Daily Brief: BMW’s Strong Update Proves It’s Not What You Know That Counts, It’s Who

Daily Brief: BMW’s Strong Update Proves It’s Not What You Know That Counts, It’s Who

over 2 years ago3 mins

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German carmaker BMW reported better-than-expected quarterly earnings on Wednesday, proving just how important it is to make friends in all the right places.

What does this mean?

BMW is well-known in the industry for having strong relationships with suppliers of its microchips, arguably because its focus on luxury models means it’s able to pay more than most of its rivals. That means it’s been handling the semiconductor shortage better than most: the company’s deliveries were only down 12% last quarter compared to last year, compared to, say, rival Volkswagen’s 24% decline.

Deliveries fall

But 12% is still a drop-off, and BMW’s been trying to make up for it by pushing its more profitable models. That – along with a jump in sales of its fully electric vehicles – helped boost profit by a better-than-expected 50% versus the same time last year. That might explain why the company’s still confident in its September decision to raise its full-year profit outlook.

Why should I care?

The bigger picture: New cars are old news.

The drop in car production doesn’t mean no one’s buying cars, mind you: they’re just turning to second-hand models instead, where prices are now so high that some hand-me-downs are more expensive than their brand new counterparts. And since car-buying overall is still going strong, carmakers’ finance segments – which offer customers the opportunity to pay in instalments – have been banking pretty healthy profits too.

Car price change

Zooming out: No chips for Christmas.

The tech industry feels carmakers’ pain: Apple has reportedly slashed production of iPads by half, and Nintendo production of its Switch consoles by 20%. And if even those giants are suffering, spare a thought for smaller firms without the clout to get anywhere near the chips they need. Fewer gifts for Christmas, then, could mean that consumer spending will take a hit over the all-important holiday season. So much for happy holidays…

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CVS Beat Expectations, Working Hard To Get Shots In Arms

CVS image

CVS reported better-than-expected earnings on Wednesday, as the healthcare giant’s shots do wonders for American shoppers and its own bank balance.

What does this mean?

Coronavirus vaccines are still in high demand in the US, with Delta still on the prowl and booster shots now the must-have winter accessory. And CVS has been more than happy to provide: the company administered 9 million vaccines last quarter, which helped push up retail revenue by 10% versus the same time last year. What’s more, a rise in visits to the doctor has meant more prescriptions for CVS to fill, which boosted its pharmacy revenue by a tidy 9%.

All in all, that brought overall revenue up 10% last quarter. And CVS doesn’t think that’ll dry up anytime soon: the US authorized the Pfizer vaccine for kids aged five to eleven this week, which might just be why it raised its full-year profit outlook. Investors were impressed: they sent CVS’s stock up 5% after the news.

CVS stock
Source: Google Finance

Why should I care?

The bigger picture: The best of both.

CVS is actually an “integrated healthcare provider”, meaning it both sells drugs and offers health insurance services. That’s proved forward-thinking: the pandemic has, after all, boosted retail revenue through vaccines and tests, even as it’s increased costs for its insurance business. Pure-play companies like Humana haven’t been so lucky: the health insurance firm announced on Wednesday that Covid’s hurt its bottom line, and its stock initially fell 7%.

Zooming in: CVS is innovating.

CVS has something else up its sleeve: the company’s increasingly been linking its different healthcare offerings with one another – encouraging its health insurance members to visit its clinics, say. It’s also just launched a virtual care service, allowing customers to see a doctor around the clock. That could be a shrewd move: McKinsey reckons the US telehealth industry will grow from its 2019 revenue of $3 billion to as much as $250 billion.

US telehealth industry
Source: McKinsey


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