Morning Preview: February 1, 2018

Scott GreenDaily Market Report

Early Look
Thursday, February 1, 18
  
Stock futures are mixed after major averages closed the month out higher, booking solid gains, but losing altitude the final few days of January after the Federal Reserve hinted that it is set to raise interest rates as early as its next meeting in March. With the State of the Union behind us (no major revelations) and the FOMC meeting yesterday (slightly more hawkish commentary/higher inflation), attention now firmly turns to earnings this morning, with tech giants FB, MSFT, BABA, and EBAY moving markets early, with AAPL and AMZN reporting after the bell. Economic data remains pivotal for markets, with the monthly nonfarm payroll report tomorrow (after a strong private payroll reading yesterday) and monthly auto sales data out as well. Healthcare looks to bounce back after back-to-back losing session on AMZN competition fears and President Trump focusing on high drug prices during his speech Tuesday night. Back to the FOMC, as expected, the central bank held key rates at a range between 1.25% and 1.50%, with commentary pointing to a rate hike in the March meeting. Major averages are less than 2% below last Friday’s record closes after declining on Monday and Tuesday and up between 24% and 31% over the last year, boosted by an expanding U.S. economy and growth in corporate profits. For January, the Dow gained 5.8%; the S&P, 5.6%; and the Nasdaq, 7.4%. In Asian markets, The Nikkei Index jumped 387 points to settle at 23,486, the Shanghai Index fell -33 points to end at 3,446 and the Hang Seng Index fell -245 points to close at 32,642. In Europe, the German DAX is up over 30 points at 13,225, while the FTSE 100 is flat at 7,530.
 
Market Closing Prices Yesterday
·      The S&P 500 Index inched higher 1.38 points, or 0.05%, to 2,823.81
·      The Dow Jones Industrial Average rose 72.50 points, or 0.28%, to 26,149.39
·      The Nasdaq Composite gained 9.00 points, or 0.12%, to 7,411.48
·      The Russell 2000 Index declined-7.83 points, or 0.49% to 1,574.98
 
Events Calendar for Today
·      7:30 AM EST       Challenger Job Cuts YoY for January
·      8:30 AM EST       Weekly Jobless Claims…est. 235K
·      8:30 AM EST       Continuing Claims…est. 1.929M
·      8:30 AM EST       Nonfarm Productivity for Q4-P…est. 0.7%
·      8:30 AM EST       Unit Labor Costs for Q4-P…est. 0.9%
·      9:45 AM EST       Markit US Manufacturing PMI, Jan-F…est. 55.5
·      9:45 AM EST       Bloomberg Consumer Comfort Index…prior 53.7
·      10:00 AM EST     ISM Manufacturing for January…est. 58.6
·      10:00 AM EST     Construction Spending for December…est. 0.4%
·      10:30 AM EST     Weekly EIA Natural Gas Inventory Data
 
Earnings Calendar
·      Earnings Before the Open: APO, APTV, BABA, BDC, BSX, BX, CI, CME, COP, DGX, DWDP, ETN, IP, LSTR, MA, MCK, MMC, MO, PH, R, RL, TWX, UPS, VLO, WCC, XYL
·      Earnings After the Close: AAPL, AIV, AMGN, AMZN, ATHN, CPT, DATA, EMN, EW, RBHS, GOOGL, LPLA, MAT, MSI, RTEC, V, VIAV, VR, WFT, XL
   
Sector News Breakdown
Consumer
·      Mondelez (MDLZ) Q4 EPS 57c/$6.97B vs. est. 56c/$6.97B; sees FY organic revenue +1% to +2%; sees FY adjusted operating margin about +17%; sees double-digit Adj. EPS growth on constant-currency basis; 4Q adjusted gross margin 39.2% and Q4 organic revenue +2.4%
·      Allegiant Travel (ALGT) Q4 adjusted EPS $2.71/$378.6M vs. est. $1.66/$377.11M; sees 2018 EPS $10-$12 up from prior view $8-$10; expects 2018 effective tax rate to be 24%-25%
·      Tractor Supply (TSCO) Q4 adjusted EPS 91c/$1.95B vs. est. 87c/$1.93B; Q4 comparable store sales up 4.0% vs. est. 2.1%; sees FY18 diluted EPS $3.95-$4.15 on revs $7.69B-$7.77B vs. est. $4.00/$7.75B; sees FY18 comparable store sales up 2.0%-3.0%.
 
