024 18:19:23 +0000

JPMorgan Chase CEO and Chairman Jamie Dimon speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, U.S., December 6, 2023.

Evelyn Hockstein | Reuters

JPMorgan Chase CEO Jamie Dimon sees risks climbing around the world amid widening conflicts in the Middle East and with Russia’s invasion of Ukraine showing no signs of abating.

“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said Friday in the bank’s third-quarter earnings release.

“There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,” he said.

The international order in place since the end of World War II is unraveling in light of conflicts in the Middle East and Ukraine, rising U.S.-China tensions, and the risk of “nuclear blackmail” from Iran, North Korea and Russia, Dimon said last month during a fireside chat held at Georgetown University.

“It’s ratcheting up, folks, and it takes really strong American leadership and Western world leaders to do something about that,” Dimon said at Georgetown. “That’s my No. 1 concern, and it dwarves any I’ve had since I’ve been working.”

The ongoing conflict between Israel and Hamas recently hit the one-year mark since Hamas’ attack on Oct. 7, 2023, sparked war, and there have been few signs of it slowing down. Tens of thousands of people have been killed as the conflict has broadened into fighting on multiple fronts, including with Hezbollah and Iran.

At least 22 people were killed and more than 100 injured in Beirut from Israeli airstrikes on Thursday. Iran launched more than 180 missiles against Israel on Oct. 1, and worries have risen that an Israeli retaliation could target Iranian oil facilities.

Meanwhile, the Russian government approved a draft budget last week that boosted defense spending by 25% from 2024 levels, a sign that Russia is determined to continue its invasion of Ukraine, analysts say.

Dimon also said Friday that he remained wary about the future of the economy, despite signs that the Federal Reserve has engineered a soft landing.

“While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world,” Dimon said. “While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.”

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Ozempic is driving up the cost of your health care, whether you can get your hands on it or not

Harsh — Fri, 11 Oct 2024 15:45:20 +0000

About 165 million Americans rely on employer-sponsored health insurance, and yet workers may still not get the coverage they want — particularly when it comes to drugs such as Novo Nordisk’s weight-loss drug Wegovy and diabetes drug Ozempic.

About 1 in 3 employees are looking for more resources to combat obesity, according to a recent report by consulting firm Gallagher. Glucagon-like peptide-1 treatments such as Wegovy and Ozempic, which mimic hormones produced in the gut to suppress a person’s appetite, are considered game changers on this front.

These blockbuster weight-loss drugs have skyrocketed in popularity in the U.S. but are still not universally covered — even though “Americans have higher rates of obesity and diabetes and more behavioral health conditions today than ever before,” according to Trilliant Health’s “2024 Trends Shaping the Health Economy” report.

Cost is a key issue.

Although research shows that obesity drugs may have significant health benefits beyond shedding unwanted pounds, organizations representing U.S. insurers have said concerns remain about the high price involved in covering those medications, which are nearly $1,350 per month for a single patient.

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The price tag for GLP-1 medications, along with the large number of workers who could potentially benefit from using them, are a big driver of higher health-care costs, several studies show. Already, prescription drug costs jumped 8.6% last year, due in part to a surge in the use of GLP-1 drugs, according to a recent report by Mercer.

“Is that significant? Yes,” said Sunit Patel, Mercer’s U.S. chief health actuary.

Patients on these medications need to complete months, if not years, of continuous treatment.

“It becomes a lifelong drug,” said Gary Kushner, chair and president of Kushner & Company, a benefits design and management company. “That’s a pretty expensive commitment.”

expensive weight-loss drugs to some extent. Another 27% are considering adding coverage in the year ahead, according to the survey by Mercer.

Still, “not everyone who wants it can get it,” Patel said.

On the flip side, 3% of employers have recently removed coverage for these drugs and 10% of companies that currently cover them are considering removing them for 2025.

