Because of higher oil prices, the war is impacting the earnings of some companies. Is a recession on the horizon? We will look at this week's quarterly earnings for clues. This week, well over 100 companies reported across multiple industries. These results give us a big window into the health of the economy. The results at UnitedHealthcare, Elevance, and Molina were mostly better than expected or at least met expectations. The industry is turning, or at least appearing to turn. The negative reactions to ServiceNow and IBM show how precarious building a positive software narrative can be. I would tread very carefully.
Hi, this is Steve Eisman, and welcome to another episode of the weekly wrap. This is for the week ending Friday, April 24th, but recorded Thursday night, April 23rd. I'm excited to share that in a few weeks we'll be announcing an additional feature to The Real Eisman Playbook alongside our existing Monday and Friday episodes. This is something we've been building behind the scenes, and it's going to take things in a really exciting new direction. We'll be revealing more soon. Signing up for the mailing list grants access to a special founders' offer when the new project goes live. Visit realismanplaybook.com to sign up for our mailing list, or visit the link in this episode's description.
On this week's wrap, we will discuss: one, the war in Iran remains opaque; two, some revealing news in private credit; three, is a recession on the horizon? We will look at this week's quarterly earnings for clues. It was a big, big week for earnings season. We have a broad base of companies to discuss, from industrials to software and private equity. These results give us a big window into the health of the economy. And four, I discuss comments and questions from two viewers. So, let's get started.
First, the war in Iran. A conclusion to the war remained, as we all know, elusive. Vice President Vance was set to travel to Pakistan to negotiate, but that was put on hold as the various factions apparently in Iran keep issuing contradictory statements. President Trump announced that he would give the Iranians time to put together a proposal. In the meantime, the market mostly keeps rallying as it keeps assuming the war will soon be over. We shall see.
In the private credit world, there was some bad news. Blackstone's flagship private credit fund, called BCRED, which has $81 billion in assets and is the largest private credit fund in the industry, reported sales from new share issuances on April 1st, which were approximately $230 million of gross inflows, nearly unchanged from March and down from $1 billion a month on average in 2025. That's not terrible. The performance news was not so good. Performance was flat in March, slightly better than the negative 40 basis points in February, as write-downs on select private loans and spread widening on loans totally, totally offset portfolio yield. During the quarter, non-accruals increased to 1.4% of fair value. FYI, its portfolio value is driven by write-downs of Medallia and Affordable Care, which are currently marked at 60.3 cents on the dollar and 69.8 cents on the dollar, respectively.
On warnings from companies, the war is impacting the earnings of some companies. Because of higher oil prices, United Airlines cut its 2026 earnings outlook to a range of $7 to $11, down from its prior forecast of $12 to $14. And on Thursday, American Airlines cut its 2026 guidance as well.
Now, last week we focused on the large banks that reported earnings, and our focus was on credit quality. The banks reported benign credit data, thereby indicating that at least for now, a recession is not on the horizon. This week, well over a hundred companies reported across multiple industries, and that provides an even broader picture of the economy. Now, I'm not going to discuss all the companies, obviously, but my conclusion again: earnings results were mostly good, and there was certainly no data that indicated that a recession is looming.
Given that I've already mentioned private credit, let's start with the earnings of Blackstone, which reported Thursday morning. The stock moved lower on Thursday as investors weighed a beat on one key metric against falling returns within its massive private credit and real estate businesses. Distributable earnings rose 25% to $1.76 billion, or $1.36 a share, edging past the $1.34 a share that analysts had anticipated. So, a two-cent beat. No big deal. The metric represents the cash flow available to be paid as dividends to shareholders.
Now, total revenue increased a pretty impressive 10% to $3.62 billion. And Blackstone finished the quarter with an amazing $1.3 trillion in assets under management, which is a 12% year-over-year increase. But, and here's the big but, returns fell across certain businesses, even as Blackstone drew in $69 billion in new assets. Weak first-quarter investment performance across credit and real estate funds, with opportunistic real estate at 90 basis points, core-plus real estate at plus 80 basis points, liquid credit at -1.3%, private credit at 60 basis points, and PE secondaries at only 70 basis points. I am sure that for at least Thursday, investors will focus on this list of weak performance metrics, and that's why the stock was down.
