Morning Preview: July 31, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, July 31, 2018

U.S. stock futures are pointing to a slightly lower open, as major averages look to snap their recent losing streak on this final day of trading for July. With one session left in July, the Dow is up 4.3% for the month, while the S&P and Nasdaq have tacked on 3.1% and 1.6%, respectively. Stocks ended lower Monday, with the S&P 500 and the Nasdaq Composite logging a three-day losing streak as tech shares continued to decline. It has been corporate earnings and disappointing guidance from some of the big tech companies that has weighed on markets the last few sessions, but as the earnings barrage continues, investors may turn part of their attention to central banks, as the Fed kicks off its 2-day meeting today with results released tomorrow afternoon (though no rate hike is expected).

According to Bespoke, February 2002 was the last time we saw the Nasdaq 100 drop 1%+ 3 days in a row while the S&P 500 didn’t drop 1%+ on any of those days. That achievement was reached last night as tech extended its weakness. Declines were led by Internet and social media stocks as FB, NFLX, and TWTR all add to recent earnings-related losses. The NASDAQ also dropped below its 50-day moving average support of 7,650 (lows 7,604) ahead of AAPL earnings results Tuesday night.

In Asian markets, The Bank of Japan kept its ultra-easy monetary policy in place in a bid to stimulate inflation, which the central bank acknowledged will likely fall short of its 2% goal until at least 2021.The Nikkei Index inched higher 8 points to close at 22,553, the Shanghai Index rose 7-points to settle at 2,876 and the Hang Seng Index lost -150 points to settle at 28,583. In Europe, the German DAX is little changed around 12,800, while the FTSE 100 is up about 20 points at 7,720. Also today, June readings on personal incomes, consumer spending and core inflation are due at 8:30 AM, followed by July release on business conditions in the Chicago area at 9:45 AM and a May reading for consumer confidence at 10:00 AM EST.

Market Closing Prices Yesterday

· The S&P 500 Index slumped -16.22 points, or 0.58%, to 2,802.60

· The Dow Jones Industrial Average fell -144.23 points, or 0.57%, to 25,306.83

· The Nasdaq Composite plunged -107.42 points, or 1.39%, to 7,630.00

· The Russell 2000 Index declined -10.21 points, or 0.61% to 1,653.13

Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:30 AM EST Employment Cost Index (ECI) for Q2…est. 0.7%

· 8:30 AM EST PCE Core YoY for June…est. 2%

· 8:30 AM EST Personal Income…est. 0.4%

· 8:30 AM EST Personal Spending for June…est. 0.4%

· 8:30 AM EST PCE Deflator MoM for June…est. 0.1%

· 8:30 AM EST PCE Core MoM for June…est. 0.1%

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 9:00 AM EST S&P CoreLogic’s 20-city Index for May

· 9:45 AM EST Chicago PMI for July…est. 62.0

· 10:00 AM EST Consumer Confidence for July…est. 126.0

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: ADM, ALSN, AME, AMT, APTV, ARCH, ARNC, BP, CHTR, CMI, COMM, CS, ETN, FIS, HRS, HUN, I, IGT, MAS, OSK, PFE, PG, RL, SABR, SNY, SHPG, SHOP, VMC, VNTR, WCG, XYL

· Earnings After the Close: AAPL, ACGL, AKAM, BAND, BXP, CAKE, CHRW, CLS, DOX, DVN, EVTC, FISV, FTR, GLUU, GNW, H, HOLX, MB, MKL, MOBL, MRCY, MTSI, NANO, NBIX, NFX, NUVA, P, PAYC, QLYS, SEND, SIMO, SMG, TX, UIS, ULTI, VRSK, WNC, ZEN

World News

· The Bank of Japan bucked market expectations and kept its ultra-easy monetary policy in place in a bid to stimulate inflation, which the central bank acknowledged will likely fall short of its 2% goal until at least 2021.

· Eurozone GDP increased at an annualized rate of 1.4% in the second quarter, down from 1.5% in the first. In the U.S., growth according to the same measure was 4.1%.

