Morning Preview: October 26, 2018

Terrie AmengualDaily Market Report

Early Look

Friday, October 26, 2018

The market giveth…and the market taketh away. After an impressive bounce back performance for major averages on Thursday, with the Nasdaq Comp jumping nearly 3% (after a 4% decline on Wednesday), the S&P 500 moving back above the 2,700 level and the Dow Industrials rising over 400 points, it appeared it was safe to get back into U.S. stocks. However, following disappointing results and or guidance from two of the biggest tech-related companies AMZN (-9%) and GOOG (-6%), markets have turned sour on stocks, with futures falling sharply. Defensive assets are on the rise early, as U.S. Treasury prices climbed, pushing the 10-year yield to a three-week low below 3.10%, as stocks globally resumed a downward trend that has underpinned appetite for the perceived safety of government paper. There are a few important economic data points later this morning with third-quarter gross domestic product expected around 8:30 AM EST and consumer-sentiment index at 10:00 AM EST. For the week as of Thursday, the Dow was off 1.8%, the S&P 500 2.2% and the Nasdaq 1.8%. For the month of October so far, the S&P has lost 7.15%, the Dow is down 5.57%, and the Nasdaq has shed 9.05%.

In Asian markets, The Nikkei Index drop -84 points to end the week at 21,184, the Shanghai Index only dipped -4 points to slip below 2,600 and the Hang Seng Index fell -276 points to finish at 24,717. In Europe, the German DAX is lower by around -200 points (1.75%) at 11,100, while the FTSE 100 is down over -100 points (1.5%) moving under 6,900. Noe the Chinese yuan has fallen against the dollar every day this week, and experienced a nearly 7% selloff this year. Trade worries also remain after U.S. officials reportedly said trade talks with China won’t resume until Beijing comes up with solid proposals over forced technology transfers and other economic issues.

Market Closing Prices Yesterday

· The S&P 500 Index jumped 49.47 points, or 1.86%, to 2,705.57

· The Dow Jones Industrial Average rose 401.13 points, or 1.63%, to 24,984.55

· The Nasdaq Composite spiked 209.94 points, or 2.95%, to 7,318.34

· The Russell 2000 Index advanced 31.70 points, or 2.16% to 1,500.40

Events Calendar for Today

· 8:30 AM EST Gross Domestic Product (GDP) Q3-A

· 8:30 AM EST Personal Consumption for Q3-A

· 8:30 AM EST GDP Price Index, Q3-A

· 8:30 AM EST Core PCE QoQ, Q3-A

· 10:00 AM EST University of Michigan Sentiment, Oct-F

· 1:00 PM EST Baker Hughes Weekly Rig Count

Earnings Calendar:

· Earnings Before the Open: B, CHTR, MCO, PSX, R, WY, ZBH

Sector News Breakdown

Consumer

· Amazon.com (AMZN) shares fell -8%; Q3 EPS $5.75/$56.6B vs. est. $3.14/$57.1B; sees Q4 revenue $66.5B-$72.5B below consensus $73.89B as anticipates an unfavorable impact of approximately 80 basis points from foreign exchange rates. Operating income is expected to be between $2.1B-$3.6B, vs. $2.1B YoY; Q3 AWS net sales $6.68B vs. $4.58B last year and Q3 AWS operating income $2.08B vs. $1.17B a year ago

· Chipotle (CMG) Q3 EPS ex-charges $2.16/$1.2B vs. est. $2.00/$1.23B; Q3 comparable restaurant sales increased 4.4%, digital sales grew 48.3% in the quarter and accounted for 11.2% of sales; restaurant level operating margin was 18.7%.

