Morning Preview: January 25, 2018

Scott GreenDaily Market Report

Early Look
Thursday, January 25, 18
  
Stock futures are higher, led by energy as WTI crude tops $66 per barrel and Brent t$71 per barrel, extending gains, while markets await details of the European Central Bank meeting at 7:45 AM EST later this morning. Dollar weakness continues, as Bloomberg notes all G-10 majors strengthen and MSCI emerging-markets currency index rises to a record. Outside of the ECB, and the ongoing meeting in Davos with world leaders, markets prepare for another busy morning of earnings, including Dow component CAT later this morning and chip maker INTC tonight. The tech heavy Nasdaq leading early after chip makers LRCX and XLNX trade higher after earnings. With a few days left in January trading, the three main averages are up between 6.1% and 7.4% so far in 2018 as the melt-up continues.
 
U.S. stocks ended mixed on Wednesday, with the Dow Industrials posting small gains, though the tech heavy Nasdaq Composite and S&P 500 each retreated form intraday record highs. Stronger-than-expected corporate earnings have buoyed appetite for equities to start the year, extending big gains from 2017 after markets surged on tax reform policies. The weaker dollar has also boosted sentiment in stocks, helped again yesterday after Treasury Secretary Steven Mnuchin, said President Donald Trump’s administration supports “bilateral trading agreements,” saying “a weaker dollar is good for trade.”  Note a softer dollar can help boost multinational companies offering competitive prices for products abroad.
 
In Asian markets, The Nikkei Index dropped -271 points to settle at 23,669, the Shanghai Index dropped -11 points to close at 3,548 and the Hang Seng Index dropped -304 points to end at 32,654. In Europe, the German DAX is flat around 13,420, while the FTSE 100 is flat at 7,645.
 
Market Closing Prices Yesterday
·      The S&P 500 Index slipped -1.59 points, or 0.06%, to 2,837.54
·      The Dow Jones Industrial Average rose 41.31 points, or 0.16%, to 26,252.12
·      The Nasdaq Composite dropped -45.23 points, or 0.61%, to 7,415.06
·      The Russell 2000 Index declined -11.09 points, or 0.69% to 1,599.61
 
Events Calendar for Today
·      8:30 AM EST       Weekly Jobless Claims…est. 235K
·      8:30 AM EST       Continuing Claims…est. 1.925M
·      9:45 AM EST       Bloomberg Consumer Comfort Index…prior 53.8
·      10:00 AM EST     New Home Sales MoM for December…est. 675K
·      10:00 AM EST     Leading Index for December…est. 0.5%
·      10:30 AM EST     Weekly EIA Natural Gas Inventory Data
·      11:00 AM EST     Kansas City Fed Manufacturing Activity for January…est. 14
 
Earnings Calendar
·      Earnings Before the Open: ADS, AEP, ALK, BIIB, BMS, CAT, CCMP, CELG, FCX, LUV, MMM, NOC, OSK, PX, RCI, RTN, SHW, UNP
·      Earnings After the Close: BDN, ETFC, FLEX, INTC, ISRG, MXIM, PKI, SBUX, SIVB, TMST, WDC
 
Other Key Events
·      European Central Bank (ECB) Policy meeting 7:45 AM EST – press conference 8:30 AM         
   
Sector News Breakdown
Consumer
·      Ford (F) Q4 adjusted EPS 39c/$38.5B vs. est. 39c/$36.99B; Q4 automotive revenue $38.5B; reiterates 2018 guidance provided on Jan. 16; said moving into 2018, Ford is focused on improving the operational fitness of its business
·      Las Vegas Sands (LVS) Q4 EPS 8cc/$3.44B vs. est. 77c/$3.26B; 4Q Sands China revenue $2.10B; 4Q Sands China adjusted property EBITDA $731M; Q4 Sands China profit $519M; raises annual dividend for 2018 to $3.00 per share
·      Ethan Allen (ETH) Q2 EPS 53c/$198.5M vs. est. 52c/$201.4M; said wholesale sales increased 3.8% on increases to our international and domestic independent retailers and the Department of State; retail sales decreased 2.1%, primarily due to delayed shipments to the retail segment
·      Whirlpool (WHR) Q4 ongoing EPS $4.10/$5.7B vs. est. $3.93/$5.86B; sees FY18 ongoing EPS $14.50 -$15.50 vs. consensus $15.45
·      Southwest (LUV) Q4 EPS 77c/$5.27B vs. est. 77c/$5.25B; sees 1Q RASM up 1%-2% y/y; 4Q RASM grew 1.9% y/y; sees 1Q CASM up 0.5%-1.5%
·      McCormick (MKC) Q4 EPS $1.54/$1.49B vs. est. $1.52/$1.48B
 
