Morning Preview: July 26, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, July 26, 2018


Stock futures are mixed as Nasdaq futures slide following a weak revenue outlook from Facebook, while the Dow and S&P 500 futures are active given the busy day of earnings upcoming. Meanwhile German stocks jumped by the most in six weeks Thursday, leading European equity markets higher following the trade truce between the US and EU last night. European markets will also be watching the European Central Bank decision on rates, when they announce their policy decision at 7:45 AM EST (no changes are expected), and press conference from ECB President Draghi at 8:30 AM EST. In Asian markets, The Nikkei Index lost -27 points to settle at 22,586, the Shanghai Index fell -21 points to end at 2,882 and the Hang Seng Index dropped -139 points to settle at 28,781. In Europe, the German DAX is up over 170 points at 12,750, while the FTSE 100 is flat around the 7,660 level.


Stocks jumped late Wednesday, with the Nasdaq Composite closing at a new all-time high and the S&P 500 touching its best levels since January after positive developments between the US and the EU relating to trade. President Trump said late yesterday he and European Commission President Jean-Claude Juncker agreed to “to work together toward zero tariffs” and “zero subsidies” on non-auto industrial goods during meeting at the White House today. “Soybeans is a big deal” and EU to start “almost immediately to buy a lot of soybeans” from U.S. farmers, Trump said. Trump says EU wants to import more LNG from the U.S. and will be a “massive buyer.” “We had a big day,” Trump said. Up until those comments, markets had been steadily moving higher, but got the extra push it needed.


Overnight, social-networking giant Facebook shares plunged more than 20% after its quarterly revenue and average daily user figures missed estimates and noted it sees decelerating revenue in Q3 and Q4. Autos got another piece of negative news as Ford made it the “trifecta” lowering its annual profit outlook after FCAU and GM did so the day prior. Biotech shares will be active as GILD quarterly results topped views handily, but announced it CEO was stepping down, while BIIB shares fell from record highs, down over 10% after positive Alzheimer data slower progression of the disease but needs more studies. Homebuilding and product related stocks have come under pressure as well, with recent profit warnings from WHR, OC and now MHK overnight.

Market Closing Prices Yesterday

· The S&P 500 Index surged 25.67 points, or 0.91%, to 2,846.07

· The Dow Jones Industrial Average rose 172.16 points, or 0.68%, to 25,414.10

· The Nasdaq Composite spiked 91.47 points, or 1.17%, to 7,932.24

· The Russell 2000 Index advanced 5.01 points, or 0.30% to 1,685.20

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 215K

· 8:30 AM EST Continuing Claims…est. 1.733M

· 8:30 AM EST Advance Goods Trade Balance for June…est. (-$67.0B)

· 8:30 AM EST Durable Goods Orders, June-P…est. 3.0%

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

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 58.8

· 10:30 AM EST Weekly EIA Natural Gas Inventory Data…est. 25

· 11:00 AM EST Kansas City Fed Manufacturing Activity for July

Earnings Calendar:

· Earnings Before the Open: AAL, AB, AGN, AGNC, Airbus, ALK, ALLY, ALXN, APD, AZN, AXE, AXTA, BC, BMY, BUD, CELG, CFR, CMCSA, CME, COP, CRI, DDAIF, DHI, DNKN, ENTG, FCN, GNC, HSY, KIM, LAZ, LDOS, LEA, LUV, MA, MCD, MCK, MMC, MO, NEM, NSRGY, NLSN, PHM, PX, ROP, RDS/A, RTN, SAVE, SPGI, TECK, TPX, UA, WWE, XRX.

· Earnings After the Close: AFL, AJG, AMGN, AMZN, BZH, CMG, CY, DFS, EA, EIX, EW, EXPE, FBHS, FICO, FII, FLEX, HIG, IMPV, INTC, JNPR, LOGM, LPLA, LRCX, LSCC, LYV, MXIM, NATI, NCR, NOV, PFPT, PRO, RGA, RSG, SBUX, SIVB, TMST, VRSN, WDC

World News

· A man detonated an explosive device outside the U.S. Embassy in Beijing on Thursday, injuring himself but no one else, police said. The explosion happened about 1 p.m. local time just outside the embassy’s southeast corner, an embassy spokesman said

· German consumer sentiment is set to weaken slightly in August as GfK’s forward-looking consumer confidence index is set to decline to 10.6 points in August from 10.7 points in July

