HR Block | June 21st, 2024

Today's insights are courtesy of Block Advisors by H&R Block, trusted by millions of small business owners for their year-round small business expertise.

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GOOD MORNING

Here's everything you need to know this week: Accenture's revenue growth surges with a 50% increase in AI-related bookings, driven by robust demand for AI integration services and strategic blockchain implementations. The company’s market performance highlights its role as a key industry player under the leadership of CEO Julie Sweet.

U.S. home construction hits a four-year low due to high mortgage rates. The decline signals potential economic impacts, with major homebuilders like Lennar Corp. and KB Home attempting to counteract trends with sales incentives.

Hertz plans to raise $750 million to offset EV depreciation costs and improve liquidity amidst financial turmoil. The car rental agency's financial strain highlights the risks of overestimating consumer demand in volatile markets.

Let’s dive into more detail below.

CRYPTO

Accenture Rev Growth Surges with 50% Increase in AI-Related Bookings

Accenture’s strategic AI and blockchain implementations are reshaping business operations, highlighting their role as a key industry player

BREAKING NEWS
Accenture, the global professional services company, projects annual revenue growth to exceed initial expectations, driven primarily by robust demand for its AI integration services. The company, led by CEO Julie Sweet, recorded a 50% jump in new AI-related bookings, significantly boosting its market performance.

WHAT HAPPENED
Accenture’s surge in new bookings for generative AI services reflects a broader trend of companies seeking cost-saving measures and technological advancements in response to economic pressures from rate cuts and inflation. According to research by Exploding Topics, 77% of companies use or explore AI in their operations, and 83% claim that AI is a top priority in their business plans.

The increase in bookings for AI services indicates a shift in enterprise spending priorities, focusing on innovative solutions despite a weak demand for traditional IT services. This trend will likely bolster Accenture’s market position and financial performance in the short term. As of June 2024, Accenture has a market capitalization of $179.40 billion, making it the 71st most valuable company by market cap. In the long term, sustained investment in AI will likely drive ongoing transformative growth and industry leadership for Accenture and others.

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HOUSING

FED’s Interest Rates Lead to Four-Year Low in US Home Construction

As mortgage rates remain elevated, the housing market faces potential reduced activity and rising home prices amid tight supply

BREAKING NEWS
US home construction plummeted in May to its lowest rate in four years, impacted by persistently high interest rates.

Although major homebuilders like Lennar Corp. and KB Home attempt to counteract these trends with sales incentives, the broader economic impact and potential for recovery still need to be determined.

WHAT HAPPENED
The broad-based decline in US home construction in May affected both single-family and multifamily units, with building permits also seeing significant drops. This sharp decrease signals a potential drag on economic growth as the housing sector struggles amid high borrowing costs.

The higher interest rates, aimed at controlling sticky inflation, have increased mortgage costs, deterring potential homebuyers and stalling new projects. Ultimately, it’s really about a tight supply and an ever-increasing demand.

Major homebuilders, including Lennar Corp. and KB Home, have been trying to offset high rates with generous sales incentives, which has helped boost demand. Despite these incentives, the companies have maintained healthy margins, with executives suggesting margins could improve further when a lower-rate environment reduces the need for concessions. Like everyone else, they wait to see what the FED will do next.

In the short term, this could lead to reduced economic activity in the sector and even higher home prices due to the existing shortage.

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AUTOMOTIVE

Hertz to Raise $750 Million as Financial Woes Rise

Hertz’s latest fundraising effort aims to offset massive EV depreciation costs and improve liquidity amidst financial turmoil

BREAKING NEWS
Car rental agencies are still grappling with the lingering effects four years after the pandemic. Hertz, for instance, sold over 770,000 vehicles to mitigate losses in 2020, but it has not stemmed the financial bleeding. Their shares have plummeted over 70% so far this year. On Thursday, in a bid for survival, Hertz announced a plan to raise $750 million through a secured notes offering to bolster its balance sheet after their failed EV investment in 100,000 Teslas in October 2021.