To improve access to weight-loss drugs, many businesses would have to pay even more — and health-care costs are already reaching a post-pandemic high, with employers and employees set to shell out significantly more for coverage in 2025, according to WTW, a consulting firm formerly known as Willis Towers Watson. U.S. employers project their health-care costs will increase by 7.7% in 2025, compared with 6.9% in 2024 and 6.5% in 2023.

Among employers’ greatest concerns was how to cover increasingly sought-after weight loss drugs, a Kaiser Family Foundation survey also found.

“Employers face the challenge of integrating these potentially important treatments into their already costly benefit plans,” Gary Claxton, KFF’s vice president said in a press statement.

Packages of weight loss drugs Wegovy, Ozempic and Mounjaro.

Picture Alliance | Getty Images

FDA-approved for the treatment of Type 2 diabetes.

“Most employers cover Ozempic for diabetes, they don’t necessarily cover it as an anti-obesity medication,” said Seth Friedman, pharmacy and health plans practice leader at Gallagher.

That makes it even trickier for employees to navigate whether they can get access to the drug and if it will be covered by their insurance. “They see that it’s covered but they get rejected,” Friedman said.

A 2023 survey by the International Foundation of Employee Benefit Plans found that 76% of the companies polled provided GLP-1 drug coverage for diabetes, versus only 27% that provided coverage for weight loss — leaving many workers shut out.

“Obviously, there is demand for them, and it’s not for diabetes, it’s for weight loss,” said Kushner.

“Looking ahead to 2025, about half of large employers will cover the drugs for weight loss,” said Beth Umland, Mercer’s research director of health and benefits. However, “even when they do, there are guardrails around who can use it.”

Demand for these treatments is only expected to increase — but the added controls for coverage are also helping to keep costs in check.

Nearly all employers have some sort of “utilization management” restrictions in place, such as a prior authorization requirement, according to Gallagher’s Friedman.

For some companies, that may mean workers must try other weight-loss methods first or meet with a dietitian and enroll in a weight-loss management program. Others may require a threshold for body mass index, or BMI, of at least 30, depending on how the plan is set up, Friedman said.

This information is available during open enrollment, which typically runs through early December.

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JPMorgan Chase shares pop 5% after topping estimates on better-than-expected interest income

suimt — Fri, 11 Oct 2024 15:27:04 +0000

JPMorgan Chase posted third-quarter results that topped estimates for profit and revenue as the company generated more interest income than expected.

Here’s what the company reported:

Earnings: $4.37 a share vs. $4.01 a share LSEG estimate
Revenue: $43.32 billion, vs. $41.63 billion estimate

JPMorgan said profit fell 2% from a year earlier to $12.9 billion, while revenue climbed 6% to $43.32 billion. Net interest income rose 3% to $23.5 billion, exceeding the $22.73 billion StreetAccount estimate, on gains from investments in securities and loan growth in its credit card business.

CEO Jamie Dimon touted the firm’s quarterly results in a statement, while also addressing regulators’ sweeping efforts to force banks to hold more capital and expressing concern about rising geopolitical risks, saying that conditions are “treacherous and getting worse.”

“We believe rules can be written that promote a strong financial system without causing undue consequences for the economy,” Dimon said, addressing the pending regulatory changes. “Now is an excellent time to step back and review the extensive set of existing rules – which were put in place for a good reason – to understand their impact on economic growth” and the health of markets, he said.

The bank’s results were also helped by its Wall Street division. Investment banking fees climbed 31% to $2.27 billion in the quarter, exceeding the $2.02 billion estimate.

Fixed income trading generated $4.5 billion in revenue, unchanged from a year earlier but topping the $4.38 billion StreetAccount estimate. Equities trading jumped 27% to $2.6 billion, edging out the $2.41 billion estimate, according to StreetAccount.

The company also raised its full-year 2024 guidance for net interest income from the previous quarter, saying that NII would hit roughly $92.5 billion this year, up from the previous $91 billion guidance. Annual expenses are projected at about $91.5 billion, down from the earlier $92 billion guidance.

Shares rose 5% in midday trading.

