Mid-Morning Look: August 07, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Tuesday, August 7, 2018

U.S. equities stocks advanced for a fourth session, as the benchmark S&P 500 index trades within 0.3% from its January record highs, led by gains in energy and technology, offsetting weakness in defensive sectors such as real estate and consumer-staples companies. The Nasdaq Composite looks to make it a 6th straight day of gains (hasn’t achieved that since March), as several software companies report strong results overnight (index about 40-points from its 7,933 record high on 7/25). Healthcare continues to chug along higher, with LLY, MRK and PFE all trading to fresh 52-week highs. Lodging and housing stocks weak after softer results in those sectors (IHG, MAR, ZG). No fear in the markets as the CBOE Volatility index (VIX) moves to 6-month lows despite no deal with China or Nafta related partners regarding trade or tariffs. Of the 413 S&P 500 companies that have reported earnings so far, 79.2% have topped estimates. If the beat rate holds, it will be the highest on record, dating back to the first quarter of 1994, according to Thomson Reuters I/B/E/S. U.S. markets following strong gains in Asia overnight as the Shanghai Composite climbed 2.7% after a 1.2% tumble to start the week (and off multi-year lows).

Treasuries, Currencies and Commodities

· In currency markets, the US dollar giving back some recent gains, but already bouncing off lows vs. major counterparts; the dollar index (DXY) came up just short of 2018 highs yesterday, but still holding above the 95 level, as markets keep eyes on trade and FOMC policy

· Precious metals little changed as gold prices bounce off 52-week lows, to trade slightly higher around $1,220 an ounce. Meanwhile, oil prices moving higher ahead of inventory data tonight (API) and tomorrow morning (EIA), extending its rise off last week 6-week lows around $67 per barrel (prices failed shy of $70 yesterday)

· Treasury markets quiet, as the yield on the 10-yr back around 2.96% (up a few basis points), after falling from multi-month highs above 3% last week; no major economic data the last two days to move markets; 2-yr yield inches up slightly to 2.66%

Sector Movers Today

· Medical equipment and devices; ILMN was upgraded to equal-weight at Morgan Stanley as the risks to long-term success on DNA-based diagnostics and biopharma investment in the space is lower; BLPH said its Phase 3 clinical trial, INOvation-1, evaluating INOpulse in patients with pulmonary arterial hypertension (PAH) failed to demonstrate a treatment effect; IART and MMSI both downgraded to underperform at Bank America; VCEL jumps as Q2 sales rise 12% topping views and raised guidance for the year to $80M-$83M from $73M-$78M; LMNX plunges on the heels of its Q2 report that included EPS miss

· Media & Telecom movers; Dow component DIS to report earnings after the close tonight; DISCA shares fell after missed analyst estimates for quarterly profit as they took on more costs related to integration of the recently acquired Scripps network; CBS was downgraded to hold at Argus as see significant downside risks to CBS shares both from the sexual harassment allegations against CEO Les Moonves and the board’s legal battle to prevent a re-merger with Viacom

· Lodging; sector weak after IHG lower after some first half results fall slightly short of estimates/reports 1H revenue of $900M vs. $899M consensus and adjusted operating profit of $398M. RevPAR grew 3.7% during the period; MAR 2Q results and guidance disappointed after net unit growth guidance was cut to 5% from 5.5%-6.0%.

· E&P sector; Macquarie moves to the sidelines on PDCE and XOG (downgrade both to neutral) given the heightened Colorado risk/should events warrant, we would revisit our changes but we see limited ability to outperform peers until greater clarity is established and longer-term damage is repaired; in earnings; SM posting a 2Q loss hurt by a challenging operational quarter at Comanche according to the company; OAS trades up after beating expectations for both Q2 earnings and revenues and raising full-year production guidance/Q2 production rose 28% Y/Y to 79.4K boe/day