Sector News Breakdown

Consumer

· Ford Motor (F) Q2 adjusted EPS 27c/$35.9B vs. est. 31c/$35.8B; cuts FY adjusted EPS outlook to $1.30-$1.50, from $1.45-$1.70 (below est. $1.51) saying outside of North America, it was a “particularly challenging” quarter for Asia Pacific and Europe; in Asia Pacific, Ford now focused on China and taking urgent action to address underperformance; says redesigning global business model to enhance competitiveness and improve returns; potential restructuring-related EBIT charges of $11B, with cash-related effects of $7B, over the next 3-5 years

· Allegiant Travel (ALGT) Q2 EPS $3.10/$436.8M vs. est. $2.71/$438.34M; sees FY18 EPS $9-$10 vs. est. $10.49; 2018 EPS is expected to be between $9 and $10 per share due to the expected higher fuel cost

· Ethan Allen (ETH) Q4 EPS 43c/$205.6M vs. est. 39c/$200.05M; 4Q adjusted operating margin +7.9%

· Imax (IMAX) Q2 EPS 30c/$98.3M vs. est. 26c/$98.5M; 2Q gross box office from IMAX DMR titles $342.6 million

· Interface (TILE) Q2 EPS 42c/$283.6M vs. est. 42c/$274.5M; continues to expect its strongest operating income growth in the Q2 and Q3 2018, with softer growth in Q1 and Q4

· Las Vegas Sands (LVS) Q2 EPS 74c/$3.30B vs. est. 79c/$3.28B; Q2 Sands China revenue up 18% to $2.11B compared to $1.79B in Q2 of 2017; net income for Sands China increased 30% to $427M; in Macao, adjusted property EBITDA Increased 25% to $750M

· Mattel (MAT) Q2 EPS loss (56c)/$841M vs. est. (30c)/$847.82M; company plans to cut over 2,200 positions, representing 22% of global non-manufacturing workforce, and announces planned sale of manufacturing sites in Mexico; 2Q reported gross margin fell to 30.1% from 41% y/y due to higher materials costs

· Mohawk (MHK) shares fell -13%; Q2 EPS $3.51/$2.58B vs. est. $3.90/$2.59B; sees Q3 EPS ex-items $3.54-$3.64 vs. consensus $4.29

· Mondelez (MDLZ) Q2 EPS 56c/$6.11B vs. est. 54c/$6.12B; raised its FY18 outlook for organic net revenue growth to the high end of the previous range of 1%-2%; maintained its outlook for adjusted operating income margin of approximately 17% and double-digit adjusted EPS growth on a constant-currency basis

· Sleep Number (SNBR) Q2 EPS 10c/$316.3M vs. est. 0c/$314.8M; said comparable sales up 9%, noting that the prior year’s second quarter sales were impacted by an inventory shortage which shifted approximately $25M to the third quarter; backs FY18 EPS view of $1.70-$2.00 vs. est. $1.81

· Spirit Airlines (SAVE) Q2 EPS $1.11/$851.77M vs. est. $1.09/$853.27M; Total revenue per available seat mile, or TRASM, for Q2 decreased 6.8% compared to the same period last year

Energy

· Saudi Arabia is suspending oil shipments through the Red Sea following an attack from Yemen on two of its giant crude carriers, the country’s energy minister said on Wednesday.

· Core Labs (CLB) Q2 EPS 59c/$175.5M vs. est. 59c/$174.8M; sees Q3 EPS 64c-66c vs. est. 65c and revs $177M-$179M vs. est. $178.5M

· Ensco (ESV) Q2 EPS loss (33c)/$459M vs. est. loss (31c)/$447.61M

· QEP Resources (QEP) Q2 EPS 6c/$532.4M vs. est. loss (12c)/$441.02M; said will continue to focus on balancing capital investments with cash flow and will be allocating the vast majority of capital to the Permian Basin. We expect to put approximately 31 wells on production in the Permian Basin in the second half of 2018

· Royal Dutch Shell (RDS/A) to launch $25 billion share buyback program

· TechnipFMC (FTI) Q2 EPS 28c/$2.96B vs. est. 39c/$3.19B

Financials

· Visa (V) Q3 adjusted EPS $1.20/$5.2B vs. est. $1.09/$5.09B; Q3 payments volume growth 11%, reports Q3 cross-border volume growth 10% and reports Q3 processed transactions growth 12%; backs FY18 revenue growth view of low-double digits on nominal basis; sees year adjusted EPS growth of “low 30’s”, saw “high-20’s” growth prior vs. estimate up 29.3%

