Morning Preview: August 07, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, August 7, 2018

Global equity markets are trading higher, led by Asia gains overnight, as the Shanghai Composite bounced back, gaining 2.7%, after hitting fresh multiyear lows Monday. Global stock gains also followed an upbeat session Monday on Wall Street, where the S&P 500 came within less than 1% of its all-time highs from January. European markets are also showing strength, shaking off another negative economic data point out of Germany, as major averages continue their march higher. Earnings season (for the most part) has shaped up very well as we head into the tail end of the quarter, which accounts for why U.S. equities remain comfortably higher, helping offset the impact of trade tariffs between the U.S. and its trading counterparts. In Asian markets, The Nikkei Index jumped 155 points to settle at 22,662, the Shanghai Index spiked 74 points (2.74%) to settle at 2,779, while the Hang Seng Index surged 429 points to close at 28,248. In Europe, the German DAX is higher by more than 100 points above 12,700, while the FTSE 100 is up around 50 points at 7,715. U.S. stock-market indexes closed higher on Monday, led by gains in technology, consumer discretionary and financials shares. Better-than-expected earnings reports continued to provide support to the main benchmarks, allowing investors to overcome trade jitters.

Market Closing Prices Yesterday

· The S&P 500 Index gained 10.05 points, or 0.35%, to 2,850.40

· The Dow Jones Industrial Average rose 39.60 points, or 0.16%, to 25,502.18

· The Nasdaq Composite jumped 47.66 points, or 0.61%, to 7,859.68

· The Russell 2000 Index advanced 10.94 points, or 0.65% to 1,684.31

Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 10:00 AM EST JOLTs Job Openings for June…est. 6625

· 3:00 PM EST Consumer Credit for June…est. $15.0B

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: AFI, ARMK, AYR, BHC, BR, DF, DISCA, EMR, EPC, EXPD, IIVI, JELD, KMT, MGP, MNK, MOS, MTW, ODP, ONDK, RDUS, VSH, XRAY, ZBRA

· Earnings After the Close: AAOI, AIZ, ALB, ALRM, BOOT, CALX, CAR, CSOD, CYBR, DDD, DIOD, DIS, DXC, G, HDP, INFN, JAZZ, LC, MODN, MTCH, MXL, NEWR, NSTG, PLT, PXD, QTWO, SFLY, SNAP, TWNK, WEN

Other Key Events:

· Cowen Communications Infrastructure Summit, 8/6-8/7, in Boulder, CO

· Jefferies 2018 Global Industrials Conference, 8/7-8/9 in New York

· Oppenheimer 21st Annual technology, Internet and Communications Conference, 8/7-8/8, in Boston

· UBS Financial Services Conference, 8/7-8/8, in Chicago

World News

· China reserves rose $5.82 billion in July from the previous month to $3.118 trillion, after inching up $1.51 billion in June, according to data released Tuesday by the People’s Bank of China

· German industrial production declined in June by slightly more than expected, as total industrial output–which comprises output in manufacturing, energy and construction–fell 0.9% from May, vs. the estimate for an expected a 0.4% decline.

· The Reserve Bank of Australia completed two years of policy stasis, keeping its benchmark interest rate unchanged at a record low 1.5%. The widely anticipated on-hold verdict of the RBA board extends a record period of inactivity around interest rate stretching from mid-2016

· Analysts at Goldman Sachs project that stock repurchases will reach $1 trillion this year, up 46% from 2017 on the back of tax reform and strong corporate cash flows. And investors are likely to see immediate the impact of those repurchases as August tends to be the most popular month for buybacks. The month usually accounts for 13% of such deals for the year, Goldman says https://on.mktw.net/2KEJu40

· NBC News reported that the Trump administration is expected to issue a proposal in coming weeks that would make it harder for legal immigrants to become citizens

Sector News Breakdown

Consumer

· Etsy (ETSY) Q2 EPS 3c/$132.4M vs. est. 4c/$127.12M; raises FY18 adjusted EBITDA view to ~$124M-$136M from ~$123M-$135M; Q2 GMS $901.7M; raises FY18 revenue growth view to 33%-35% from 32%-34%

· Hertz (HTZ) Q2 EPS loss (19c)/$2.39B vs. est. loss (20c)/$2.31B; Q2 adjusted corporate EBTIDA $93M vs. $35M last year

· Marriott International Inc. (MAR) Q2 EPS $1.73/5.35B vs. est. $1.38/$5.84B;

· Fiesta Restaurant (FRGI) Q2 adjusted EPS 25c/$176.8M vs. est. 22c/$172.7M; Q2 comparable restaurant sales at Pollo Tropical increased 3.4% and were positively impacted by approximately 0.2% related to the fiscal calendar shift of Easter

· Pandora A/S plunged after the world’s biggest jewelry maker cut its profit and sales forecasts amid struggles in key markets such as the U.S. and China (shares fell 20%)

