Match Group, Kraft Heinz top estimates, CVS raises wages

Myles Udland and Brian Sozzi dive back into more earnings which include: Match Group beating Q2 estimates as dating scene rebounds, Kraft Heinz stock dipping despite topping expectations, and CVS raising hourly wage to $15 for workers.

Video transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance live on this Wednesday morning. About 3 and half minutes out from the opening bell here, and we see futures pointing to losses. At the open markets reacting to that ADP employment report, which came in a little bit weaker than expected. Some 330,000 jobs being added to the private sector in the month of July. But earnings, center of the storm continues here.

Let's take a look quickly at what happened over at Match Group in the company's most recent quarter. The Tinder parent company out with its results last night. We see here a beat on the top line, slight miss on the bottom line here. Brian Sozzi though, it seems that the pandemic has not really slowed down. We've seen surprising performance. I think the strength of the business from the Match Group shows that people are looking for companionship, let's say, in the pandemic. We have each other, we get to talk to each other every day, but a lot of people still at home all by themselves.

BRIAN SOZZI: Yeah, I ain't searching for you on Tinder, Myles. I love you man, but I'm not looking for you there. But Match Group, it might be also time for a new logo, I'm really not liking that thing. But anyway, you're looking on how the company performed in the most recent quarter. I am surprised to see the market reaction here, because Tinder, which is really the main dating service inside of this company, they are noting vaccination rates continue to rise, Tinder to direct revenue growth is accelerating, as users' propensity to pay is increasing.

So people are getting vaccinated, and they're willing to fork out more and more money to go out there on 5, 7, 10 dates a night. And you're seeing it in the Tinder direct revenue, which hit about $399 million in the most recent quarter. In 2019, for this same time period, we like those 2019 comparisons, that number was 276 million. So good to see people going back out there, getting their dating game on.

MYLES UDLAND: And they have a chart in here of they call it Tinder's a la carte revenue. I guess this is when you decide I want a slight boost on an ongoing basis? I'm not sure.

BRIAN SOZZI: Swipe boost?

MYLES UDLAND: Well there's like extra swipes, right? Isn't there a Tinder plus thing that you pay for, but then you can, you could pay to get--

BRIAN SOZZI: You have to get Zack Guzman in here. He's our chief dating officer--

MYLES UDLAND: We should really be better with the product side of this. But we shouldn't, because neither of us have a use for it. I just wanted to point out, Tinder's a la carte revenue, which Match flagged in its release, over the last quarter has really been above what the company saw in January. And of course in January, you expect, as you see every year, a spike when people say, OK, New Year's Resolution. I'm going to find someone this year. So for the company to be above those one-time, seasonally aggressive numbers is I think an encouraging sign through the summer.

BRIAN SOZZI: We're getting some breaking commentary inside of our Slack channel here, explaining to Boomer folks like us what are some of these things on Tinder. You pay, and you can get extra swipes. And if you pay more, there is no limit on swipes, so I guess that's a good thing.

MYLES UDLAND: OK.

BRIAN SOZZI: OK, I mean, I don't know. I've never used the thing.

MYLES UDLAND: It's great. All right, let's quickly talk about Kraft Heinz, a company reporting out with its earnings and sales down in the US business, sales decreasing about 2.3%, I believe, in the US market-- 3.6% in the US market in the most recent quarter. Beat here on the top line, beat here on the bottom line, but Sozzi, I think something that stands out to me. A company talking about a more normalized, promotional, environment in the US relative to last year.

BRIAN SOZZI: Well if you're going out and you're using Tinder, don't give that first date a box of Mac and cheese. I love this transition.

MYLES UDLAND: And certainly don't transition from the Tinder super swipe into the Kraft Heinz earnings results.

BRIAN SOZZI: Absolutely not. But I think what you're seeing here is-- Oh, Doma! Our friends at Doma, ringing the opening bell. Always good to see you guys.

MYLES UDLAND: Bailing out of the segment here.

BRIAN SOZZI: Yeah, good timing.

BRIAN SOZZI: So yesterday, we had a guest go in, and things were good here. We didn't play the sound, but today our producers are like, these idiots are talking about Kraft, they're talking about math. Let's play the sound so they shut up.

