Morning Preview: May 25, 2018

Terrie AmengualDaily Market Report

Early Look
Friday, May 25, 2018

Stock futures are pointing to a firmer open, as markets look to rebound from losses Thursday after a week of geopolitical tensions and trade concerns. Despite the declines yesterday and the disappointment following the cancelled summit with North Korea, major U.S. averages are on track for modest gains on the week, with the Dow currently up 0.4%, the S&P 500 0.6% and nearly a 1% advance for the Nasdaq Composite this week. The S&P 500 Index and Nasdaq Composite posted modest declines on Thursday, while the Dow Industrials fell -0.3% amid concern that escalating geopolitical and trade tensions may overshadow the recent pick-up in economic growth. Energy stocks led the declines as crude-oil prices fell to the lowest levels in about 2-weeks as worries about U.S. crude inventories help to extend the U.S. benchmark’s downturn for a third straight session. Sentiment weakened after President Donald Trump canceled a planned meeting with North Korea, adding a new element of geopolitical uncertainty into the market. Expect low volumes today ahead of the three-day Memorial Day weekend, with only a few key items to watch next week with the U.S. jobs report, the last before Federal Reserve policy makers meet in June, the highlight of the week. Today markets look to Durable Goods orders for April at 8:30 AM EST and Michigan sentiment data at 10:00 AM EST, along with a few Fed speakers as well (Powell, Evans and Kaplan). In Asian markets, The Nikkei Index inched higher 13 points to settle at 22,450, the Shanghai Index dropped -13 points to settle at 3,141 and the Hang Seng Index fell -172 points to end at 30,588. In Europe, the German DAX is up over 125 points at 12,980, while the FTSE 100 is up a few points around 7,730.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -5.53 points, or 0.20%, to 2,727.76

· The Dow Jones Industrial Average fell -75.05 points, or 0.30%, to 24,811.76

· The Nasdaq Composite slipped -1.53 points, or 0.02%, to 7,424.43

· The Russell 2000 Index inched higher 0.61 points, or 0.04% to 1,628.22

 

Events Calendar for Today

· 8:30 AM EST Durable Goods Orders, Apr-P…est. (-1.3%)

· 8:30 AM EST Durable Goods Ex: transportation, Apr-P…est. 0.5%

· 10:00 AM EST University of Michigan Sentiment, May-F…est. 98.8

· 11:45 AM EST Fed’s Kaplan, Evans and Bostic speak at Dallas Fed

· 1:00 PM EST Baker Hughes Weekly Rig Count

 

World News

· Business investment in the U.K. posted its weakest quarterly growth in almost three years in the first three months of 2018 as capital expenditure by British businesses fell by 0.2% in the first three months of the year, the sharpest slowdown since the third quarter of 2015.

· German business sentiment came to a halt in May, as the Ifo business climate index came in at 102.2, unchanged from April and above economists’ forecasts of 101.9 point

 

Sector News Breakdown

Consumer

· Decker’s Outdoor (DECK) Q4 EPS 50c/$400.7M vs. est. 19c/$376.1M; sees FY adjusted EPS $6.20-$6.40 vs. est. $6.01; sees 1Q adjusted EPS loss ($1.41-$1.50) vs. est. loss ($1.30); sees 1Q net sales $225M-$235M vs. est. $213.6M

· Foot Locker (FL) Q1 EPS $1.45 vs. est. $1.25; Q1 comp sales fell (-2.8%) vs. est. (-3.6%)

· Gap Stores (GPS) Q1 EPS 42c/$3.78B vs. est. 46c/$3.61B; affirms year guidance; 1Q total comparable sales +1% vs. est. 1/5%; Q1 Old Navy comparable sales +3% vs. est. 3.1%; Q1 Gap Global comparable sales -4% and Banana Republic comparable sales +3%; still expect comparable sales for fiscal year 2018 to be flat to up slightly

· Ross Stores (ROST) Q1 EPS $1.11/$3.59B vs. est. $1.07/$3.54B; Q1 comp sales 3% vs. est. 2.6%; sees 2Q EPS 95c-99c vs. est. $1.03 and sees 2Q comparable sales +1% to +2%; sees FY EPS $3.92-$4.05 vs. est. $4.06

· Shoe Carnival (SCVL) Q1 EPS 83c/$257.4M vs. est. 71c/$263.02M; Q1 comp sales up 1.3%; raises FY18 EPS view to $1.90-$2.05 from $1.85-$2.00 (est. $1.94); cuts FY18 revenue view to $1.013B-$1.02B from $1.013B-$1.023B (est. $1.02B); raises comp sales view to up low single digits from flat to up low single digits

