Morning Preview: January 31, 2019

Scott GreenDaily Market Report

Early Look

Thursday, January 31, 2019

Futures

Up/Down

%

Last

DJ Industrials

-13.00

0.05%

24,955

S&P 500

2.50

0.09%

2,685

Nasdaq

29.50

0.42%

6,866

 

 

U.S. stock futures are flat while Nasdaq futures outperform early behind better than expected quarterly results out of Facebook, with shares rising over 11% to its best levels since September as investors prepare for the busiest single day of S&P 500 earnings of the quarter. European shares fell and Asian stocks rose while Treasury yields and the dollar extended declines. Outside of earnings, President Trump is expected to meet with China’s Vice Premier Liu He in the Oval Office this afternoon as talks between senior officials began in Washington yesterday. In Asian markets, The Nikkei Index jumped 216 points to 20,773, the Shanghai Index rose 9 points to 2,584 and the Hang Seng Index gained 299 points to settle at 27,942. In Europe, the German DAX is flattish around 11,185, while the FTSE 100 is up around 30 points at 6,975. Earnings action today includes MSFT, GS, NOC, DWDP among others with AMZN set to report earnings after the close tonight.

 

Stocks extended early gains to close at their best levels in roughly two months, boosted by strong earnings in the tech space (AAPL, AMD) as well as positive commentary from the Fed which left interest rates unchanged and said it would be “patient” with raising rates in the future. Fed Chairman Powell reaffirmed the need for a patient approach given current economic risks, a major positive for investors after Powell’s comments last year were interpreted as too aggressive. The Fed removes reference to further gradual rate increases and says it’s prepared to adjust balance-sheet normalization. The Fed commentary pushed U.S. Treasury prices higher, sending the two-year yield down 4 bps to 2.53%, and the 10-year yield, which also had been 2 bps higher, fell 2 bps to 2.70%. Meanwhile, WTI crude oil settled +1.7% to a two-month high $54.23 per barrel on bullish inventory data. Gold prices jump nearly 1% as approaches the $1,330 an ounce level on dovish Fed/dollar slide.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 41.05 points, or 1.55%, to 2,681.05

·     The Dow Jones Industrial Average rose 434.90 points, or 1.77%, to 25,014.86

·     The Nasdaq Composite spiked 154.79 points, or 2.20%, to 7,183.08

·     The Russell 2000 Index advanced 15.49 points, or 1.05% to 1,486.94

 

Events Calendar for Today

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

·     8:15 AM EST      Employment Cost Index for Q4…est. 0.8%

·     8:30 AM EST      Weekly Jobless Claims…est. 215K

·     8:30 AM EST      Continuing Claims…est. 1.721M

·     9:45 AM EST      Chicago PMI for January…est. 61.5

·     9:45 AM EST      Bloomberg Consumer Comfort Index…prior 57.4

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

·     4:00 PM EST       Net-long term TIC flows for November

 

Earnings Calendar:

·     Earnings Before the Open: ABC, ABMD, APRN, BAX, BC, BHGE, BLL, BMS, BX, CELG, CHTR, CMS, CNX, COP, CRR, DWDP, EPD, ETN, GE, JSY, IIVI, IP, LEM, KIM, LSTR, MA, MAN, MMC, MNRO, MO, MSCI, NOC, PH, RTN, S, SHW, TSCO, UPS, VLO, WCC, WRK, XEL, XYL, YRCW

·     Earnings After the Close: AFL, AJG, AMZN, CPT, CY, DECK, EMN, ENVA, EPAY, EW, EXPO, FBHS, LPLA, MATW, MCK, MOD, PFPT, PKI, POST, SKYW, SYMC

 

 

Macro

Up/Down

Last

WTI Crude

-0.02

54.22

Brent

0.32

61.97

Gold

12.00

1,327.50

EUR/USD

0.0005

1.1485

JPY/USD

-0.40

108.64

10-Year Note

-0.014

2.661%

 

 

World News

·     Chinese manufacturing shrank a second month in January — the official PMI came in at 49.5, a tad better than December’s 49.4; the sub index for new orders edged down to 49.6 from 49.7 in December, suggesting weakness ahead

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) Q4 EPS $1.93/$7.23B vs. est. $2.19/$7.07B; says Model 3 production will reach a sustained rate of 7,000 cars per week by the end of 2019; says it is planning to continue to produce Model 3 vehicles “at maximum production rates throughout 2019”; 4Q adj. automotive gross margin +24.7%, vs. Bloomberg estimate +21.5%; sees 1Q Model S & Model X deliveries slightly down vs. ’18 and sees deliveries in North America lower in 1Q Q/Q; Elon Musk said CFO Deepak Ahuja will retire for a second time

