Morning Preview: February 9, 2018

Scott GreenDaily Market Report

Early Look
Friday, February 9, 18
  
Stock futures are mixed, trying to rebound after posting another tumultuous decline yesterday that saw the Dow Industrials decline over 4% (and now down nearly 9% for February) as markets are on track for their worst weekly declines in years. Driven by volatility worries and inflation concerns, the Dow is down 6.5% as of Thursday’s close, while the S&P 500 is down 6.6% for the week, as of Thursday’s close. The CBOE Volatility Index (VIX) soared 24% to 34.48 on Thursday (had touched highs above 50 mid-week before pulling back) after the stock rout. Stocks did get a boost overnight after the government avoided a shutdown early Friday, helping lift futures initially…but has since pulled back from highs as the Dow turns negative. Asia got crushed overnight, while Europe is currently trading lower as well.
 
The House of Representatives voted early Friday for a two-year budget deal that raises both defense and domestic spending by hundreds of billions of dollars, approving a package that would also reopen the federal government after it shut down just past midnight. The House followed the Senate in approving the sweeping bill, which would also suspend the debt limit through March 1, 2019. President Donald Trump needs to sign it to reopen the government. The Senate voted 71 to 28 to approve the measure and send it to the House, where it passed 240 to 186
 
Dow Jones Industrial Average marked its second-worst point decline in history (the biggest was this past Monday) as the stock market continued lower, pushing the blue-chip gauge and the S&P 500 into correction territory. The S&P 500 Index. Down industrials and Dow Transports, with yesterday’s declines, are now more than 10% from their record closing levels (considered correction territory). Worries about inflation, rising rates weighed on the market’s psyche as bond yields bounced around. Prices for WTI crude fell for a 5th straight session, falling along with the plunge in U.S. stocks.
 
In Asian markets, The Nikkei Index dropped -508 points (2.32%) to settle at 21,382, the Shanghai Index dropped -132 points or over 4% to close at 3,129 and the Hang Seng Index plunged -943 points (3.1%) to close at 29,507. In Europe, the German DAX adds to its recent decline, falling over -60 points to 12,200 (has dropped over 10% from its record highs), while the FTSE 100 is down around -20 points at 7,150
 
Market Closing Prices Yesterday
·      The S&P 500 Index dropped -100.66 points, or 3.75%, to 2,581.00
·      The Dow Jones Industrial Average fell -1,032.89 points, or 4.15%, to 23,860.46
·      The Nasdaq Composite plunged -274.82 points, or 3.90%, to 6,777.16
·      The Russell 2000 Index declined -44.18 points, or 2.93% to 1,463.79
 
Events Calendar for Today
·      10:00 AM EST     Wholesale Inventories MoM for December
·      1:00 PM EST        Baker Hughes Weekly Rig Count
   