Energy
·      Chevron (CVX) raised its quarterly dividend to $1.12 from $1.08
·      Marathon Petroleum (MPC) Q4 revs $21.24B vs. est. $20.99B
·      UGI Corporation (UGI) Q1 adjusted EPS $1.01/$2.125B vs. est. 95c/$1.87B
·      American Midstream Partners (AMID) files $2B mixed securities shelf
 
Financials
·      Aflac (AFL) Q4 adjusted operating EPS $1.60/$5.4B vs. est. $1.55/$5.33B; raises quarterly dividend 15.6% to 52c per share; sees FY18 operating EPS $7.45-$7.75 vs. est. $7.50
·      Lincoln Financial (LNC) Q4 operating EPS $1.98/$3.669B vs. est. $1.94/$3.65B; said another strong quarter capped an exceptional year as we generated sales growth in every business, record operating EPS, a 13% increase in book value per share, and a 13% ROE
·      PayPal (PYPL) Q4 EPS 55c/$3.74B vs. est. 52c/$3.63B; sees year EPS $2.24-$2.30 vs. est. $2.24; Q4 active customer accounts added 8.7M, 4Q active customer accounts 227M, 4Q payment transactions 2.20B, 4Q payment transactions per active account 33.6; Venmo processed about $10.4 billion of total payment volume (TPV) in Q4, up 86% from the prior year, but a deceleration from last quarter, when Venmo volume surged 93% to about $9B; 4Q overall TPV was $131B
·      Hanover Insurance (THG) Q4 operating EPS $2.00/$1.33B vs. est. $1.86/$1.2B; combined ratio of 95.1% in the fourth quarter and 98.7% in the full year
·      RenaissanceRe (RNR) Q4 operating EPS $1.05/$491.3M vs. est. 76c/$474.64M.
·      SEI Investments (SEIC) Q4 EPS 75c/$408.22M vs. est. 60c/$398.26M
·      Unum Group (UNM) Q4 after-tax operating EPS $1.13/$2.84B vs. est. $1.08/$2.83B; raises FY18 after-tax adjusted operating income growth to 17%-23%
 
Healthcare
·      Cigna (CI) Q4 EPS $1.94/$10.53B vs. est. $1.89/$10.3B; sees FY18 adjusted EPS 12.40-$12.90 vs. est. $12.20, which represents per share growth of 19% to 23% over 2017; sees FY18 revenue growth 7%-8%
·      Seattle Genetics (SGEN) 11.538M share Secondary priced at $52.00
·      Sol-Gel Technologies (SLGL) 6.5M share IPO priced at $12.00
·      CONMED (CNMD) Q4 EPS 69c/$222.6M vs. est. 65c/$212.16M; sees FY18 adjusted EPS $2.11-$2.17 vs. est. $2.07; sees FY18 constant currency sales growth 4%-5%
·      Express Scripts (ESRX) downgraded to underperform from market perform saying tax-reform driven 27% rally since Thanksgiving is overdone as gross margins will continue to come under pressure from managed care in-sourcing, increasingly sophisticated clients
·      Gemphire Therapeutics (GEMP) announced initiation of a Phase 2a proof-of-concept clinical trial investigating gemcabene as a treatment for pediatric nonalcoholic fatty liver disease
·      Vertex (VRTX) Q4 EPS 61c/$651.63M vs. est. 53c/$594.72M; total CF net product revenues increased 37% to $621.2M from $454.0M; to advance VX-659 and VX-445 into Phase 3 development as part of two different triple-drug combinations for people with cystic fibrosis; says regulatory discussions ongoing to finalize the design of Phase 3 programs; authorizes share repurchase program of up to $500M
·      Zogenix (ZGNX) announced that the last patient has been randomized into the treatment period of Study 1504, its second Phase 3 clinical trial evaluating ZX008 as an adjunctive treatment for seizures in children and young adults with Dravet syndrome
 
