Morning Preview: October 31, 2018

Terrie AmengualDaily Market Report

 

Early Look

Wednesday, October 31, 2018

U.S. stock futures are higher, tracking both Europe and Asia to the upside, as markets look to end a “scary” month on a positive note. U.S. stock benchmarks surged on Tuesday, erasing all of Monday’s losses as markets have been dealing with whipsawing swings amid fears about earnings, the health of the global economy and Federal Reserve interest rate hikes, among other concerns. With yesterday’s gains, the S&P 500 and the Dow Industrial Average moved back into positive territory for 2018. In Asian markets, The Nikkei Index jumped 463 points (2.16%) to settle at 21.920, the Shanghai Index rose 34 points (1.35%) to close October above 2,600 and the Hang Seng Index gained 394 points of 1.6% to end the month at 24,979. The moves came after the Bank of Japan kept its ultra-easy monetary policy in place as concerns grow about the impact of U.S.-China trade tensions on the Japanese economy. In Europe, the German DAX is up around 130 points over 11,400, while the FTSE 100 is up over 100 points at 7,140. The bounce overseas is having a carry over effect in the U.S., but averages are still on track to post big losses for October. There were several data points overseas (China PMI, Eurozone inflation, BOJ policy news, among others), but another busy day of earnings should drive markets in the U.S.

Market Closing Prices Yesterday

· The S&P 500 Index gained 41.38 points, or 1.57%, to 2,682.63

· The Dow Jones Industrial Average rose 431.72 points, or 1.77%, to 24,874.64

· The Nasdaq Composite spiked 111.36 points, or 1.58%, to 7,161.65

· The Russell 2000 Index advanced 29.33 points, or 1.98% to 1,506.64

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 8:15 AM EST ADP Employment Index for Oct…est. 187K

· 8:30 AM EST Employment Cost Index for Q3…est. 0.7%

· 9:45 AM EST Chicago Purchasing Manager index for Oct…est. 60.0

· 10:30 AM EST Weekly DOE Inventory Data

Earnings Calendar:

· Earnings Before the Open: ACOR, ADP, AEE, AIT, ANTM, APO, APTV, BAX, BG, CDW, CG, CLX, CRTO, DBD, DIN, EL, GNC, HES, GSK, GM, GNC, GRMN, HES, HFC, ICE, JBT, K, S, SNY, SAN, SC, SPR, TAP, TEL

· Earnings After the Close: AIG, ALL, ATH, CACI, CDE, CF, CLI, CMP, ESRX, FISV, FIT, FORM, MOH, MUSA, NXPI, QRVO, SSNC, STAY, WMB, XPO, ZNGA

World News

· Former Fed Chairwoman Janet Yellen said Tuesday the Federal Reserve should stick to the task of raising interest rates to slow down the economy despite the market turmoil seen this month. “I think it’s appropriate for the Fed to be raising interest rates a bit more,” Yellen said during a talk at the Charles Schwab Impact 2018 conference in Washington. Yellen said financial conditions remain “accommodative,” or easy, despite the market correction.

· China’s official Purchasing Managers’ Index (PMI) fell to 50.2 in October from 50.8 in September, only slightly above the 50-point mark that separates growth from contraction for the 27th straight month.

· The Bank of Japan board voted 7-2 to maintain short-term interest rates at minus 0.1% and the target for the 10-year Japanese government bond yield at around zero. The BOJ reiterated Wednesday that it would keep “extremely” low interest rates “for an extended period” and allow the 10-year JGB yield to move in a more flexible manner. The central bank kept its price projections largely unchanged in its quarterly outlook report, sticking to the view that inflation won’t reach the BOJ’s 2% target until at least March 2021.

· Inflation in the EuroZone hit 2.2% in October, the highest rate since December 2012, on the back of the surge in energy prices

· Investors Intelligence poll newsletter writers classified as bulls fell for a fourth week; slumps to 44.3%, the lowest reading since May 9, after bullishness peaked on October 3 at 61.8%; those looking for a correction rises to a five-month high of 35.9% vs 30.5% last week; bearish sentiment increases to 19.8%, the highest since May 9, vs 19.0% last week

Sector News Breakdown

Consumer

· Big 5 Sporting (BGFV) Q3 EPS 15c/$266.4M vs. est. 19c/$275.76M; sees Q4 EPS loss (25c)-(15c) vs. est. 14c; expects same store sales to be in the range of negative low single-digits to positive low single-digits and expects to realize a loss per share in the range of (25c)-(15c

