Morning Preview: February 05, 2019

Auto PostDaily Market Report

Early Look

Tuesday, February 5, 2019

Futures

Up/Down

%

Last

DJ Industrials

84.00

0.33%

25,272

S&P 500

5.50

0.19%

2,726

Nasdaq

16.75

0.24%

6,954

 

 

U.S. stock futures are pointing to a stronger open, tracking gains in Asia on better earnings, while markets prepare for the State off the Union address from President Trump, which will likely touch upon topics such as the Wall, healthcare prices, the economy, and the government shutdown. Alphabet (GOOGL) shares slipped overnight as quarterly margins slipped while expenses rose. Last night, Federal Reserve Chairman Jerome Powell and Vice Chairman Richard Clarida had dinner with President Donald Trump to “discuss recent economic developments and the outlook for growth, employment and inflation,” the Fed said in a statement released Monday evening. In Asian markets, The Nikkei Index slipped -39 points to settle at 20,844, while both the Shanghai Index and the Hang Seng Index were closed for holiday. In Europe, the German DAX is higher by 130 points topping 11,300, while the FTSE 100 gains around 100 points to 7,130, as better earnings in Europe helps boost market sentiment. Today marks another very busy day of earnings in one of the busier of the quarter.

 

Stocks extended recent gains in Monday, led by gains in the technology sector as Google shares rose 2% ahead of its quarterly earnings report after today’s close, boosting other Internet stocks as well. A combination of a “softer” Fed on rates and continued optimism about a potential trade truce between the U.S. and China have helped boost markets lately. Meanwhile, corporate earnings for the quarter have been strong to this point with results so far from the 47% of the 100-plus companies in the S&P 500 reporting profits rising 12% in Q4, according to FactSet (though guidance has disappointed). Commodity prices slipped yesterday amid a stronger dollar while U.S. Treasury prices finished lower, pushing both the two-year yield and 10-year yield 3 bps higher to a respective 2.53% and 2.72%.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 18.34 points, or 0.68%, to 2,724.87

·     The Dow Jones Industrial Average rose 175.48 points, or 0.70%, to 25,239.37

·     The Nasdaq Composite spiked 83.67 points, or 1.15%, to 7,347.54

·     The Russell 2000 Index advanced 15.48 points, or 1.03% to 1,517.54

 

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     9:45 AM EST      Markit US Services PMI, Jan-F…est. 54.2

·     9:45 AM EST      Markit US Composite PMI, Jan-F…prior 54.5

·     10:00 AM EST    ISM Non-Manufacturing Index for January…est. 57.1

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ADM, AGCO, BDX, BMI, CHD, CNC, EL, EMR, ENR, HUBB, ITT, LAZ, LITE, MSGN, PBI, RL, TDG, UFS, VIAB, VSH, WCG, WDR

·     Earnings After the Close: ALL, APC, ASH, BRKS, CERN, DATA, DIS, DOX, EA, GNW, MANH, MCHP, MXL, MYGN, NBIX, OI, PAA, PAYC, PLT, SFLY, SKY, SNAP, SWKS, TMK, ULTI, UNM, USNA, VIAV, VOYA, VRTX, ZEN

 

Other Key Events:

·     President Trump delivers State of the Union address

·     Reserve Bank of Australia rate decision

 

 

Macro

Up/Down

Last

WTI Crude

0.37

54.93

Brent

0.24

62.75

Gold

-1.50

1,317.80

EUR/USD

-0.0023

1.1415

JPY/USD

0.06

109.95

10-Year Note

+0.009

2.731%

 

 

World News

·     The Reserve Bank of Australia kept its rate steady at 1.5%, though RBA Governor Philip Lowe said global risks have increased. He said the country’s growth remained steady, though, at around 3% this year

 

Sector News Breakdown

Consumer

·     Beazer Homes (BZH) Q1 EPS 23c/$402.0M vs. est. 14c/$406.63M; Q1 adjusted EBITDA of $26.8M, down 5.5% from last year; Q1 net new home orders down 12.1%; Q1: total home closings up 1.6%, Average Selling Price $370.3K vs. $345.0K last year, homebuilding gross margin 19.7% vs. 20.9% last year

