Mid-Morning Look: November 06, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Tuesday, November 6, 2018

U.S. equities are edging higher after mixed results on Monday (S&P/Dow rose while the NASDAQ fell), though currency, commodity and bond markets are trading in a narrow range ahead of today’s mid-term elections. Potential record turnouts are expected for mid-term elections where markets weigh the possible outcomes and the meaning of those outcomes to specific sectors. According to the most recent polls, Democrats may win back the House, while the GOP is expected to hold the Senate. Markets have been moving with those expectations over the last few days. Any changes where GOP holds both or the Democrats surprise and take back both, will likely lead to volatility in overnight action. Sectors such as financials, technology (regulatory/tax cuts), specific energy stocks, Pharma (amid battle on drug pricing) and industrials (infrastructure plan by Trump) are among the names that could move the most. If that’s enough for you, weekly energy inventory data out tonight and tomorrow (WTI crude looks to snap its 6-day losing streak), and an FOMC meeting in a few days (though no changes are expected at this time). Earnings plentiful in another very week of corporate results.

Treasuries, Currencies and Commodities

· In currency markets, the dollar index little changed after slipping yesterday, gold prices also little changed holding around $1,230 an ounce, Treasury prices little changed with the 10-year yield around 3.20% and oil prices looking to snap its 6-day losing streak, longest streak in 20-months, ahead of inventory data tonight and tomorrow – all macro movers steady ahead of the mid-term election results later tonight!

Sector Movers Today

· Autos; TM raised its earnings forecast for the year, citing growing sales in China and the weaker yen and said it will buy back about $2.2 billion of stock; recent Chinese IPO NIO a wider loss than anticipated with its Q3 report while discloses 4,206 ES8 vehicles were produced and 3,268 were delivered during the quarter; Subaru rose in Japanese trading despite posting a Q2 loss, cutting its full-year forecast and expanding a vehicle recall on quality problems; GM tgt raised to $60 at Citigroup saying now is the time to seize opportunity to unlock value; MNRO tgt raised to Street high $86 at Oppenheimer saying key internal initiatives have started to take hold

· Housing & Building Products; building material stocks weaker after SUM reported 3Q results below analysts’ estimates and lowered its full-year adjusted Ebitda forecast, citing inflationary cost increases and persistent weather conditions that hurt operations; MLM also with cautious full-year revenue forecast , with the midpoint falling below expectations (shares of peers VMC, EXP, USCR, CBPX, USG, GMS, AMWD, BLDR, AWI among movers)

· Pharma movers; generics get a boost after MYL earnings beat estimates and it held on to its 2018 forecast, while BHC 3Q results beat and its year Ebitda view was raised; MNK rises after its 2018 earnings view topped estimates in a good round of earnings in generics/specialty pharma; NBIX matched 3Q expectations for Ingrezza sales, registering $111M vs $110M consensus, as Ingrezza performance was driven by continued script growth at 16% q/q, lower than the 34% 2Q growth; in large cap Pharma, LLY posted a Q3 beat and raise guidance, but shares slipped

· E&P sector; OAS issued a modest earnings miss in 3Q, lower than expected 4Q production guidance and overall higher 2018 expense guidance; BE posted solid revenue, better than expected non-GAAP GM, and in-line EPS, but 4Q18 guidance was disappointing; LPI 4Q oil guidance that missed analyst estimates; CRZO strong beat and raise production quarter inclusive of an encouraging Delaware ops update but offers Q4’s oil guide coming up short of expectations; also watch names APC, NBL, PDCE, SRCI regarding Colorado ballot vote; weakness in sand frac continues as HCLP the latest to cut guidance ($50M-$65M vs. $110M)

· Chemicals rise led by fertilizer companies after MOS and NTR each boosts forecasts; MOS raises FY outlook and points to “strong operational performance” in the business units and strong fertilizer demand; NTR raises FY outlook for net earnings/share and adjusted Ebitda, pointing to “the strength of market fundamentals and acceleration of merger synergies

        Stock GAINERS

· BKNG +6%; posted a beat & raise for Q3, while also marked the 1st qtr of accelerating bookings & room night growth in 6 quarters

· BOJA +1%; reports a definitive pact to be bought by Durational Capital Management and the Jordan Company LP for $16.10 per share in cash/$593M deal https://reut.rs/2RCxkfF

· CVON +32%; enters into pact to be acquired by affiliates of CVC Fund VII in an all-cash deal valued at about $1.8B with holders to get $12.50/share cash https://on.mktw.net/2PKFzc8

· ELF +14%; as sales and GM% came in better than expected and shares were higher in the aftermarket/sales beat consensus by ~$4M due to a pull forward in the holiday program

· LASR +23%; rises as reported 3Q18 earnings results ahead of expectations and provided an outlook ahead of views

· MTW +6%; shares jumped on mixed results as EPS beat by 10c, though miss on revs and narrowed its FY revenue views

· MYL +13%; earnings beat estimates and it held on to its 2018 forecast as shares were upgraded to

· buy at Bank America

· NTR +4%; raises FY outlook for net earnings/share and adjusted Ebitda, pointing to “the strength of market fundamentals and acceleration of merger synergies

Stock LAGGARDS

· ABC -7%; 2019 forecast came in below analysts’ estimates, as saw EPS of $6.65-$6.95 below the $7.11 consensus and also forecast fiscal 2019 revenue would grow in the mid-single digits vs. estimate of 7% growth

· CAR -9%; misses estimates with its Q3 report for profit and revenue as its European business, with higher fleet costs and lower pricing leading to an 8.2% drop in international adjusted Ebitda for the quarter/raised year guidance

· FRGI -21%; after reporting EPS 8c worse than the consensus estimate and guiding for capital expenditures to be on the high end of its prior guidance range

· FTDR -31%; slashed its yearly Ebitda forecast in its first earnings report since its spinoff from ServiceMaster Global Holdings./cut 2018 adjusted Ebitda to $215-$225M from $245-$255M

· GSKY -27%; after cutting full-year forecasts due to Q4 seasonal headwinds coupled with a much steeper yield curve than management initially expected/guides 2018 Ebitda $165M-$175M, below prior view $192M-$199M

· ITRI -9%; Q3 EPS beat but guided 4Q below consensus as supply chain constraints weighed on sales/margin outlook and lowered its year outlook

· IVC -39%; shares among the top underperformers in the S&P 500 after Q3 EPS and revenue lagged estimates

· MAR -4%; cut its forecast for Q4 RevPAR below analyst estimates as now sees 4Q North America RevPAR up about 1%, had seen 1.5%-2%

· NKTR -10%; after an abstract for the Society for Immunotherapy of Cancer meeting highlighted that a 50% response rate in melanoma patients has remained unchanged from last update in June

· NVRO -19%; downgraded to underweight at JPMorgan after reporting wider than expected loss

· RL -5%; posted profit and revenue that topped analysts’ estimates, but shares slipped early amid flat sales growth/same-store sales were flat last quarter in constant currency terms

· THC –15%; issued a guidance cut more than miss, prelim 2019E EBITDA in line/adj. EBITDA was $577M, 4% below consensus, and towards the low end of the guide on worse margins

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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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