Financials
·      Ameriprise Financial (AMP) Q4 EPS $1.18/$3.11B vs. est. 94c/$3.06B; Q4 EPS excluding impact from the Tax Act $3.26, up 19%; included a $320 million impact primarily from the remeasurement of net deferred tax assets using the lowered corporate tax rate
·      Discover Financial (DFS) Q4 EPS $1.51/$2.61B vs. est. $1.54/$2.60B; 4Q net interest margin 10.3%; 4Q provision for loan losses $679M; Q4 net interest income $2.12B
·      Legg Mason (LM) Q3 EPS $1.58/$793.1M vs. est. $1.40/$768.5M; assets under management $767.2 billion; Q3 adjusted operating margin +27.2% – LM recap
·      RLI Corp. (RLI) Q4 EPS $1.21/$207.9M vs. est. $175.2M; reports underwriting income of $9.0M, resulting in a combined ratio of 95.2; reports 11% increase in gross premiums written and 10% increase in investment income; 4Q net premiums earned $188.3M & premiums written $192.9M
·      SL Green (SLG) Q4 FFO $1.60/$361.3M vs. est. $1.60/$375.3M; sees FY FFO per share $6.70-$6.80 vs. est. $6.70; raises 2018 earnings guidance
·      Banner (BANR) Q4 EPS loss (41c) with items; said NII, before the provision for loan losses, was $98.3M; 4Q allowance for loan losses $89.0M and 4Q cash and cash equivalents $261.2M
·      Raymond James (RJF) Q1 EPS $1.61 with assets under administration $727.2 billion
·      Texas Capital (TCBI) Q4 EPS 84c below consensus $1.15 and reports Q4 NII $210.6M; Q4 tangible book value $40.97
 
Healthcare
·      Biogen Inc. (BIIB) Q4 EPS $5.26/$3.31B vs. est. $5.45/$3.08B; sees year revs$12.7B-$13B vs. est. $12.68B; sees FY18 adjusted EPS $24.20-$25.20, consensus $24.16
·      Spark Therapeutics (ONCE) in pact with Novartis (NVS) which will commercialize investigational voretigene neparvovec when and if approved in Europe and all other markets outside the U.S.; ONCE to receive $105M as an upfront fee and is eligible to receive up to $65M in milestone
·      Varian Medical (VAR) shares rose 15%; Q1 EPS $1.06/$678.5M vs. est. 93c/$636.8M; raises FY18 EPS view to $4.24-$4.36 from $4.05-$4.17 (est. $4.24) and raises FY18 revenue growth view to 4%-7% from 3%-5% vs. est. $2.77B
·      Audentes Therapeutics (BOLD) 5.75M share Secondary priced at $35.00
·      Menlo Therapeutics (MNLO) 7M share IPO priced at $17.00
·      Iovance Biotherapeutics (IOVA) files to sell $125M in common stock
·      Albireo Pharma (ALBO) files to sell common stock
·      ConforMIS (CFMS) files to sell common stock
 
Industrials & Materials
·      Briggs & Stratton (BGG) Q2 EPS 25c/$446M vs. est. 23c/$424M; quarterly gross profit margin of 20.8% and adjusted gross profit margin of 21.1%; raises FY18 view to $1.45-$1.62 from $1.41-$1.58 (est. $1.63) – EPS outlook due to the reduction in the planned effective tax rate
·      Hexcel (HXL) Q4 EPS 70c/$511.7M vs. est. 69c/$507.3M;
·      United Rentals (URI) Q4 EPS $3.34/$1.92B vs. est. $3.35/$1.88B; 4Q rental revs $1.65B and Q4 adjusted Ebitda $947M; within rental revenue, owned equipment rental revenue increased 26.5%, reflecting increases of 28.7% in the volume of equipment on rent and 1.1% in rental rates. 
·      Northrop Grumman (NOC) Q4 EPS $2.82/$6.6B vs. est. $2.74/$6.35B; sees FY18 EPS $15.00-$15.25 on revs approximately $27B vs. est. $14.24/$26.91B; sees FY18 CapEx approximately $1B
·      Gates Industrial (GTES) 38.5M share IPO priced at $19.00
 
Technology, Media & Telecom
·      F5 Networks (FFIV) Q1 adjusted EPS $2.26/$523.19M vs. est. $2.04/$521.09M; sees Q2 adjusted EPS $2.24-$2.27 on revs $525M-$535M vs. est. $2.12/$528.21M
·      Lam Research (LRCX) Q2 EPS $4.34/$2.58B vs. est. $3.68/$2.57B; 2Q shipments $2.63 billion and Q2 adjusted gross margin 47.6%, estimate 47.5%; sees Q3 revs $2.73B-$2.98B
·      Teradyne (TER) Q4 adjusted EPS 46c/$479M vs. est. 34c/$438.8M; raises quarterly dividend by 29% to 9c per share; announces new $1.5B share repurchase program; sees Q1 EPS 38c-45c on revs $460M-$490M vs. est. 43c/$490.7M
·      Xilinx (XLNX) sees Q4 revenue approximately $635M-$665M vs. est. $643.54M; said gross margin is expected to be 69% to 71%; operating expenses are expected to increase to approximately $285 million, including a one-time charge of approximately $30M
·      Aspen Technology (AZPN) Q2 adjusted EPS 59c/$124.9M vs. est. 50c/$121.81M; said saw positive performance from owner-operator customers and growth from our Engineering and Manufacturing/Supply Chain suites; raises FY18 adjusted EPS view to $2.16-$2.21 from $1.92-$1.97 and raises FY18 revenue view to $490M-$495M from $487M-$494M
·      Celestica (CLS) shares fell 8% on Q4 miss; Q4 EPS 27c/$1.55B vs. est. 31c/$1.56B; sees Q1 revs $1.43B-$1.53B vs. est. $1.46B (recall SANM recently lowered guidance in the EMS space)
·      Crown Castle (CCI) Q4 revs $1.24B vs. est. $1.14B; sees FY AFFO $2.22B-$2.26B and boosts forecast for 2018
 

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Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P.  Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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