Now, before we move on to other earnings, I want to flag news on Fair Isaac, aka FICO. FICO is the backbone of the entire consumer lending industry. When a consumer applies for any kind of consumer loan, the lender, whoever that is, pulls a FICO score from Fair Isaac. And that score is the largest determinant of whether the consumer gets the loan. FICO has had a monopoly on this process for decades. No longer. The FHFA, which is the regulator of Fannie and Freddie, announced this week that the GSEs will start accepting VantageScore loans from approved lenders immediately as an alternative to FICO, effectively concluding the era in which FICO Classic was the only approved score in GSE mortgage world. The updated loan-level pricing adjustment will present a level playing field between FICO and VantageScore. Previously, FICO bulls argued that the pricing grids would favor the classic FICO score, and they are wrong. FICO stock has been under assault, with the stock down over 40% this year. Full disclosure: I have been short FICO for a few months. I flag this story because in a few weeks we will post an interview with a sell-side analyst who covers FICO and the credit bureaus, and we are going to examine this story in great depth.
Now let's move on to health insurance. It looks like that for now the industry is turning, or at least appearing to turn. The results at UnitedHealthcare, Elevance, and Molina were mostly better than expected or at least met expectations, which is a big change for the better. With respect to UNH, we have spoken about UNH for many months now, and the company has been dealing with high medical costs as well as problems in its Optum division, a division that provides medical services to Medicare Advantage customers. The bull case for UNH, the case for a turnaround, has been that UNH's traditional health insurance division is a short-tailed business, and that means that UNH has the ability to reprice fairly quickly. And it looks like that's what happened this quarter.
UNH reported earnings per share of $7.23 versus $6.57 expected. So a nice beat, but I would just point out that earnings per share was flat versus last year. Revenue, though, was also a little bit better than expected. The EPS beat was largely driven by improvement in the medical loss ratio, otherwise known as MLR. Also, Optum Health margins, while still weak, were 5.4% versus expectations of 3.2%. Now, UNH still has major issues with respect to Optum Health. As we've discussed before, Optum is an aggressive coder, and the new Medicare Advantage healthcare pricing system penalizes companies like Optum, but that's a negative story that may unfold more in the future. For now, investors will look at the improvement in the medical loss ratio and hope for continued improvement.
Investors love a turnaround story, especially where there is at least some evidence of a turnaround. That's why UNH has rallied so nicely. But investors have been disappointed in the turnaround stories of Starbucks and Nike. Investors keep hoping for evidence of a turnaround in those two companies, but that evidence remains elusive.
Elevance also reported, but the results were not quite as positively received as UNH's. Earnings per share for the first quarter was a 5% growth beat, but was largely driven by non-recurring investment income. The company also added to claims reserves, which should help 2027 earnings per share. Still, the consensus for 2026 remains for a total EPS decline of 15%. But not bad.
Molina, this is a medical insurance company mostly in the Medicaid space. Now, during COVID, the population of Medicaid participants exploded, and the government is now pruning the rolls, with the result that the remaining Medicaid participants are composed of sicker cohorts, thereby driving up the medical loss ratios of companies like Molina. Eventually the government has to raise prices, but it does not seem to be in any rush.
Now, Molina reported this week: 1Q earnings per share beat by a nice 45 cents. So $2.35 is what they earned versus the $1.90 consensus, driven by an 80 basis points medical loss ratio beat, partially offset by somewhat higher SG&A. Despite the beat, the company only affirmed 2026 earnings guidance, but they do expect to update full-year guidance when they report second quarter. Now, on the negative side, Medicaid membership attrition continued. Total Medicaid patients were 4.498 million in the quarter versus 4.568 million in the fourth quarter, and continued attrition means a potentially higher future medical loss ratio.
Molina, like other medical insurance companies, has had a bounce off of the bottom, but I would be careful with the Molina stock. Continued Medicaid attrition means that the remaining participants are part of sicker cohorts, and that does not bode well for future earnings. Now, the current estimate for Molina for 2026 is $5, which is down 54% versus last year. Investors are playing for a turnaround and a big jump in earnings in 2027. I'm just not yet convinced.
Moving on to industrials. Let's start with GE. Now, GE has split into three companies: GE Aerospace, GE Vernova, and GE Healthcare. This week we will be discussing GE Aerospace, whose symbol is the old GE, and GE Vernova, symbol GEV. First, GE. GE manufactures jet engines largely for commercial airlines, and that business tends to go in waves. There are periods where airlines are expanding and need more planes, followed by periods of retrenchment. We are in a period without question of expansion right now, and that's why GE has been reporting good quarters, and it did so again. Earnings per share was $1.86 versus $1.49 last year, 25% growth and a beat. Revenue beat as well and was up at a very impressive 29%. Most importantly, total orders of $23 billion were up, get this, 87%.
Yes, the war is causing investors to worry about travel-related companies, but so far airlines are not pulling back from buying new airplanes.