· BJ’s Restaurants (BJRI) Q3 EPS 39c/$270.3M vs. est. 23c/$262.8M; 3Q comparable sales +6.9% and Q3 total restaurant operating weeks increased approximately 3.1%

· Container Store (TCS) Q2 EPS 10c/$224.5M vs. est. 14c/$225.08M; reports Q2 comparable store sales increase of 1.3%; affirms 2018 adjusted EPS outlook 41c-51c and affirms 2018 sales outlook $885M-$895M vs. est. 46c/$886.14M; still sees 2018 comparable store sales up 1.5%-2.5%

· Cheesecake Factory (CAKE) Q3 adjusted EPS 62c/$580.9M vs. est. 58c/$587.33M; 3Q company-owned comp sales +1.5%, estimate +1.9%

· Herbalife Nutrition (HLF) announces new $1.5B share repurchase program; sees 2018 adjusted EPS $1.99-$2.09 vs. est. $2.84 and sees 2018 net sales growth 9.9%-10.9% vs. 2017; Q3 adjusted EPS 74c vs. consensus 67c

· Hyatt (H) Q3 adjusted EPS 33c vs. est. 26c; Q3 Net income increased to $237M, aided by gains on sales of real estate. Adjusted EBITDA decreased 0.9% to $175M, an increase of 0.1% in constant currency. Comparable system-wide RevPAR increased 2.8%; announces new $750M stock buyback program

· MGM Resorts (MGM) Q3 EPS 26c/$3.03B vs. est. 20c/$2.96B; net revenues decreased 2% compared to the prior year quarter at the Company’s domestic resorts to $2.2 billion and decreased 3% on a same-store basis; RevPAR decreased 3.9% y/y at MGM’s Las Vegas Strip resorts, a worsening trend vs 2Q’s +2.8%, but better than the company’s view of down 5%-7%

· Nutrisystem (NTRI) Q3 EPS 54c/$159.3M vs. est. 54c/$164.04M; authorizes new $75M stock repurchase program; backs FY18 EPS view of $2.08-$2.13 vs. est. $2.10 and sees FY18 revenue $691M-$696M, consensus $701.09M; sees adjusted EBITDA between $105.1M-$107.1M

· SkyWest (SKYW) Q3 EPS $1.57/$829M vs. est. $1.40/$822.13M

· Yum China (YUMC) Q3 adjusted EPS 51c/$2.2B vs. est. 45c/$2.23B; Q3 comparable sales -1%, vs. estimate -1.9%; 3Q Pizza Hut Casual Dining Comparable Sales -5%, vs. estimate -2.8%

Energy

· The American Petroleum Institute (API) reported U.S. crude supplies rose by 5.7M barrels for the week ended Oct. 26 (sixth straight increase is the longest streak since March 2017), showed supply declines of -3.5M barrels for gasoline and 3.1 million barrels for distillates

· Anadarko (APC) Q3 EPS 82c vs. est. 86c; 3Q sales vol. 682,000 mboe/d; sees 4Q capital expenditure $650M-$950M; sees 4Q net sales volume 674 to 728 mboe/d

· Concho Resources (CXO) Q3 EPS $1.42 vs. est. $1.06; sees 4Q production 305 to 310 mboe/d after 3Q production 286,634 boe/d; capital spending for 2019 is expected to be between $3.4 billion and $3.6 billion; sees 2019 production growth 25%-30%

· Edison International (EIX) Q3 EPS $1.56/$4.27B vs. est. $1.31/$3.62B

· Holly Frontier (HFC) Q3 EPS $1.98 vs. est. $1.66

· Nabors (NBR) Q3 EPS loss (31c) vs. est. loss (20c)

· SunPower (SPWR) Q3 adjusted EPS loss (29c)/$443.4M vs. est. (40c)/$475.82M; sees Q4 adjusted revenue $510M-$610M vs. est. $655.23M; sees Q4: gross margin of 6%-8%; sees FY18 adjusted revenue $1.8B-$1.9B vs. est. $1.99B

· Western Gas Partners (WES) Q3 EPS 39c/$507.76M vs. est. 67c/$553.49M

· Whiting Petroleum (WLL) Q3 EPS 92c vs. est. 59c; Q3 total net production for the Company averaged 128,680 BOE/d; the Bakken/Three Forks plays in the Williston Basin averaged 106,835 BOE/d

Financials

· Arch Capital (ACGL) Q3 adjusted EPS 59c vs. est. 52c; reports Q3 gross premiums written $$1.73B, consensus $1.35B; Q3 combined ratio 82.3% vs. 111.8% last year