JPMorgan’s provision for credit losses in the quarter was $3.1 billion, worse than the $2.91 billion estimate, as the company had $2.1 billion in charge-offs and built reserves for future losses by $1 billion.

Consumers are “fine and on strong footing” and the increase in reserves was because the bank is growing its book of credit card loans, not because the consumer is weakening, CFO Jeremy Barnum told reporters Friday.

The biggest American bank has thrived in a rising rate environment, posting record net income figures since the Fed started hiking rates in 2022.

Now, with the Fed cutting rates, there are questions as to how JPMorgan will navigate the change. Like other big banks, its margins may be squeezed as yields on interest-generating assets like loans fall faster than its funding costs.

Last month, JPMorgan dialed back expectations for 2025 net interest income and expenses. On Friday, Barnum reiterated the bank’s view that NII was headed lower before rebounding “in the future.”

The third-quarter outperformance in NII was “a bit of a blip” that was the result of “intersecting trends that happen to net out” to an increase, not a sustainable trend, he said.

Shares of JPMorgan have climbed about 25% this year before Friday, exceeding the 20% gain of the KBW Bank Index.

Wells Fargo also released quarterly results Friday, while Bank of America, Goldman Sachs, Citigroup and Morgan Stanley report next week.

The Fed is finally cutting rates, but banks aren't in the clear just yet

suimt — Thu, 10 Oct 2024 18:57:42 +0000

Federal Reserve Board Chairman Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, U.S., September 18, 2024. REUTERS/Tom Brenner

Tom Brenner | Reuters

Falling interest rates are usually good news for banks, especially when the cuts aren’t a harbinger of recession.

That’s because lower rates will slow the migration of money that’s happened over the past two years as customers shifted cash out of checking accounts and into higher-yielding options like CDs and money market funds.

When the Federal Reserve cut its benchmark rate by half a percentage point last month, it signaled a turning point in its stewardship of the economy and telegraphed its intention to reduce rates by another 2 full percentage points, according to the Fed’s projections, boosting prospects for banks.

But the ride probably won’t be a smooth one: Persistent concerns over inflation could mean the Fed doesn’t cut rates as much as expected and Wall Street’s projections for improvements in net interest income — the difference in what a bank earns by lending money or investing in securities and what it pays depositors — may need to be dialed back.

“The market is bouncing around based on the fact that inflation seems to be reaccelerating, and you wonder if we will see the Fed pause,” said Chris Marinac, research director at Janney Montgomery Scott, in an interview. “That’s my struggle.”

So when JPMorgan Chase kicks off bank earnings on Friday, analysts will be seeking any guidance that managers can give on net interest income in the fourth quarter and beyond. The bank is expected to report $4.01 per share in earnings, a 7.4% drop from the year-earlier period.

president said that expectations for NII next year were too high, without giving further details. It’s a warning that other banks may be forced to give, according to analysts.

“Clearly, as rates go lower, you have less pressure on repricing of deposits,” JPMorgan President Daniel Pinto told investors. “But as you know, we are quite asset sensitive.”

There are offsets, however. Lower rates are expected to help the Wall Street operations of big banks because they tend to see greater deal volumes when rates are falling. Morgan Stanley analysts recommend owning Goldman Sachs, Bank of America and Citigroup for that reason, according to a Sept. 30 research note.

Morgan Stanley analysts upgraded their ratings on US Bank and Zions last month, while cutting their recommendation on JPMorgan to neutral from overweight.

Bank of America and Wells Fargo have been dialing back expectations for NII throughout this year, according to Portales Partners analyst Charles Peabody. That, in conjunction with the risk of higher-than-expected loan losses next year, could make for a disappointing 2025, he said.

“I’ve been questioning the pace of the ramp up in NII that people have built into their models,” Peabody said. “These are dynamics that are difficult to predict, even if you are the management team.”

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Recursion gets FDA approval to begin phase 1 trials of AI-discovered cancer treatment

Harsh — Wed, 02 Oct 2024 12:51:36 +0000

Source: Recursion Pharmaceuticals

AI drug pioneer Recursion Pharmaceuticals said Wednesday that one of its experimental treatments hit a key milestone.

