Morning Preview: January 24, 2019

Scott GreenDaily Market Report

Early Look

Thursday, January 24, 19

Futures

Up/Down

%

Last

DJ Industrials

13.00

0.05%

24,563

S&P 500

2.50

0.10%

2,641

Nasdaq

28.50

0.43%

6,694

 

 

Stock futures are edging slightly as earning season kicks into full gear, while investors look for resolutions in trade with China and the US government shutdown. The partial government shutdown moves into day-34, as the Senate will vote on two measures to reopen the government but will probably fail on both sides as Democrats refuse to support a GOP bill that includes wall funds, while their own temporary funding bill will also probably fail. In stocks news, chipmakers get a little relief after shares of TXN, LRCX and XLNX rally overnight following better quarterly results and guidance, though STM became the latest to issue a profit warning. Oil prices are slightly lower but given the protests and political strife in Venezuela, markets are watching closely. In Asian markets, The Nikkei Index fell -19 points to 20,574, the Shanghai Index gained 10 points to 2,591 and the Hang Seng Index gained 112 points to settle at 27,120. In Europe, the German DAX is up over 70-points at 11,150, while the FTSE 100 is down a few points around 6,830. Stocks posted decent gains yesterday, with the Dow Industrial Average outperforming following better results from Dow components IBM, UTX and PG. Later this morning, the European Central Bank holds its monetary policy meeting where they are expected to leave policy unchanged when officials conclude their meeting later Thursday, having closed down a bond-buying program known as quantitative easing in December. But ECB President Mario Draghi is expected to acknowledge the darkening economic outlook during the news conference especially after weaker PMI data overnight and recent GDP data growth.

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 218K

·     8:30 AM EST      Continuing Claims…est. 1.73M

·     9:45 AM EST      Markit US Composite PMI, Jan-P…est. 53.5

·     9:45 AM EST      Bloomberg Consumer Comfort Index…prior 58.1

·     10:00 AM EST    Leading Index for December…est. (-0.1%)

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

·     11:00 AM EST    Weekly DOE Inventory Data

·     11:00 AM EST    Kansas City Fed Manufacturing for January…est. 3

 

Earnings Calendar:

·     Earnings Before the Open: AAL, AEP, BMY, FCX, GWW, HBAN, HII, JBLU, LUV, MKC, RCI, SLM, STM, TXT, UNP, WBS

·     Earnings After the Close: ALK, ASB, AVT, DFS, ETFC, FII, INTC, ISRG, NSC, SBUX, SIVB, WDC

 

Other Key Events:

·     European Central Bank (ECB) rate decision 7:45 AM EST and press conference 8:30 AM EST

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 5.80 points, or 0.22%, to 2,638.70

·     The Dow Jones Industrial Average rose 171.14 points, or 0.70%, to 24,575.62

·     The Nasdaq Composite climbed 5.41 points, or 0.08%, to 7,025.77

·     The Russell 2000 Index slipped -3.20 points, or 0.22% to 1,454.26

 

 

Macro

Up/Down

Last

WTI Crude

-0.10

52.53

Brent

-0.29

60.85

Gold

-5.90

1,284.30

EUR/USD

-0.0039

1.1342

JPY/USD

0.14

109.74

10-Year Note

-0.018

2.728%

 

 

World News

·     Data firm IHS Markit said the EuroZone composite Purchasing Managers Index–a measure of activity in the manufacturing and services sectors–fell to 50.7 in January from 51.1 in December, its lowest level in five-and-a-half years.

·     President Trump said in a late-night Tweet that he would delay a State of the Union address until the government shutdown was over, responding to House Speaker Nancy Pelosi’s move to obstruct his plans for the speech.

·     A group of British lawmakers appealed to Labour leader Jeremy Corbyn on Thursday to back a second referendum on Brexit, saying they did not have enough support in parliament to persuade the government to stage such a vote – Reuters

 

Sector News Breakdown

Consumer

·     Ford (F) Q4 adjusted EPS 30c/$41.8B vs. est. 32c/$37.01B; said revenue increased from the prior year in both periods, while net income and company adjusted EBIT were both lower. North America delivered a fourth-quarter EBIT margin of 7.6% and a full-year margin of 7.9%; Auto operations outside of North America generated an EBIT loss of $828M in the fourth quarter, down $692M, driven by China and Europe

·     Las Vegas Sands (LVS) Q4 EPS 77c/$3.48B vs. est. 85c/$3.53B; 4Q Sands China revenue $2.25B, Q4 Sands China adjusted property EBITDA $786M

·     McCormick (MKC) Q4 EPS $1.67/$1.5B vs est. $1.70/$1.55; sees years EPS view $5.17-$5.27 vs. est. $5.39 and sales up 1%-3% and in constant currency up 3%-5%

 

Energy

·     The American Petroleum Institute (API) reported that U.S. crude supplies rose by about 6.6M barrels for the week ended Jan. 18, and also showed that gasoline stockpiles climbed by 3.6 million barrels, while distillate inventories added 2.6 million barrels

·     PG&E Corp. (PCG) estimates it would cost as much as $150 billion this year alone to comply with a federal judge’s extraordinary fire-safety proposal. The figure would be about five times as much as PG&E’s forecast liabilities for wildfires that scorched the state in 2017 and 2018. The estimate was included in PG&E’s response Wednesday to a call by U.S. District Judge William Alsup for the utility to trim tree branches and inspect and repair thousands of miles of power lines or cut local electricity supply to prevent wildfires.