BRIAN SOZZI: But Doma, a good logo. I like that logo. Match Group, no go. But I will note on Kraft Heinz, where the stock is under pressure here. This stock historically trades off of the US organic sales number come earnings day, and that fell 4%. So you're seeing the market concern that that pandemic pantry loading that we did last year is definitely not continuing. You'll talk more about that. We didn't see that Clorox yesterday. They got destroyed, because nobody's buying wipes to the extent they were.

MYLES UDLAND: Well, what's interesting about Kraft calling out the promotional environment normalizing relative to a year ago is that on the call, Clorox was asked, and now we're kind of mashing these two things together, granted, it's different parts of the grocery store, but ultimately in an increasingly commoditized grocery store, both those companies are selling premium brands.

So, how are you getting someone to buy a branded slice of cheese, rather than a generic slice of cheese? Same thing with wipes, and Clorox was asked, why are you guys doing promotions right now? And I think for Kraft saying that the promotional environment is getting more aggressive, it's essentially telling us that the amount of money and time and interest Americans have at the grocery store, is going back to pre-pandemic levels. That's the way that I'm reading it.

BRIAN SOZZI: Yeah, and this has been a disastrous season for consumer products companies of any kind. Cleaning products, food, P&G, Kraft Heinz I'll give a pass. This was a pretty good quarter for them, that recovery continues. But Clorox, just real dreadful, dreadful, earnings days.

MYLES UDLAND: And I think what's surprising, and I was listening to an interview on the way into the office this morning with the strategist over at Bridgewater, and they were talking about how inflation has created such an interesting environment today, where the textbook tells you that when you have more demand for products than there is supply, you go ahead and you raise prices. And we're continuing to see companies that have demand for their products, they cannot bring the supply in.

And it doesn't exactly apply in these situations, but it's important here, because they're then not going and aggressively raising prices into that kind of market. They're actually going back to the old discounted model. And so you see complaints about margins, you see problems on the bottom line for some of these businesses. But shouldn't it be the environment when you're jacking up gas prices 50%?

BRIAN SOZZI: Yeah, look, that stock has done squat since mid-May, and as it should, because there are concerns about foreign demand, and can they push the price increases. Kraft Heinz noting in their quarter pricing up 1.5%. I'm not paying $20 for a box of Mac and cheese.

MYLES UDLAND: And I think that's what's interesting on the inflation side, is that the answer to can you jam through price increases into pretty much the best consumer environment most of these companies have operated in-- I mean, could you? Yes. Are they trying to? No, and so it's quite a time for investors they're saying, well, we're going to deal with it on the cost side. We'll hope that passes, and then we'll get back to you, however we are modeling the business previously.

Another company out with its results this morning. CVS, Sozzi, I know a couple of headlines here stood out to you. Take a look at CVS's latest quarterly results, and we can see the company with a beat on the top and the bottom line as has become the pro [? forma ?] expectation here from investors.

BRIAN SOZZI: Well, good to see CVS getting with the times here. Raising their hourly wage to $15 an hour by July 2022. Unclear what the profit impact of that would be. Perhaps you're seeing that start to be priced into the stock today. But they're well behind the curve. Many others in retail: Target, Walmart, they've been well ahead of the curve in a lot of the pharmacy chains in lifting their wages, and they have to do it. I think the next question is for Walmart, for Target, CVS, now, next up probably the dollar stores when do you get to $20 an hour? Is $15 an hour an inflationary environment? Does that really cut it? Probably not. Especially if you have hours cut, you're working 25 hours a week.

MYLES UDLAND: Yeah. I mean, look, we could do the political science side of it, where you didn't get $15 as a mandated minimum wage, but you said, fight for 15 over and over, and now everybody does 15. Now, all major national players do $15 an hour, so.

BRIAN SOZZI: Fight for 25.

MYLES UDLAND: Well, there you go. Brian Sozzi.

BRIAN SOZZI: Man of the people.

MYLES UDLAND: What are you going to run for on the fight for 25? How are you going to start?

BRIAN SOZZI: I just want to help people.

MYLES UDLAND: I know but you've got to pick a position within local government to start.

BRIAN SOZZI: I don't know.

MYLES UDLAND: OK, comptroller. Brian Sozzi.

BRIAN SOZZI: I like that, that's good.

MYLES UDLAND: Comptroller. Fight for 25.

BRIAN SOZZI: Senior treasurer officer.

MYLES UDLAND: Brian Sozzi, all right--