Morning Preview: February 2, 2018

Scott GreenDaily Market Report

Early Look
Friday, February 2, 18
  
Stock futures are under pressure to start the day/end the week, with major averages on track for their first losing week in five ahead of the monthly jobs report later this morning. Estimates are for 180K jobs to be added for nonfarm and private payrolls and the unemployment rate to hold steady at 4.1%. Overnight earnings from Apple and Amazon proved positive, with shares rising 3% and 6% respectively, though Google results missed, sending shares down 4%. Rising bond yields and concerns about higher inflation left stocks mostly lower this week, as the yield on the 10-year bond nears 2.80%, and the 30-year yield topped 3% for the first time since last May yesterday. U.S. stocks are sliding, but markets in Europe are fairing worse this week, falling to 4-week lows led by the German Dax.
 
The S&P 500 was down 1.8% on the week as of Thursday’s close, set for its worst weekly performance since November 2016. The Dow average was facing a 1.6% weekly loss, its worst since September 2016. The Nasdaq Composite, meanwhile, was looking at a 1.6% loss, the deepest seen since last June.
 
Another big story this week has been the collapse of crypto-currencies, with Bitcoin down another 11% this morning, trading to around $8,000, the lowest levels since late November and down about 25% this week alone. Kicking off a fresh wave of selling, India’s finance minister came down hard on cryptocurrencies Thursday, as he said the government does not see them as a form of legal tender, according to media reports (marketwatch.com).
 
In Asian markets, The Nikkei Index fell -211 points to settle at 23,274, the Shanghai Index gained 15 points to end at 3,462, and the Hang Seng Index dipped -40 points to 32,601. In Europe, the German DAX is down again, falling over -160 points to 12,835 (and down about -3.6% this week), while the FTSE 100 is down over -20 points at 7,465. German bund yields trade close to 2-year highs (adds 4 bps to 0.69%), as German stocks head for worst week since June, as Deutsche Bank shares fall 5% on earnings.
 
Market Closing Prices Yesterday
·      The S&P 500 Index dropped -1.83 points, or 0.06%, to 2,821.98
·      The Dow Jones Industrial Average rose 37.32 points, or 0.14%, to 26,186.71
·      The Nasdaq Composite slumped -25.62 points, or 0.35%, to 7,385.86
·      The Russell 2000 Index advanced 4.87 points, or 0.31% to 1,579.85
 
Events Calendar for Today
·      8:30 AM EST       Change in Nonfarm Payrolls for January…est. 180K
·      8:30 AM EST       Change in Private Payrolls for January…est. 181K
·      8:30 AM EST       Change in Manufacturing Payrolls for January…est. 20K
·      8:30 AM EST       Unemployment Rate for Jan…est. 4.1%
·      8:30 AM EST       Average Hourly Earnings for Jan…est. 0.2%
·      8:30 AM EST       Average Weekly Hours for Jan…est. 34.5 hours
·      10:00 AM EST     Factory Orders for December…est. 1.5%
·      10:00 AM EST     University of Michigan Sentiment, Jan-F…est. 95.0
·      10:00 AM EST     Durable Goods Orders, Dec-F…est.
·      1:00 PM EST        Baker Hughes Weekly Rig Count
·      3:30 PM EST        Fed’s Williams speaks in San Francisco
 
Earnings Calendar
·      Earnings Before the Open: AON, CHTR, CLX, CVX, EL, LYB, MAN, MRK, PSX, ROP, WY, XOM
   
World News
·      Activity in the U.K.’s construction sector eased to a four-month low as Markit Ltd. said its purchasing managers’ index for the construction industry fell to 50.2 in January, down from 52.2 a month earlier.
 
Sector News Breakdown
Consumer
·      Amazon.com (AMZN) shares rise 5%; Q4 EPS with benefits $3.75/$60.5B vs. est. $1.85/$59.83B; Q4 operating income $2.13B vs. est. $1.48B; sees Q1 revenue $47.75B-$50.75B vs. consensus $48.73B; sees Q1 operating income between $300M-$1.0B, compared with $1.0B YoY (and $1.48B est.); Q4 AWS net sales $5.11B vs. $3.54B last year and Q4 AWS operating income $1.35B vs. $926M a year ago
·      Clorox (CLX) Q2 EPS $1.77/$1.42B vs. est. $1.23/$1.43B; raises year EPS outlook on tax reform
·      Decker’s Brands (DECK) shares rise 7%; Q3 EPS $4.97/$810.5M vs. est. $3.82/$748.41M; sees Q4 adjusted EPS 15c-20c on revs $370M-$375M vs. est. 24c/$377.46M; sees FY18 adjusted EPS $5.37-$5.42 on revs $1.873B-$1.878B vs. est. $5.10/$1.85B
·      Fortune Brands (FBHS) Q1 EPS 80c/$1.4B vs. est. 80c/$1.38B; sees FY18 EPS ex-items $3.54-$3.66 vs. est. $3.53 saying outlook is based on a U.S. home products market growth assumption of 5%-7% and assumption of 5%-6% for total global market
·      GoPro (GPRO) Q4 non-GAAP EPS loss (30c)/$334.8M vs. est. loss (11c)/$340.08M; 4Q adj. gross margin 24.8% vs 39.5% YoY
·      Mattel (MAT) Q4 adjusted EPS (72c)/$1.61B vs. est. 17c/$1.69B; 4Q gross margin 30.7% vs 47% y/y citing inventory mgmt. efforts, unfavorable product mix, higher freight/logistics expenses; 4Q net sales in North American Region fell 17% y/y; gross sales in N.A. region decreased by 16%
·      Natural Grocers (NGVC) Q1 EPS 23c/$202.5M vs. est. 7c/$196.88M; Q1 daily average comparable store sales increased 4.7%; raises FY18 EPS view to40c-50c from 21c-31c (est. 26c) and raises expected FY18 daily average compare store sales growth t0 1%-3% from 0.5%-2.5%; still sees opening of new stores FY18 8-10 stores
·      SkyWest (SKYW) Q4 EPS 81c/$797.2M vs. est. 71c/$776.23M; sees effective tax rate for 2018 to generally range between 24% and 25%, excluding the impact of any discrete tax items
 