·     Mondelez (MDLZ) Q4 EPS 63c/$6.77B vs. est. 63c/$6.77B; sees FY free cash flow $2.8B vs. estimate $2.72B and sees FY organic revenue +2% to +3% and adjusted EPS +3% to +5%

·     Wynn Resorts (WYNN) Q4 EPS $1.06/$1.69B vs. est. $1.36/$1.61B; 4Q Las Vegas Local Adjusted EBITDA $105.2M, Q4 Las Vegas net revenue $393.6M, 4Q adjusted property Ebitda $499.4M and 4Q total Macau operations adj. property Ebitda $499.4M

·     Allegiant Travel (ALGT) Q4 EPS $2.56/$412.1M vs. est. $2.47/$411M; sees 2019 EPS $13.25-$14.75 vs. est. $13.19 (may not compare to est.)

·     Blue Apron (APRN) Q4 EPS loss (12c)/$140.7M vs. est. loss (16c)/$137.8M; customers 557,000 vs. 646,000 q/q; 4Q adjusted Ebitda loss $7.81 million, vs. estimate loss $13.0 million; reiterates commitment to achieving profitability on an adjusted EBITDA basis in the Q1 for full year 2019

·     Meritage Homes (MTH) Q4 EPS $1.91 vs. est. $1.52; 4Q home closing revenue $996.1 million; home closing gross margin increased to 19.0% for Q4 and total orders were 8% lower than 2017, which benefited from a rebound in Florida and Houston orders

·     Unilever PLC (UN) said that 2018 pretax profit surged 52%, handily beating analyst forecasts, but it warned of a difficult year ahead.

 

Energy

·     Bonanza Creek (BCEI) sees 2019 capex $230M-$255M vs. est. $244M; prelim. proved reserves of 116.8MMboe at year-end 2018, 29% increase from year-end 2017 Wattenberg reserves

·     Matador Resources (MTDR) says it will reduce its operated drilling program by releasing its south Texas rig upon the completion of its drilling program in the area next month; says it plans to sell portions of its non-core assets, particularly in its Haynesville and parts of its south Texas positions, and consider monetizing other assets

·     PetroChina Co (PTR) plans to drop Petroleos de Venezuela SA (PDVSA) as a partner in a planned $10 billion oil refinery and petrochemical project in southern China – Reuters

·     Shell’s (RDSA) 4Q earnings were well ahead of consensus and the cash flow performance was very strong; 4Q net earnings of $5.7b around 7% ahead of consensus expectations, driven by beats in upstream, downstream

 

Financials

·     Visa (V) Q1 adjusted EPS $1.30/$5.5B vs. est. $1.25/$5.41B; Q1 payments volume up 11% and Q1 processed transactions up 11%; 1Q cross-border volumes +7%, 1Q total Visa processed transactions $33.9 billion and reaffirms FY19 net revenue growth view of low double digits; authorizes new $8.5B share repurchase program

·     PayPal (PYPL) Q4 adjusted EPS 69c/$4.23B vs. est. 67c/$4.24B; sees FY19 EPS $2.84-$2.91 on revs $17.85B-$18.10B vs. est. $2.88B/$18.04B; reports FY18 active accounts up 17% to 267M and FY18 Payment transactions rose 27% to 9.9%

·     Ameriprise (AMP) Q4 adjusted operating EPS $3.80/$3.18B vs. est. $3.57/$3.15B; assets under management $431 billion and 4Q adjusted ROE +37.8%

·     Credit Acceptance (CACC) Q4 EPS $7.85/$342.8M vs. est. $7.26/$338.2M; 4Q consumer loan unit volume +5.9%

·     Deutsche Bank’s (DB) executives are preparing for a possible government-brokered merger with competitor Commerzbank (CRZBY) by mid-year as such a deal could be their only option if there is no clear improvement in the first three months of 2019, Bloomberg reports

·     Essex Property (ESS) Q4 FFO $3.19 vs. est. $3.18; sees FY core FFO/share $12.83-$13.23 vs. estimate $13.07

·     Fair Isaac (FICO) Q1 adjusted EPS $1.45/$262.3M vs. est. $1.42/$264.73M; sees FY adjusted EPS $6.88 on revs $1.13B vs. est. $6.91/$1.13B

·     Hanover (THG) Q4 operating EPS $1.51 vs. est. $1.47; 4Q net investment income $69.4 million and 4Q net premiums written $1.04 billion

 

Healthcare

·     Hologic (HOLX) Q1 EPS 58c/$830.7M vs. est. 57c/$817.94M; sees Q2 adjusted EPS 55c-57c on revs $795M-810M vs. est.58c/$811.36M; raises FY19 adjusted EPS view to $2.39-$2.43 from $2.38-$2.42 and raises FY19 revenue view to $3.305B-$3.335B from $3.29B-$3.335B