GEV, full disclosure, I've owned this stock for a while. Before we discuss earnings, let me explain the basic story. GEV has three businesses. It manufactures gas turbines for utilities. It has an electrification equipment business and a wind turbine business. The wind business loses money. The key is the gas turbine and electrification equipment businesses. And this is one of the best AI-related stories out there. Prior to 2020, electrical production in the US was barely growing. Thereafter, because of re-industrialization and the creation of AI data centers, electrical production is now growing around 3% per year. Now that may not sound like much, but 3% off of the huge electrical base of the United States, trust me, is an enormously large number, and we are constantly hearing about AI data centers and their need for electricity and how they are looking at nuclear and any other alternatives they can get their hands on.
Now, regardless, electrical production in the United States can only grow with the help of gas turbines. And gas turbines are manufactured by only three companies in the world: GEV, Siemens, and Mitsubishi. And that, in a nutshell, is the GEV story, plus the benefits reaped by the electrification equipment division.
Now, on to earnings. GEV reported earnings per share of $3.30 versus $1.78, a beat, and up a whopping 85% versus last year. Revenue beat as well. Even more importantly, orders were $18.3 billion, up 71% year-over-year, and the company also raised guidance. These are very powerful numbers. Now, the one caveat is that the 2026 PE is, get this, 80 times. However, this is a very, very long-tail business. Orders taken today do not create revenue until years from now. It takes that long to manufacture gas turbines. Thus, given the growth in orders, the company has earnings visibility for many years. And because of the strong growth, the 2028 PE is 36 times, which seems more reasonable.
Boeing. This has been a very problematic company for years, but things seem to be moving in the right direction. The company reported a loss of 20 cents per share for the quarter versus a loss of 49 cents per share last year. The EPS estimate for 2026 is roughly zero. However, the stock rallied on this report because it reported lower-than-expected cash outflow of $1.45 billion, and it also delivered the most aircraft in the first quarter since 2019. Commercial aircraft deliveries rose to 143 planes.
Moving on to Tesla. I have to say this is a funny stock. The investors who are short, and I'm not one of them, all point to how poorly the company is doing in its auto business. The investors who are long don't care and point to how well Tesla will do in the future in autonomous vehicles and robots. It's like the two sides are talking about entirely different companies. Anyway, Tesla did report, and the results were not great. They weren't terrible either. On the positive side, Tesla's earnings per share of 41 cents beat the consensus of 34 cents, and that's versus 27 cents last year. Revenue, however, missed. But like I said, the bulls don't care about current fundamentals at all. They are dreaming the dream. By the way, Tesla's 2026 PE is over 200 times. It's quite a dream.
Now, prior to the Wednesday night conference call, the stock was up a few percent because of the earnings beat. But on the call, Musk upped the capex the company will spend this year on autonomous vehicles and robots to above $25 billion. Investors were not crazy about that, and the stock ended the evening down a few percent.
Now, let's talk to one of our favorite topics, software. Over the past two weeks, the software group has bounced off the bottom as bargain hunters have bought software stocks, hoping that the negative software narrative is overblown. Unfortunately, they did not get help from ServiceNow's earnings report. Now, on the positive side, earnings per share for ServiceNow was 97 cents, which is 20% growth, which beat by a penny, and revenue of $3.77 billion beat expectations of $3.74 billion. So total revenue grew quite an amazing 22%. So far, so good.
However, the company said on the call that subscription revenue growth during the quarter, quote, saw an approximately 75 basis point headwind from delayed closings of several large on-premise deals in the Middle East due to the ongoing conflict. Now, normally, given the amazing 22% revenue growth, the subscription revenue delays would be just shrugged off. But given how precarious the narrative for software has become, there is no shrugging in software. The stock was down 13% after hours Wednesday.
The software group was also not helped by IBM. IBM posted earnings per share of $1.91 and revenue of $15.9 billion, both better than expected. Software revenue increased 11% to $7.05 billion, which was in line with estimates. But given the precarious nature of software these days, investors were hoping for more than an in-line software revenue result, and the stock was down 7% after hours Wednesday. The negative reactions to ServiceNow and IBM show how precarious building a positive software narrative can be. I know there are some of you out there who are looking to bottom fish here. I would tread very carefully.
Moving on to homebuilders. First, DHI. Now, homebuilders have been having a hard time. The year started with some hope as the 10-year yield declined below 4%. However, with the inflationary pressures created by the war, the 10-year got as high as 4.4%, thereby putting a real crimp into the all-important spring selling season. DHI results, however, were not terrible. Closings came in modestly below guidance, but this was offset by slightly stronger gross margins. The company reported earnings per share of $2.24 versus $2.58 last year, so down 13%, but that was in line with expectations, and the company maintained its earnings per share guidance for 2026 of down around 10% versus 2025. In absolute terms, these results are not great, but expectations for the sector are so low that DHI and the group rallied on these numbers. The hope is that the war will end and interest rates will come down.