· Industrial output in Japan contracted at the sharpest pace in five months in June as production of machinery fell, but a government forecast projects a rebound for July and August. Industrial output fell 2.1% in June from a month earlier, following May’s 0.2% fall

· China’s manufacturing sector grew at the slowest pace in more than a year in July, according to official figures that point to a drop-in orders and employment continued to fall. China’s official nonmanufacturing purchasing managers index fell to 54.0 in July from 55.0.

· The official China July manufacturing PMI, also released on Tuesday, fell to a five-month low of 51.2 in July at 51.5 in June.

· North Korea has constructed two new buildings at a missile facility in the northern suburbs of Pyongyang and appears to be actively continuing production there, according to an analysis of newly available commercial satellite imagery

Sector News Breakdown

Consumer

· Chipotle (CMG) has shut down a restaurant in Powell, Ohio following multiple reports of sickness by customers, Bloomberg reported, citing comments by the company spokesperson. Several customers reported symptoms that included vomiting, nausea, and fever

· Chegg (CHGG) Q2 EPS 12c/$74.2M vs. est. 8c/$70.28M; sees FY18 revenue $306M-$311M vs. est. $303.84M; sees FY18 gross margin 73%-75% and adjusted EBITDA $79M-$81M

· Del Frisco’s (DFRG) announces $75M common stock offering

· Denny’s (DENN) Q2 EPS 18c/$157.3M vs. est. 17c/$160.7M; 2Q company restaurant comparable sales -0.1%, vs. estimate +0.7%; reiterates annual guidance for same-store sales growth, adjusted Ebitda and adjusted free cash flow; lowers FY18 revenue view to $626M-$634M from $634M-$642M

· Heidrick & Struggles (HSII) Q2 EPS 59c/$183.1M vs. est. 45c/$164.31M; sees Q3 revenue $170M-$180M vs. consensus $166.1M

· J & J Snack Foods (JJSF) Q3 EPS $1.39/$306.2M vs. est. $1.51/$312.54M

· Knoll (KNL) Q2 EPS 42c/$323.4M vs. est. 38c/$307.7M; 2Q gross margin +36.9%,

· Nautilus (NLS) Q2 EPS 3c/$75.5M vs. est. 4c/$78.67M; raises FY18 revenue view to $431M-$440M, vs. consensus $431.17M and are reiterating operating income to be in the range of $42 million to $45 million

· Nutrisystem (NTRI) Q2 EPS 87c/$191.3M vs. est. 81c/$189.06M; sees Q3 EPS 50c-55c on revs $162M-$167M vs. est. 59c/$163.39M; raises FY18 EPS view to $2.07-$2.17 from $2.04-$2.14

· Rent-A-Center (RCII) Q2 EPS 47c/$655.7M vs. est. 20c/$642.12M; generated adjusted EBITDA of $61.1M vs. $28.9M last year; adjusted EBITDA as a percent of revenue increased 500 basis points versus the second quarter of last year; Q2 comp sales 3.7% vs. est.2.8%

· Service Corp. (SCI) Q2 EPS 44c/$796.1M vs. est. 43c/$789.04M; sees FY EPS $1.72-$1.90 vs. est. $1.82

· Texas Roadhouse (TXRH) Q2 EPS 62c/$629.2M vs. est. 67c/$634.86M; Q2 comparable restaurant sales Increased 5.7% at company restaurants and 3.9% at domestic franchise restaurants

· Trex Company (TREX) Q2 EPS 73c/$207M vs. est. 65c/$190.75M; sees Q3 revenue $173M vs. est. $155.94M

· TrueBlue (TBI) Q2 EPS 57c/$614.3M vs. est. 49c/$582.5M; sees Q3 EPS 75c-81c on revs $662M-$677M vs. est. 75c/$669.25M; CEO Steven Cooper to step down and become Executive Chairman

· Tesla (TSLA) names Dave Morton Chief Accounting Officer; Morton joins the company from Seagate Technology (STX)

Energy

· Advanced Energy (AEIS) Q2 EPS $1.25/$196.0M vs. est. $1.35/$199.66M; sees Q3 EPS 93c-$1.07 on revs $160M-$170M vs. est. $1.24/$189.99M

