Systematic Credit and Equity G-250 Earnings Season grouped with Trading Indicators for May 2, 2025
Good morning. We are going to try a little different approach to this morning's reporting. With 62 of the top 250 issuers of corporate debt reporting over the past 4 days (including today) we will send out 2 reports: This first with 16 of the most recent issuer reports (principally last night and this AM). And the second report (around 11am) with the model output containing all of the reports from last night, and this morning (including those issuers that have not reported yet. We are offering single recommendations for each secondary trading curve in our trading/research universe (6,500 bonds) if you would like to see model output for any of the secondary trading curves we have published, please contact us and we will send along.
Earnings results from yesterday and last night
Issuers not yet written up and not yet displayed in model output:
Becton Dickinson (BDX, Baa2/BBB): reported 1Q revenue that increased 4.5% YoY and earnings that exceeded analyst expectations. Company updates full-year fiscal 2025 guidance and provides estimated tariff impact. Becton Dickinson (BDX) is relevering its balance sheet.
G-250 issuers with less than 5 USD bonds.
Deutsche Post (DHL, A2/A) reported revenue +2.8%, EBIT +4.5%, Free cash flow (excluding M&A) improved by 17.4% and Guidance unchanged: EBIT of at least EUR 6 billion and free cash flow of approximately EUR 3 billion in 2025. Issuer is delevering.
BASF (BASGR, A3/A-) reported a (-40%) decline in 1Q operating earnings and is relevering its balance sheet.
Airbus (AIRFP, A2/A) reported improved deliveries, revenue and operating earnings in 1Q 2025 and has almost as much cash + investments as debt ($20 billion).
Issuers reporting this morning and last night
Shell (RDSALN, A2/A+)
• Shell reported 1Q production growth of 6%, a (+3%) rise YoY revenue, and decline in everything else including cash flow from operations. Company also committed to a $2.5 billion share repurchase plan.
• Financial Position: RDSALN net debt is $48 billion. That is flat when compared to 4Q 2024 and $9 billion higher YoY.
• Model Trading Indicates: Our trading model again sees the Shell secondary trading curve as an attractive short trading Indicators (-12 to -20bp) tighter.
Natwest Group (NWG, A3/BBB- Sr. Non Preferred)
• Natwest reported its second best first quarter result in its history. Net interest margin rose 22bp QoQ even as credit quality declined slightly and the bank's loan book did not grow. Similar to other major banks, NatWest simply moved more capital (not much more) into its trading desks. A great strategy and even better result.
• Financial Position: Natwest has a 13.8% CET1 ratio and £33 billion of net cash on its balance sheet. Natwest balance sheet is now delevering and the company is retaining capital.
• Model Trading Indicates: NatWest (NWG) has issued bonds in May in the past (2024) but just once. Having already sold bonds in March – there is only a 26% chance of new USD supply in the next 10 trading days. Our credit trading model sees all 15 of the current liquid NatWest (NWG) Senior non-preferred USD bonds as attractive with the NWG 5.778 03/01/35 most attractive.
Standard Chartered (STANLN, A3/BBB+ Sr. Non Preferred)
• Standard Chartered reported 1Q operating results that were 15% higher than 1Q 2024 owing to higher NIM and lower risk. While we are reading Bloomberg stories about warnings relating to "bad loans" which we saw £219mm of net charge-offs on £345 billion risk portfolio. Standard Chartered (STANLN) CET1 capital is 14.2% and management is maintaining its 2025 forecast.
• Financial Position: Standard Chartered has £29 billion of net cash on its balance sheet and that is a £5.7 billion rise YoY.
• Model Trading Indicates: Our credit trading model continues to see the Standard Chartered secondary trading curve as an attractive long Indicators with the STANLN 6.228 01/21/36 the most attractive bond in the STANLN secondary trading structure.
Santander USA (SANUSA, Baa2/BBB+ Sr. Non Preferred)
• Santander USA reported 1Q operating earnings that doubled to $385mm while revenues rose 9% YoY. Some of the largest revenue growth for US banks in 1Q 2025. CET1 capital is now up to 12.5% at the end of Q1 2025, and net charge-offs on the Santander loan book are now falling. Credit quality continues to improve, deposits are stable, and global markets income rose 11% YoY. 1Q 2025 profit before tax of €2,124 million with a CET1 ratio of 13.6%.
• Financial Position: Santander USA balance sheet is now delevering and the company is retaining capital.