Sector News Breakdown
Consumer
·      Expedia (EXPE) shares fell -17%; Q4 adjusted EPS 84c/$2.32B vs. est. $1.15/$2.36B; Q4 room night growth down 757 bps and reports Q4 gross bookings up 14% y/y; Q4 adjusted EBITDA down 9% y/y and reports Q4 adjusted net income down 28% y/y; free cash flow down 90% y/y
·      Beacon Roofing (BECN) Q1 EPS 68c/$1.12B vs. est. 55c/$1.10B
·      Barnes & Noble Education (BNED) announced an expanded relationship with McGraw-Hill Education, which will provide students, faculty and institutions with greater access to more affordable course materials
·      Bright Horizons (BFAM) Q4 EPS 73c/$440M vs. est. 69c/$438.99M; adjusted EBITDA increased 7% to $82M; sees FY18 adjusted EPS $3.12-$3.16 vs. est. $3.02 and sees FY18 revenue growth 8%-10%
·      Columbia Sportswear (COLM) Q4 EPS $1.31/$776.0M vs. est. $1.15/$761.69M; Q4 gross margin of 47.9%, compared to 47.1% in the prior year; raises quarterly dividend 16% to 22c per share; sees FY18 EPS $3.17-$3.27 vs. est. $3.12 and sees FY18 revenue growth of 4%-6%
·      Knoll (KNL) Q4 EPS 36c/$316.1M vs. est. 42c/$302.07M; Q4 gross margin 35.5%
·      MCBC Holdings (MCFT) Q2 EPS 43c/$78.4M vs. est. 33c/$74.63M
·      Mohawk (MHK) Q4 adjusted EPS $3.42/$2.37B vs. est. $3.32/$2.37B; sees Q1 EPS $2.93-$3.02, vs. consensus $2.95; said anticipate opportunities to enhance their product innovation and marketing strategies, lower their costs by supplying raw materials and increase their sales of hard surface products
·      Skechers (SKX) Q4 adjusted EPS 21c/$970.6M vs. est. 13c/$881.39M; sees Q1 EPS 70c-75c, on revenue $1.175B-$1.2B vs. est. 79c/$1.23B; authorizes up to $150M share buyback program
·      Urban Outfitters (URBN) Q4 revenue $1.09B vs. est. $1.08B; said comparable retail segment net sales increased 4%, driven by strong, double-digit growth in the direct-to-consumer channel, partially offset by negative retail store sales
·      United Continental (UAL) reports January consolidated traffic up 1.8% and consolidated capacity increased 3.3% versus January 2017. UAL’s January 2018 consolidated load factor decreased 1.2% compared to January 2017; still expects Q1 passenger unit revenue flat-up 2%
 
Energy
·      South Carolina Senate delays vote on bill to push back Scana (SCG) merger; measure Thursday pushed back the vote until at least next week, according to Senate journal. The pending joint resolution would prohibit an order on the merger by the state public service commission until 90 days after general assembly adjourns 2018 session
 
Financials
·      AIG Corp. (AIG) Q4 EPS 57c vs. est. 71c; said net loss of $6.7B included charge related to the Tax Act; Q4 reflected net prior year adverse loss reserve development of 1.4 points, driven by short-tail international commercial lines; general insurance loss ratio 78.3 vs 146.7 y/y
·      Ellie Mae (ELLI) Q4 EPS 33c/$112.9M vs. est. 25c/$108.16M; sees Q1 adjusted EPS 7c-9c, on revenue $107M-$109M vs. est. 22c/$109.14M; sees FY18 adjusted EPS $1.68-$1.78 vs. est. $1.63 and sees FY18 revenue $495M-$505M vs. est. $491.28M
·      Franklin Resources, Inc. (BEN) preliminary month-end assets under management of $770.8 billion at January 31, 2018, compared to $753.8 billion at December 31, 2017. The increase in assets under management was due to strong market gains that more than offset net outflows.
·      Cohen & Steers, Inc. (CNS) preliminary assets under management of $61.3 billion as of January 31, 2018, a decrease of $825 million from December 31, 2017. The decrease was due to market depreciation of $612 million and distributions of $279 million, partially offset by net inflows
·      FleetCor (FLT) Q4 EPS $2.42/$610M vs. est. $2.33/$604.89M; sees 2018 adjusted EPS $10.05-$10.35 on revs $2.49B-$2.55B vs. es.t $10.16/$2.54B
·      Hartford Financial (HIG) Q4 core EPS 81c/$4.54B vs. est. 77c/$4.6B
·      Regency Centers (REG) Q4 FFO 92c (in-line); sees FY core FFO per share $3.48-$3.54 vs. est. $3.81
 
