Morning Preview: February 7, 2018

Scott GreenDaily Market Report

Early Look
Wednesday, February 7, 18
  
It looks like investors and traders are in for another wild ride, as U.S. stock futures are tumbling early, with Dow futures down over 200 points after yesterday’s dramatic rebound that sent main benchmark indexes to their best gains since 2016, as buyers stepped in after the worst selloff in two years. The S&P 500 advanced 1.7%, reversing a 2.1% drop at the open as tech, materials, and consumer discretionary were among the biggest gainers. The Dow industrial jumped 2.3%, rebounding from a 2.3% drop earlier and after losing a record 1,175 points Monday. The VIX index fell 19% to 30.13, after more than doubling Monday. Yesterday also marked the busiest session since November 2016. The combination of rising bond yields amid signs of inflation, and equities due for a pullback after scoring big gains in January and throughout 2017, the main focus for the market pullback the last week. Overnight, the House passed a temporary bill late Tuesday to avoid a gov’t shutdown, and Senate Majority Leader Mitch McConnell, R-Ky., said he’s “optimistic that very soon we’ll be able to reach an agreement.” A brief partial shutdown last month didn’t weigh on the market that much.
 
Treasury yields pared losses but ended lower after stocks rebounded from the previous day’s rout that drew investors into perceived safe havens and pushed bond prices higher. The yield on 10-year Treasury notes fell 2.8 bps to 2.766%, after having fallen as low as 2.648% (had risen to a four-year high of 2.883% Monday). The CBOE Volatility Index (VIX) fell 7.34 or 19.6% to close at 29.98 Tuesday.
 
In Asian markets, The Nikkei Index rose 35 points to settle at 21,645, the Shanghai Index fell -61 points (1.8%) to settle at 3,309 and the Hang Seng Index declined -272 points to 30,323. In Europe, the German DAX is up over 50 points around 12,450, while the FTSE 100 is up about 50 points trading just under 7,200. There are no top-tier economic reports expected on Wednesday, but three Federal Reserve officials are slated to make remarks (see below for speaker times)
 
Market Closing Prices Yesterday
·      The S&P 500 Index rebounded 46.20 points, or 1.74%, to 2,695.14
·      The Dow Jones Industrial Average rose 567.02 points, or 2.33%, to 24,912.77
·      The Nasdaq Composite spiked 148.36 points, or 2.13%, to 7,115.88
·      The Russell 2000 Index advanced 16.08 points, or 1.08% to 1,507.17
 
Events Calendar for Today
·      6:00 AM EST       Fed’s Kaplan speaks in Frankfurt
·      7:00 AM EST       MBA Mortgage Applications Data
·      8:30 AM EST       Fed’s Dudley speaks in moderated Q&A
·      10:15 AM EST     Fed’s Evans speaks on Economic and Policy Outlook
·      10:30 AM EST     Weekly DOE Inventory Data
·      3:00 PM EST        Consumer Credit for December…est. $20.0B
·      5:20 PM EST        Fed’s Williams speaks in Hawaii
 
Earnings Calendar
·      Earnings Before the Open: BCO, CDW, CG, CSTE, CTSH, BLL, HAIN, HAS, HUM, ICE, KORS, TRVG, XEL.
·      Earnings After the Close: ALL, AXS, BHE, CCK, CINF, CSGS, CSRA, DIOD, FISV, FORM, FOXA, FWRD, IAC, INFN, IPHI, IRBT, KN, LLNW, MC, NTES, NXPI, ORLY, PRI, PRU, RYN, SYNA, TSLA, TTMI, TTWO, TYL, XPO, YELP, ZAYO, ZNGA
  
World News
·      German Chancellor Angela Merkel’s conservative party and its former center-left partner Wednesday clinched a deal to set up a governing coalition, according to media reports. Following marathon talks that started Tuesday morning, Merkel’s Christian Democratic Union and the Social Democrats early Wednesday agreed on distributing ministries, which was seen as a stumbling block to conclude the coalition negotiations https://goo.gl/GQLw8e
·      Bitcoin prices rebound from yesterday lows, trading back above the $8,000 level after briefly trading below the $6,000 level early yesterday
·      Germany’s industrial output slipped at the end of 2017, as industrial production in December fell 0.6% from November, led by construction output, vs. a forecast a 0.5% decline.
 
Sector News Breakdown
Consumer
·      Chipotle (CMG) Q4 EPS $1.55/$1.1B vs. est. $1.33/$1.11B; Q4 comparable restaurant sales up 0.9% vs. est. 0.7%; EPS included a benefit of 21c per share resulting from changes in U.S. tax law; sees FY comp sales up low single digits; sees savings of approximately $40M-$50M on tax change
·      Container Store (TCS) Q3 adjusted EPS 11c/$233M vs. est. 13c/$227.51M; Q3 comp sales down (-0.2%); narrows FY17 adj. EPS view to 31c-37c from 30c-41c (est. 37c) and narrows FY17 revenue view to $850M-$860M from $845M-$865M (est. $857.19M)
·      GameStop (GME) announced that Michael Mauler has been appointed as the company’s new CEO, effective immediately
·      Hasbro (HAS) Q4 EPS $2.30/$1.60B vs. est. $1.81/$1.72B; boosts dividend to 63c from 57c
·      Steve Wynn resigned late Tuesday as chief executive and chairman from Wynn Resorts (WYNN) following allegations last month of sexual misconduct.
 