·     There have been no proposals to convene an emergency meeting of the OPEC and non-OPEC monitoring committee because of the political turmoil in OPEC member Venezuela, Russian Energy Minister Alexander Novak said on Thursday – Reuters

 

Financials

·     Berkshire Hills (BHLB) Q4 core EPS 63c vs. est. 66c; 4Q NIM on taxable-equivalent basis 3.41%, estimate 3.28%; 4Q provision for loan losses $6.72M

·     Cathay General (CATY) Q4 EPS in-line at 80c; 4Q return on average assets 1.57%, and 4Q return on average equity 12.1%

·     Cohen & Steers (CNS) Q4 EPS 56c/$93.9M vs. est. 59c/$95.7M; 4Q operating margin +36.5%; 4Q ending AUM of $54.8B, average AUM of $57.6B

·     Raymond James (RJF) Q1 EPS $1.79/$1.93B vs. est. $1.72/$1.91B; assets under administration $725.4 billion; 1Q effective tax rate 25.2%

·     RLI Corp. (RLI) Q4 EPS 40c vs. est. 16c; 4Q net premiums earned $204.0 million and 4Q net premiums written $212.4 million

·     SL Green Realty (SLG) Q4 FFO $1.61/$317M vs. est. $1.72/$254.34M; Q4 Same-store cash net operating income, including share of same-store cash NOI from unconsolidated joint ventures, up 4.9% or 4.5%, excluding lease termination income from last year

·     Sallie Mae (SLM) Q4 adjusted EPS 33c/$383M vs. est. 27c/$370.44M; Q4 Private education loan originations of $733M rose 16% and Q4 net interest margin rose 11bps to 6.11%; sees FY19 EPS $1.22-$1.26 vs. est. $1.21; sees FY19 private education loan originations of $5.7B; declares 1Q dividend 3c and to buy back up to $200M in shares

·     Texas Capital (TCBI) Q4 EPS $1.38 vs. est. $1.59; 4Q net interest income $240.7 million and 4Q provision for credit losses $35 million

·     Umpqua (UMPQ) Q4 provision for loan losses $17.2 million vs. est. $14.7 million (Bloomberg); 4Q net interest margin 4.15% and 4Q book value per share $18.42

 

Healthcare

·     Advaxis, Inc.’s (ADXS) ongoing Phase 3, randomized, double-blinded, placebo-controlled, pivotal study of axalimogene filolisbac in cervical cancer has been placed on partial clinical hold by the FDA

·     Ironwood Pharmaceuticals (IRWD) said IW-6463 is being developed for the treatment of serious and orphan central nervous system disorders; data from the study expected in 2H 2019

·     NextGen Healthcare (NXGN) Q3 EPS 20c/$130.9M vs. est. 15c/$131.16M; raises FY19 EPS view to 72c-76c from 70c-74c and backs FY19 revenue view for $525M-$535M (est. $530.44M)

·     Varian Medical (VAR) Q1 non-GAAP EPS $1.06/$741M vs. est. $1.07/$717.83M; said recently enacted US/China tariffs negatively impacted revenues by $8M and operating earnings by $11M, generally in line with company expectations; sees FY adjusted EPS $4.60-$4.75 vs. est. $4.73 and sees FY revenue +5% to +8% (backs FY19 revenue view $3.06B-$3.15B)

·     Vertex Pharmaceuticals (VRTX) terminates Ian Smith as Chief Operating Officer and interim Chief Financial Officer effective immediately as a result of personal behavior that violated Vertex’s Code of Conduct and values

 

Industrials & Materials

·     Briggs & Stratton (BGG) Q2 EPS 20c/$505.5M vs. est. 25c/$463.3M; forecast revision reflects the weather-related market softness in Europe and Australia and the impact of the Sears bankruptcy; sees FY adjusted EPS $1.10-$1.30 down from prior view of $1.40-$1.60 and vs. est. $1.45

·     Canadian Pacific (CP) 4Q adjusted EPS C$4.55/C$2.01B vs. est. C$4.23/C$1.94 billion; sees FY capital expenditure C$1.6B; 4Q operating ratio 56.5%; sees double-digit adj EPS growth for 2019