· SunPower (SPWR) Q2 EPS loss (1c)/$447.2M vs. est. loss (29c)/$409.7M; sees 3Q adjusted gross margin +6% to +8%; sees 3Q adjusted revs $450M-$500M vs. est. $555.4M; sees full-year Adj. Ebitda $95M-$125M up from prior $75M-$125M

· Transocean (RIG) Q2 EPS loss (4c)/$790M vs. est. loss (17c)/$766.09M; 2Q revenue efficiency 97.4% and 2Q rig utilization 57%

Financials

· OneMain Holdings (OMF) Q2 adjusted EPS $1.18 vs. est. $1.14

· Stifel Financial (SF) Q2 EPS $1.24/$742.73M vs. est. $1.15/$745.62M; said the growth in higher margin businesses such as our bank helped to drive our quarterly compensation ratio to its lowest level in more than seven years

· Unum Group (UNM) Q2 EPS $1.30/$2.89B vs. est. $1.26/$2.9B; backs Fy18 after-tax adjusted ops income growth view 17%-23%; 2Q book value per share $43.20

Healthcare

· Acadia Healthcare (ACHC) shares fall -9%; Q2 EPS 70c/$765.7M vs. est. 70c/$767.88M; cuts FY18 adj. EPS view to $2.52-$2.56 from $2.58-$2.62 (est. $2.59) and cuts FY18 revenue view to $3.02B-$3.06B from $3.04B-$3.08B (est. $3.06B)

· Athenahealth (ATHN) Q2 EPS $1.09/$323.3M vs. est. 91c/$333.24M; Sees FY revenue $1.34B-$1.37B vs. est. $1.35B; 2Q bookings $74.9 million

· Castlight Health (CSLT) Q2 EPS loss (5c)/$37.8M vs. est. loss (5c)/$36.8M; Q2 adjusted gross margin +62.2% below Bloomberg est. 65%; 2Q cash and cash equivalents $44.6 million; sees cutting operating expenses by 10 to 15%, which will position co. to break even starting in 4q

· Illumina (ILMN) Q2 EPS $1.43/$830M vs. est. $1.11/$785.56M; Q2 gross margin 70.3% vs. 67.0% last year; raises FY18 EPS view to $5.35-$5.45 from $4.75-$4.85 (est. $4.87)

· Qiagen (QGEN) and Hamilton Robotics, a privately held leader in automation and liquid handling technology, today announced a new collaboration to improve processing of Qiagen’s QuantiFERON-TB Gold Plus diagnostic test through the integration of Hamilton’s Microlab STAR automated liquid handling workstation into the QFT-Plus assay workflow

· Sanofi SA (SNY) delivered Q2 declines in key metrics, as quarterly sales came to 8.18 billion euros ($9.56 billion), down from EUR8.67 billion the previous year, and missing estimate for EUR8.28 billion.

· Tandem Diabetes (TNDM) Q2 EPS loss ($1.17)/$34.1M vs. est. loss (35c)/$29.67M; said look to further this momentum through our upcoming launch of the t:slim X2 Insulin Pump with Basal-IQ Technology and by progressing our product pipeline as we work to improve the lives of people with diabetes; ” raises FY18 sales view to $140M-$148M from $132M-$140M

Industrials & Materials

· Allison Transmission (ALSN) Q2 EPS $1.29/$711M vs. est. $1.30/$655.3M; updated full year 2018 guidance includes a year-over-year net sales increase in the range of 15%-18%, Net Income in the range of $570M-$600M, Adjusted EBITDA in the range of $1.04B-$1.08B

· Eaton Corp. (ETN) Q2 operating EPS $1.39/$5.5B vs. est. $1.33/$5.45B; raises FY18 EPS view to $5.20-$5.40 from prior $5.10-$5.30 (est. $5.25)

· Rexnord (RXN) Q1 EPS 41c/$504M vs. est. 36c/$505.13M; raises FY19 adjusted EBITDA view to $425M-$440M from $420M-$440M; sees FY19 net income from continuing operations $132M-$143M