• Model Trading Indicates: 7 of SANUSA's 14 liquid $ bonds are considered undervalued by our credit trading model with the SANUSA 5.353 09/06/30 as the most attractive.
ING (INTNED, Baa2/BBB Sr. Non Preferred)
• ING reported 1Q operating results that were (-7.8%) below 1Q 2024 owing to lower net interest income and higher operating costs. Issuer is retaining capital, loan book is growing, credit quality is flat QoQ and positive YoY. CET1 capital is 12.5% and management is maintaining its 2025 forecast.
• Financial Position: ING is shrinking the amount of debt outstanding but utilizing more capital in its trading operations. The net result is increased net debt and decreased debt outstanding. ING has more cash than debt, one of the highest CET1 capital ratios in Europe, and is managing its dividend policy and share repurchases to keep balance sheet liquidity strong.
• Model Trading Indicates: Our credit trading model continues to see the INTNED Float 03/25/29 now @ DM 116 as one of the most attractive bonds in the entire 6,500 bond systematic trading/research universe with (-21bp) of tightening left in the trade.
Mastercard (MA, Aa3/A+)
• Mastercard net earnings were $3.3 billion, +9% from 1Q 2024. Revenue rose 15% to $7.5 billion. MA raised 2Q and 2025 forecast revenue and earnings.
• Financial Position: Like other companies that do not have the operating cashflow metrics of a Meta, Apple, Microsoft, JP Morgan or HSBC, MA uses its balance sheet to supplement its cash return to shareholders.
• Model Trading Indicates: Our trading model sees 3 of the Mastercard secondary bonds as overvalued from a short trading Indicator perspective. The MA 2.95 06/01/29 is the most overvalued on the MA secondary credit trading curve.
Apple (AAPL, Aaa/AAA)
• AAPL 2Q revenue rose 5% to $95.3 billion, with net earnings growing 4% to $24 billion. For us to speculate about "tariff talk" is just that speculation. Our trading model operates only on publicly available information. Management guidance here is ultimately irrelevant including another $100 billion share buyback.
• Financial Position: Apple (AAPL) has $136 billion of cash + investments against $100 billion of debt. The company generates $100 billion of operating cash flow per year. So this is one of the few issuers that can return capital to shareholders without needing to use its balance sheet.
• Model Trading Indicates: Our trading model made a similar recommendation in March. 10 of the 29 liquid Apple secondary bonds are seen as undervalued by our credit trading model. The AAPL 4.65 02/23/46 is seen as the most attractive.
Amazon (AMZN, A1/AA)
• Amazon 1Q revenue came in at $155.7 billion (+8% YoY), above analysts' expectations. Amazon (AMZN) net income rose 64% YOY to $17.1 billion and the company is revising guidance higher. Amazon won't print their 10-Q until tomorrow so we don't have information on returns to shareholders just yet.
• Financial Position: Amazon (AMZN) has $42 billion of net cash and is delevering YOY.
• Model Trading Indicates: 14 of the 23 liquid AMZN bonds are seen as undervalued by our credit trading model. The AMZN 4.05 08/22/47 is seen as the most attractive.
Crown Castle (CCI, Baa3/BBB-)
• Crown Castle 1Q revenue declined (-35%) and net earnings were at a loss position for a second consecutive quarter. While the company is pointing at higher Funds From Operations (FFO), with $1 billion per quarter of revenue that's a tough statement to comprehend.
• Financial Position: Despite just $1 billion in 1Q revenue, Crown Castle spent $711mm on cash dividends and share repurchases in the quarter. CCI balance sheet debt is over 5x annual revenue.
• Model Trading Indicates: Our trading model sees the Crown Castle (CCI) secondary trading curve as an attractive short trading Indicator with the CCI 3.8 02/15/28 the most overvalued CCI secondary bond in the credit curve.
Abbott Labs (ABT, Aa3/AA-)
• Abbott reported 1Q revenue and operating results April 16. They filed their 10-Q Thursday night.
• Abbott continues to delever as it has for most of the past 5 years. Company has just $14 billion of overall debt and is the smallest issuer in terms of overall debt of the G-250 trading/research universe.
• Model Trading Indicates: There are still 2 bonds in the Abbott Labs (ABT) secondary trading curve our model sees as attractive. The ABT 4 3/4 11/30/36 and the ABT 4.9 11/30/46. However, our trading model sees just (-2 to -4bp) of spread tightening remaining in those bonds from current trading levels.
