Morning Preview: August 2, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, August 2, 2018


U.S. stock futures are moving sharply lower, tracking global markets to the downside, as trade tensions between the U.S. and China appeared to be escalating amid the U.S. threat to raise the proposed tariffs on $200 billion of Chinese goods to 25%, more than double the 10% originally laid out. China said it is fully prepared to retaliate of the U.S. does increase tariffs further. Concerns about the possible hit to exporters helped to partly pressure lower European stock markets as well. In Asian markets, The Nikkei Index dropped -234 points to settle at 22,512, the Shanghai Index fell 2%, or -56 points to close at 2,768 and the Hang Seng Index plunged -626 points to settle at 27,714. In Europe, the German DAX is lower by over -200 points above 12,500, while the FTSE 100 is down around -90 points at 7,550. In addition to trade concerns, European attention turns to the Bank of England with its latest interest rate decision, minutes from the meeting and the Quarterly Inflation Report at 7:00 AM EST. A rate hike of 25 bps could be in the cards, though there is a chance they hold rates unchanged. Oil prices drop for a third day, with WTI crude heading towards $67 per barrel, while the dollar climbs.


Stocks closed mixed on Wednesday Just as Apple’s results eased concerns over technology stocks, lifting the Nasdaq Composite while commodity and industrial shares underwent renewed selling on trade/tariff concerns with China on reports the U.S. was considering raising proposed tariffs, pushing the S&P 500 to its 4th loss in 5 days. Financial shares held steady as the 10-year Treasury yield pushed toward 3% while the Federal Reserve kept interest rates unchanged, while interest rate sensitive stocks such as utilities, telecom and REITs declined.


Late yesterday, President Trump has directed U.S. Trade Rep. Robert Lighthizer to consider increasing proposed tariffs on $200b in Chinese goods to 25% from 10%, senior administration officials tell reporters. Officials reiterate the process is ongoing with hearings scheduled later this month. Officials say U.S. has given China many opportunities over past year to address concerns

Market Closing Prices Yesterday

· The S&P 500 Index slipped -2.93 points, or 0.10%, to 2,813.36

· The Dow Jones Industrial Average fell -81.37 points, or 0.32%, to 25,333.82

· The Nasdaq Composite gained 35.50 points, or 0.46%, to 7,707.29

· The Russell 2000 Index dipped -1.54 points, or 0.09% to 1,669.26

Events Calendar for Today

· 7:30 AM EST Challenger Job Cuts YoY

· 8:30 AM EST Weekly Jobless Claims…est. 220K

· 8:30 AM EST Continuing Claims…est. 1.75M

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 59.0

· 10:00 AM EST Factory Orders for June…est. 0.7%

· 10:00 AM EST Durable Goods, June-F

· 10:30 AM EST Weekly EIA Natural Gas Inventory Data


Earnings Calendar:

· Earnings Before the Open: ABC, AET, AMCX, APRN, AVP, BCE, BDX, BLL, CBRE, CI, CLX, CTSH, DWDP, HFC, HII, ICE, IDCC, K, MGM, PH, REGN, SEE, SFM, TEVA, THS, TVPT, W, WLTW, YUM, ZTS

· Earnings After the Close: ACLS, AIV, ANET, APPN, ATVI, BL, BMRN, BNFT, CARB, CBS, CC, CERN, DATA, ESL, FLR, GDDY, GHL, GLPG, GPRO, NUS, OTEX, SHAK, SPXC, SSNC, TDC, TTWO, VECO, WU


World News

· The Brazilian central bank left the country’s benchmark interest rate unchanged at a record low of 6.5% on Wednesday shrugging off a recent spike in inflation

· Eurozone industrial price growth accelerated sharply in June, as industrial prices were up 3.6% in June

· Turkish financial markets dropped sharply on Thursday, sending the lira to a new record low, after the US hit two of senior government ministers with sanction


Sector News Breakdown

Consumer

· Tesla (TSLA) up 8%; Q2 EPS loss ($3.06)/$4.0B vs. est. loss ($2.92)/$3.92B; Cash outflow from operating activities in Q2 2018 was $130M, which was significantly better than outflows of $398M in Q1; capital expenditures were $610M, slightly below the Q1 2018 level; still expect to achieve GAAP profitability in Q3 and Q4; Q2 gross margins 21% vs. Bloomberg est. 16%

· TripAdvisor (TRIP) shares down -11%; Q2 EPS 41c/$433M vs. est. 40c/$434.92M; said user reviews and opinions grew 24% YoY and reached 661M at June 30, 2018, covering approximately 7.7M places to stay