Energy
·      Anadarko (APC) Q4 EPS 18c vs. est. 3c; sees 1Q sales volume 55 to 58 MMBoe and Q1 capital expenditure $1.20B-$1.4B; sees FY sales volume 238-248 MMBoe and FY capital expenditure $4.10B-$4.5B; Q4 sales vol. 637,000 mboe/d
·      The American Petroleum Institute (API) reported that U.S. crude supplies fell by -1.1M barrels for the week ended Feb. 2, a decline of 227K barrels in gasoline stockpiles, while inventories of distillates saw a surprise climb of 4.6M barrels
·      Chesapeake Energy (CHK) provided an update to certain operational results for the Q4: average Q4 production projected at 593,000 boe per day, including oil production of 100,000 barrels per day, as previously targeted; three Mid-Continent sales agreements for approximately $500M
·      Halcon Resources (HK) files to sell 8M shares of common stock; announced it has recently acquired or entered into definitive agreements to acquire 22,617 net acres in Ward County, Texas for approximately $381M
·      Pioneer Natural (PXD) announces $100M stock repurchase program; raises semiannual dividend from 4c to 16c per share; Q4 adjusted EPS $1.22/$1.53B vs. est. 86c/$1.22B; reports Q4 production 305K BOE/d, up 11% on the quarter; announced that it plans to divest its properties in South Texas, Raton and the West Panhandle field; sees year cap-ex $2.9B
·      Plains All American (PAA) Q4 adjusted EPS 26c/$7.61B vs. est. 42c/$6.68B; sees year Ebitda $2.3B below Bloomberg $2.39B est.
·      Targa Resources (TRGP) announced that it has entered into development joint ventures with investment vehicles affiliated with Stonepeak Infrastructure Partners. The DevCo JVs own Targa’s 25% interest in the Gulf Coast Express Pipeline, a 20% interest in the Grand Prix Pipeline, and a 100% interest in Targa’s next fractionation train.
·      Viper Energy (VNOM) Q4 EPS 37c vs. est. 30c; reports Q4 2017 net income of $42.1 million and distributable cash flow of $52.4M; Q4 2017 production of 12,413 boe/d (72% oil), up 57% year over year. Proved reserves as of December 31, 2017 of 38.2 MMboe up 22% year over year
 
Financials
·      Artisan (APAM) Q4 EPS 66c/$210.7M vs. est. 67c/$210.8M; 4Q average assets under management $115.1B; recorded non-cash charge in the December quarter of 2017 of $62 million on tax reform act
·      UDR Corp. (UDR) Q4 FFO 48c (in-line); sees 1Q FFO per share 46c-48c vs. est. 48c and year FFO $1.91-$1.95 vs. est. $1.97
 
Healthcare
·      Gilead Sciences (GILD) Q4 EPS $1.78/$5.9B vs. est. $1.67/$5.74B; Q4 product sales $5.8B; 4Q Harvoni revenue $644M, Sovaldi revenue $117M, Epclusa revenue $565M, Truvada revenue $797M, Genvoya revenue $1.06B and Atripla revenue $440.0M; raises quarterly dividend 10% to 57c per share
·      Myriad Genetics (MYGN) Q2 EPS 31c/$194M vs. est. 24c/$188.8M; sees FY18 EPS 1.11-$1.16 on revs $760M-$770M vs. est. $1.05/$770.24M
·      Cerner (CERN) Q4 EPS 58c/$1.31B vs. est. 61c/$1.33B; sees Q1 EPS 57c-59c on revs $1.315B-$1.365B vs. est. 64c/$1.35B; sees FY18 EPS $2.57-$2.73 on revs $5.45B-$5.65B vs. est. $2.68/$5.58B
·      Seattle Genetics (SGEN) Q4 EPS loss (41c)/$129.6M vs. est. loss (43c)/$116.24M;
 
Industrials & Materials
·      Jacobs Engineering (JEC) Q1 EPS 77c/$2.75B vs. est. 73c/$2.55B; sees year EPS $3.85-$4.25 vs. est. $3.87
·      Esco Technologies (ESE) Q1 EPS 33c/$173M vs. est. 31c/$166.94M
 
Media & Telecom
·      Disney (DIS) Q1 EPS $1.89/$15.35B vs. est. $1.61/$15.45B; says decrease in Q1 ESPN revenue due to lower advertising revenue; Cable Networks revenues for the quarter increased 1% to $4.5 billion and operating income decreased 1% to $0.9B; Q1 Media Networks revenue $6.24B vs. $6.23B last year, Q1 Parks and Resorts revenue $5.15B, Studio Entertainment revenue $2.50B vs. $2.52B last year and Consumer Products & Interactive Media revenue $1.45B vs. $1.48B last year
·      Match Group (MTCH) Q4 EPS 29c ex-items on revs $378.9M vs. est. 32c/$363M; sees Q1 revs $380M-$390M vs. est. $364.9M and Q1 adj. Ebitda $115M-$120M; sees 2018 revs $1.5B-$1.6Bb, vs. est. $1.55B; Q4 Tinder average subscribers exceeded 3 million for the first time, up 544K QoQ and almost 1.5M YoY
·      Tronc Inc. (TRNC) is in advanced talks to sell its troubled flagship newspaper, the Los Angeles Times, to billionaire biotech investor Dr. Patrick Soon-Shiong for around $500 million, a person familiar with the matter said. https://goo.gl/RvqyUD
 