Healthcare
·      Bruker (BRKR) Q4 non-GAAP EPS 51c/$530.5M vs. est. 49c/$503.95M; sees FY18 non-GAAP EPS $1.34-$1.38 vs. est. $1.34; sees FY18 revenue growth 7%, including organic revenue growth of approximately 3%
·      Ensign Group (ENSG) Q4 EPS 40c/$487.7M vs. est. 40c/455.16M; raises FY18 EPS view to $1.80-$1.87 (est. $1.72) due to tax benefits
·      Hologic (HOLX) Q1 EPS 55c/$791.1M vs. est. 52c/$785.93M; raises FY8 non-GAAP EPS view to $2.22-$2.27 from $2.10-$2.15 (est. $2.20) and backs FY18 revenue view $3.2B-$3.28B
·      Mettler-Toledo (MTD) Q4 adjusted EPS $5.97/$778M vs. est. $5.93/$764.07M; raises FY18 adjusted EPS view to $19.95-$20.15 from $19.65-$19.85 (est. $19.87); anticipates local currency sales growth in 2018 will be approximately 6%, consensus $2.89B
·      QIAGEN N.V. (QGEN) announced that Japan’s Ministry of Health Labor and Welfare has approved QuantiFERON-TB Gold Plus as an in vitro diagnostic to detect tuberculosis infection
·      REGENXBIO (RGNX) announced it has completed dosing of the third cohort of six patients in a Phase I clinical trial evaluating RGX-314 for the treatment of patients suffering from wet age-related macular degeneration
 
Industrials & Materials
·      FedEx (FDX) and UPS Inc (UPS) under pressure after the WSJ reportedAmazon.com Inc. (AMZN) is preparing to launch a delivery service for businesses, positioning it to directly compete with the package delivery giantshttps://goo.gl/WFcH3d
·      Fortive (FTV) Q4 EPS 95c/$1.8B vs. est. 78c/$1.77B; sees adjusted Q1 EPS 72c-76c vs. est. 71c; sees adjusted FY18 EPS $3.35-$3.45 vs. est. $3.28
·      Manitowoc (MTW) Q4 adjusted EPS loss (15c)/$481.5M vs. est. loss (5c)/$422.82M; sees FY18 adjusted EBITDA $96M-$116M and sees FY18 CapEx $25M-$30M
·      Republic Services (RSG) Q4 EPS 61c/$2.56B vs. est. 57c/$2.52B; sees FY18 adjusted EPS $3.05-$3.10 vs. est. $2.87 and sees FY18 revenue growth 4%-5%
·      S&W Seed (SANW) sees FY18 revenue at low end of previous $75M-$80M guidance (est. $76.03M) and sees FY18 adjusted EBITDA at lower end of previous guidance of $4.0M-$5.5M
·      Wesco Aircraft (WAIR) Q1 EPS 15c/$363.1M vs. est. 13c/$346.8M; Sees a low single-digit percentage increase in net sales year-over-year in fiscal 2018 and sees a low double-digit percentage increase in adjusted EBITDA year-over-year in fiscal 2018
·      Woodward (WWD) said late day it is “not in discussions with Boeing over a possible acquisition”. There are various articles originating from a Wall Street Journal article stating, “Boeing Co. is in talks to buy aerospace parts maker Woodward Inc., according to people familiar with the matter.” This rumor is incorrect. Woodward is not in discussions with Boeing over a possible acquisition of Woodward, and will not provide any further comment on this story
 
Media & Telecom:
·      Lions Gate (LGF/A) Q3 EPS 48c on revenue $1.14B vs. est. 43c/$1.08B; 3Q backlog $1.2 billion, 3Q adjusted Oibda $177.6 million
·      News Corp (NWSA) Q2 adjusted EPS 24c/$2.18B vs. est. 19c/$2.13B; Q2 Total Segment EBITDA of $329 million, a 1% increase compared to $325 million in the prior year
 