· Wynn Resorts (WYNN) Q2 EPS $1.53/$1.61B vs. est. $1.92/$1.71B; Q2 Wynn Macau revenue $543.3M, down 14.9% and Q2 Las Vegas Operations revenue $441.6M, up 0.8%;

· Clorox (CLX) Q4 EPS $1.66/$1.69B vs. est. $1.58/$1.72B; sees FY EPS $6.32-$6.52 vs. est. $6.37

· Chefs’ Warehouse (CHEF) Q2 EPS 24c/$370.4M vs. est. 22c/$361.85M

· Clearwater Paper (CLW) Q2 EPS 43c/$432.1M vs. est. 28c/$428.58M

· Fitbit (FIT) Q2 EPS loss (22c)/$299.3M vs. est. loss (24c)/$285.4M; sold 2.7M wearable devices in Q2 and average selling price increased 6% YoY to $106 per device driven by the growing mix of smartwatches; smartwatch revenue grew to 55% of revenue, up from 30% on a sequential basis; sees Q3 EPS (2c)-1c on revs $370M-$390M vs. est. loss (2c)/$377.63M

· Herbalife Nutrition (HLF) Q2 adjusted EPS 80c/$1.3B vs. est. 67c/$1.26B;

· Pilgrim’s Pride (PPC) Q2 adjusted EPS 53c/$2.84B vs. est. 57c/$2.76B;

· Red Robin (RRGB) shares fell -17%; Q2 adjusted EPS 46c/$315.4M below est. 66c/$324.59M; Q2 Comparable restaurant revenue decrease of 2.6% and Q2 Comparable guest count decrease of 0.7%; cuts FY18 EPS view to $1.80-$2.20 from $2.40-$2.80 (est. $2.54)

· Yum China (YUMC) Q2 EPS 36c/$2.1B vs. est. 33c/$2.09B; Q2 same-store sales declined 1% year over year vs. est. up 2.5%, with flat same-store sales at KFC and a 4% decrease at Pizza Hut, excluding F/X; Q2 restaurant margin 15.1% vs. 16.6% a year ago

· Scientific Games (SGMS) Q2 EPS loss (6c)/$844.7M vs. est. loss (5c)/$853.64M

· Starbucks (SBUX) will start coffee deliveries in China next month as part of a new tie-up with Alibaba (BABA)

· Del Frisco’s (DFRG) 11.25M share Secondary priced at $8.00


Energy

· Marathon Oil (MRO) Q2 adjusted EPS 15c/$1.42B vs. est. 20c/$1.46B; Q2 total production averaged 419,000 net boed; U.S. production averaged 298,000 net boed, both up 5% compared to the prior quarter. U.S. resource plays averaged 285,000 net boed, up 6% compared to the prior quarter with all four basins growing sequentially. Eagle Ford production increased to 106,000 net boed, up 2% sequentially

· American Water (AWK) Q2 EPS 83c/$853M vs. est. 81c/$867.02M

· Concho Resources (CXO) Q2 EPS $1.24/$945M vs. est. 95c/$888.57M; updated its 2018 production and capital program outlook to reflect the RSP transaction

· Gulfport Energy (GPOR) Q2 EPS 33c/$252.7M vs. est. 36c/$332.42M; 2Q production 1,330 mmcfe/d; reaffirms Forecast for 2018 Capex; sees 3Q net production averaging about 1,360 MMcfe/day

· Matador (MTDR) Q2 EPS 41c/$209.0M vs. est. 33c/$185.25M

· MRC Global (MRC) Q2 EPS 17c/$1.08B vs. est. 22c/$1.07B

· SRC Energy (SRCI) Q2 revs $147.1M vs. est. $143.3M; 2Q adjusted Ebitda $107.7M


Financials

· Square (SQ) Q2 EPS 13c/$385.4M vs. est. 12c/$367.95M; sees Q3 EPS 8c-10c on revs $407M-$412M vs. est. 13c/$384.51M; sees Q3 adjusted EBITDA $62M-$65M; backs FY18 EPS view 42c-46c while raises FY18 revenue view to $1.52B-$1.54B from $1.45B-$1.48B; Q3 EPS 8c-10 vs. 13c

· Cushman & Wakefield (CWK) 45M share IPO priced at $17.00

· Assured Guaranty (AGO) Q2 EPS 66c/$221M vs. est. 74c/$232.55M

· Lincoln Financial (LNC) Q2 adjusted EPS $2.02/$4.02B vs. est. $2.10/$4.04B

· MetLife (MET) Q2 EPS $1.30/$21.19B vs. est. $1.17/$15.72B

· Hanover Insurance (THG) Q2 operating EPS $2.20/$1.36B vs. est. $2.06/$1.34B; Q2 catastrophe losses of $63.6M

· Voya Financial (VOYA) Q2 adjusted EPS $1.13 vs. est. $1.09 and reports Q2 book value $52.22 vs. $74.30 last year; says executing on plans to hit adjusted EPS $1.30-$1.40


Healthcare

· DaVita (DVA) Q2 EPS $1.05/$2.89B vs. est. 97c/$2.88B; raises FY18 effective tax rate to approximately 28.5%-29.5% from prior about 26.5%-27.5%.