Technology
·      Akamai (AKAM) Q4 EPS 69c/$663M vs. est. 63c/$649.05M; 4Q performance and security solutions revenue $416.1M, 4Q cloud security revenue $135.2M and Q4 media delivery revenue $189.9M; records $52M restructuring charge to drive targeted operational efficiency improvement
·      Acxiom (ACXM) announced plans to realign its portfolio into two distinct business units: LiveRamp and Acxiom Marketing Solutions; to explore strategic options for Marketing Solutions business; Q3 EPS 31c/$234.9M vs. est. 24c/$238.9M
·      Blackbaud (BLKB) Q4 EPS 61c/$218.8M vs. est. 60c/$217.43M; sees FY18 adjusted EPS $2.75-$2.88 vs. est. $2.47; sees FY18 adjusted revenue $870M-$890M vs. est. $872.35M
·      j2 Global (JCOM) Q4 EPS $1.79/$316.4M vs. est. $1.70/$318.82M; Q4 adjusted EBITDA increased 21.8% to $141.9M vs. $116.5M YoY; sees year revs $1.2B-$1.25B vs. est. $1.19B
·      Manhattan Associates (MANH) Q4 EPS 45c/$144.1M vs. est. 45c/$144.8M; sees FY18 adjusted EPS $1.48-$1.52 on revs $546-$558M vs. est. $1.29/$559.8M
·      MagnaChip (MX) sees Q1 revenue $158M-$164M, vs. est. $162.05M; Q1 revenue view represents a decrease of 7.8% sequentially at the mid-point of the projected range
·      Macom (MTSI) sees Q2 adjusted EPS 10c-16c on revs $142M-$150M vs. est. 28c/$149.7M
·      Microchip (MCHP) Q3 EPS $1.36/$994.2M vs. est. $1.35/$992.1M; sees Q4 EPS $1.30-$1.39 on revs $964.4M-$1B vs. est. $1.37/$1.01B
·      Nanometrics (NANO) Q4 EPS 53c/$78.2M vs. est. 47c/$76.8M
·      Netgear Inc. (NTGR) said it plans to spin off its Arlo security-camera business into a new company and hold an initial public offering for the company. Netgear said it would seek to sell 20% of the business and distribute the other shares to Netgear investors; Q4 EPS 71c/$397.1M vs. est. 65c/$390.7M; sees Q1 revs $330M-$345M vs. est. $343M
·      New Relic (NEWR) Q3 EPS 5c/$91.8M vs. es.t loss (8c)/$89.31M; sees Q4 adjusted EPS 4c-5c, on revs $95M-$96.5Mvs. est. 1c/$94.86M; raises year EPS and revenue outlook
·      Paycom (PAYC) Q4 adjusted EPS 29c/$114.0M vs. est. 24c/$113.0M; sees Q1 revenue $150M-$152M vs. est. $150.07M and sees Q1 adjusted EBITDA in the range of $74M-$76M
·      Proofpoint (PFPT) to acquire Wombat Security Technologies for $225M in cash; Q4 EPS 29c/$145.4M vs. est. 20c/$139.49M; sees Q1 EPS 15c-17c on revs $149M-$151M vs. est. 19c/$149.41M; sees FY18 EPS 95c-$1.02 on revs $660M-$665M vs. est. $1.03/$668.54M
·      ScanSource (SCSC) Q2 EPS 90c/$1.03B vs. est. 81c/$965.15M; sees Q3 adjusted EPS 67c-73c on revs $860M-$920M vs. est. 67c/$858.58M
·      Snap Inc. (SNAP) shares rose 20%; Q4 adjusted EPS loss (13c)/$285.7M vs. est. loss (16c)/$252.95M; Q4 DAUs up 18% from prior year, up 5% from prior quarter; users increased 8.9M or 5% sequentially to 187M (vs. est. 184.3M), representing the highest net adds since Q3 2016; average revenue per user was $1.53 in Q4 2017, up 46% year-over-year and 31% sequentially
·      Ultimate Software (ULTI) Q4 adjusted EPS $1.11c/$251.4M vs. est. 87c/$244.79M; sees Q1 revenue $269M-$272M vs. est. $267.08Mand Q1 Operating margin of approximately 18%
·      Zendesk (ZEN) Q4 adjusted EPS loss (1c)/$123.4M vs. est. loss (4c)/$119.66M; sees Q1 revenue $125M-$127M vs. est. $123.06M; sees Q1 adjusted operating loss $3M-$5M
 

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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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