Meritage Homes reported, and here too the results were not great but not terrible. Earnings per share of 82 cents was down 51% versus last year. That's bad. But orders declined only 5% versus last year, which is less bad. On the positive front, free cash flow was stronger than expected as the company has begun to dial back land spend in favor of increased share repurchases, given the stock's below tangible book value valuation. Meritage purchased 3% of shares outstanding during the quarter. Now, I recommended Meritage in January, and so far it has not worked out because the war caused rates to climb pretty quickly. I still like the stock because the company continues to grow tangible book value, and the stock is valued at less than tangible book value of $75.
Finally, PulteGroup also reported, and here too the results were not great but not a disaster. Earnings per share was $1.79, down 30% versus last year. But on the positive side, orders were actually up 3% versus last year. Clearly, higher interest rates have hurt the spring selling season for the entire group.
And now we turn to our two mailbags from two viewers. Our first question is from Kanan, who asks: 'I've been an enthusiastic subscriber to the YouTube channel for a while, and I have learned an enormous amount through it, especially about macroeconomic trends and influential market forces that often don't make the front pages of mainstream newspapers. You've made me smarter and more financially capable, and I thank you for it.' And I thank you for those kind comments. 'Financial news outlets have covered Hank Paulson's recent exhortation that the government make a plan for a collapse in the equity market, noting that a government debt crisis could be far more impactful than crises in other markets. I try to avoid alarmism,' he says, 'but the legislation has ballooned our projected deficit and severely impacted lower and middle-class consumers at a time when the White House foreign policy has also dealt blow after blow to America's global standing. Do you consider Paulson's warning well-founded? And if so, how might everyday investors and non-investing consumers position themselves relative to it?' A very fair question.
Ever since the Great Financial Crisis, there has been this weird competition to see who can predict the next financial calamity. And the latest competition has been the focus around private credit. Here, Hank Paulson is focusing on the federal deficit and the high levels of debt to GDP in the United States. The federal debt to GDP level is at an all-time high of 125%. And some people are worried, like Paulson, that investors will just stop buying US Treasuries. Now, Hank Paulson is chiming in on this one. But first of all, what I would say is that with all due respect to former Secretary of the Treasury Paulson, he's not so great at predicting a crisis. On August 1, 2007, Paulson stated that the market impact of the US subprime mortgage fallout is largely contained and that the global economy is as strong as it has been in decades. Looking back, that's about as bad a prediction as you can get. But everyone makes mistakes. So, let's focus on this prediction.
It's not like Paulson is the first to make such a prediction. People have been predicting the same thing about the impact of the deficit for 40 years. 40 years is a long time to predict a calamity. Two points here. First, Japan's debt to GDP ratio is 240%, almost double the United States, and Japan's debt markets function quite well. Second, the price of this risk is interest rates. If the market was worried about the deficit, truly, truly worried, then the 10-year Treasury yield would be considerably higher. Instead, it's been in a range of 3.9 to 4.5% for the last several years. The commentators of this calamity never seem to ask why their 40-year predictions have not occurred. And I think I have an answer for that.
The global financial system functions on Treasuries. Banks park money overnight with each other through a multi-trillion-dollar global repo market that only uses short-term Treasuries. When large institutions need to park significant money for any duration, they buy long-term Treasuries. Why? Because there is no alternative, at least not yet. If and when there is a large liquid alternative to Treasuries, I will become more worried about the deficit.
Our second comment comes from Boris. This is a long email about the current debate surrounding software, and I have edited his comments down for the sake of brevity. I thought Boris's comments were very interesting, and he starts with the following: 'Thanks for the podcast. I've been listening for a while, and I find it very useful. Quick background: I'm a computer scientist. Spent 10 years as a product manager at Google.' He gave some more history as well, and 'I wanted to share a practitioner perspective on the recent AI software selloff. I do have positions in some names mentioned.' Main thesis, he says: 'AI made software development much cheaper and more accessible, but people are over-extrapolating what that changes. B2C software business to consumer software is usually not that complex,' he says, 'technically. Excluding the mega caps, the moats are elsewhere: network effects, marketplaces, content, brand. In B2C, AI coding unlocks a long tail of small products that were previously uneconomic. I'm already seeing many one-person businesses, but most won't scale into public companies. Mega caps will likely benefit the most since user acquisition is the real bottleneck. My running joke is that the VC money for B2C startups is going straight into Google and Meta pockets.'
