Margins Over Stories: Who Delivers Before the Fed and Big Tech

Dear readers,

Yesterday’s lesson from UPS and Coca-Cola was pricing power. Today’s reports add a second, harder test: what is left after costs. Medical technology, financial firms and parcel carriers show what investors are paying for right now: rising margins, cautious cost planning and raised guidance. Robinhood supplies the counterexample. A record revenue figure does not help when earnings miss expectations.

The Fed’s decision and the reports from Microsoft and Alphabet follow in the hours ahead.

GE HealthCare: The Margin Does the Heavy Lifting

GE HealthCare clearly beat expectations for the third quarter. Adjusted earnings came to $1.34 per share against a consensus of $1.20. Revenue rose 7.2 percent to $5.5 billion. The key figure is the adjusted operating (EBIT) margin, which climbed from 14.8 to 16.6 percent.

The company raised its full-year outlook and now expects 2026 adjusted earnings of $4.95 to $5.05 per share, up from $4.80 to $5.00. In premarket trading the stock gained between just under 3 percent and more than 8 percent, depending on the venue.

None of this is automatic. The patient care segment remains weak, with operating profit down 61.5 percent over nine months to $52 million. Tariffs weighed on results by $209 million in that period, of which $162 million was cushioned by refunds. Growth is carried by imaging and diagnostics, with pharmaceutical diagnostics recently up 13 percent. A backlog of $23.7 billion adds visibility.

Anyone looking for a defensive counterweight to AI enthusiasm will find one here. But the price jump also shows that expectations rose along with the guidance.

Robinhood: Record Revenue, Wrong Engine

Robinhood shows how quickly a platform can change its face. Third-quarter revenue hit a record $1.42 billion, up 12 percent. Earnings under US accounting rules (GAAP) came to $0.51 per share, short of the expected $0.55. Adjusted, they were $0.60. In early trading on Wednesday the stock lost about 7 percent to roughly $88.

Crypto revenue collapsed 55 percent to $120 million. Revenue from event contracts, by contrast, rose sixfold to $173 million, and options business grew 31 percent. Robinhood now earns more from those contracts than from crypto trading.

The company oversees $396 billion in customer assets and has booked more than $13 billion in net inflows so far in October. The growth is real, but it has become more expensive: operating costs rose 16 percent. The finance chief also warned of tighter trading spreads at the start of the fourth quarter. The quality of the platform’s earnings therefore depends more on cost discipline than on trading mania.

Banks and Advisers: The Deal Backlog Clears

Financial firms deliver a consistent picture. Investment bank Evercore earned an adjusted $4.28 per share in the third quarter, against a consensus of $2.53. Revenue of $1.17 billion marked its sixth straight record quarter. Advisory fees rose 14 percent and underwriting revenue 27 percent. In premarket trading the stock gained about 5 percent to $274.

Deutsche Bank booked its third consecutive record quarter. Assets under management grew to $2.2 trillion, and the stock is currently up a little more than 3 percent at just under €30. UBS raised pretax profit by almost 30 percent. Net profit rose 8.4 percent, and wealth management took in $55.1 billion in new money. The stock is nonetheless slightly lower in the session.

Insurance broker Aon shows the defensive variant. Organic revenue growth came in at 6 percent, and the adjusted operating margin rose 70 basis points to 27.0 percent. Adjusted earnings of $3.36 per share narrowly beat the consensus of $3.30. The stock has recovered sharply over the past month but is still down for the year.

Should investors sell immediately? Or is it worth buying Microsoft?

The message for investors: deal activity is picking up, and firms that earn high margins from it are being rewarded.

UPS: Less Volume, Better Prices

UPS gained almost 6 percent on Tuesday and now trades at just over $105. The company raised its full-year guidance for the second time in a row, to revenue of about $92.6 billion and adjusted operating profit of about $8.75 billion.

The adjusted operating margin did fall by a full percentage point to 9.0 percent in the third quarter. One-time charges of $279 million for restructuring and write-downs cut net profit by 11 percent.

Analysts are split. Citigroup raised its price target from $122 to $131 and confirmed its buy rating. JPMorgan cut its target from $115 to $112 with a neutral rating. For the fourth quarter, UPS is aiming for revenue of $25.7 billion and adjusted operating profit of $3.3 billion.

Daily US package volume is expected to fall year over year because UPS is deliberately shedding low-margin Amazon shipments. In short, it is selling less volume at better prices. Whether that leaves enough cushion for the dividend will be decided by the margin in the holiday season.

This Evening: The Fed and the Free Cash Flow Question

The Fed announces its decision at 19:00 CET, with the press conference featuring Kevin Warsh following at 19:30 CET. A hold at 3.75 to 4.00 percent is expected, after September’s first rate increase in three years.

Market pricing puts the odds of another move at the December 8-9 meeting at roughly 85 percent. US consumer prices rose 3.7 percent in September. The yield on ten-year Treasuries sits near 5 percent, which remains the yardstick for equity valuations.

Afterward, Alphabet (conference call at 21:30 CET) and Microsoft (webcast at 22:30 CET) report. Options markets are pricing moves through Friday of about 6 percent for Alphabet and about 5 percent for Microsoft. Alphabet trades just under $324, roughly a fifth below its yearly high. Microsoft stands at just over $529, only about 4 percent below its record.

The revenue picture is clear: Microsoft is targeting almost $90 billion, and Alphabet is expected at about $128 billion. The more interesting question is therefore less cloud growth than the cash register.

Alphabet and Amazon are expected to burn more cash than they take in, while Microsoft is projected to generate more than $8 billion in free cash flow. Investors who pay for cloud growth only when cash follows should look closely at Microsoft’s cash.

The Takeaway

The Fed will probably decide less about rates tonight than about the tone for December. The midterm elections on November 3 are also approaching, and Brent above $110 a barrel keeps inflation worries alive.

Whether the margin strength at GE HealthCare, Evercore and Aon carries share prices, or only buys a pause before the next rate step, will become clear in the coming days. The market’s reaction to the Microsoft and Alphabet results gives the first signal.

Best regards,
The StocksToday.com Editorial