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Stocks in focus: 3M, Union Pacific, Verizon

Shares of 3M closed lower following news of layoffs, Union Pacific stock fell after reporting fourth-quarter earnings, and Verizon stock closed in the green.

Video transcript

- Let's take a look at some of the top movers of the day. First up, speaking of industrials, let's talk about 3M falling today after an earnings miss. You can look at the stock closing off just about 6%. Now, the company signaling more turmoil to come this year in 2023. 3M also announcing that it plans to cut 2,500 manufacturing jobs. Layoffs spreading from the tech sector here, Dave, to other industries.

We're certainly seeing that reflected more broadly across a number of industries as we brace for more of these types of announcements. We're only, what, two and a half weeks into this earnings season. The majority of those layoffs have been concentrated in technology. But 3M, certainly bracing for what will likely be a challenging couple of quarters, are looking to cut costs. And they're doing it by eliminating some of their headcount.

- Yeah, this is an employer of 100,000 employees. So we are starting to get a glimpse of what could potentially be around the corner as you see layoffs spread. And you see predictions for the economy really beginning to soften. They really cite several times slowing demand. And that's the heart of it.

I want to highlight something CEO Mike Roman had to say in the earnings call. "The slower-than-expected growth was due to rapid declines in consumer-facing markets such as consumer electronics and retail, a dynamic that accelerated in December as consumers sharply cut discretionary spending and retailers adjusted inventory levels. We also saw a significant slowing in China due to COVID-related disruption."

So yes, on the tail end, you do have some good news coming around the corner as China begins to reopen. But look, ultimately, the big picture takeaway is that slowing demand consumer-facing side of 3M shows what we're going to be enduring the first half of 2023 is slowing economy, whether we like it or not.

- Yeah, certainly, it is a slowing economy. We know that when you take a look at 3M, oftentimes, it's a bellwether for this sector--

- Yeah.

--which is why we're placing so much emphasis on this report because it could signal some of those weakening conditions more broadly for the industrial sector. When you take a look at some of their numbers, their outlook there that disappointed, 3M expecting sales to decline 2% to 6%. Now, in terms of what the company will do going forward, they do have the capacity for deals. But they likely will be conservative in this environment in the economy-- in the economy, which is clearly very challenging right now.

In terms of TheStreet's reaction to this report, Vital Knowledge was out saying that there's nothing positive in this report, in this guide other than, quote, "Expectations were already very low. Most of the weakness seems to be confined to that consumer business," that you were just talking about. So I guess if we're looking for a positive spin on this, yes, the consumer side of their business, obviously, very weak right now, not necessarily the case for 3M at large.

- Looking pretty hard for some positive news.

- Very, I know.

- Revenue growth of 0.4% on 1% to 3% expectations. While 3M is cutting staffers, other sectors are still struggling to find workers. Union Pacific CEO, Lance Fritz spoke with Yahoo Finance following his company's earnings report earlier today and discussed the state of employment at Union Pacific. You can see shares falling more than 3% on their earnings report. Here is their CEO earlier today.

LANCE FRITZ: The hiring picture was very difficult through last year and specifically in areas where we operate in a rural environment where the workforce is small and the unemployment rate are very low. That's areas like in the middle of Iowa, in the middle and Western Nebraska, out into Wyoming, and even up into Minnesota. Now, we're doing things like paying a $25,000 hiring bonus in certain spots. We're adjusting other aspects of the job. We've made sure our training produces a conductor that's fully capable and ready to work.

- Boy, that's a telling statement right there, Shannon. I think we're going to see this on so many different sectors of the economy difficult to find employees right now. You know about the labor negotiations in rail and with port workers. You can touch on just about every type of job that falls in line with this-- truck drivers, mechanics, the nurses. There is a shortage of employees. And how you're going to incentivize employees throughout this year is going to be an impossible task if they're offering $25,000 bonuses and still not finding enough employees in this economy.

- They aren't finding enough employees in this economy. The word hiring was mentioned 10 times in that earnings call. Really just speaks to the challenge that this presents for Union Pacific here going forward. They have, though, been adding to their headcount. Obviously, not as quickly as they would like. Their headcount is up 4%, just above 31,100. They do have 600 additional workers currently in that training program that Lance Fritz was just talking about.

But on this earnings call, when we talk about the impact that it's having on their business, the company is saying that they still have tight spots in the network that are limiting their ability to grow and to ship all of that demand because they simply do not have the workers to meet the demand that their business is facing right now. And not only that, they're also facing higher costs. Another challenge, another headwind here for Union Pacific going forward-- the cost per employee.

Talking about some of those incentives there, that grew 6%. That was primarily driven by wage inflation. They need to pay workers more in order to keep the workers that they already have. Also, higher fuel costs. Clearly, a headwind here for the company. Fuel costs were up about 43%, which is clearly hurt their bottom line. We're looking at shares off just about 3%.

I also want to quickly take a look at Verizon also out with earnings today, boasting an increased subscriber base and boosted revenue. But guidance for the 2023 fiscal year came in lower than what TheStreet was expecting, Verizon guiding for earnings per share in the range of $4.50 to $4.85. TheStreet have been looking for $4.96 there. So below what TheStreet was looking for. Yet, shares moving to the upside today.

I think that subscriber number better than expected. 217,000 new wireless subscribers were added during the fourth quarter. That beat TheStreet's estimates. But clearly, when you stock that against some of its competitors out there, T-Mobile and their prelim number ads, Dave, they said that they added over 900,000. AT&T expected to add over 600,000. So you can clearly see Verizon there losing some of its market share to its biggest competitors.

- The CEO saying current levels of sales and discounts being offered across the industry unsustainable, adding that 5G story really has not come to fruition. And they would like investors them to cut spending there.