Morning Preview: November 01, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, November 1, 2018

U.S. futures pointed to gains as the new month of trading gets underway, while the dollar slips from 16-month highs, as the pound jumped on hopes for progress in Brexit negotiations. Treasuries slipped for a fourth day, while crude extends its losses. The big news comes after the bell as tech bellwether and Dow component Apple (AAPL) is expected to report quarterly earnings. Also later this morning, the Bank of England policy meeting where they are seen standing pat on rates and is expected to give new forecasts. There was one big deal in the oil E&P sector with Newfield (NFX) being acquired by Encana (ECA) in a $5.5B deal. U.S. monthly auto sales are also expected out today. Back to the dollar, it slides as the British pound soars after a report that the U.K. has reached a post-Brexit deal for the financial services sector. The pound traded above the $1.29 level from $1.2767 late yesterday. In Asian markets, The Nikkei Index fell -232 points to 21,687, the Shanghai Index inched higher 3 points to 2,606 and the Hang Seng Index gained 436 points to settle at 25,416. In Europe, the German DAX is up about 100 points at 11,550, while the FTSE 100 is up about 20 points at 7,150. U.S. stocks look to get back on track after a dreadful month of returns in October!

Investors happily say good-bye to October, as stocks climbed on Wednesday to close out an ugly month on a positive note as solid earnings from high-profile companies lifted spirits of investors, as the S&P 500 and Dow posted their best 2-day gain in about 9-months. The Dow Jones Industrial Average moved back above 25,000 since Oct. 23, the S&P 500 index gained 1%, posting its first 2-day win streak since late September and the Nasdaq surged 2% to close back above 7,300 (off lows below 7K just a day ago). For October, the S&P 500 shed 6.9% for its biggest monthly decline since September 2011, while the Dow dropped 5.1% in its biggest monthly percentage fall since January 2016. The Nasdaq was the worst-performing major benchmark, dropping 9.2% in October for the biggest fall since November 2008. The worst performers in the Dow Industrials for October were: IBM -24%, CAT -20%, DWDP -16%, HD -15%, and CVX -9%, led by weaker earnings outlooks, a 10% drop in crude and tariff impacts.

Market Closing Prices Yesterday

· The S&P 500 Index jumped 29.11 points, or 1.09%, to 2,711.74

· The Dow Jones Industrial Average rose 241.12 points, or 0.97%, to 25,115.76

· The Nasdaq Composite spiked 144.25 points, or 2.01%, to 7,305.90

· The Russell 2000 Index advanced 4.78 points, or 0.32% to 1,511.41

Events Calendar for Today

· 7:30 AM EST Challenger Job Cuts YoY for Oct

· 8:30 AM EST Weekly Jobless Claims…est. 212K

· 8:30 AM EST Continuing Claims…est. 1.64<

· 8:30 AM EST Nonfarm Productivity, Q3-P…est. 2.1%

· 8:30 AM EST Unit Labor Costs, Q3-P…est. 1.0%

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 60.1

· 9:45 AM EST Markit US Manufacturing PMI, Oct-F…est. 55.8

· 10:00 AM EST Construction Spending MoM for September…est. 0.0%

· 10:00 AM EST ISM Manufacturing for Oct…est. 59.0

· 10:00 AM EST ISM Prices Paid Index for Oct…est. 69.0

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

· N/A Monthly auto sales data for October

Earnings Calendar:



World News

· Times of London reported that government sources indicated a tentative deal had been reached to allow U.K. banks to keep operating in European Union markets even after Brexit goes through.

· President Trump reiterated plans for a 10% middle-class tax cut, saying it will come next year, rowing back from a previous pledge that Congress would vote on it before the elections.