· DexCom (DXCM) shares rose 19%; Q2 EPS loss (10c)/$242.5M vs. est. loss (18c)/$205.66M; raises FY18 revenue view to about $925M from $850M-$860M (est. $862.25M)

· Exact Sciences (EXAS) Q2 EPS loss (30c)/$102.9M vs. est. loss (33c)/$104.66M; Q2 test volume was 215,000, up 59%, and average recognized revenue per test was $479, an improvement of 12%; backs FY18 revenue view $420M-$430M vs. est. $435.8M

· Express Scripts (ESRX) Q2 EPS $2.22/$25.64B vs. est. $2.21/$25.4B; raises FY18 core adjusted EBITDA view to $5.275B-$5.425B from prior view $5.25B- $5.4B; updating its expected 2019 retention rate for the 2018 selling season from a range of 96%-98% to a range of 97.5%-98.5%

· Health Insurance Innovations (HIIQ) Q2 EPS 61c/$71.7M vs. est. 57c/$70.09M; raises FY18 EPS view to $2.47-$2.57 from $2.45-$2.55 and raises FY18 revenue view to $293M-$303M from $290M-$300M

· PerkinElmer (PKI) Q2 EPS 91c/$703.6M vs. est. 86c/$693.01M; raises FY18 EPS view to $3.65 from $3.60

· PRA Health (PRAH) Q2 EPS $1.00/$722.8M vs. est. 96c/$709.93M; raises FY18 adj. EPS view to $4.13-$4.32 from $4.00-$4.15 (est. $4.12) and sees FY18 revenue $2.87B-$2.92B vs. est. $2.92B

· Teladoc (TDOC) Q2 EPS loss (40c)/$94.6M vs. est. loss (37c)/$92.37M; sees Q3 EPS (39c)-(37c) on revs $106M-$108M vs. est. loss (34c)/$105.11M

· BioCryst (BCRX) files to sell $50M in common stock


Industrials & Materials

· U.S. Steel (X) Q2 adjusted EPS $1.46/$3.61B vs. est. $1.13/$3.49B; sees Q3 adjusted EBITDA approximately $525M; sees FY18 adjusted EBITDA approximately $1.85B-$1.9B

· DowDuPont (DWDP) Q2 EPS $1.37/$24.2B vs. est. $1.30/$23.68B; Q2 operating Ebitda $5.7B and said sees Q3 sales up more than 10%

· Advanced Disposal Services (ADSW) Q2 EPS 19c/$398.1M vs. est. 17c/$389.47M; Backs 2018 adjusted EBITDA guidance of $426M-$436M and adjusted free cash flow guidance of $134M-$144M

· Century Aluminum (CENX) Q2 EPS 32c/$470M vs. est. 25c/$462.24M;

· CF Industries (CF) Q2 EPS 63c/$1.3B vs. est. 45c/$1.22B; reports $500M share buyback

· Hub Group (HUBG) Q2 EPS 66c/$1.2B vs. est. 49c/$1.1B; sees FY18 EPS $2.73-$2.83 vs. est. $2.44; sees 2018 capital expenditures $200M-$220M and sees effective tax rate 24.5%-25.5%

· Nutrien (NTR) Q2 EPS $1.48/$8.15B vs. est. $1.40/$7.98B; raises 2018 EPS forecast view to $2.40-$2.70 from $2.20-$2.60, consensus $2.34

· Rayonier (RYN) Q2 EPS 28c/$245.9M vs. est. 18c/$193.04M; sees FY18 EPS 63c-68c below consensus 73c

· Siemens AG (SIE.GY) shares dropped more than 5% amid a shakeup of its organizational structure and its fiscal third-quarter earnings.