· CyrusOne (CONE) Q3 FFO 79c/$206.6M vs. est. 80c/$208.62M; Q3 adjusted EBITDA $110.8M, up 16% from last year

· FleetCor (FLT) raised its 2018 total revenue forecast to $2.390B-$2.420B from $2.365B-$2.415B after Q3results topped views; now expects 2018 adjusted EPS of $10.40-$10.50 vs its prior forecast of $10.32-$10.52; estimate $10.46; Q3 EPS $2.68/$619.6M vs. est. $2.66/$609.8M

· Public Storage (PSA) Q3 core FFO $2.70/$706.4M vs. est. $2.67/$706.06M;

· Voya Financial (VOYA) Q3 EPS $1.34 vs. est. $1.19; 3Q adjusted book value per share $47.28; authorizes an added $500M of share repurchases

Healthcare

· Amgen (AMGN) Q3 EPS $3.69/$5.9B vs. est. $3.45/$5.77B; raises FY18 adjusted EPS view to $14.00-$14.25 from $13.30-$14.00 (est. $14.02) and raises FY18 revenue view to $23.2B-$23.5B from $22.5B-$23.2B (est. $23.17B); Enbrel $1.29B, Neulasta $1.05B, Aranesp $477M, Epogen $252M, Kyprolis $232M and Repatha $120M

· Accuray (ARRY) Q3 EPS (11c)/$95.8M vs. est. loss (9c)/$94.26M; sees FY19 revenue $415M-$425M vs. est. $418.7M; product revenue growth is expected to range between 4%-8% and service revenue is expected to grow approximately 2% resulting in total revenue of between $415.0M-$425.0M, which would represent 3%-5% growth year over year

· Clovis (CLVS) Q3 EPS loss ($1.71)/$22.76M vs. est. loss ($1.60)/$30.11M; 3Q Rubraca revenue $22.8M vs. Bloomberg est. $31.1M

· Exact Sciences (EXAS) Q3 EPS loss (23c)/$118.3M vs. est. loss (42c)/$109.31M; raises FY18 revenue view to $435M-$440M from $420M-$430M (est. $428.75M); said 241k tests were completed during quarter, had forecast 227k-237k tests

· Horizon Technology (HRZN) Q3 EPS 30c/vs. est. 29c; reports net assets were $134.5M as of September 30, or $11.66 per share, as compared to $136.0M, or $11.81 per share, as of September 30, 2017, and $135.1M, or $11.72 per share, as of December 31, 2017

· KemPharm (KMPH) announced its entry into a definitive collaboration and license agreement with KVK Tech for the U.S. commercial rights of its FDA-approved prodrug product, Apadaz Under the terms of the agreement, KemPharm is eligible to receive up to an estimated $3.4M in pre-launch payments and certain cost reimbursements

· NextGen Healthcare (NXGN) guides FY19 EPS 70c-74c vs. prior 70c-78c and lowers FY18 revenue outlook to $525M-$535M from $532M-$548M (est. $541.61M)

· NuVasive (NUVA) Q3 EPS 56c/$271.3M vs. est. 62c/$265.44M; lowers FY18 non-GAAP EPS view to $2.15-$2.23 from $2.37-$2.40 (est. $2.38) while raises FY18 revenue view to $1,105-$1,110 from $1,095-$1,105 (est. $1.1B)

· Cardiovascular Systems (CSII) Q1 EPS loss (9c)/$56.3M vs. est. loss (5c)/$55.48M

· Thermo Fisher Scientific Inc. (TMO) is considering a sale of its anatomical pathology unit in a deal that could fetch about $1 billion, Bloomberg reported

· Takeda Pharma raised its annual net profit forecast by 36% on the back of cost cuts and an improved outlook for its blockbuster cancer drug Velcade

· Orchard Therapeutics (ORTX) 14.3M share IPO priced at $14.00

· Twist Bioscience (TWST) 5M share IPO priced at $14.00

Industrials & Materials

· Apollo Global (APO) is in advanced talks to acquire Arconic (ARNC) for over $11B, Reuters reports, said Reuters. The private equity firm could reach a deal with the aluminum products maker as early as next week after a competing buyout consortium including Blackstone (BX), Carlyle (CG), Onex (ONEXF), and Canada Pension Plan Investment Board suggested it may need three more weeks to complete due diligence on the company https://on.mktw.net/2SvLdxz

· C.H. Robinson (CHRW) Q3 EPS $1.25/$4.3B vs. est. $1.17/$4.29B; said truckload volume trends improved sequentially, and we delivered volume growth in many of our other service lines