· Expedia (EXPE) Q3 EPS $3.65/$3.28B vs. est. $3.12/$3.3B; Q3 gross bookings up 11%; Q3 gross bookings increased $2.5B or 11% year-over-year to $24.7B; Net income and Adjusted EBITDA grew 49% and 29% year-over-year, respectively

· Boot Barn (BOOT) Q2 EPS 16c/$168.1M vs. est. 9c/$161.42M; raises FY19 EPS outlook to $1.16-$1.24 from $1.04-$1.14 (est. $1.17) and sees same store sales growth of 6.5% to 8.0%

· Boyd Gaming (BYD) Q3 EPS 23c/$612.2M vs. est. 24c/$611.81M

· Columbia Sports (COLM) Q3 EPS $1.42/$795.8M vs. est. $1.28/$789.9M; sees FY net sales change +11% to +11.5% and raises year EPS to $3.57-$3.62, from prior $3.37-$3.47

· Decker’s Brands (DECK) Q3 EPS $2.38/$501.9M vs. est. $1.72/$494.37M; raises non-GAAP FY19 view to $6.65-$6.85 from $6.25-$6.45 (est. $6.45) and narrows FY19 revenue view to $1.935B-$1.96B from $1.93B-$1.96B (est. $1.95B)

· Fortune Brands (FBHS) Q3 EPS 93c/$1.4B vs. est. $1.05/$1.44B; cuts FY18 EPS ex-items view to $3.41-$3.49 from $3.62-$3.72 (est. $3.64); said outlook is based on a U.S. home products market growth assumption of 5% (from 5%-7% prior)

· Leggett & Platt (LEG) lowers FY18 EPS view to $2.40-$2.50 from $2.55-$2.70 (est. $2.61) and now sees FY18 revenue of $4.25B at lower end of previous guidance of $4.25B-$4.35B; Q3 EPS 67c/$1.09B vs. est. 71c/$1.1B

· Mattel (MAT) Q3 adjusted EPS 18c/$1.44B below est. 20c/$1.49B; says on track to achieve or exceed $650M run-rate savings exiting 2019; Gross sales fell 6% as reported, fell 4% in constant currency, reflecting negative 3% impact from the Toys R Us liquidation and a negative 3% impact from the slowdown in China; gross Sales in North America increased 6%, primarily driven by strong sales of Barbie

· Mohawk (MHK) Q3 EPS $3.29/$2.5B vs. est. $3.58/$2.6B

Energy

· First Solar (FSLR) Q3 EPS 54c/$676M vs. est. 41c/$696.01M

· FirstEnergy (FE) Q3 EPS 80c/$3.1B vs. est. 71c/$2.94B; revises FY18 adj. EPS view to $2.50-$2.60 vs. est. $2.49; also reaffirmed its three-year operating earnings growth rate projections

· World Fuel Services (INT) Q3 EPS 63c/$10.43B vs. est. 56c/$10.44B; reports total of 5.0 billion gallons of fuel sold

Financials

· Cincinnati Financial (CINF) Q3 EPS 84c/$1.92B vs. est. 73c/$1.46B; reports $51.22 book value per share at September 30, a record high, up 93c or 1.8% since year-end

· Discover (DFS) Q3 EPS $2.05/$2.72B vs. est. $2.05/$2.71B; total loans ended the quarter at $86.9B, up 8% compared to the prior year; credit card loans ended the quarter at $69.3B, up 9% from the prior year and personal loans increased $148M, or 2%, from the prior year

· Ellie Mae (ELLI) Q3 EPS 67c/$123.0M vs. est. 54c/$128.11M; reports Q3 adjusted EBITDA $40.9M vs. $38.7M last year; sees Q4 EPS 34c-39c on revs $113M-$116M vs. est. 46c/$127.73M; sees FY18 EPS $1.84-$1.88 on revs $477M-$480M vs. est. $1.87/$498.94M

· First Hawaiian (FHB) Q3 core EPS 52c vs. est. 51c; net income for Q3 was $67.4M; reports Q3 net interest margin 3.11%

· Hartford Financial (HIG) Q3 core EPS $1.15/$4.84B vs. est. $1.06/$4.71B; said net income and core earnings return on equity were 16.4% and 12.7% annualized