· U.K. manufacturing growth slumped to the lowest since the aftermath of the Brexit vote last month; the PMI fell to 51.1, well below economists’ estimates of 53

Sector News Breakdown


· Extended Stay America (STAY) Q3 EPS 39c/$351.1M vs. est. 37c/$344.64M; Q3 adjusted FFO 61c.Reports comparable system-wide Revenue Per Available Room grew 1.9% to $55.57; sees FY18 EPS $1.10-$1.14 on revs $1.27B-$1.28B vs. est. $1.12/$1.27B

· Fitbit (FIT) Q3 adjusted EPS 4c/$394M vs. est. loss (1c)/$381.21M; says sold 3.5 million wearable devices in the quarter; re-affirming full year revenue guidance of $1.5 billion; sees Q4 adjusted EPS greater than 7c and revs above $560M vs. est. 6c/$569.22M

· Fox Factory (FOXF) Q3 EPS 72c/$175.8M vs. est. 66c/$173.3M; announces operations expansion; sees Q4 EPS 50c-56c on revs $148M-$158M vs. est. 50c/$152.11M.

· Hilton Grand Vacations (HGV) Q3 EPS 42c/$427M vs. est. 45c/$430.36M; reports Q3 contract sales up 11.7%; net Owner Growth for the 12 months ending Sept. 30, 2018, was 7.4%; Sees FY EPS $2.94 to $3.04 vs. estimate $3.01

· Churchill Downs (CHDN) has agreed to buy the ownership interests of Midwest Gaming from Clairvest Group for about $291M; Q3 adjusted EPS $1.60/$221.3M vs. est. $1.48/$208.88M


· Encana (ECA) to acquire Newfield Exploration (NFX) in all-stocks transaction valued at about $5.5B; Encana will assume $2.2 billion of Newfield net debt. Subject to approvals, the transaction is expected to close in the first quarter of 2019

· Antero Resources (AR) Q3 EPS 24c vs. est. 23c; 3Q production 2,718 mmcfe/d; Q3 lease operating expenses $36.3 million

· Apache Corp. (APA) Q3 EPS 63c vs. est. 47c; 3Q production 476,000 boe/d; sees 2019 production at high end of previously announced guidance of 410k to 440k/BOE per day on annual system capital upstream program of $3B

· Keane Group (FRAC) Q3 EPS 28c/$558.9M vs. est. 22c/$547.65M; Q3 Adjusted EBITDA $100.9M vs. $111.3M in Q2; sees Q4 revenue $470M-$500M, vs. consensus $529.15M

· Noble Corp. (NE) Q3 EPS loss (33c)/$279.4M vs. est. loss (46c)/$260.89M; 3Q backlog $2.5 billion; 3Q contract drilling revenue $267.2 million

· Halcon (HK) says it will retain all of its oil and gas infrastructure assets; to sell assets to a private company; $200M of the purchase price is payable in cash upon closing and $125M payable on a deferred basis over a 5-year period based on meeting certain annual incentive thresholds

· Hornbeck Offshore (HOS) Q3 EPS loss (83c)/$58.5M vs. est. loss (70c)/$58.3M

· Mammoth Energy (TUSK) Q3 EPS $1.54/$384M vs. est. $1.06/$475.8M; 3Q adjusted Ebitda $183.6M vs. est. $110.8M; Q3 capital expenditure $40.7M

· Matador (MTDR) Q3 EPS 48c/$216.3M vs. est. 36c/$205.49M; Q3 average daily oil equivalent production increased 3% sequentially to a record quarterly high for the Company of 54,600 barrels of oil equivalent per day; Sees FY capital expenditure $645 million to $680 million; raises FY oil production 11.0 million to 11.1 million barrels, saw 10.6 million to 10.9 million

· Newfield Exploration (NFX) Q3 EPS $1.01/$711M vs. est. 86c/$639.68M; Sees FY domestic NGL production 42 mboepd, saw 41; sees 4Q domestic oil production 185 to 200 mboepd; sees FY total domestic production 185 to 190 mboepd, saw 180.0 to 190.0