Energy
·      Callon Petroleum (CPE) operational update; reports Q4 production of approximately 26.5 MBoe/d 79% oil, and full year 2017 annual production growth of over 50%. 2018 Operational CapEx is expected to be $500M-$540M, with approximately 40% allocated to the Delaware Basin and 60% to the Midland Basin; expects to see another significant production increase after Q1, with multiple projects coming online during Q2 and Q3
·      Eversource Energy (ES) shares dropped late day on news that a New Hampshire state committee denied its application for the Northern Pass transmission project. The Site Evaluation Committee voted unanimously that Northern Pass had not met its burden to show the proposed transmission line would not “unduly interfere with the orderly development of the region
 
Financials
·      Visa (V) said it now sees 2018 operating expense growth at the high end of mid-single digits vs its prior forecast for mid-single digits; now sees a 2018 tax rate of about 23% vs its prior forecast for about 29%; Q1 payments volume growth was 10%; cross-border volume growth was 9%; authorizes $7.5B share repurchase program; Q1 EPS $1.08/$4.86B vs. est. 99c/$4.84B
·      Deutsche Bank (DB) shares fell 5%; posted its third consecutive full-year loss and said it would have been profitable in 2017 without an already-announced hit from the U.S. tax overhaul adopted in December
·      Apartment Investment (AIV) Q4 FFO 63c/$255.2M vs. est. $245.2M; sees 2018 AFFO $2.11-$2.21
·      Camden Property (CPT) Q4 FFO $1.18 vs. est. $1.18; sees 1Q FFO per share $1.11-$1.15 vs. est. $1.15; sees FY FFO per share $4.62-$4.82 vs. est. $4.80; boosts dividend
·      LPL Financial (LPLA) Q4 EPS 69c/$1.12B vs. est. 35c/$1.09B; says tax reform will lower 2018 effective tax rate to within a range of 27% to 29%
·      Selective Insurance (SIGI) Q4 EPS 86c/$633.7M vs. est. 82c
·      XL Group (XL) Q4 operating EPS 45c vs. est. 38c; Q4 net premiums earned $2.68B; reports tangible book value per common share of $29.44 at December 31, 2017, a decrease of 26c; 4Q catastrophe losses were $315.2M, in line with the company’s forecast and 4Q P&C combined ratio was 99.0% vs 94.8% YoY
 
Healthcare
·      Amgen (AMGN) Q4 adjusted EPS $2.89/$5.8B vs. est. $3.03/$5.83B; sees FY18 adjusted EPS $12.60-$13.70 on revs $21.8B-$22.8B vs. est. $12.71/$22.8B; announces additional $10B share repurchase program; top drug revs: Enbrel $1.42B, Neulasta $1.1B, Prolia $574M, Aranesp $491M, Epogen $270M and Kyprolis $227M
·      Merck & Co (MRK) Q4 EPS 98c/$10.4B vs. est. 94c/$10.49B
·      Alnylam Pharmaceuticals (ALNY) says the FDA accepted for filing its NDA for patisiran, granting priority review and Pdufa action date of Aug. 11; says that at this time, the FDA isn’t planning to hold an advisory committee meeting to discuss this application
·      athenahealth (ATHN) Q4 EPS $1.11/$329.2M vs. est. 63c/$319.94M; to introduce FY08 guidance at Investor Summit on Feb.
·      Edwards Lifesciences (EW) Q4 EPS 94c/$888.5M vs. est. 91c/$867.09M; raises FY18 adjusted EPS to $4.43-$4.63 from $4.10-$4.30 (est. $4.26); increased its sales estimate to be at the higher end of its $3.5B-$3.9B guidance vs. est. $3.74B
·      Revance Therapeutics (RVNC) announced presentation of clinical data from the company’s two pivotal SAKURA Phase 3 trials of DaxibotulinumtoxinA Injectable at the 20th annual IMCAS World Congress
·      Varex Imaging (VREX) raises FY18 adjusted EPS view to $1.82-$1.92 from $1.78-$1.88 and reiterates expectations for FY18 revenues to grow by 13%-14% from the prior fiscal year
·      Viking Therapeutics (VKTX) files to sell common stock, no amount given
 