· LPL Financial (LPLA) Q3 EPS $1.19/$1.33B vs. est. $1.24/$1.3B

· Principal Financial (PFG) Q3 EPS $1.67 vs. est. $1.67; reports AUM of $667.8B for the quarter, up 2%; 3Q book value per share $41.26

· Reinsurance Group (RGA) Q3 EPS $4.03/$3.28B vs. est. $3.29/$3.21B

Healthcare

· Gilead Sciences (GILD) Q3 EPS $1.84/$5.596B vs. est. $1.63/$5.38B; total product sales for Q3 was $5.5B compared to $6.4B YoY; 3Q Harvoni revenue $311M vs. Bloomberg est. $263.6M, 3Q Epclusa revenue $477M, Truvada revenue $757M vs. est. $701.2M; Q3 Genvoya revenue $1.18B

· Cerner (CERN) Q3 EPS 63c/$1.34B vs. est. 63c/$1.36B; sees Q4 EPS 62c-64c on revs $1.37B-$1.42B vs. est. 67c/$1.39B; reports Q3 bookings $1.588B

· Stryker (SYK) Q3 EPS $1.69/$3.2B vs. est. $1.68/$3.26B; Q3 organic net sales increase of 7.9%; sees 2018 organic net sales growth at high end of 7.0%-7.5% range; sees 2018 organic net sales growth, which excludes the impact related to adoption of the new revenue recognition standard, to be at the high end of the range of 7.0%-7.5%; sees FY18 EPS $7.25-$7.30 vs. est. $7.25

· Syndax Pharmaceuticals (SNDX) said E2112, a phase 3 breast cancer trial, did not achieve the first primary endpoint of improving progression-free survival. Achieving the primary endpoint would have provided the earliest regulatory filing opportunity, Syndax said

· Seattle Genetics (SGEN) Q3 EPS loss (42c)/$169.4M vs. est. loss (27c)/$166.92M; as of September 30, 2018, Seattle Genetics had $485.7M in cash and investments. In addition, the company held stock investments, primarily in Immunomedics common stock, valued at $169.4M

· Universal Health (UHS) Q3 adjusted EPS $2.23/$2.65B vs. est. $2.01/$2.66B; narrows FY18 adj. EPS view to $9.25-$9.60 from $9.25-$9.90; 3Q acute care adjusted admissions +1.5%; 3Q behavioral health adjusted admissions +4.7%

Industrials & Materials

· Briggs & Stratton (BGG) Q1 EPS loss (51c) vs. est. $279M vs. est. loss (47c)/$296.44M;

· Century Aluminum (CENX) Q3 EPS 2c/$481.8M vs. est. 0c/$476.68M

· Fortive (FTV) Q3 EPS 86c/$1.84B vs. est. 87c/$1.86B; lowers FY18 adjusted EPS view to $2.98-$3.02 from $3.42-$3.50 vs. est. $3.46

· Glencore PLC (GLNCY) cut its full-year oil-production guidance by 6% on the back of a one-month unplanned stoppage at the Mangara field in Chad, but maintained its other guidance.

· Hub Group (HUBG) Q3 EPS 77c/$933.2M vs. est. 70c/$1.11B; sees Q4 EPS 85c-95c vs. est. 78c; sees Q4 capital expenditures $60M-$80M, and Q4 effective tax rate of 22.0%-22.4%

· OSI Systems (OSIS) Q1 EPS 81c/$266.2M vs. est. 61c/$247.03M; raises FY19 EPS view to $3.85-$4.05 from $3.80-$4.00 and raises FY19 revenue view to $1.14B-$1.175B from $1.125B-$1.165B

· Republic Services (RSG) Q3 EPS 82c/$2.57B vs. est. 81c/$2.57B; backs FY18 adjusted EPS view $3.05-$3.10

