Capital Market Earnings Crash Out

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Lou Whiteman discuss:

• Equifax’s and MSCI’s earnings and stock reactions.
• How AI costs are eating into profits.
• Halliburton’s comments on the oil market.
• Mailbag: Best banking ETF to buy now

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A full transcript is below.

This podcast was recorded on July 21, 2026.

Tyler Crowe: Digesting today's earnings duds on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today, I'm joined by longtime Fool contributors Lou Whiteman and Matt Frankel. Earnings season is in full swing here. We got a whole bunch of companies reporting. We even related to the oil market. We're going to touch into Halliburton's earnings, but more on a state of the oil market analysis. We'll also hit in the mailbag.

But today, we're going to start with the two companies that reported earlier this morning, and we could say were the duds of the earnings reports so far because they were MSCI and Equifax. Shares of bull stocks were down more than 10% in pre-market trading, and as of we're recording right now, MSCI is still down about 11%, Equifax is down about almost 7%. Obviously, the market didn't like what they were seeing. The funny thing was, as I was looking at the results just as a cursory glance before I got to talk to you guys, it looked like they both posted improving results, and even MSCI's earnings per share was up almost 20%. Guys, what happened here? Matt, I know you looked at Equifax; Lou, you looked at MSCI. What was going on?

Matt Frankel: Equifax earnings on the surface, at least, were not a dud, 11% year-over-year revenue growth, earnings per share grew 13% on an adjusted basis and beat estimates. Revenue from the U.S. mortgage business is up 25%, which is nice to see, given the state of the mortgage market. The company actually doubled its AI-driven cost reduction estimate to $150 million through 2028. Cost reductions are a good thing. The stock was down, like you said, double digits in pre-market. It's rebounded a little bit, but it's still down despite the earnings beat. A few potential reasons and things to flag here. There was $100 million charge related to a credit miscalculation glitch that happened in 2023. GAAP earnings were down 4% year over year as a result, so that's worth noting. The adjusted EBITDA margins actually fell in all of the segments of the business year over year. Essentially, rising compensation costs, incentives, they're both rising faster than revenue. Most importantly, there's no easier way to make a stock go down than to lower your guidance. While they didn't really lower their guidance, they kept their full year. The third-quarter guidance was a little softer than expected. The adjusted EPS estimate would actually represent a sequential decline, and investors aren't thrilled. Really, this was a solid quarter with a disappointing outlook and margin trends that seem to be scaring investors.

Lou Whiteman: Kind of a similar story over to MSCI. I don't know if people know this one as well. This former Morgan Stanley unit, it's a market data and analytics company separate from Morgan Stanley now. They grew revenue and earnings by double digits. The earnings number was a little light relative to expectations. Guys, I'm tempted to blame AI here. The company said that expenses were up 9%, primarily due to higher IT costs among other expenses. Maybe they are adding to their tech stack. There are also some accounting things going on. They recognize some amortization on related to acquisitions. Tyler, as he said, stock is down double digits. The market just has this one. Period. I'm just going to say it. Company is in growth mode. It launched twice as many products in the first half of 2026 as it did in all of 2024. Growing does come with costs. The costs are investment in the business. There's nothing wrong with the core business here.

Tyler Crowe: I want to pick at something a little bit because reading through the lines of both of these, Matt, Equifax says that these AI-driven cost reductions of $150 million, but then their margins were down. Lou, as you said, higher IT costs. Some of it seemed to me implying tech costs, IT costs, AI costs, tokens, whatever cost you want to associate with using AI in their business seems to be rising, and the whole theory here was that AI costs were going to drive down a personnel cost to put the big domer approach was people out of jobs. But it appears that this is actually starting to for high data companies doing a lot of data processing like Equifax and MSCI, it is becoming a real cost headwind. I'm curious on your thoughts. How is this going to play out? People continuing to jump into these frontier models that are getting incredibly expensive and are they going to have to change their AI strategies?

Matt Frankel: Well, with Equifax, in particular, it would have been easier if they gave the explanation MSCI did that higher IT costs while lowering personnel costs and things like that. But their margin compression was specifically blamed on rising compensation and incentive costs, it's a bit of a head scratcher. There are a few possible explanations. In order to train AI models and things like that, they need to bring on some new talent. That could definitely be a part of it. But it's a two-way street, when it comes to AI cost savings by making your business more efficient and having to pay more for the personnel that are putting those cost reductions in place. It remains to be seen if that's a temporary margin headwind as they ramp up these AI savings or if it's something that is worth further discussion.