Recursion was able to use its artificial intelligence-enabled drug discovery platform to identify an area of biology to target for the treatment of solid tumors and lymphoma, match it with a drug candidate and move all the way to gaining regulatory approval to begin studies in less than 18 months.

“We think that’s a really exciting proof point, not only for us as a company, but I think for the techbio industry as well,” said CEO and co-founder Chris Gibson, in an interview with CNBC.

The Food and Drug Administration cleared the investigational new drug application for a phase 1/2 clinical trial of an experimental drug candidate known as REC-1245. The company said the potential market for this treatment could be more than 100,000 patients in the U.S. and European Union.

The trial will evaluate the safety and tolerability of REC-1245 and will begin in the fourth quarter of this year. The phase 1 data from the dose-escalation portion of the study could be completed by the end of next year, the company has said.

The drug will target RBM39, which Recursion said appears functionally similar to a well-known but hard to target marker known as CDK12 to treat advanced HR-proficient cancers such as ovarian, prostate, breast and pancreatic cancers.

“I think what’s really exciting about this particular program of Recursion is that this small molecule and novel target came out from essentially a Google-search equivalent, from this giant map of biology that we’ve already built,” Gibson said, referring to the massive datasets that Recursion has created over the past 11 years.

“This is the first program that’s come of that,” he continued. “It’s the first program that really is leveraging many of these new tools that we’ve built in one unit.”

There is much hope that artificial intelligence will be able to significantly speed up drug discovery and make it less costly by eliminating some of the time-consuming trial-and-error as drug candidates are screened and selected. But investors have been wanting to see that the reality can live up to the hype.

Recursion shares year to date

Recursion, which counts Nvidia among its investors, has seen its shares fall 38% in 2024. But the stock is still more than 60% below a 52-week high it hit in late February.

The company is planning to merge with fellow AI-drug discovery company Exscientia, which will allow it to harness even more data. The deal is expected to close early next year.

The majority of analysts rate Recursion shares a hold, but two analysts do have a buy rating on the stock, according to FactSet. The average analyst price target of $10.14, implies a 64% return.

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GE Healthcare has been an under-the-radar winner — and a new catalyst just arrived