Industrials & Materials
·      DowDuPont (DWDP) Q4 adjusted EPS 83c/$20.1B vs. est. 67c/$19.55B
·      U.S. Steel (X) Q4 adjusted EPS 76c/$3.13B vs. est. 67c/$3.1B; Q4 adjusted Ebitda $309.3M and sees year Ebitda about $1.5B
·      Eaton (ETN) Q4 adjusted EPS $1.43/$5.2B vs. est. $1.21/$5.1B; sees Q1 EPS $1.10-$1.10 vs. est. $1.06 and year EPS $5.00-$5.20 vs. est. $5.00
·      Boeing Co (BA) was awarded a $6,560,000,000 definitized modification to a previously awarded contract for the extension of the Ground-based Midcourse Defense development and sustainment contract
·      Hillenbrand (HI) Q1 adjusted EPS 54c/$397M vs. est. 49c/$384.3M; raises FY18 adjusted EPS view to $2.28-$2.40 from $2.16-$2.28 (est. $2.25) based on tax reform, which results in a lower expected adjusted effective tax rate for the fiscal year of 26% to 28%, down from 31% prior
·      Landstar System (LSTR) Q4 EPS $1.08/$1.05B vs. est. $1.02/$1.01B; sees 1Q EPS $1.22-$1.27 on revs $925M-$975M vs. est. $1.13/$896.3M
·      Methanex (MEOH) Q4 EPS $1.70/$861M vs. est. $1.28/$780.33M; to increase dividend 10%
·      Rexnord (RXN) Q4 adjusted EPS 37/$492M vs. est. 28c/$479.88M
·      Tetra Tech (TTEK) Q1 ongoing EPS 65c/$544.8M vs. est. 53c/$510.2M; sees Q2 EPS 48c-53c on revs $490M-$515M vs. est. 53c/$532.79M; raises year outlook
 
Media & Telecom:
·      AT&T (T) Q4 adjusted EPS 78c/$41.7B vs. est. 65c/$41.19B; reports 4.1M total wireless net adds, 2.7M in U.S., driven by connected devices, postpaid phones and prepaid 1.3M in Mexico; 300,000 total video net adds in Q4; operating income margin of 22.1% with EBITDA margin of 32.7% and wireless service margin of 43.8%; 4Q wireless postpaid net adds 541,000 vs. estimate 267,000
·      CACI (CACI) Q2 EPS $2.00/$1.09B vs. est. $1.68/$1.08B; raises FY18 EPS outlook to $7.00-$7.23 from $6.76-$7.08 and reaffirms FY18 sales outlook $4.35B-$4.5B vs. consensus $4.45B
·      Meredith (MDP) Q2 EPS $1.14/$417.7M vs. est. 89c/$415.44M; is temporarily altering its outlook practices; sees to return to its traditional guidance methodology in July when it reports full year fiscal 2018 results
·      NIC Inc. (EGOV) Q4 EPS 16c/$83.5M vs. est. 16c/$81.0M; sees effective tax rate ex items from 24% to 25% in 2018
 