Lou Whiteman: I don't think we know yet if it's ongoing. There's definitely going to be investment. Just like I said, investment and growth. There's always one-time investments. As you're implementing, is it one-time investments, or is this tokens, and it's just going to be an ongoing thing? I don't know if we know the answer to that. I don't think the companies know the answer to that yet. But for now, I think there's at least an argument to be made that this is more investment capital than it is, just permanent ongoing expense.

Tyler Crowe: I want to put a last question here because we've got two companies. Stocks are down quite a bit today in particular. Equifax is actually down 34% over the past year. MSCI has done a little bit better than that. Looking at stock prices right now, where the businesses are right now, which one do you think is the better buy today, Equifax or MSCI?

Matt Frankel: On the surface, Equifax is definitely the cheaper stock. It trades for 18 times forward earnings last I looked, versus about 24 for MSCI. But there are concerns. Dependence on the mortgage market for growth, for one thing. Those margin trajectories I mentioned, it's a bit of a head scratcher that their compensation costs are rising while AI is making the business more efficient. MSCI is more expensive stock, but you get what you pay for. It's a higher margin business. It honestly has a more defensible mot which is validated by its record high revenue that we're seeing or retention rate that we're seeing. It's more of an expense problem with them than anything else with rising IT costs and things like that. To be clear, I'm not buying either of these right now and don't really have any plans to, but I'd probably lean toward MSCI if I were forced to choose one today.

Lou Whiteman: I just don't want to buy a credit bureau. More of an ethical stance. I want them to be disrupted out of business, so I'm not going to buy it, but that's not a business case. Look, MSCI is a fantastic company. It scores really well on our Hidden Gems Moneyball database, which I think is a great place to go to screen for ideas. Definitely, MSCI would be my choice. It's been on my radar for a while. I'm talking about it now, so I'm not going to take advantage of this drop, but it's a really good company.

Tyler Crowe: Coming up after the break, we're doing an analysis of the oil market.

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Tyler Crowe: There's this small set of companies out there where even if you don't really have a financial stake owning the stock, or I don't know if you're one of those people who short stocks does that, too, just listening to what they have to say about their respective markets can be incredibly illuminating, and Halliburton is one of those companies. It may not be on everyone's radar as a potential stock to buy, being a oil and gas service company, but often it's market commentary that it provides. It gives a rare window into the oil market that we can't really get elsewhere because they work with the biggest companies in the world, the ExxonMobils all the way down to the wildcat drillers and they can really give you a sense of what the vibes, if you will, of the market is at any given moment. With the war in Iran escalating again, traffic through the Strait of Hormuz is grinding back to a halt. It seemed like a good time to check in with what Halliburton was saying on its most recent earnings report, which came out earlier this morning. Guys, we had a task of looking through the earnings report, a little bit of market commentary. What were some of the key takeaways for you when you were looking at this report?

Matt Frankel: A few things to unpack here. Halliburton’s international strength, especially when it comes to Latin America and Europe, it's helping to offset the disruption they're seeing from the Middle East. They're keeping their Middle East crews in place, which really sets them up nicely to capture demand once the war de-escalates, which hopefully happens. Hopefully, we actually get a lasting agreement at some point, and the war doesn't start and end another 72 times or whatever it is. It's also worth quantifying the disruption, which management did. They said on the call that rerouting due to the Hormuz situation and other conflict-related disruption could cost $0.07-$0.09 of earnings per share, but they did sound very optimistic when it comes to the next quarter.

The most interesting part about this report, and maybe I'm just showing my ignorance of the oil market is, but it was the North American numbers they posted. North American revenue was flat at $2.2 billion, due in part to lower specialty chemical activities, but also due to decreased drilling activity in the Gulf of that really surprised me. Given the geopolitical backdrop, everything we're talking about with the Middle East, I thought that was interesting. Now, I note that CEO Jeff Miller said he was encouraged by signs that drilling and fracking are picking up in the U.S. Maybe it's just a timing thing that we're getting there. It just takes time. There's a lot of noise about the global picture, but North America is Halliburton's largest market, so I think that is good for the stock if it's picking up. I'm just surprised that given all of the attention that North America was flat, and it's just now starting to ramp up.