· Retailers; Piper said JWN Anniversary Sale had “a slower second half y/y and ended below that” of last year as cuts its comp sales estimates (also cuts views on LB, JCP); JPMorgan said recent fieldwork, satellite data, and management call takeaways point to solid 2Q prints across our Dollar/Discount coverage (DLTR, BIG, DG); in consumer electronics, HEAR Q2 beat and Q3 guide setting up an increase in FY guidance of $255M in revs (+71%), $45M in adj. EBITDA (+298%), and $1.95 (+457%), up from $205M, $26M, $0.95 previously; CROX posts Q2 EPS/revs beat but CFO departs and guides year revs below consensus; overseas, jeweler Pandora issued weak earnings and guidance, taking toll on some names in US (FOSL)

       Stock GAINERS

· BMRN +6%; benefits on failed study for ONCE Hemophilia drug/BMRN has appeared to show more promising results in earlier studies

· ETSY +10%; Q2 revenue beat, raised forecast; Q2 revenue rises 30% as posts fifth straight revenue beat on higher marketplace, services revenues and also raises FY forecast for gross merchandise sales (GMS) and revs growth target to 33-35% from 32-34%

· HEAR +2%; Q2 beat and Q3 guide setting up an increase in FY guidance of $255M in revs (+71%), $45M in adj. EBITDA (+298%), and $1.95 (+457%), up from $205M, $26M, $0.95 previously

· HTZ +23%; posted better-than-expected second-quarter results, amid pricing pressure and flagging demand, lifting transports

· MNK +23%; as Q2 top and bottom line beat estimates, raises FY18 guide to rev growth 4%-7% from prior 3%-6% view on higher earnings

· NPTN +21%; posted 2Q revenue beat highest estimate and loss per share was narrower than estimates, and positive commentary on favorable demand trends in China

· ONDK +27%; after reporting Q2 adjusted EPS that beat consensus by 8 cents and boosting year adjusted net income guidance to $30M-$36M from prior range of $18M-$28M

· RPD +11%; strong 2Q revenue beat driven by strength across vulnerability management (VM), IDR (SIEM), and Application Security (AppSec).

· TWLO +19%; trades to record highs as Q3 rev forecast of $150M-$152M well above the $135M estimate on higher EPS as well

Stock LAGGARDS

· BLPH -76%; said its Phase 3 clinical trial, INOvation-1, evaluating INOpulse in patients with pulmonary arterial hypertension (PAH) failed to demonstrate a treatment effect

· DF -11%; after slashing year adj. EPS forecast to 32c-52c from 55c-80c citing significantly higher-than-expected non-dairy inflation

· GEMP -48%; downgraded at Raymond James saying while they anticipated GEMP’s 2H18 would be a prelude to Phase 3 gemcabene trial initiations, FDA’s request for additional safety data appears to delay efforts until ~2020

· OMI -15%; full-year profit forecast falls short of analysts’ estimate as expects FY18 adj EPS in the range of $1.40-$1.50 vs estimate $1.98 (Q2 revenue miss for 7th time in past 8 quarters)

· ONCE -29%; said two patients in its hemophilia phase 1/2 trial had a concerning immune response, one of whom was hospitalized as a result/plans a phase 3 trial for the fourth quarter of this year

· PANDY -16%; after cut its profit and sales forecasts amid struggles in key markets such as the U.S. and China

· SCG -4%; as a federal judge rejected a request by Scana to immediately block a rollback of its electric rates, marking another setback to Dominion Energy Inc.’s planned acquisition of them

· SN -15%; following a massive miss against Q2 earnings estimates even as revenues rose 47% Y/Y to $259M/company said Q2 was a challenging operational quarter at Comanche

· XRAY -19%; lowered revenue forecast, restructuring plans as sees year EPS of $2-$2.15, down from $2.55- $2.65 forecast and sees lower revenue for the rest of 2018 due to higher levels of inventory destocking at partner dealers

· ZG -16%; reported 2Q revs/EBITDA roughly in line with Street expectations, but meaningfully reduced its FY:18 revenue/ EBITDA outlook for 2018, primarily due to a slower-than-expected start in the Homes segment (aka Zillow Offers)

 

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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