· PayPal (PYPL) Q2 adjusted EPS 58c/$3.86B vs. est. 57c/$3.81B; Q2 operating margin 21.3% vs. 21.0% last year; Q2 total payment volume $139B, up 29% from last year; Q2 payment transactions 2.3B, up 28% from last year and Q2 35.7 payment transactions per account on a trailing 12-month basis, up 9% from last year; announces $10B stock repurchase authorization

· AGNC Investment (AGNC) reports Q2 non-GAAP EPS 63c vs. est. 61c; reports Q2 NII $177M, consensus $275.12M. Tangible net book value per common share was $18.41 per share

· Equifax (EFX) Q2 EPS $1.56/$876.9M vs. est. $1.54/$886.11M; sees Q3 adjusted EPS $1.39-$1.44 on revs $853M-$863M vs. est. $1.50/$872.77M

· DDR Corp. (DDR) Q2 FFO 49c/$204.3M vs. est. 47c/$199.83M

· Regions Financial (RF) raises quarterly dividend 56% to 14c per share

Healthcare

· Biogen (BIIB) shares fell -9% (from 52-week highs) after an experimental Alzheimer’s disease drug from the company and Eisai Co. slowed the progression of the earliest stages of the condition by 30% percent in a study, a first in the decades-long research. However, while the results were encouraging, more information was needed from larger, longer studies – also noting that only the highest of the five doses worked. And while the percentage benefit exceeded analysts’ expectations, the new data was for patients treated for 18 months rather than the 12 months many had anticipated

· Gilead Sciences (GILD) announced that John F. Milligan, PhD, will step down as President and Chief Executive Officer after a 28-year career with the company; Q2 adjusted EPS $1.91/$5.65B well above the $1.56/$5.21B est.; reports Q2 product sales $5.54B; backs FY18 net product sales view of $20B-$21B and cuts FY18 adjusted effective tax rate view to 19%-21% from 21%-23%.

· Roche Holding AG (RHHBY) raised its outlook for the year again after its first-half sales and after-tax profit grew; 1H IFRS after-tax profit grew to 7.5 billion Swiss francs ($7.6 billion) from CHF5.6 billion in 2017; 1H sales grew to CHF28.1 billion from CHF26.3 billion

· Vertex (VRTX) Q2 adjusted EPS 94c/$750M vs. est. 75c/$680.98M; raises FY18 revenue to $2.9B-$3.0B from $2.65B-$2.80B vs. est. $2.81B; 2Q Orkambi revenue $311 million and 2Q Kalydeco revenue $253M; reiterates full-year 2018 combined non-GAAP R&D and SG&A expense guide

· Universal Health (UHS) Q2 adjusted EPS $2.47/$2.68B vs. est. $2.39/$2.72B

· Align Technology (ALGN) Q2 EPS $1.30/$490.3M vs. est. $1.09/$471.88M; sees Q3 EPS $1.13-$1.18 on revs $493M-$503M vs. est. $1.19/$500.42M; says it has received Certificate of Medical Device Registration and Certificate of Production from the China Food and Drug Administration to manufacture the iTero scanner

· Anika Therapeutics (ANIK) Q2 EPS 68c/$30.55M vs. est. 33c/$27.9M; still sees product revenue flat for FY18, revises licensing revenue view

· Chiasma (CHMA) announced it has successfully enrolled 135 acromegaly patients into the six-month run-in phase of its international Phase 3 clinical trial referred to as MPOWERED

· Icon (ICLR) Q2 EPS $1.54/$641.6M vs. est. $1.48/$632.69M; said excluding the impact of ASC 606, net business wins in Q2 of $600M; a book to bill of 1.27; excluding the impact of ASC 606, closing backlog of $5.2B, an increase of 16% year on year

· Nabriva Therapeutics (NBRV) files to sell $50M of ordinary shares

· Varian Medical (VAR) Q3 EPS $1.04/$709M vs. est. 99c/$664.42M; sees FY18 adjusted EPS $4.43-$4.48 vs. est. $4.48 and sees FY18 revenue growth 9%-11%

Industrials & Materials

· Arconic Inc. (ARNC) is weighing takeover approaches from at least two private-equity groups, according to people familiar with the matter, in what would be one of the biggest recent leveraged buyouts. Blackstone and Carlyle Group made a joint approach, while Apollo Global Management LLC also expressed interest, WSJ reported https://on.mktw.net/2OdAtBI