GlaxoSmithKline (GSK, A2/A)
• GSK reported strong 1Q earnings on slightly higher revenue growth. Specialty Medicines sales (+17%); Respiratory, Immunology and Inflammation (+28%); Oncology (+53%) and HIV sales (+7%) led the company to raise guidance for the remainder of 2025. Company also stated it is well prepared to deal with US trade tariffs.
• Financial Position: Net debt on the GSK balance sheet continues to grow as after-investment cash flow continues to be insufficient to fund shareholder payouts.
• Model Trading Indicates: GSK's March 2025 $2.6 billion over 4 tranches was the first GSK USD offering in 6 years. Those bonds currently trade (+10bp) wide of new issue spread. Our trading model sees the secondary USD GSK trading curve as an attractive short trading recommendation (-10 to -15bp) from current trading levels.
Eli Lilly (LLY, Aa3/A+)
• Reported 1Q revenue growth of 45% and earnings growth of 23% YoY post several acquisitions. However, LLY had its largest daily equity decline in 17 years post CVS dropping Lilly's obesity drug Zepbound from its "preferred" offerings and Eli Lilly cutting 2025 guidance on R&D charges.
• Financial Position: LLY continues to grow its pharmaceutical portfolio, revenues, dividends, share repurchases and balance sheet as part of its overall operating strategy. Unfortunately, sometimes operating cashflow doesn't grow at the same rate as management's capital and shareholder spending. LLY net debt has grown $10 billion (to $35 billion) in the past 12 months.
• Model Trading Indicates: Our credit trading model sees just 4 of the 28 liquid USD LLY bonds as overvalued from a short trading perspective. The model sees (-10 to -15bp) of credit spread tightening needed before the Eli Lilly secondary trading curve would be considered an attractive short trading Indicator.
Amgen (AMGN, Baa1/BBB+)
• Reported 9% 1Q revenue growth and 12% operating earnings growth (there were several "other items" in the operating earnings line). Amgen affirmed 2025 guidance as its call was also focused on the growth of the obesity drug market.
• Financial Position: Amgen did not provide a full financial statement with last night's earnings report. However, they did confirm that the AMGN balance sheet continues to trim net debt on a YoY basis.
• Model Trading Indicates: Our credit trading model sees 17 of the 30 liquid USD Amgen secondary bonds as undervalued from a long trading perspective. The model sees the AMGN 5.6 03/02/43 as the most attractive long trading Indicator.
Southern Co (SO, Baa1/BBB+)
• Reported 17% 1Q revenue growth and 19% operating earnings growth on price increases and transmission growth. Company continues to expand its footprint and execute its strategy throughout all of Southeastern subsidiary operating companies.
• Financial Position: Southern Co and its operating subsidiaries (Georgia Power, Alabama Power, Southern Co Gas) are one of the country's largest utilities with almost $70 billion of debt. Hence the company is constantly adding balance sheet leverage to its capital structure.
• Model Trading Indicates: Our credit trading model sees just 4 of the 93 liquid USD SO secondary bonds as overvalued from a short trading perspective. The model sees another (-12bp) of tightening in SO credit spreads necessary for an attractive short trading Indicator.
McDonald's (MCD, Baa1/BBB+)
• Reported -1% overall comparable sales in 1Q 2025 and -3.6% in the U.S. One of the worst quarters on record at McDonald's (MCD). There are numerous explanations for this, but that won't change the level the bonds trade at.
• Financial Position: McDonald's does not release balance sheet data when it reports initial equity results. MCD was relevering (as is the case in 75% of the reported quarters for the past 15 years) at 12/31/24.
• Model Trading Indicates: Our credit trading model sees the McDonald's (MCD) secondary trading curve as an attractive short trading Indicator with the MCD 3.6 07/01/30 the most overvalued bond in the MCD trading structure.
Disclaimer - This report is not intended as, and does not constitute an offer, or a solicitation to buy or sell any securities or financial instruments. All data, levels, opinions, and representations herein are provided for informational purposes only and should not be relied upon for making investment decisions. Past performance is not indicative of future results. The authors of this report assume no liability for losses or damages arising from the use of this information. Investors should consult with a qualified financial advisor before making any investment decisions. The information in this report is based on sources believed to be reliable, but no guarantee is made as to its accuracy, completeness, or timeliness.