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Tue, April 29, 2025

Systematic Credit and Equity G-250 Earnings Season grouped with Trading Indicators for April 29, 2025

More Earnings Results this AM

General Motors (GM), Baa2/BBB)

  • GM reported 1Q revenue slightly lower revenue and earnings YoY and delayed their post earnings conference call until Thursday pending another change in the "official" auto tariffs from the US Whitehouse. The company also suspended further share repurchases of which they spent just over $ 2 billion on in 1Q 2025.

  • Financial Position: Like most healthy auto companies, General Motors (GM) balance sheet continues to re-lever as they approach the $135 billion total debt number for the first time selling their GM finance unit.

  • Model Trading Indicators: Our credit trading model has successfully indicated shorting GM Finance bonds for most of the past 10 years. So when the credit trading model sees the secondary GM trading curve as attractive short trading indicators at much tighter levels, there is nothing to trade here in the near term.

United Parcel Service (UPS, A2/A)

• 1Q Results: UPS revenue and earnings were flat YOY as the company announced 20,000 job cuts and facility closures associated with the change in their relationship with Amazon (AMZN). UPS did not provide any update on US trade tariffs or 2025 earnings outlook updates.

• Financial Position: UPS generated $2.3 billion of operating cash flow, used $1.3 billion of to invest in their business and spent $2.3 billion on share repurchase and dividends. The net result is the United Parcel Service balance sheet is now re-levering.

• Model Trading Indicators: Our credit trading model now sees the United Parcel Service secondary trading curve as an attractive short trading indicators at materially tighter (-8 to -12bp) trading levels.

Coca Cola (KO, A1/A+)

• 1Q Results: Coca Cola (KO) reported 2% unit case growth and a(-4%) revenue decline YOY with a 6% foreign currency headwind which left operating earnings higher year on year, but not by much. Company is still calling for a (+3 to +5%) rise in operating profit for the remainder of f2025.

• Financial Position: Similar to Pepsico (PEP), Coca Cola deploys its balance to fund its shareholder payments as running a global beverage business does not necessarily provide free cashflow from operations. Net debt on the KO balance sheet has grown by 50% since September 2023. Over the same period of time earnings growth has been roughly 8% per annum.

• Model Trading Indicators: Our credit trading model now sees the Coca Cola (KO) secondary trading curve as overvalued and would become an attractive short trading indicator (-4 to -9bp) from present trading levels.

Altria (MO, A3/BBB)

• 1Q Results: MO reported a 6% revenue decline on(-14%) lower cigarette sales. Company "adjusted earnings" however, exceeded analyst expectations. MO management (who is pretty reliable) affirmed 2025 EPS guidance at a record result.

• Financial Position: MO balance sheet has been de-levering as cigarette unit volumes slowed. However in 1Q 2025, the Altria balance sheet is again re-levering slightly with net debt (-12%) lower than it was in 2020.

• Model Trading Indicators: Our credit trading model avoids the MO secondary trading curve but would participate in MO new supply if the opportunity presents itself.

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.