· Royal Dutch Shell PLC (RDSA) reported a 51% rise in third-quarter profit and launched the second tranche of its $25 billion share-buyback program

· Warrior Met Coal (HCC) Q3 EPS $1.06/$273.3M vs. est. $1.34/$274.01M; Q3 adjusted EBITDA of $94.1M compared to Adjusted EBITDA of $107.3M in the third quarter of 2017; sees FY18 coal sales 7.1M-7.5M tons; Q3 met coal output 1.8M tons vs. 1.6M last year

· Williams Cos (WMB) Q3 adjusted Ebitda $1.20B vs. est. $1.14B; 3Q adjusted EPS 24c; sees full-year results trending toward the upper end of financial guidance for 2018

· WPX Energy (WPX) Q3 EPS 7c/$484M vs. est. 9c/$516.88M; tightened its full-year 2018 guidance for oil to 79-82 MMbbl/d and total equivalent production to 123-130 Mboe/d. For 2019, WPX is targeting 25-30 percent year-over-year growth in oil volumes, with expected production of 100-105 MMbbl/d. Total equivalent production for 2019 is estimated at 159-171 Mboe/d


· AIG Corp. (AIG) Q3 EPS loss (34c) vs. est. 6c; 3Q net unfavorable prior year loss reserve development $170M; North America personal insurance was adverse by $148M due to updated loss estimates for the 2017 California wildfires; 3Q book value per share $66.23 vs $68.65 q/q; 3Q net pretax catastrophe losses $1.6B vs company forecast of ~$1.5B-$1.7B

· Athene Holding (ATH) Q3 EPS $1.95/vs. est. $1.74; Q3 NII $1.07B; Q3 adjusted book value per share of $45.94, an increase of 8% and 23% for the quarter-over-quarter and YoY

· CNO Financial (CNO) Q3 EPS 53c/$1.48B vs. est. 51c/$999.03M; 3Q book value per share $21.99; 3Q new annualized premiums $81.7 million

· Credit Suisse (CS) fell after revenue and profit missed in the third quarter thanks to a loss from global markets

· Janus Henderson’s (JHG) net income tumbled more than a fifth to $111m in the third quarter compared to the second as the company was hit by a sharp turnaround in performance fees.

· Fiserv (FISV) Q3 EPS 75c/$1.41B vs. est. 77c/$1.43B; narrows FY18 EPS view to $3.10-$3.15 from $3.02-$3.15 vs. est. $3.14; continues to expect internal revenue growth of at least 4.5%

· Hanover (THG) Q3 EPS $1.97 vs. est. $1.85; 3Q net investment income $66.4 million and 3Q net premiums written $1.18 billion

· New Residential (NRZ) announces 25M share common stock offering


· AMN Healthcare (AMN) Q3 EPS 84c/$526.8M vs. est. 76c/$526.63M

· Express Scripts (ESRX) Q3 EPS $2.43/$25.56B vs. est. $2.42/$25.02B; 3Q total adjusted claims 334.6 million; says will no longer provide financial guidance due to pending acquisition by Cigna

· Heron Therapeutics (HRTX) submits New Drug Application to FDA for HTX-011, which has Breakthrough Therapy and Fast Track designations from FDA

· Masimo (MASI) Q3 adjusted EPS 71c/$210.6M vs. est. 69c/$207.62M; raises FY18 EPS view to $2.92 from $2.90 and raises FY18 revenue view to $854M from $850M (est. $850.8M)

· Molina Healthcare (MOH) Q3 EPS $2.97/$4.697B vs. est. $1.64/$4.7B; raises FY18 adj. EPS view to $9.05-$9.25 from $7.39-$7.59 (est. $7.52); backs FY18 revenue view of roughly $18.8B, vs. consensus $18.85B