Industrials & Materials
·      OSI Systems (OSIS) shares fell -18%; said the SEC has started an investigation into the company’s compliance with the Foreign Corrupt Practices Act, and the U.S. Attorney’s Office for the Central District of California has said it also intended to request information regarding FCPA compliance. OSI Systems said the regulators were acting in response to a short seller, as the firm Muddy Waters has alleged the company has relied on bribes to win a major contract in Albania. The SEC and DOJ are also conducting an investigation of trading in the company’s securities; Q2 EPS 97c/$278M vs. est. 89c/$266.1M; raises year EPS and revenues
·      Eastman Chemical (EMN) Q4 EPS $1.62/$2.36B vs. est. $1.06/$2.25B
·      Esterline (ESL) Q1 EPS 49c/$482.3M vs. est. 39c/$457.84M; sees FY18 EPS $3.65-$4.05 on revs $2.025B-$2.075B vs. est. $3.88/$2.04B; sees FY18 EBITDA in the range of $290M-$310M and free cash flow in the range of $105M-$130M
·      YRC Worldwide (YRCW) Q4 EPS loss (23c)/$1.209B vs. est. 3c/$1.21B; Q4 Ebitda $58.5M
 
Technology, Media & Telecom
·      Apple (AAPL) Q1 EPS $3.89/$88.3B vs. est. $3.86/$87.28B; sees Q2 revs $60B-$62B vs. est. $65.8B; sees Q2 gross margin 38%-38.5% vs est. 39.0%; Q1 product breakdown (est. Bloomberg): 1Q iPhone units sold 77.3M vs est. 80.2M, 1Q iPhone ASP $796 vs. est. $767, 1Q services revenue $8.47V vs. est. $8.52B, 1Q gross margin 38.4% (in-line w/ests); sees 2Q operating expenses $7.6 billion to $7.7 billion and sees 2Q tax rate of about 15%
·      Alphabet (GOOGL) shares fell -4%; Q4 EPS $9.70/$32.32B vs. est. $10.04/$31.87B; Q4 aggregate paid clicks up 43% vs. last year and Q4 aggregate cost-per-click down 14% vs. last year; authorizes repurchase up to nearly $8.6B of Class C shares; says tax act resulted in additional tax expense of $9.9B in Q4
·      Bottomline Technologies (EPAY) Q2 EPS 8c/$95.2M vs. est. 7c/$1.21B
·      Brooks Automation (BRKS) Q1 EPS 32c/$189.3M vs. est. 31c/$184.9M; sees Q2 EPS 33c-41c vs. revs $195M-$205M vs. est. 34c/$189.57M
·      CBS Corp. (CBS) and Viacom Inc. (VIAB) said that they have each set up special committees to evaluate a potential recombinationhttps://goo.gl/6kFXFV
·      Cypress (CY) Q4 adjusted EPS 28c/$597.5M vs. est. 25c/$593.6M; sees Q1 adjusted EPS 22c-26c on revs $565M-$595M vs. est. 22c/$576.82M
·      II-VI (IIVI) Q2 EPS 39c/$281.5M vs. est. 37c/$277.1M; sees Q3 revs $270M-$285M vs. est. $288.7M
·      Impinj (PI) sees Q4 revenue $29M-$30M vs. est. $28.92M, CFO to step down
·      Motorola Solutions (MSI) to acquire Avigilon, which makes advanced video surveillance and analytics, for C$27.00/share; enterprise value of the transaction is ~$1.0B, including Avigilon’s net debt; Q4 adjusted EPS $2.10/$2B vs. est. $2.04/$1.94B
·      Omnicell (OMCL) Q4 EPS 54c/$198.3M vs. est. 52c/$205.14M; sees Q1 non-GAAP EPS 22c-28c on revenue $174M-$179M vs. est. 39c/$190.85M
·      Power Integrations (POWI) Q4 EPS 74c/$108.2M vs. est. 72c/$110.48M; sees Q1 revenue $100M-$106M vs. consensus $112.6M and margins about 51.5%; announces $30M share buyback and raises dividend
·      Tableau (DATA) shares gained 15%; Q4 adjusted EPS 12c/$249.4M vs. est. 3c/$240.68M; CFO Tom Walker to step down, Damon Fletcher named interim CFO; 4Q license revs $129.2M
·      Viavi Solutions (VIAV) announced that it has signed a definitive agreement to acquire the Test and Measurement business of Cobham for $455M cash consideration, subject to certain customary closing adjustments; Q2 non-GAAP EPS 9c/$201.8M vs. est. 7c/$185.8M
 

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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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