· PlayAGS (AGS) files $1B mixed securities shelf, 19M shares for holders

· Weight Watchers (WTW) Q2 EPS $1.01/$409.7M vs. est. 88c/$409.6M; said end of period subscribers in Q2 were up 27.6% versus the prior year period, driven by growth in all major geographic markets; raises FY18 EPS view to $3.10-$3.25 from $3.00-$3.20

· Zillow (ZG) Q2 revenue $325.25M (in-line with ests.); sees 2018 revenue $1.32B-$1.35B vs. est. $1.5B; sees 2018 EBITDA $237M-$253M. In addition, Zillow Group expects to hold 300 to 550 homes in inventory as related to the Homes segment as of December 31, 2018

· Central Garden & Pet (CENT) files to sell $200M in common stock

Energy

· Scana (SCG) shares fell 4%: as a federal judge rejected a request by Scana Corp. (SCG) to immediately block a state-mandated rate rollback. The company had boosted rates 18% to help pay for a nuclear power project that was abandoned last year after costs ballooned to more than $20 billion, but lawmakers last month slashed that surcharge to about 3%. The news threatens its $7.9B merger deal with Dominion (D) who said it may pull out of deal if rates cut too much

· Callon Petroleum (CPE) Q2 EPS 21c/$129.1M vs. est. 22c/$132.6M; sees FY production 29.5 to 32.0 boe/d and sees FY adjusted capital expenditures $500 million to $540 million

· Carrizo Oil & Gas (CRZO) Q2 EPS 79c/$263.97M vs. est. 68c/$237.14M; Q2 total production 57,077 Boe/d; reports Q2 crude oil production 37,860 Bbls/d

· Continental Resources, Inc. (CLR) said that Franco-Nevada (FNV) has agreed to pay approximately $220 million for a stake in a newly-formed minerals subsidiary

· Itron (ITRI) Q2 EPS 51c/$585.9M vs. est. 49c/$591.06M; lowers FY18 EPS view $2.75-$2.90 from $2.95-$3.35 (est. $2.98) and raises FY18 revenue view to $2.425B-$2.475B from $2.33B-$2.43B

· Mammoth Energy (TUSK) Q2 EPS $1.34/$533.6M vs. est. $1.56/$532.91M

Financials

· Brighthouse Financial (BHF) Q2 adjusted EPS $1.27/$1.7B vs. est. $1.96/$2.05B; said adjusted earnings for the quarter included $44M of a net unfavorable notable item, or 37c on a per share basis, for establishment costs primarily related to planned technology and branding investments

· American Equity (AEL) Q2 adjusted EPS 95c/$685.47M vs. est. 85c/$593.02M

· Commerzbank AG said that net profit rose in the second quarter, boosted by increased revenues; net profit was 272 million euros ($314.3 million) compared with a net loss of EUR640 million the previous year.

· Standard Life Aberdeen PLC said that its pretax operating profit for 1H of the year fell 8% on lower fee-based revenue; said its pretax operating profit for the six months ended June 30 fell to 478 million pounds ($619.4 million) from GBP521 million in the year-earlier period; net profit for the first half of the year fell 37% to GBP185 million from GBP292 million

Healthcare

· Carl Icahn is going public with his campaign to scuttle Cigna Corp.’s (CI) $54B plan to buy Express Scripts Holding Co. (ESRX), the WSJ reported saying the activist investor plans to send an open letter urging fellow Cigna shareholders to vote against the deal https://on.mktw.net/2ONQcrz

· Allergan (AGN) and Editas Medicine (EDIT) announced that Allergan’s wholly-owned subsidiary, Allergan Pharmaceuticals International, has exercised its option to develop and commercialize EDIT-101 globally for the treatment of LCA10

· Akcea Therapeutics (AKCA) Q2 EPS loss (72c)/$18.3M vs. est. loss ($1.24)/$12.56M; said with the upcoming top line results from the AKCEA-APO(a)-LRx Phase 2 study, we have the potential to make a significant step forward for patients with cardiovascular disease caused by elevated levels of lipoprotein

· Dentsply (XRAY) Q2 EPS 60c/$1.04B vs. est. 59c/$1.02B; cuts year EPS view to $2.00-$2.15 from prior $2.55-$2.65

· Diplomat Pharmacy (DPLO) Q2 EPS 17c/$1.416B vs. est. 23c/$1.42B; cuts FY18 EPS view to (15c)-1c from 6c-17c vs. est. 92c and sees FY18 revenue $5.5B-$5.9B vs. est. $5.67B

· Gemphire Therapeutics (GEMP) announced that it has amended and restated the license agreement with Pfizer (PFE) covering gemcabene. Gemphire licensed exclusive worldwide commercial rights to gemcabene from Pfizer in an agreement signed in April 2011

· Envision Healthcare (EVHC) Q2 EPS 92c/$2.07B vs. est. 87c/$.2.09B; Q2 Adjusted EBITDA of $246.7M vs. $253.8M last year