· Quaker Chemical (KWR) Q2 EPS $1.56/$222M vs. est. $1.43/$215.64M

· Woodward (WWD) Q3 EPS, $1.12/$588.1M vs. est. $1.03/$572.74M

REITs

· Alexandria Real Estate (ARE) Q2 FFO $1.64/$325.03M vs. est. $1.64/$253.57M

· AvalonBay (AVB) Q2 FFO $2.23/$569.2M vs. est. $2.20/$564.87M; sees FY18 FFO $8.87–$9.07, vs. consensus $8.87

· Brixmor (BRX) Q2 FFO 51c/$313.03M vs. est. 50c/$307.99M; backs previous FY18 NAREIT FFO, same property NOI growth outlook; affirms previously provided NAREIT FFO per diluted share and same property NOI growth expectations for 2018

· Sunstone (SHO) Q2 AFFO 37c/$317.4M vs. est. 36c/$317.7M; sees FY AFFO/share $1.07-$1.14, vs. est. $1.14; sees 3Q AFFO/share 27c-29c vs. est. 31c

· Taubman Centers (TCO) Q2 FFO 87c (in-line); sees FY FFO per share $3.63-$3.73 up from prior $3.56-$3.70 and vs. est. $3.74 (range $3.60 to $3.85) (Bloomberg data)

· UDR (UDR) Q2 AFFO 45c/$259.74M vs. est. 48c/$253.31M; raises FY18 AFFO view to $1.78-$1.81 from $1.76-$1.80vs. est. $1.93

· Vornado (VNO) Q2 AAFO 98c/$541.8M vs. est. $1.06/$539.94M

Technology, Media & Telecom

· Amkor Technology (AMKR) Q2 EPS 14c/$1.066B vs. est. 5c/$1.03B; sees Q3 EPS 12c-23c on revs $1.1B-$1.18B vs. est. 25c/$1.16B

· Blackbaud (BLKB) Q2 EPS 69c/$214.6M vs. est. 67c/$214.81M; sees FY18 adjusted EPS $2.75-$2.88 on revs $870M-$890M vs. est. $2.83/$879.71M

· Cognex (CGNX) Q2 EPS 31c/$211.26M vs. est. 30c/$204.86M; sees Q3 revenue $220M-$230M vs. consensus $221.75M

· Electronics for Imaging (EFII) Q2 EPS 50c/$261.1M vs. est. 53c/$263.32M; CEO to step down

· Harmonic (HLIT) shares fall -17%; Q2 EPS 5c/$99.2M vs. est. 0c/$95.72M; sees Q3 adjusted EPS (5c)-3c on revs $93M-$103M vs. est. 3c/$104.12M; sees FY18 adjusted EPS (1c)-16c on revs $388M-$411M vs. est. 9c/$407.27M

· Integrated Device (IDTI) Q1 EPS 44c/$228.5M vs. est. 43c/$226.93M

· KLA-Tencor (KLAC) Q4 EPS $2.22/$1.07B vs. est. $2.14/$1.05B; sees Q1 EPS $2.04-$2.36 on revs $1.03B-$1.11B vs. est. $2.06/$1.04B

· MagnaChip (MX) Q2 EPS 23c/$199.7M vs. est. 16c/$185M; sees Q3 revs $200M-$210M vs. est. $197.5M; cites record demand for its OLED display drivers coupled with a higher-than-expected number of launches of OLED smartphones, primarily in China for Q2 beat

· Samsung (SSNLF) said “demand for high-density products remained strong amid solid demand from data centers”, saw NAND shipments respond actively to growing demand for 128GB mobile storage, and saw China demand for high-performance computing chips increasing

· Sanmina (SANM) Q3 EPS 55c/$1.81B vs. est. 57c/$1.73B; sees Q4 adjusted EPS 63c-69c on revs $1.825B-$1.875B vs. est. 64c/$1.77B

· Varonis (VRNS) Q2 EPS loss (8c)/$62.2M vs. est. loss (5c)/$62.17M

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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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