·     Cavco Industries (CVCO) Q3 EPS $1.44/$233.7M vs. est. $1.45/$238.05M; 3Q total factory-built homes sold 3,447; company recorded $1.3 million related to legal and other expenses during 3Q; says it experienced some softening in home order rates beyond the typical seasonal slowdown expected during winter months

·     Leggett & Platt (LEG) Q4 EPS 62c/$1.05B vs. est. 53c/$1.02B; sees FY sales $4.95B-$5.1B vs. est. $4.8B; sees 2019 adj EPS $2.45-$2.65 vs. est. $2.64; will temporarily suspend share repurchases

 

Energy

·     Cabot Corp (CBT) Q1 EPS 87c/$821M vs. est. 93c/$767.0M; sees FY19 EPS $4.20-$4.60 vs. est. $4.61 citing challenging first half coupled with stronger second half results

·     Advanced Energy (AEIS) Q4 EPS 73c/$154.2M vs. est. 76c/$155.58M; sees 1Q adjusted EPS from continuing operations 40c-55c on revs $138M-$148M, below estimates 75c/$160.7M

·     Iron ore miners in Australia climbed to multi-year highs after Vale (VALE) was ordered to stop using tailing dams on its second largest operation following its recent accident that killed over 100 people

·     Rosneft, Russia’s largest crude producer, increased its fourth quarter net profit on growing hydrocarbons production and sales volume helping offset the oil price drop in the period

·     BP Plc (BP) shares rise after higher oil and gas production gave the company a Q4 boost to earnings from a year ago, helping the energy major more than double its 2018 profits

 

Financials

·     Hartford Financial (HIG) Q4 core EPS 78c/$4.63B vs. est. 58c/$4.79B; 4Q net investment income $457 million, 4Q book value per share $35.06 and announces a $1B stock buyback

·     Legg Mason (LM) Q3 operating revenue $704.3M vs. est. $720.7M as Q3 EPS loss ($2.55); Q3 assets under management $727.2 billion, 3Q net outflows $8.5 billion and 3Q adjusted operating margin 21.1%; says quarterly results were negatively impacted by the industry’s record net outflows from actively-managed U.S. mutual funds, as well as double-digit equity market losses

·     AvalonBay (AVB) Q4 core FFO $2.31/$578.5M vs. est. $2.32/%575.5M; sees FY core FFO/share $9.05-$9.55 vs. est. $9.34

·     Artisan (APAM) Q4 adjusted EPS 61c/$191.5M vs. est. 61c/$193.2M; 4Q average assets under management $105.0 billion; Q4 AUM $96.2B vs. $116.6B last quarter

 

Healthcare

·     Gilead (GILD) Q4 adjusted EPS $1.44/$5.795B vs. est. $1.71/$5.52B; Q4 product sales $5.681B; raises quarterly dividend by 11% to 63c per share; 4Q adj. EPS missed estimates due to an impairment and non-cash tax charge related to intangible assets acquired from Kite Pharma $820M impairment charge (99c/share); 4Q Harvoni revenue $232M (light), 4Q Epclusa revenue $453M (inline), Truvada revenue $823M (beat) 4Q Yescarta revenue $80M (miss)

·     Centene (CNC) Q4 EPS $1.38/$16.56B vs. est. $1.32/$16.4B; sees FY19 split-adjusted non-GAAP EPS $4.11-$4.31 on revs $70.3B-$71.1B vs. est. $4.19/$70.22B

·     WellCare (WCG) Q4 EPS $1.63/$6.07B vs. est. $1.56/$5.83B; raises FY19 adj. EPS view to $13.25-$13.50 from $13.15-$13.40 (est. $13.47) and backs FY19 revenue view $25.8B-$26.7B vs. est. $25.99B

·     Eli Lilly and Company (LLY) and Incyte Corporation (INCY) announced that baricitinib met the primary endpoint in BREEZE-AD1 and BREEZE-AD2, two Phase 3 studies evaluating the efficacy and safety of baricitinib monotherapy for the treatment of adult patients with moderate to severe atopic dermatitis