·     United Rentals (URI) Q4 adjusted EPS $4.85/$2.31B vs. est. $4.84/$2.22B; backs FY19 revenue view $9.15B-$9.55B vs. est. $9.23B and backs FY19 adjusted EBITDA view $4.35B-$4.55B; sees FY free cash flow $1.3 billion to $1.5 billion

·     Hexcel (HXL) Q4 adjusted EPS 82c/$561.0M vs. est. 79c/$557.94M; sees FY19 EPS $3.38-$3.52 on revs $2.375B-$2.475B vs. est. $3.45/$2.40B; sees FY19 free cash flow above $250M vs. $237M in FY18; sees FY19 capex $170M-$190M vs. $184.1M in FY18 and FY19 effective tax rate of 24.0%

·     Textron (TXT) Q4 EPS $1.15/$3.75B vs. est. 98c/$4.0B; sees year EPS $3.55-$3.75 vs. est. $3.49 and sees year cap-ex $380M

·     Watch lighting stocks Cree (CREE), Acuity Brands (AYI), Hubbell (HUBB) after German lighting peer Osram Licht warned that market weakness would cause revenue to fall short of expectations in its fiscal Q1; Osram cited an “accelerated market decline, especially in December 2018” while noting that the auto, general lighting and mobile devices were particularly affected

 

Technology, Media & Telecom

·     Texas Instruments (TXN) Q4 EPS $1.27/$3.72B vs. est. $1.24/$3.75B; sees 1Q revenue $3.34B-$3.62B vs. est. $3.60B; sees 1Q EPS $1.03-$1.21 vs. est. $1.21; 4Q effective tax rate 18%; sees 2019 annual operating tax rate about 16%

·     Lam Research (LRCX) Q2 EPS $3.87/$2.52B vs. est. $3.66/$2.5B; 2Q adjusted gross margin +46.3% vs. Bloomberg est. +45.9%; sees 3Q EPS $3.40 +/-20c, vs. est. $3.35 and sees 3Q revs $2.4B +/- $150M, vs. est. $2.46B; announces $5B share buyback

·     Citrix (CTXS) Q4 EPS $1.67/$802M vs. est. $1.59/$791.95M; Q4 Subscription revenue increased 45%, Product and License decreased 11%, and Support and Services increased 2% versus last year. Deferred and unbilled revenue totaled $2.17B as of December 31, 2018; sees Q1 EPS $1.15-$1.20 on revs $700M-$710M vs. est. $1.37/$726.6M

·     F5 Networks (FFIV) Q1 EPS $2.70/$543.8M vs. est. $2.54/$547.36M; sees Q2 adjusted EPS $2.53-$2.56 on revs $543M-$553M vs. est. $2.58/$553.89M; gross profit rose nearly 5% to $457.1M, and GAAP net income jumped by 48% with help from lower provisions for income taxes

·     Nielsen Holdings (NLSN) has restarted a process to sell itself amid fresh interest from Blackstone Group, the private equity shop controlled by billionaire Stephen Schwarzman, The Post has learned. Blackstone is partnering in a bid with fellow buyout firm Hellman & Friedman that could value the company at around $10 billion, according to the report https://on.mktw.net/2UboI0L

·     PTC (PTC) Q1 adjusted EPS 57c/$339.0M vs. est. 41c/$324.65M; sees Q2 EPS 15c-27c on revs $283M-$298M below est. 39c/$325.01M; sees FY19 EPS $1.35-$1.70 on revs $1.25B-$1.30B vs. est. $1.73/$1.34B

·     STMicroelectronics NV (STM) became the latest chip maker to warn saying Q4 profit and revenue both rose, but that it expects revenue will decline in the first quarter of this year.

·     Teradyne (TER) Q4 EPS 63c/$519.6M vs. est. 50c/$494.5M; sees 1Q adjusted EPS 39c-47c on revs $460M-$490M vs. est. 46c/$478.1M

·     Xilinx (XLNX) Q3 EPS 92c/$800M vs. est. 85c/$770.49M; sees Q4 revenue $815M-$835M vs. est. $775.4M; sees Q4 adjusted gross margin ~68.5%, adj. tax rate 6%-8%

·     Adtran (ADTN) Q4 EPS loss (12c)/$140.1M vs. est. loss (4c)/$134.8M

·     Over 200 employees have been dismissed from Apple’s (AAPL) Project Titan autonomous car project, CNBC reported Thursday, citing sources. The layoffs were not seen as a surprise to some, given Apple hired Tesla Inc. engineering vice president Doug Field to co-head the Titan

·     Microsoft Corp’s (MSFT) Bing search engine has been blocked in China, the company said on Wednesday, making it the latest foreign technology service to be shut down behind the country’s Great Firewall.

_________________________________________________________________

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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