Technology, Media & Telecom
·      Facebook (FB) Q4 EPS $1.44/$12.97B vs. est. $12.55B (Q4 EPS lowered by 77c due to accounting bulletin); Q4 daily active users of 1.40B on average for December, an increase of 14% YoY; Monthly active users were 2.13B as of December 31, 2017, up 14% YoY; mobile advertising revenue represented approximately 89% of advertising revenue for Q4, up from approximately 84% of advertising revenue in Q4 of last year; capital expenditures were $2.26B for Q4
·      Microsoft (MSFT) Q2 EPS 96c/$28.92B vs. est. 86c/$28.39B; Q2 Intelligent Cloud revenue up 15% to $7.8B; Q2 revenue in Intelligent Cloud was $7.8B and increased 15%, as server products and cloud services revenue increased 18% driven by Azure revenue growth of 98%.
·      Alibaba (BABA) Q3 revs $12.76B vs. est. $12.68B; Q3 adjusted PES 10.61 yuan vs. est. 10.53 yuan; agrees to 33% equity stake in Ant Financials; says to end current profit-sharing arrangement with Ant; raises FY18 revenue growth view to 55%-56% from 49%-53%
·      eBay Inc. (EBAY) Q4 adjusted EPS 59c/$2.6B vs. est. 59c/$2.61B; sees Q1 adjusted EPS 52c-54c on revs $2.57B-$2.61B vs. est. 52c/$2.41B; authorizes additional $6B stock repurchase program; Q4 GMV $24.4B, up 10% on as reported basis; active buyers up 5% in Q4 to 170M; Marketplace GMV was up 9% on an as-reported basis and 6% on an FX-Neutral basis
·      Cadence Design (CDNS) Q4 EPS 39c/$501.7M vs. est. 39c/$496.24M; sees Q1 EPS 36c-38c on revs $500M-$510M vs. est. 34c/$492.4M; sees year EPS $1.50-$1.60 vs. est. $1.52
·      Cavium (CAVM) Q4 EPS 83c/$260.4M vs. est. 81c/$2601.M; Q4 adjusted gross margin 65.2%
·      Citrix (CTXS) Q4 EPS $1.66/$778M vs. est. $1.61/$778.47M; Q4 Product and license revenue increased 3%, Software as a service (SaaS) revenue increased 38%, and revenue from license updates and maintenance increased 4%
·      Electronics for Imaging (EFII) Q2 EPS 52c/$269.2M vs. est. 53c/$264.81M
·      Kulicke & Soffa (KLIC) Q1 adjusted EPS 54c/$213.7M vs. est. 26c/$189.48M; sees Q2 revenue $205M-$215M vs. consensus $220.05M
·      MKS Instrument (MKSI) Q4 EPS $1.71/$511.8M vs. est. $1.63/$500.22M; sees 1Q adjusted EPS $1.86-$2.12 on sales $510-$550M vs. est. $1.62/$504.0M
·      OpenText (OTEX) Q2 EPS 76c/$734.4M vs. est. 63c/$688.41M; 2Q license revs $135.2M; 2Q cloud rev. $208.1M; 2Q adjusted gross margin 73.9%
·      Qorvo (QRVO) Q3 EPS $1.69/$844.8M vs. est. $1.60/$841.9M; sees Q4 EPS $1.05 on revs $645M-$665M vs. est. $1.40/$777.02M; Q3 gross margin 48%
·      Qualcomm (QCOM) Q1 EPS 98c/$6.04B vs. est. 91c/$5.93B; sees Q2 adjusted EPS 65c-75c on revenue $4.8B-$5.6B vs. est. 85c/$5.58B; sees Q2 MSM chip shipments 170M-190M after Q1 MSM chip shipments 237M
·      Qualcomm (QCOM) announced that it has expanded its global patent cross-license agreement with Samsung (SSNLF) covering mobile devices and infrastructure equipment. The amended agreement is consistent with Qualcomm’s global handset-level licensing practices
·      ServiceNow (NOW) Q4 EPS 35c/$546.4 vs. est. 35c/$534.3M; 4Q free cash flow $150.1M; sees Q1 revs $525M-$530M and FY subs revs $2.36B-$2.38B; Sees Q1 subscription billings $600M-$604M, up 25%-26% on year
·      Symantec (SYMC) Q3 revenue below expectations and called for much lower per-share earnings and sales for the fiscal year;
 

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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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