Technology, Media & Telecom

· Alphabet (GOOGL) Q3 EPS $13.06/$27.2BB vs. est. $10.40B/$27.33B (ex-TAC); Q3 properties revenues $24.05B vs. $19.72B last year; reports Q3 Network Members’ properties revenues $4.9B vs. $4.34B last year; Q3 traffic acquisition cost $6.58B vs. $5.5B last year; reports cost-per-click on Google properties down 28% YoY and Q3 paid clicks on Google properties up 62% YoY

· Intel (INTC) Q3 EPS $1.40/$19.2B vs. est. $1.15/$18.11B; said stronger than expected customer demand across our PC and data-centric businesses continued in the third quarter; sees Q4 adjusted EPS $1.22 on revs about $19.0B vs. est. $1.09/$18.39B; raises FY18 adjusted EPS view to $4.53, consensus $4.16 and raises FY18 revenue outlook to $71.2B vs. est. $69.54B

· Cypress Semiconductor (CY) Q3 EPS 40c/$673.0M vs. est. 38c/$669.24M; announced that it has entered into a joint venture with SK Hynix system Inc.; sees Q4 EPS 31c-35c on revs $585M-$615M vs. est. 35c/$644.32M

· Flex (FLEX) shares fall -15%; said Michael McNamara, its CEO and a member of the company’s Board of Directors, has decided to retire; 2Q adjusted EPS 29c/$6.71B vs. est. 28c/$6.79B; guides year below views: EPS $1.05-$1.15 on revs $26B-$27B vs. est. $1.23/$27.6B; Flex, Nike agree to wind down footwear manufacturing operations in Mexico

· Mellanox Technologies (MLNX) has hired a financial adviser to help it seek a sale after drawing acquisition interest from at least two companies, CNBC reported https://cnb.cx/2PQRnq5

· Avnet (AVT) Q1 EPS $1.03/$5.09B vs. est. $1.02/$5.05B; sees 2Q adjusted EPS 98c-$1.08 on revs $4.9B-$5.3B vs. est. 98c/$4.90B

· Lattice Semiconductor (LSCC) Q3 adjusted EPS 11c/$101.48M vs. est. 10c/$101.58M; sees Q4 revenue $93M-$97M vs. consensus $105.59M

· LogMeIn (LOGM) Q3 EPS $1.40/$308.9M vs. est. $1.34/$303.11M; sees Q4 EPS $1.41-$1.42 on revs $306M-$307M vs. est. $1.35/$300.36M; sees FY18 EPS $5.33-$5.34 on revs $1.203B-$1.204B vs. est. $5.22/$1.19B

· Monolithic Power (MPWR) Q3 EPS $1.06/$160M vs. est. $1.05/$158.53M; sees Q4 revenue $151M-$157M vs. est. $158.53M

· Power Integrations (POWI) Q3 EPS 77c/$110.1M vs. est. 77c/$113.92M; sees Q4 revenue $94M-$100M vs. est. $113.82M and non-GAAP gross margin is expected to be between 51.5% and 52%

· Snap (SNAP) assumes daily active users will decline sequentially in Q4; posted better-than-expected top- and bottom-line numbers for Q3 but reported another slip in daily active users; Q3 EPS (12c)/$298M vs. est. loss (14c)/$283.21M; operating cash flow improved by $61M

· VeriSign (VRSN) Q3 EPS $1.23/$305.78M vs. est. $1.20/$305.38M; said ended the third quarter with 151.7 million .com and .net domain name registrations in the domain name base, a 4.0 percent increase from the end of the third quarter of 2017, and a net increase of 1.99 million during the third quarter of 2018

· Western Digital (WDC) Q1 adjusted EPS $3.04/$5B vs. es.t $3.04/$5.14B; said Q1 results reflected strength in capacity enterprise, surveillance hard drives and embedded flash solutions, with each growing revenue over 30% from the year-ago quarter.” “However, strength in these end markets was offset by ongoing declines in flash pricing”

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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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