Technology, Media & Telecom
·      Qualcomm (QCOM) announced that its Board of Directors has unanimously rejected the revised non-binding, unsolicited proposal by Broadcom (AVGO) to acquire all of the outstanding shares of Qualcomm for $82.00 per share ($60.00 in cash and $22.00 in Broadcom stock), which Broadcom announced on February 5, 2018
·      Nvidia (NVDA) Q4 EPS $1.72/$2.91B vs. est. $1.29/$2.68B; sees returning $1.25B to shareholders in FY19; sees Q1 revenue $2.9B plus or minus 2% vs. est. $2.47B; sees Q1 GAAP and non-GAAP gross margins to be 62.7% and 63.0%, respectively, plus or minus 50 bps
·      Activision Blizzard (ATVI) Q4 EPS 94c/$2.04B vs. est. 93c/$2.55B; Q4 net bookings were an all-quarter record $2.64B and net bookings from digital channels were an all-quarter record $1.62B; sees Q1 adjusted EPS 65c on revs $1.82B vs. est. 43c/$1.43B; raises CY18 EPS view to $2.50 from $2.08 (est. $2.57) and raises CY18 revenue view to $7.45B from $6.68B (est. $7.41B)
·      DXC Technology (DXC) Q3 EPS $2.15/$6.19B vs. est. $1.98/$6.18B
·      FireEye (FEYE) shares rose 11%; Q4 adjusted EPS 1c/$202.3M vs. est. loss (1c)/$193.62M; sees Q1 adjusted EPS loss (6c)-(3c) on revs $192M-$197M vs. est. loss (5c)/$186.74M; sees FY18 revenue $815M-$825M vs. est. $799.31M; Q4 billings $242.2M above view $210M-$230M
·      Hortonworks (HDP) Q4 adjusted EPS loss (24c)/$75M vs., es.t loss (24c)/$70.46M
·      Imperva (IMPV) Q4 adjusted EPS 40c/$91.1M vs. est. 27c/$91.14M
·      Monolithic Power (MPWR) Q4 EPS 82c/$129.4M vs. est. 80c/$126.13M; sees Q1 revenue $122M-$128M vs. est. $122.5M and sees Q1 GAAP gross margin between 54.8% and 55.8% and non-GAAP gross margin between 55.3% and 56.3%; raises dividend to 30c from 20c
·      NCR Corp. (NCR) Q4 EPS 92c/$1.78B vs. est. 87c/$1.75B; announces plans for $300M in share repurchases in 2018; sees 1Q adjusted EPS 41c-47c vs. est. 56c; sees FY adjusted EPS $3.30-$3.45, vs. estimate $3.34
·      Nuance (NUAN) Q1 EPS 27c/$501.6M vs. est. 26c/$505.87M; 1Q net new bookings $418.4M; expects to deliver annual net new bookings growth of between 5%-7%; raises organic revenue growth in fiscal year 2018 to be in range 3%-5%, up from 2%-4% previously
·      Paylocity (PCTY) Q2 EPS 16c/$86.0M vs. est. 12c/$85.0M; sees Q3 EPS 45c-47c on revs $110M-$111M vs. est. 46c/$110.5M
·      Trimble (TRMB) Q4 adjusted EPS 39c/$708.4M vs. est. 37c/$674.84M; sees Q1 adjusted EPS 36c-40c on revs $700M-$730M vs. est. 39c/$696.6M
·      Unisys (UIS) Q4 EPS $1.75/$747M vs. est. 73c/$704M
·      VeriSign (VRSN) Q4 adjusted EPS 96c/$296M vs. est. 97c/$294.95M; 4Q new domain name registrations processed 9.0 million; approved added share repurchases of about $586M
·      Web.com (WEB) Q4 EPS 62c/$191.1M vs. est. 76c/$190.7M; total net subscribers were approximately 3,411,000 at the end of the Q4’17, down approximately 49,000 from the end of the Q3’17
·      Zillow (ZG) Q4 EPS 19c/$282.3M vs. est. 19c/$277.52M; said more than 151M average monthly unique users visited Zillow Group brands’ mobile apps and websites during Q4 up 8% YoY; sees Q1 revenue, consensus $291M-$296M vs. consensus $298.18M
 

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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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