· Agnico Eagle (AEM) Q2 adjusted EPS 2c/$556.3M vs. est. 8c/$544.45M. Payable gold production in Q2 was 404,961 ounces at production costs per ounce of $750, total cash costs per ounce of $656 and all-in sustaining costs per ounce of $921

· Barrick Gold (ABX) Q2 EPS loss (7c)/$1.71B vs. est. 12c/$1.82B; gold production in Q2 was 1.07M ounces, at a cost of sales applicable to gold of $882 per ounce, all-in sustaining costs4 of $856 per ounce, and cash costs of $605 per ounce

· Axalta Coating (AXTA) has appointed Terrence Hahn as CEO, effective September 4, succeeding Charlie Shaver, who served as Axalta’s Chairman and CEO since 2013; lowers FY18 revenue growth view to 8%-9% from 9%-10% while still sees Adjusted EBITDA of $950M-980M; Q2 EPS 36c/$1.21B vs. est. 35c/$1.23B

· Covenant Transportation (CVTI) Q2 EPS 54c/$196.3M vs. est. 52c/$199.25M

· Echo Global (ECHO) Q2 EPS 46c/$634.8M vs. est. 39c/$611.29M

· Forward Air (FWRD) Q2 EPS 82c/$330.3M vs. est. 76c/$314.1M; Q2 tonnage 668.1K lb., up 8.6% from last year and Q2 revenue per shipment $158, up 9.7% from last year

· Graco (GGG) Q2 EPS 48c/$424.6M vs. est. 50c/$422.17M; backs FY18 organic sales growth view of mid-to-high single digit

· Kraton (KRA) Q2 adjusted EPS 88c/$538.4M vs. est. $1.00/$544.78M

· Knight-Swift (KNX) Q2 EPS 56c/$1.33B vs. est. 57c/$1.33B

· Landstar System (LSTR) Q2 EPS $1.51/$1.18B vs. est. $1.53/$1.16B

Technology, Media & Telecom

· Facebook (FB) shares fell -23% on rev miss and lower rev outlook; Q2 EPS $1.74/$13.23B vs. est. $1.72/$13.36B; Q2 daily active users (DAUs) up 11% to 1.47B vs. est. 1.48B, monthly active users (MAUs) up 11% to 2.23M vs. est. 2.25M; mobile advertising revenue represented approximately 91% of advertising revenue for Q2, up from approximately 87% of advertising revenue YoY; said sees revenue decelerating in Q3, Q4

· Qualcomm (QCOM) CEO says will terminate NXP (NXPI) deal pending any new developments. “We intend to terminate our purchase agreement to acquire NXP when the agreement expires at the end of the day today, pending any new material developments; Q3 adjusted EPS $1.01/$5.6B vs. est. 71c/$5.19B; sees Q4 adjusted EPS 75c-85c on revs $5.1B-$5.9B vs. est. 76c/$5.44B; said to buy back up to $30B in stock

· Advanced Micro (AMD) shares jump 6%; Q2 EPS 14c/$1.76B vs. est. 13c/$1.72B; sees Q3 revenue $1.7B, plus or minus $50M vs. est. $1.76B; sees Q3 non-GAAP gross margin to increase to approximately 38%, driven by the sales growth of Ryzen and EPYC products, partially offset by lower sales of GPU products in the blockchain market

· Citrix (CTXS) Q2 EPS $1.28/$742.37M vs. est. $1.20/$717.16M; sees Q3 EPS $1.23-$1.26 on revs of $715M-$725M vs. est. $1.22/$710.3M

· F5 Networks (FFIV) Q3 EPS $2.44/$542.2M vs. est. $2.39/$540.57M; sees Q4 EPS $2.61-$2.64 on revs $555M-$565M vs. est. $2.59/$558.58M

· Monolithic Power (MPWR) Q2 EPS 90c/$139.8M vs. est. 90c/$139.45M; sees Q3 revenue $155.5M-$161.5M vs. est. $153.74M; sees Q3 GAAP gross margin 55.2%-56.2% and Q3 non-GAAP gross margin 55.6%-56.6%

· ServiceNow (NOW) Q2 adjusted EPS 49c/$631.1M vs. est. 43c/$618.44M; subscription revenues of $585.3M, representing 45% year-over-year growth; sees Q3 subscription revenue $610M-$615M, up 36-37% from last year

· Xilinx (XLNX) Q1 EPS 64c/$684M vs. est. $673.97M; sees Q2 revenue $700M-$720M vs. est. $679.75M; sees FY19 revenue $2.8B-$2.9B vs. est. $2.75B

 

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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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