· Ligand (LGND) Q2 adjusted EPS $2.59/$90.0M vs. est. $2.34/$82.2M; raises FY18 EPS to $6.30 from $6.15 (est. $6.21) and raises FY18 revenue to $232M from $226M (est. $216.58M)

· NeoGenomics (NEO) files to sell $125M in common stock

· Tenet (THC) Q2 adjusted EPS 49c/$4.51B vs. est. 25c/$4.57B; raises FY18 EPS view to $1.54-$1.88 from $1.36-$1.70 (est. $1.56) and backs FY18 revenue view $17.9B-$18.3B vs. est. $18.15B; Q2 admissions decreased 2.3%, adjusted admissions decreased 0.2%, and revenue per adjusted admission increased 3.5%.

Industrials & Materials

· Argo Group (ARGO) Q2 adjusted EPS 95c/$463.3M vs. est. 91c/$423.53M

· Compass Minerals (CMP) Q2 EPS loss (23c)/$246.7M vs. est. loss (16c)/$246.56M; sees 2018 EPS $2.75-$3.25 vs. est. $2.94

· Kennametal (KMT) Q4 EPS 87c/$646M vs. est. 80c/$631.75M; says tariffs not currently expected to have a material effect on sales projections or cost structure; sees year organic sales growth 5%-8%

· Manitowoc (MTW) Q2 EPS 40c/$495.3M vs. est. 23c/$455.81M; backs FY18 revenue view roughly $1.775B-$1.85B vs. est. $1.81B; narrows FY18 adjusted EBITDA view to $105M-$115 from $100M-$200M

· Mistras (MG) Q2 EPS 21c/$191.8M vs. est. 17c/$175.44M; lowers FY18 EPS view to 71c-83c from 83c-95c vs. est. 77c and backs FY18 revenue view $715M-$730M vs. est. $730.25M

· Mosaic (MOS) Q2 EPS 40c/$2.205B vs. est. 38c/$2.3B

Technology, Media & Telecom

· Brooks Automation (BRKS) Q3 non-GAAP EPS 46c/$223M vs. est. 43c/$219.06M; sees Q4 non-GAAP EPS 35c-43c on revs $203M-$213M vs. est. 39c/$212.17M

· Five9 (FIVN) Q2 adjusted EPS 11c/$61.1M vs. est. 4c/$56.41M; sees Q3 adjusted EPS 8c-10c on revs $61M-$62M vs. est. 6c/$58.26M; raises FY18 adjusted EPS view to 39c-42c from 25c-30c (est. 28c) and raises FY18 revenue view to $244.5M-$246.5M from $235.8M-$238.8M

· National CineMedia (NCMI) Q2 EPS 5c/$113.7M vs. est. 8c/$109.18M; adjusted OIBDA increased 23.6% to $52.3M for the second quarter of 2018 from $42.3M for the second quarter of 2017; raises FY18 revenue $430M-$450M from $425M-$445M

· MTS Systems (MTSC) Q3 adjusted EPS 49c/$194.7M vs. est. 64c/$204.69M; reports test backlog of $326.3M, driven by strong sequential Test orders growth of 33% over the prior quarter

· NeoPhotonics (NPTN) Q2 adjusted EPS loss (14c)/$81.1M vs. est. loss (20c)/$73.56M; Q2 adjusted EBITDA was $3.0 million; sees Q3 EPS (17c)-(7c) on revs $79M-$84M vs. est. loss (10c)/$80.95M; sees Q3 gross margin 20%-24%.

· Rapid7 (RPD) Q2 EPS loss (13c)/$58.4M vs. est. loss (19c)/$55.1M; said for the fourth quarter in a row, ARR growth accelerated, reaching 44%, driven by new customer growth, upsells and cross-sells, and the success of our shift towards recurring revenue; as a result, we are raising our guidance for 2018 ARR growth to over 40%”

· RingCentral (RNG) Q2 adjusted EPS 19c/$161M vs. est. 15c/$155.71M; sees Q3 adjusted EPS 15c-17c on revs $165M-$168M vs. est. 15c/$163.15M

· Turtle Beach (HEAR) Q2 EPS 40c/$60.8M vs. est. loss (2c)/$47.9M; said “the strong start to 2018 has only gained momentum in the Q2, with another period of record results, enabling us to recently pay down $5M of our subordinated debt from cash flow”; raises FY18 EPS view to $1.95 from 95c (est. $1.19) and raises FY18 revenue view to $255M from $205M (est. $212.93M)

· Twilio (TWLO) Q2 adjusted EPS 3c/$147.8M vs. est. loss (5c)/$131.06M; sees Q3 adjusted EPS 2c-3c on revs $150M-$152M vs. est. 0c/$135.92M; raises FY18 adj. EPS view to 2c-4c from (10c)-(7c) vs. est. loss (8c) and raises FY18 revenue view to $585.5M-$589.5M from $538M-$544M

 

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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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