WHAT HAPPENED
Hertz plans to use the $750 million raised to reduce its $2 billion revolving credit facility and improve liquidity. The company appointed Scott Haralson as its new CFO to navigate the financial strain caused by weak EV demand. To mitigate losses, Hertz aims to sell an additional 10,000 EVs, totaling 30,000 for the year but may continue to face challenges with ongoing interest rates, inflation, and poor earnings.

Elevated vehicle depreciation, particularly of EVs, continues to burden the company, resulting in a $588 million depreciation hit in Q1, with $195 million from EVs alone. Hertz expects an adjusted corporate loss before interest, taxes, depreciation, and amortization of $435 million to $495 million in the second quarter.

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1. FDA Expands Approval of Gene Therapy for Patients with Duchenne Muscular Dystrophy

The FDA has expanded the approval of Elevidys, a gene therapy treatment for Duchenne muscular dystrophy, to include both ambulatory and non-ambulatory individuals aged four years and older. This extension marks a significant development in the treatment options available for patients suffering from this debilitating genetic disorder.

2. Amazon's Original Book Business Booming After Almost 30 Years

An internal Amazon document leaked to Business Insider reveals a detailed breakdown of the company's book sales in 2022, showing significant growth. The resurgence of Amazon's original book business highlights the enduring demand for books and the company's successful adaptation in the e-commerce sector.

3. Lilly Files Additional Lawsuits Over US Sales of Counterfeit Mounjaro

Eli Lilly has filed six more lawsuits against U.S. medical spas, wellness centers, and other entities for selling products falsely claiming to contain tirzepatide, the active ingredient in its popular diabetes drug Mounjaro. This move underscores the company's commitment to combating counterfeit medications.

4. 'Pharma Bro' Martin Shkreli Claims He and Barron Trump Created DJT TrumpCoin

DJT TrumpCoin's value soared by 385% within 24 hours on Tuesday, following rumors of possible links to former President Donald Trump. The cryptocurrency, which amassed a trading volume of $363 million, saw its value surge after 'Pharma Bro' Martin Shkreli claimed he and Barron Trump were behind its creation.

5. United Airlines Plane Turns Back After Engine Piece Falls Off

A United Airlines plane had to return to a Connecticut airport after losing a part of the engine liner. This incident adds to the carrier's series of flight mishaps this year, raising concerns about safety and maintenance practices.

6. Trump Media Stock Sinks Near All-Time Low Amid SEC Declaration

Trump Media & Technology Group Corp. saw its stock plummet in late trading after the US SEC declared a regulatory filing effective, which may dilute existing shareholders. This development has caused significant investor concern and market volatility for the company.

7. Nvidia Stock Endures $277 Billion Midday Selloff As AI Giant Falls Behind Microsoft

Nvidia's stock experienced a dramatic selloff on Thursday, wiping out $277 billion in value. This significant drop reflects the market's sensitivity to Nvidia's performance, especially as it competes with tech giants like Microsoft in the AI sector.

8. Biden Bans U.S. Sales of Kaspersky Software Over Russia Ties

President Biden has banned the sale of Kaspersky software in the U.S. due to concerns over the company's ties to the Russian government. This decision highlights ongoing cybersecurity risks and geopolitical tensions between the two nations.

9. McDonald's Launches New $5 Meal Deal on June 25

McDonald's is set to release a new meal deal on June 25, offering four items for $5. This promotion includes a sandwich, McNuggets, fries, and a drink, intensifying the competitive landscape of the fast-food industry.

10. US Weekly Jobless Claims Fell in Latest Week

The number of Americans filing new claims for unemployment benefits fell last week. Despite a gradual cooling, the overall strength in the job market persists, reflecting the resilience of the U.S. economy.

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Today's insights are courtesy of Block Advisors by H&R Block, trusted by millions of small business owners for their year-round small business expertise

Learn More ➔