Harsh — Mon, 30 Sep 2024 19:30:34 +0000

GE Healthcare ‘s quiet outperformance is becoming harder to tune out — and its new drug used in radiology to improve the diagnosis of heart disease can help the Club stock make some more noise. In a note to clients Sunday, Wells Fargo analysts said that GE Healthcare’s diagnostic agent Flyrcado is “possibly the most underappreciated asset” owned by large medical technology companies. Flyrcado — approved by the Food and Drug Administration late Friday for the detection of coronary artery disease — is set to launch in some U.S. markets in early 2025, before availability expands. Wells Fargo said Flyrcado has peak annual sales potential of at least $1 billion and could boost earnings per share by roughly 80 cents by 2028. Wall Street currently sees GE Healthcare earning $6.72 per share in 2028, according to FactSet, up from $4.25 projected this year. “That’s incredible,” Jim Cramer said Monday about Wells Fargo’s optimism on Flyrcado. GE Healthcare has been a stock we’ve been battling since its steep slide during the second quarter. The FDA approval and impending launch of Flyrcado brightens the outlook for GE Healthcare’s diagnostic business, a part of our investment thesis that lately has not been top of mind for investors. Instead, the market has seemingly been focused on GE Healthcare’s ability to benefit from Federal Reserve interest rate cuts, which lower borrowing costs and make it easier for hospitals and other medical facilities to finance purchases of its expensive MRI and CT machines. That dynamic — coupled with the positive China stimulus announcements in recent days — turned GE Healthcare into one of our top-performing stocks in the third quarter . Shares were up another 1%-plus on Monday, pushing gains in the July-to-September period to more than 19%, compared with roughly 5% advances for both the S & P 500 health-care sector and the broad market index overall . After touching a new all-time high Friday, we trimmed our position in GE Healthcare , locking in hard-fought profits on a stock prone to periods of underperformance. Still, the fundamentals of the business look increasingly attractive, and Friday’s small sale in a run of overbought market days, according to the S & P Short Range Oscillator , was not a statement about our conviction. “I had not thought — and I should have — that the equipment here is so expensive that you need to finance it. So, once rates went down then you could get a payback,” Jim acknowledged Monday. “On top of that, now we’re getting the reasons that I felt it was important: the diagnostics.” At the time of our initiation in May 2023 , the most exciting diagnostic appeared to be Vizamyl, which is used in the detection of Alzheimer’s disease. Vizamyl’s momentum in recent quarters should continue as the nascent class of Alzheimer’s treatments — Biogen and Eisai’s Leqembi and Club holding Eli Lilly ‘s Kisunla — see more uptake. It’s clear Flyrcado also deserves attention. Flyrcado is what’s known as a radiotracer. It is given to patients via intravenous injection before they undergo a positron emission tomography, known simply as a PET scan. Flyrcado shows how blood flows through the heart muscle for patients with known or suspected coronary artery disease, the most common type of heart disease in the U.S., according to the CDC . The primary imaging technique currently used to diagnosis coronary artery disease is single-photon emission computed tomography, commonly abbreviated as SPECT. Both SPECT and PET scans are part of the nuclear medicine field, but they use different kinds of radiotracers to aid in the diagnosis process. A PET scan using Flyrcado has better diagnostic efficacy than SPECT scans, according to GE Healthcare. That makes Flyrcado a better option for “difficult-to-image patients such as those with a high body mass index (BMI) and women,” Wells Fargo analysts wrote. Due to its half-life of 109 minutes, Flyrcado also can be produced at an offsite pharmacy then delivered to hospitals and imaging centers. That is among its advantages over the existing radiotracers used in scans to detect heart disease, according to the company. “Because of these advantages, we expect Flyrcado to cannibalize current PET tracers over time,” Wells Fargo said. Analysts at Stifel are upbeat on Flyrcado’s potential, too. The radiotracer’s approval is a “clear incremental positive catalyst for GEHC, and with no [Flyrcado] contribution in consensus numbers today, it seems likely to be a growth-enhancing incremental positive for the GEHC 2025 outlook,” analysts wrote to clients Sunday. Stifel raised its price target GEHC to $102 per share from $100. Looking ahead to next year, a proposed change to the way Medicare pays for diagnostic agents such as Flyrcado could take effect, boosting its diagnostics business overall. GE Healthcare may also see a recovery in its China business due to the roll out of medical-focused stimulus spending . Management is expected to talk more about both these additional drivers at its investor day set for Nov. 21. Having just trimmed our GEHC position, we have a 2 rating on the stock, which means we’re waiting for a pullback before considering buying more. We’re reviewing our $92 price target since shares are now trading above that level. (Jim Cramer’s Charitable Trust is long GEHC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

GE Healthcare booth is seen ahead of the 2022 China International Fair for Trade in Services (CIFTIS) at China National Convention Center on August 28, 2022 in Beijing, China.

Yi Haifei | China News Service | Getty Images

GE Healthcare‘s quiet outperformance is becoming harder to tune out — and its new drug used in radiology to improve the diagnosis of heart disease can help the Club stock make some more noise.

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policy, a move many advisors recommend.

Gallagher. “More so than ever we are seeing employers looking to address the broadening needs in their workforce,” said Tom Kelly, principal in the Gallagher health and benefits practice, and “today’s employees are looking for more holistic wellbeing support.”

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GE Healthcare has been an under-the-radar winner — and a new catalyst just arrived

Gallagher.

“More so than ever we are seeing employers looking to address the broadening needs in their workforce,” said Tom Kelly, principal in the Gallagher health and benefits practice, and “today’s employees are looking for more holistic wellbeing support.”