·     Luminex (LMNX) Q4 adjusted EPS 4c/$81.1M vs. est. 9c/$79.43M; sees FY19 revenue $337M-$343M vs. est. $340.53M; sees Q1 revenue $82M-$84M vs. est. $85.29M

·     Qiagen (QGEN) Q4 adjusted EPS 40c/$403.2M vs. est. 40c/$408.56M; sees FY19 adjusted EPS $1.45-$1.47 vs. est. $1.47 and sees FY19 revenue growth 7%-8% vs. est. $1.62B

 

Industrials & Materials

·     Kennametal (KMT) Q2 adjusted EPS 71c/$587M vs. est. 63c/$605.38M; sees year EPS $2.90-$3.20 vs. est. $3.15

·     Olin (OLN) Q4 EPS 32c/$1.63B vs. est. 34c/$1.71B; 4Q adjusted Ebitda $301.4M vs. Bloomberg est. $288.1M; sees FY capital expenditure $375M-$425M; sees 2019 adjusted Ebitda to be comparable to 2018 with a balanced level of upside opportunities and downside risks

·     Regal Beloit (RBC) Q4 adjusted EPS $1.41/$881.7M vs. est. $1.31/$865.01M; sees FY adjusted EPS $6.15-$6.55 vs. estimate $6.44

·     Versum Materials (VSM) Q1 adjusted EPS 55c/$339.5M vs. est. 55c/$344.93M; said both segments continued to deliver volume and sales growth and our Advanced Materials business sustained its innovation momentum and increased revenues again by double-digits; cuts 2019 sales $1.380B-$1.430B from prior $1.425B-$1.475B (est. $1.423B) and lowers 2019 adj EBITDA to $465M-$485M from prior $475M-$495M (est. $470.6M)

 

Technology, Media & Telecom

·     Alphabet (GOOGL) Q4 EPS $12.77/$31.84B ex-TAC vs. est. $10.86/$31.33B; 4Q paid clicks on Google properties +66%, 4Q cost-per-click on Google properties -29%; 4Q operating margin +21%; Q4 costs were $31.1B, up from $24.66B a year earlier; Q4 cap-ex jumped 80% to $6.85B vs. $3.8B a year ago; Q4 operating profit margin was 21%, down from 24% YoY; 4Q operating profit was $8.2B vs. Bloomberg est. $8.7B; Q4 properties revenues $27.02B vs. $22.24B last year

·     Seagate (STX) Q2 adjusted EPS $1.41/$2.72B vs. est. $1.28/$2.71B

·     Control4 (CTRL) Q4 EPS 44c/$72.5M vs. est. 43c/$73.16M; sees Q1 EPS 8c-11c on revs $61M-$63M vs. est. 22c/$64.43M

·     Glu Mobile (GLUU) Q4 EPS loss (1c)/$95.6M vs. est. 7c/$95.98M; Q4 bookings grew 18% year over year to $98.2M; sees 1Q bookings $88.0M-$90M and year bookings $435.0M-$445M; 4Q gross margin 63.3%, vs. Bloomberg estimate 65.7%

·     Fabrinet (FN) Q2 adjusted EPS 97c/$403.1M vs. est. 92c/$386.22M; sees Q3 adjusted EPS 86c-90c on revs $384M-$392M vs. est. 87c/$377.07M

·     Harmonic (HLIT) Q4 non-GAAP EPS 11c/$113.6M vs. est. 5c/$113.35M; sees 1Q net revenue $80.0M-$90M on EPS loss (1c-11c) vs. est. $100.5M and 0c; sees FY adjusted loss per share 16c-33c vs. estimate EPS 23c

·     Infineon Technologies AG said Q1 net income rose year-on-year, but that it now expects its fiscal 2019 revenue growth to come in at the lower end of its forecast; said net income for the period was 254 million euros ($290.6 million) compared with EUR205 million the year previous; now expects fiscal 2019 revenue growth of 9% at an assumed exchange rate of $1.15 to the euro

·     AMS AG (AMS.EB) said Q4 adjusted net profit fell sharply as it expects unfavorable market conditions to weigh on its future revenues; Q4 adjusted net income stood at $1.7 million compared with $161.3 million a year earlier

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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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