Then he turns to B2B software internalization. He says: 'There's a lot of talk about it, and I think it's overstated. Key constraints: total cost of ownership, TCO. Building is easy. Maintaining is not: patching vulnerabilities, updating dependencies, remaining compliant with regulatory changes, doing user support. Talent: AI helps a lot,' he says, 'but system design still matters. Many companies don't have people with sufficient skills and a required mindset. For example, many gyms use exercise.com to run their businesses, and it's unlikely to be internalized. Risk: no CIO wants core systems like payments processing being vibe-coded. Compliance: in regulated industries, software tools must pass audits and certification. Vendors advertise this cost across many customers. Internal builds don't.' Valid point, though, he says, is that 'companies will require less seats due to automation, which undermines companies with per-seat pricing. I wonder how it will change going forward, but we shall see.'
He says: 'Competition: new entrants, lower development costs,' he says, 'cut both ways. Everyone benefits, not only newcomers, but incumbents can also ship faster, reduce development costs, and expand margins. It's not obvious,' he says, 'this lower development cost structurally favors challengers.' Sales: 'This part is often missing in the discussion,' he says. 'For most software companies, the largest cost is sales and marketing, not R&D. AI-assisted coding doesn't really reduce sales costs, especially for large enterprise contracts. New entrants will face similar go-to-market expenses. Also, many large use cases are already captured by existing SaaS companies, so entry costs are structurally high.'
A couple of notes, he says, on other things discussed in the podcast. Agentic systems: 'They are very exciting for many reasons, but two issues are underweighted. Agents: quality evaluation, tuning, and testing is hard and requires specialized sets of skills, and their outputs are non-deterministic, i.e., the same input produces different results.' That's fascinating. 'That limits use in critical workflows, for example, financial systems. I see this as an additional automation layer, not a full SaaS replacement.' And finally, he concludes on a small point on stock-based compensation, SBC. He says: 'Under GAAP, SBC is expensed at grant price, not market price. Example: grant of 1,000 RSUs at $100 vesting evenly over four years results in GAAP expense of $25K a year, even if the stock goes much higher in the meantime. Economically, the bigger issue for shareholders is dilution, not the accounting expense. Even there, grant sizes tend to adjust with stock price over time since they're typically tied to cash compensation levels. Most companies disclose total outstanding SBC in their annual report notes. Curious how you think about this, especially the sales versus R&D angle.'
And here are my takeaways. The large incumbents, I think they'll survive this AI assault, but, and it's a big, big, big but, seat growth I think is going to slow, and the raising of prices that this industry has enjoyed for decades will just become much, much, much more difficult. So the long-term bull case of software was always increasing seats and prices, and I think a lot of that goes away or is questionable. As far as his comments on stock-based compensation, I just disagree. Yes, the companies, of course, disclose the stock-based comp. It is, however, a real cost. That is why GAAP accounting requires it to be expensed. The idea that you can pay someone in stock and not count that expense when you report earnings is, to me, just ridiculous. After all, all these companies deduct stock-based compensation from their taxes. They treat it as a real expense.
Then this last Monday, April 20th, we hosted an interview with Jeffrey Hirsch, author of the famous Stock Trader's Almanac, a publication started by Jeffrey's father, Yale Hirsch, 60 years ago. In the interview, we discuss trading insights and trends and how the market can be incredibly and consistently seasonal. This episode is part of The Real Eisman Playbook's evergreen series of interviews. They are chock full of useful and fascinating information, and the conversations are lively for stock timers and charters. This episode with Jeffrey Hirsch is fun stuff. So check it out.
This coming Monday, we will post an interview with Chris Edson, global head of loan originations at Apollo Global Management. The controversy surrounding private credit continues to swirl and dominate headlines, and Chris has a front-row seat as to what's really going on in the private credit, private equity sector and how Apollo is navigating these waters. It's a great interview. I think you will learn a lot. I certainly did. So, please tune in.
Be sure to check out our website, realismanplaybook.com. If you're enjoying these weekly wraps and our podcast, we kindly ask that you support the channel by subscribing to our YouTube channel and to our audio channels, The Real Eisman Playbook. Subscribing is the best way to help us expand this community to more like-minded individuals such as yourselves. And we greatly appreciate your support. And that's the wrap.
This podcast is for informational purposes only and does not constitute investment advice. The hosts and guests may hold positions in stocks discussed. Opinions expressed are their own and not recommendations. Please do your own due diligence and consult a licensed financial adviser before making any investment decisions.