· Zoë’s Kitchen (ZOES) shares fell -22%; Q1 adjusted EPS loss (13c)/$102.1M vs. est. 0c/$105.21M; Q1 comp sales fell (-2.3%) vs. est. +0.3%; cuts FY18 revenue view to $345M-$352M from $358M-$368M (est. $361.7M); cuts FY18 SSS view to down 2%-4% from down 0%-2%

· ePlus (PLUS) Q4 EPS 96c/$330.43M vs. est. 99c/$353.53M

 

Energy

· Callon Petroleum Operating Company (CPE) to acquire certain producing oil and gas properties and undeveloped acreage for total consideration of $570M in cash from Cimarex Energy; Callon Petroleum files to sell 22M shares of common stock

 

Healthcare

· AstraZeneca PLC (AZN) said that a phase 3 trial of its cancer drug Imfinzi had met one of its two primary endpoints in an interim analysis of data

· BioMarin Pharmaceutical Inc. (BMRN) shares rose 4% after the FDA approved its drug Palynziq for the treatment of phenylketonuria, a hereditary disease where the body cannot break down the amino acid phenylalanine, which is present in all forms of protein and can damage the brain if levels are too high, leading to seizures or mental disorders.

· Quality Systems (QSII) Q4 EPS 16c/$135.8M vs. est. 13c/$131.95M; sees FY19 adjusted EPS 70c-78c on revs $532M-$548M vs. est. 76c/$541.99M

· Rockwell Medical (RMTI) board terminates CEO Robert Chioini

· Vertex (VRTX) was granted an orphan designation for one of its drugs as a treatment of Cystic Fibrosis, according to a post the FDA website

 

Industrials & Materials

· Johnson Controls International Plc (JCI) is drawing interest from private equity firms KKR & Co. and Apollo Global Management LLC for its power solutions business that could value the unit at as much as $12 billion, Bloomberg https://yhoo.it/2IMT20N

· A consortium led by Swiss asset manager Partners Group Holding will buy Techem from Macquarie (MQG.AX) in a deal that values the German metering company at an enterprise value of 4.6 billion euros ($5.4 billion), Partners Group said https://reut.rs/2s9P5bb

 

Technology, Media & Telecom

· Autodesk (ADSK) Q1 EPS 6c/$560M vs. est. 3c/$557.37M; sees Q2 EPS 13c-16c on revs $595M-$605M vs. est. 17c/$597.7M;

· Nutanix (NTNX) shares fell -6%; Q3 EPS loss (21c)/$289.4M vs. est. loss (19c)/$279.0M; Q3 billings of $351.2M, growing 50% YoY; sees Q4 EPS loss (20c)-(22c) on revs $295M-$300M vs. est. loss (13c)/$289.0M; said revenue view assumes the elimination of approximately $95M in pass-through hardware revenue and an increased billings-to-revenue ratio of 1.25; sees Q4 non-GAAP gross margin between 73% and 74%

· Splunk (SPLK) Q1 EPS loss (7c)/$311.6M vs. est. loss (9c)/$297.5M; sees 2Q revenue $356M-$358M vs. est. $354.8M and raises FY revenue to about $1.645B from prior $1.625B vs. est. $1.63B; Q1 gross margin +75%, vs. estimate +80.1%

· Veeva (VEEV) Q1 EPS 33c/$195.5M vs. est. 31c/$188.96M; sees Q2 EPS 33c-34c on revs $203M-$204M vs. est. 32c/$198.78M; raises FY19 EPS view to $1.36-$1.38 from $1.30-$1.33 (est. $1.32) and raises FY19 revenue view to $826M-$830M from $815M-$820M (est. $818.82M)

· Samsung Electronics Co. must pay Apple Inc. (AAPL) $539M for infringing patents related to the iPhone’s design, a federal jury found Thursday. The bulk of the new damages award, $533.3M, was for infringing three Apple design patents on the iPhone. An additional $5.3M was for infringing two utility patents

· DXC Technology (DXC) Q4 adjusted EPS $2.28/$6.294B vs. est. $2.23/$6.12B

· 8×8 (EGHT) shares fell -11%; Q4 adjusted EPS loss (3c)/$79.3M vs. est. 0c/$76.84M; sees Q1 service revenue $77M-$78M and Q1 adjusted pre-tax loss $4M-$5M; sees FY19 revenue $347M-$352M vs. est. $348.53M; sees FY19 service revenue $333M-$338M

· Lionsgate (LGF/A) Q4 EPS 25c/$1.04B vs. est. 20c/$1.04B

· ViaSat (VSAT) Q4 EPS loss (5c)/$439.7M vs. est. loss (45c)/$424.46M

· Pandora (P) said it agreed with certain holders of its existing 1.75% senior convertible notes due 2020 to exchange $192.9 million of 2020 Notes for a new series of 1.75% senior convertible notes due 2023

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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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