· McDermott (MDR) Q3 EPS 20c/$2.3B vs. est. 29c/$2.5B; completes review of its portfolio, concludes the two units aren’t central to its long-term goals, has decided to seek buyers; expects to sell the businesses separately, sees combined proceeds of over $1B

· Owens-Illinois (OI) Q3 EPS 75c/$1.7B vs. est. 75c/$1.78B

· Rexnord (RXN) Q2 EPS 46c/$524.8M vs. est. 42c/$515.4M; Q2 adjusted EBITDA increased 20% year over year and benefited from our structural cost reduction initiatives and from solid execution of our strategies to offset input cost inflation, including materials cost actions, supply chain management, and selective price increases.

Technology, Media & Telecom

· Facebook (FB) Q3 EPS $1.76/$13.73B vs. est. $1.47/$13.78B; reports Q3 daily active users up 9%, monthly active users up 10%; reports daily active users, or DAUs, were 1.49B on average for September 2018, an increase of 9% year-over-year. Monthly active users, or MAUs, were 2.27B as of September 30, 2018, an increase of 10% year-over-year

· Microsoft Corp. (MSFT) holder files to sell 52.7M shares

· Baidu (BIDU) Q3 adjusted EPS $2.77/$4.11B vs. est. $2.40/$3.96B; sees Q4 revenue $3.71B-$3.89B vs. est. $3.98B, representing a 15% to 20% increase year over year; 3Q active online marketing customers +7%; 3Q rev. per online marketing customer +12%

· Electronic Arts (EA) Q2 EPS 83c/$1.29B vs. est. 58c/$1.18B; reports digital net bookings for the trailing twelve months was a record $3.608B up 11% year-over-year and represents 69% of total net bookings; sees 2019 adjusted EPS $2.70-$3.10 vs. est. $3.28; sees 2019 net sales growth 2.8%-6.8% vs. 2017; sees 2019 volume point growth 4%-8% vs. last year

· 3D Systems (DDD) falls -18%; after missing on both the top line and bottom line; reported 3Q EPS 2c/$164.5M vs. est. 3c/$165.0M

· FireEye (FEYE) Q3 EPS 6c/$212M vs. est. 2c/$208.45M; sees Q4 adjusted EPS 4c-6c on revs $214M-$218M vs. est. 4c/$216.56M; sees FY18 EPS 6c-8c on revs $827M-$831M vs. est. 3c/$826.84M

· Keysight Technologies Inc. (KEYS) to replace CA Inc. (CA) in the S&P 500 index on Nov. 6

· Maxim Integrated (MXIM) Q1 EPS 75c/$638M vs. est.75c/$634.44M; sees Q2 EPS 59c-65c vs. est. 73c; approved new $1.5B share buyback

· MaxLinear (MXL) Q3 EPS 19c/$85.0M vs. est. 18c/$85.01M; sees Q4 revenue $85M-$89M vs. est. $88.9M; sees Q4 GAAP and non-GAAP gross margin of approximately 52.5% and 63.0%, respectively

· NCR Corp. (NCR) Q3 EPS 58c/$1.55B vs. est. 54c/$1.60B; Q1 Software revenue up 1% driven by cloud revenue growth of 6%; reports Q1 Services revenue up 1% and gross margin expansion of 70 basis points; backs FY18 EPS view of $2.55-$2.75 and backs FY18 revenue growth view of (3%) to (1%)

· Paycom (PAYC) Q3 EPS 52c/$133.3M vs. est. 51c/$130.24M; sees Q4 revenue $142.5M-$144.5M, vs. consensus $142.4M; sees FY18 revenue $558.5M-$560.5M vs. est. $555.94M

· T-Mobile (TMUS) Q3 EPS 93c/$10.8B vs. est. 85c/$10.72B; reports service revenues of $8.1B, up 6%; reports 1.6M total net additions and 1.1M total branded postpaid net additions in the quarter; raises FY18 adjusted EBITDA view to $11.8B-$12B from $11.5B-$11.9B; said continue to expect branded postpaid phone ARPU to be generally stable compared to full-year 2017, excluding the impact from the new revenue standard

· Ultimate Software (ULTI) Q3 EPS $1.33/$287.8M vs. est. $1.32/$287.24M; sees Q4 revenue $300M vs. est. $302.71M; sees Q4 Recurring revenues of approximately $262M to $264M

· Zendesk (ZEN) Q3 adjusted EPS 9c/$154.8M vs. est. 4c/$151.8M

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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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