Tyler Crowe: The Gulf of Mexico, Gulf of America, whatever you want to call it these days, that's been a weird sticking point for a lot of major oil and gas drillers because it takes 10 years sometimes to get one of these from exploration to production and so it's committing that much capital that long has been challenging when you've got fracking companies, it's like, well, in 30 days I can have a well up and running. Yes, it's less oil, but the turnaround on the investment is much sooner. I can see why that might be the case, but you would think with oil prices rising that would start to ease a little bit, but we haven't seen that. One of the reasons we haven't discussed the oil market as much, and it has been the challenge of translating what we're seeing with the closure of the Strait of Hormuz, the Iran conflict, and the Russia-Ukraine conflict as well, it's hard to translate that into something that's thesis altering for a company on the long-term basis because we see these as hopefully things will get better sooner than later. I think the prevailing sentiment was that things would get resolved in Iran, Middle East area so that movement of oil roots are relatively short order when things started to happen. There was some supply and demand responses to soften the blow of the closure of Strait of Hormuz. But now we're several months in fighting is escalating again. We just got a report today from courts that said that the U.S. Strategic Petroleum Reserve is now at a 45-year low.

I want to ask, and we can go in any direction you want here because oil, Strait of Hormuz, the Middle East in general, has some wide implications on other markets and not just oil here. Has anything happened in the past days, weeks, months related to this conflict or the broader conflicts of Ukraine and Russia as well that's changed your position or thesis on anything in your portfolios. It doesn't necessarily mean are you looking more at oil companies. What is something that you're seeing or maybe changing your thesis based on what we've been seeing?

Matt Frankel: I'm not much of an energy investor in my own portfolio. I'm not going to be buying oil stocks based on this, but you're right, this does affect a lot of other areas of the market. Any company that depends on shipping costs could be potentially affected here. You're right, strategic petroleum reserve or SPR, it ended the week at the lowest level since 1983, and it now sits at about 44% of authorized capacity. Even if oil prices cooperate, you're talking about years for a full refill in the most likely scenario. The biggest thing, the biggest takeaway for me is that this doesn't specifically change anything right now, but it gives the U.S. a lot less of a shock absorber if the conflict escalates or if something else goes wrong. Remember, we're at the beginning of the worst part of hurricane season right now. That can cause oil disruptions. The point is, there's a lot more that can go wrong for oil than the Iran war. Keep that in mind, and we now have less of a cushion to bolster prices artificially, I guess, you would say.

Lou Whiteman: I'm not buying energy here. To me, this year is the reason you have energy just lurking in the portfolio for a decade, and so now is not the time to buy. I don't think I've made any moves yet, but I am watching closely because I do think what Matt was saying, the macro implications could get interesting for a lot of different companies. The biggest surprise of 2026 in energy, to me, bigger than the Middle East War was China's demand flexibility. I'm oversimplifying it a bit here, Tyler, you can tell me if I'm wrong, but the way I read it is the biggest reason we didn't see oil spike to 200 or whatever the way oil experts thought it might, if the Strait was closed, was Chinese demand just came out of the market, which took the pressure off others. We know nothing about Chinese reserves. We don't know if that demand pullback is sustainable, if they're just tapping into massive reserves they have, if there's something else going on. We now have the Red Sea potentially closing to go along with issues in the Strait. We don't know what China's going to be able to do from here. It's impossible to predict, but we need to at least have it on the radar as a potential headwind that does finally zap a consumer in the U.S., and that would have a lot of ripples through the economy.

Tyler Crowe: When it comes to the oil market, it always seems like the price of oil tends to move the most when you see reports of American drilling activity, American storage activity. There seems to be some oil price movements when we get those reports. In part because it's the most information we get when it comes to oil in general. Like you said, the Chinese inventories, consumption, things like that. Those numbers are, I don't want to say they're necessarily state secrets, but they're not nearly advertised or published, like we see here in the United States. To that point, there's been a lot of either draws on capacity or not filling unknown capacity that they have had for a long time that has been in some ways, a massive sale for this. I think the numbers I saw was something like five million barrels per day of Chinese imports just went away for reasons undetermined, other than they just said, we're going to stop buying. Whether or not that was going into storage or actual consumption, we don't really know. It's coming up after the break? We're going to dip into the mailbag.

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Tyler Crowe: One quick reminder if you want to get your question answered live on air, go ahead and emails at podcast at fool.com. It's podcast with an s at fool.com. Also, the email is in the show description. Three requests that we always have is Number 1, keep it Foolish, keep it short and three, keep it as impersonal as possible so we don't get in trouble for giving individualized advice.