·     SCYNEXIS (SCYX) announced positive preliminary data from an open-label Phase 3 clinical trial, FURI, evaluating oral ibrexafungerp (formerly SCY-078) as a salvage treatment in patients with treatment-resistant mucocutaneous and invasive fungal infections

 

Industrials & Materials

·     U.S. Steel (X) Q4 EPS $1.82/$3.69B vs. est. $1.84/$3.74B.; sees Q1 adjusted EBITDA approximately $225M; currently expects Q1 adjusted EBITDA to be approximately $225M, which excludes the expected Q1 impacts of the December 24, 2018 fire

·     Berry Global Group (BERY) is considering a cash offer for British packager RPC Group in a challenge to a 3.3 billion pound ($4.33 billion) bid from the U.S. company’s former parent, Apollo Global. https://reut.rs/2Sfp9tS

·     General Electric (GE) Q4 EPS 17c/$33.28B vs. est. 22c/$32.33B; aviation revenue $8.46B and Q4 power revenue $6.76B

·     Northrop Grumman (NOC) Q4 EPS $4.93/$8.16B vs. est. $4.42/$8.12B; sees 2019 sales about $34B vs. est. $31.3B

·     Landstar (LSTR) Q4 EPS $1.68/$1.18B vs. est. $1.59/$1.21B; sees Q1 EPS $1.51-$1.57 on revs $1.025B-$1.075B vs. est. $1.43/$1.1B; to buyback up to 1M in shares

·     Rexnord (RXN) Q3 adjusted EPS 47c/$485M vs. est. 40c/$487.8M; reiterates year view for free cash flow

·     Tetra Tech (TTEK) Q1 adjusted EPS 70c/$553M vs. est. 62c/$559.13M; raises FY19 EPS view to $2.80-$2.95 from $2.75-$2.95 (est. $2.87) and backs FY19 net revenue view of $2.2B-$2.4B (est. $2.28B)

 

Technology, Media & Telecom

·     Facebook (FB) shares rose 11%; Q4 EPS $2.38/$16.91B vs. est. $2.19/$16.39B; 4Q monthly active users 2.32 billion, in line with estimates and 4Q daily active users 1.52 billion vs. estimate 1.51 billion; 4Q mobile ad revenue as percentage of ad revenue 93%; says it estimates around 2.7 billion people now use Facebook, Instagram, WhatsApp, or Messenger each month

·     Microsoft (MSFT) Q2 EPS $$1.08/$32.5B vs. est. $1.09/$32.5B; 2Q Intelligent Cloud revenue $9.38B, 2Q More Personal Computing revenue $12.99B, Q2 Productivity and Business Processes revenue $10.1B and 2Q capital expenditure $3.71B

·     Qualcomm (QCOM) Q1 adjusted EPS $1.20/$4.8B vs. est. $1.09/$4.9B; sees 2Q revenue $4.4B-$5.2B vs. est. $4.83B and 2Q adjusted EPS 65c-75c vs. est. 78c; sees 2Q MSM chip shipments 150 million to 170 million after Q1 MSM chip shipments 186 million

·     ServiceNow (NOW) shares rose 6%; Q4 EPS 77c/$715.4M vs. est. 63c/$717.8M; 4Q billings growth +38% and 4Q free cash flow $245.2M

·     Cirrus Logic (CRUS) Q3 EPS 91c/$324.3M vs. est. 78c/$319.4M; sees 4Q revenue $200M-$240M below est. $273.9M; sees 4Q gross margin 49% to 51% after 50.4% Q3 GM; authorized repurchase of up to an additional $200 million of stock

·     Cree (CREE) Q2 EPS 23c/$413M vs. est. 17c/$408.76M; said EPS exceeded the top end of our target range driven by another record quarter for Wolfspeed combined with gross margin improvement in all three businesses; Sees 3Q adjusted EPS 13c-19c on revs $385M-$405M vs. est. 15c/$406.1M

·     Electronics for Imaging (EFII) Q4 EPS 46c/$256.9M vs. est. 46c/$256.07M; sees Q1 EPS 20c-27c on revs $215M-$225M vs. est. 37c/$239.04M

·     Flex (FLEX) Q3 adjusted EPS 34c/$6.94B vs. est. 31c/$6.78B; sees Q4 adjusted EPS 25c-28c on revs $6.2B-$6.6B vs. est. 27c/$6.52B

·     Mellanox (MLNX) Q4 EPS $1.42/$290.1M vs. est. $1.30/$285.23M; sees Q1 revs $295M-$305M vs. est. $281.4M; sees 1Q adjusted gross margin 68% to 69%vs. estimate 68.8%

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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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