· Tetra Tech (TTEK) Q3 adjusted EPS 71c/$764.8M vs. est. 65c/$541.66M; says given the strength of our results and outlook, increasing our guidance for both EPS and net revenue for FY18

· XPO Logistics (XPO) Q2 EPS $1.03/$4.36B vs. est. 98c/$4.28B; reaffirmed its FY18 target for adjusted EBITDA of at least $1.6B, and 2017-2018 target for cumulative free cash flow of approximately $1B


REITs

· CBL & Associates (CBL) Q2 adjusted FFO 46c/$214.5M vs. est. 42c/$204.95M; backs FY18 adjusted FFO view of $1.70-$1.80 vs. est. $1.74

· CyrusOne (CONE) Q2 normalized FFO 81c/$196.9M vs. est. 79c/$199.2M; raised and tightened FY18 revenue view to $820M-$830M from $810M-$825M (est. $819.3M)

· Life Storage (LSI) Q2 FFO $1.39/$138.00M vs. est. $1.34/135.22M; raises FY18 FFO view to $5.42-$5.48 from $5.36-$5.43

· Macerich (MAC) Q2 FFO ex-items 96c/$234.5M vs. est. 96c/$231.94M; lowers 2018 FFO view to $3.82-$3.92 from $3.92-$4.02 (est. $3.96); 2018 guidance for lease termination revenue is being reduced from $22M to $15M

· Realty Income (O) Q2 adjusted FFO 80c/$328.9M vs. est. 79c/$327.43M; raises 2018 adjusted FFO view to $3.16-$3.21 to $3.14-$3.20 and increasing 2018 acquisitions guidance to approximately $1.75B from $1.0B-$1.5B


Technology, Media & Telecom

· Arris (ARRS) Q2 EPS 72c/$1.73B vs. est. 74c/$1.78B; Q2 order backlog was $1.3B; sees FY18 adjusted EPS $2.85-$3.00 vs. est. $3.08; sees Q3 adjusted EPS 65c-70c vs. est. 80c

· Cirrus Logic (CRUS) Q1 EPS 28c/$254.5M vs. est. 10c/$235.8M; sees Q2 revenue $310M-$350M vs. consensus $334.06M; sees 2Q gross margin +48% to +50% vs. estimate +49.1%

· FireEye (FEYE) Q2 EPS 0c/$202.7M vs. est. loss (1c) $201.51M; Q2 billings rose 13% YoY to $196M and was above the guidance range of $180M-$195m; said non-GAAP gross margin was 75% of revenue, above the guidance of approximately 74% of revenue; issues Q3 and year EPS/rev guidance at midpoint of consensus

· Fortinet (FTNT) Q2 EPS 41c/$441.3M vs. est. 36c/$425.52M; sees Q3 EPS 41c-43c on revs $445M-$455M vs. est. 39c/$431M; sees FY18 EPS $1.63-$1.67on revs $1.77B-$1.79B vs. est. $1.54/$1.73B

· HubSpot (HUBS) raises FY18 adjusted view to EPS 63c-67c from 59c-65c (est. 63c) and sees FY18 revenue $496.8M-$498.8M, up from previously guided range of $489M-$492M; sees Q3 adjusted EPS 3c-5c on revs $125.6M-$126.6M vs. est. 9c/$124.94M

· Qorvo (QRVO) Q1 EPS 96c/$692.7M vs. est. 76c/$656.51M; sees Q2 EPS $1.62 at midpoint of guidance on revs $850M-$860M vs. est. $1.57/$857.75M

· Sonos (SONO) 13.889M share IPO priced at $15.00

· Stamps.com (STMP) Q2 EPS $2.75/$139.6M vs. est. $2.38/$134.43M; Q2 on-GAAP adjusted EBITDA was $63.6 million, up 10% YoY; raises FY18 EPS view to $10.15-$11.15 from $9.60-$10.60

· T-Mobile (TMUS) Q2 EPS 92c/$10.57B vs. est. 87c/$10.66B; reports 1.6M total net additions, 1.0M total branded postpaid net additions, 686,000 branded postpaid phone net additions, 91,000 branded prepaid net additions and 0.95% branded postpaid phone churn; raises 2018 adjusted EBITDA outlook to $11.5B-$11.9B from the prior target range of $11.4B-$11.8B

· Trimble (TRMB) Q2 adjusted EPS 50c/$785.5M vs. est. 45c/$776.31M; sees Q3 adjusted EPS 43c-47c on revs $795M-$825M vs. est. 44c/$777.38M; sees FY18 adjusted EPS $1.81-$1.89 on revs $3.14B-$3.19B vs. est. $1.77/$3.08B

· Zynga (ZNGA) Q2 EPS 0c/$217.0M vs. est. 3c/$230.42M; Q2 mobile revenue $192.7M, up 7%; Q2 Mobile bookings of $211.6 million; up 17% YoY; Q2 Mobile user pay revenue and bookings were up 3% and 14%, respectively, YoY; sees Q3 revenue $218M vs. est. $250.51M

 

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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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