· PerkinElmer (PKI) Q3 EPS 90c/$674.3M vs. est. 92c/$676.4M; reports core organic revenue growth of 7%; lowers FY18 adjusted EPS view to $3.60 from $3.65; said pleased with the high-single digit organic revenue growth and greater than 20% adjusted EPS growth in the third quarter

Industrials & Materials

· BHP Billiton (BHP) announces $10.4B to return to holders; $5.2B in buyback and to use towards special dividend

· CF Industries (CF) Q3 EPS 13c/$1.04B vs. est.15c/$999.7M; sees FY capital expenditure $425M

· Compass Minerals (CMP) Q3 EPS 37c/$322.5M vs. est. 52c/$323.53M; excluding the impact of restructuring charges in 2017, operating earnings for the third quarter of 2018 were 9% below prior-year adjusted results while adjusted EBITDA declined 2%.

· Fluor Corporation (FLR) announced that it has been awarded an engineering, procurement and construction management contract by Teck (TECK) for the Fording River South Active Water Treatment Facility in the Elk Valley, British Columbia, Canada

· Gardner Denver (GDI) announces offering of 20M shares of common stock for holders

· Rayonier (RYN) Q3 EPS 18c/$200.9M vs. est. 6c/$180.9M; Sees year adj. Ebitda Above Prior Guidance

· XPO Logistics (XPO) Q3 EPS 89c/$4.34B vs. est. 98c/$4.4B; sees FY adjusted Ebitda about $1.59B vs. est. $1.60B; reaffirms 2017-2018 target for cumulative free cash flow about $1b


· Federal Realty (FRT) Q3 FFO $1.58/$229.75M vs. est. $1.55/$227.68M; Sees FY FFO per share $6.18 to $6.24 vs. estimate $6.19

· Life Storage (LSI) Q3 FFO $1.45/$141.5M vs. est. $1.63/$141.08M; increased same store revenue by 3.6% and same store net operating income by 4.2% as compared to Q3’17; sees FY18 FFO $5.46-$5.52, consensus $5.46

· MAA (MAA) Q3 EPS 46c/$397.1M vs. est. 47c/$394.57M; reaffirming its existing full-year expectation for Same Store property revenue growth of 1.75% to 2.25%; now expects Same Store property operating expenses for the full-year to increase by 2.00% to 2.50%

Technology, Media & Telecom

· CACI (CACI) Q1 EPS $3.10/$1.17B vs. est. $2.04/$1.15B; reports contract awards in the quarter were $2.54B, which excludes ceiling values of multi-award, indefinite delivery, indefinite quantity contracts; raises FY19 EPS view to $9.77-$10.16 from $9.14-$9.53 and backs year revs

· FormFactor (FORM) Q3 EPS 26c/$135M vs. est. 23c/$133.13M; sees Q4 EPS 23c-29c on revs $132M-$140M vs. est. $132M

· OpenText (OTEX) Q1 EPS 60c/$667.2M vs. est. 59c/$688.21M

· Qorvo (QRVO) Q2 EPS $1.75/$884M vs. est. $1.62/$855.97M; sees Q3 EPS $1.95 at guidance midpoint vs. est. $1.97; sees Q3 revenue $880M-$900M vs. est. $899.02M; sees gross margin of approximately 50%

· SS&C (SSNC) Q3 EPS 79c/$1.0B vs. est. 74c/$1B; sees Q4 revenue $1.08B-$1.09B vs. consensus $1.08B; sees Q4 adjusted net income $210M-$220M

· (STMP) Q3 EPS $2.76/$143.5M vs. est. $2.38/$132.28M

· Zynga (ZNGA) Q3 EPS 1c/$233.2M vs. est. 4c/$249.43M; Q3 average daily active users 22M vs. 23M last quarter; Q3 average monthly active users 20M vs. 21M last quarter; sees Q4 revenue $235M below est. $268.95M; sees Q4 bookings of $250M and net loss of $2M; release of Harry Potter game expected to come in the 2H’19, while Star Wars product will not launch in 2019



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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