Today's question comes in from Thomas Hanks, and it's actually oriented towards you, Matt. We wanted to make sure you were on when we did this. Question is, Hello fools I believe on one of your episodes, Matt said he had exposure to different banks through ETFs. I was wondering if you could tell us which banking financial ETF he likes. I had looked up a few and I was looking at the tickers are XLF and VFH. I know XLF’s a State Street ETF, and VFH has Vanguards. They're both financial ETFs. Could you discuss the pros and cons of each, or let me know if there are better choices? I've been wanting to hold it long term and obviously lower expense ratios. Thanks, Thomas. I did a quick cursory glance, and to be honest, over the past 20 years, I think the difference in performance on a net basis for both of these, was something like 10 or 15% difference in terms of total performance. Part of me says, splitting hairs here, but guys, what are some of the things that may be different about these two ETFs or if maybe there's some better alternatives out there?

Matt Frankel: Well, first of all, I had no idea Tom Hanks was a fan of the show. That's pretty awesome [OVERLAPPING].

Tyler Crowe: That will be great.

Matt Frankel: Those two, yes, you're right. I actually ran a statistical correlation, and they have a 0.99% correlation between the performance of the two over the long term. You're absolutely right. It's hard to make the case for one versus the other. They are rather different despite the big, the similarities in performance. The XLF is by far the most popular financial sector ETF. It is a more concentrated play. It owns about 75 stocks. It's market cap weighted and both of these also have a lot of exposure to insurance and payments processing. Berkshire Hathaway is the largest holding in the XLF. The Visa and Mastercard are among the top 10. It's not pure banking exposure. Really, the VHF, it's more than 400 stocks and significantly more exposure to small and mid caps, but like you said, the long term returns are the same. The big thing you want to look at is how how directly do you want to invest in banks versus the financial sector? Like I said, the financial sector includes insurance, payment processing, and other things. You might want to look at the one with Ticker symbol as KBE, that's the S&P Bank ETF. Expense ratio is a little higher 0.35%. That's not outrageous, and it has an equal weighted approach to bank stocks. Meaning that J. P. Morgan Chase and a regional bank would have the exact same weighting in the fund. You might want to take a look at that one. Then there's another one that's called the KBWB, it's the Invesco KBW Bank ETF. That only has about 25 stocks, mostly large banks. The top 10 positions are 65% of the assets. If you just want to invest in the large banks, that's one that could be worth a look. But the two you mentioned, they're the lowest cost options. They're the most diverse options, and the performance is very similar.

Lou Whiteman: Matt did a good job breaking it down. But I think these are the two things no matter what sector it is that you want to look for in ETFs, A, what is actually in there? There's a lot of examples of things that have a name, but if you actually look at what's in the portfolio, you might be surprised. Always go to their website, and list their holdings and see if it is actually if you're getting the exposure you want. Two, Tyler and the question Thomas said, I focused on expense ratios, but said, I'm willing to pay a little more for upside. I'm with you on the expense ratios, but Thomas, I personally, and this is just me, given that upside is never guaranteed and actively managed funds, for the most part, tend to lose to the market over time. I'm less willing to pay a little more for the potential upside, so I think trust your gut there with just get low fees because that's the one thing you can guarantee.

Matt Frankel: I would add to that. I'm not willing to pay more for potential upside for the reasons Lou just mentioned. I am willing to pay more to invest in exactly what I want. Like I said, pure banks versus a mix of banks and insurance companies and things like that. I am willing to pay a little bit higher of an expense ratio to get exactly what I want my portfolio.

Tyler Crowe: Always, probably the most important things when it comes to ETF and whenever we have these questions, it's always going to be the fees and exposure to what you want. When we're talking about ETF, it's pretty much going to distill down to that [inaudible].

As always, people on the program may have interest in stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy yourself stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it is not approved by advertisers. Advertisements are sponsored content and provide for informational purposes only. To see our Fool advertising disclosure, please check out our shows. Thanks for producer Dan Boyd and the rest of the Motley Fool team. For Lou, Matt and myself, thanks for listening, and we'll chat again soon.

JPMorgan Chase is an advertising partner of Motley Fool Money. Lou Whiteman has positions in Berkshire Hathaway. Matt Frankel, CFP® has positions in Berkshire Hathaway. Tyler Crowe has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Equifax, JPMorgan Chase, MSCI, Mastercard, and Visa. The Motley Fool has a disclosure policy.