Morning Preview: February 06, 2019

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Early Look

Wednesday, February 6, 2019

Futures

Up/Down

%

Last

DJ Industrials

-23.00

0.09%

25,301

S&P 500

-1.75

0.06%

2,729

Nasdaq

-2.25

0.03%

7,005

 

 

Stock futures are slipping ahead of another busy day of corporate earnings, while markets react to President Trump’s State of the Union address last night. President Donald Trump vowed to build his proposed border wall but stopped short of declaring a national emergency. Trump also talked about the need to lower prescription drug costs (as well as defeating AIDS), protect American jobs when making trade deal and his progress with North Korea and China. The president also said rebuilding roads and bridges is not an option but a necessity, but the commentary lacked details. In addition to the State of the Union speech last night, reports late yesterday said the Trump administration is dispatching U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing early next week to continue trade talks as a March 1 deadline to reach an accord nears, a senior administration official said. In Asian markets, The Nikkei Index rose 29 points to settle at 20,874, while the Shanghai Index and the Hang Seng Index remained closed for holiday. In Europe, the German DAX is down about -50 points above 11,300, while the FTSE 100 is little changed at 7,180.

 

Stocks logged their fifth consecutive session of gains on Tuesday to hit their highest levels in two months, helped by a round of stronger than expected earnings reports from some consumer discretionary companies (RL and EL) as well as strength in tech. The extended bounce in stocks over the last week follows dovish commentary from the Fed last Wednesday when they kept rates on hold and said they would remain “patient” regarding future interest rate moves.

 

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 12.83 points, or 0.47%, to 2,737.70

·     The Dow Jones Industrial Average rose 172.15 points, or 0.68%, to 25,411.52

·     The Nasdaq Composite spiked 54.55 points, or 0.74%, to 7,402.08

·     The Russell 2000 Index advanced 2.69 points, or 0.18% to 1,520.23

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Trade Balance for November…est. (-$54.0B)

·     10:30 AM EST    Weekly DOE Inventory Data

·     7:00 PM EST       Fed Chairman Powell to host Town Hall meeting with educators

 

Earnings Calendar:

·     Earnings Before the Open: ABG, BCO, BSX, BTU, CG, CMI, CTSH, ELAN, FDC, GM, GWR, HUM, IRWD, JEC, LLY, MBUU, NYT, PFGC, REGN, SAVE, ST, TTWO, WD

·     Earnings After the Close: AINV, BLKB, CCK, CCMP, CINF, CMG, CSGS, CUB, EGP, ELY, FEYE, FLT, FORM, FTNT, GPRO, HIVE, HQY, IRBT, LCI, LNC, MC, MDT, MET, NEWR, NOV, ORLY, OSUR, PRU, RGLD, RYN, SONO, TRMB, TTGT, TTMI, TWO, VVV, WERN, ZNGA

 

 

Macro

Up/Down

Last

WTI Crude

-0.34

53.32

Brent

-0.40

61.58

Gold

-2.50

1,316.70

EUR/USD

-0.0018

1.1388

JPY/USD

-0.23

109.73

10-Year Note

-0.013

2.689%

 

 

World News

·     German manufacturing orders slumped in December, led by a sharp drop in orders from outside the eurozone as total manufacturing orders declined 1.6% from November vs. an expected rise

 

Sector News Breakdown

Consumer

·     Daimler AG said that Q4 earnings slumped despite the company generating higher revenue and selling more cars, and declared a lower dividend for the year; said after-tax profit plunged to 1.64 billion euros ($1.87 billion) from EUR3.22 billion in the same period a year earlier

·     Shutterfly Inc. (SFLY) shares fell 9% after mixed quarterly earnings and said its CEO was on his way out as its board has formed a committee to review its future. Shutterfly has been approached by a third party about a potential acquisition and subsequently engaged in talks with additional third parties, but no proposals have been received, the company said; reports Q4 EPS $5.19/$950M vs. est. $5.26/$955.7M

·     Boot Barn (BOOT) Q3 ops EPS 66c/$254M vs. est. 66c/$254.54M; Q3 same store sales increased 9.2%, with double-digit growth in e-commerce and high single-digit growth in retail stores; raises FY19 EPS view to $1.31-$1.33 from $1.16-$1.24 and raises year comps to 10% from 6.5%-8%.

·     Jack Henry (JKHY) Q2 EPS 88c/$386.3M vs. est. 85c/$380.6M; 2Q operating margin +23%

·     Skyline (SKY) Q3 adjusted EPS 27c/$354.7M vs. est. 22c/$351.92M; Q3 adjusted EBITDA increased 3% to $26.4M; Q3 gross margin 18.3% vs. 19.1% last year

·     Spirit Air (SAVE) Q4 adjusted EPS $1.38/$862.8M vs. est. $1.37/$860.9M; 4Q total revenue per available seat mile +11.4%, 4Q adjusted CASM excluding fuel 5.49c, 4Q operating margin +15.8% and 4Q adjusted operating margin 16.2%

·     Usana (USNA) Q4 EPS $1.32/$299M vs. est. $1.33/$307.69M; sees FY19 EPS $5.25-$5.55, vs. consensus $5.84 and sees FY19 revenue $1.25B-$1.3B vs. est. $1.31B

 

Energy

·     Anadarko (APC) Q4 adjusted EPS 38c vs. est. 63c; smaller-than-expected profit as sales and energy production lagged forecasts; sees 1Q capital expenditure $1.10B-$1.3B and sees FY capital expenditure $4.3B-$4.7B; sees FY net sales volume 260 to 270 mboe/d; sees FY natural gas sales volumes per day 1,100 to 1,200 MMcfe/d

·     Exxon (XOM) and Qatar Petroleum announced Tuesday that they will go ahead with a $10 billion project to export liquefied natural gas from a plant on the Texas Gulf Coast

·     MDU Resources (MDU) Q4 EPS 40c/$1.2B vs. est. 42c/$1.15B

·     Plains All American (PAA) sees FY19 adjusted EBITDA of $2.75B which compares to FY18 actual adjusted EBITDA of $2.68B; sees FY19 Implied DCF per Common Unit and Common Equivalent Unit of $2.54, which compares to FY18 actual of $2.38

·     Viper Energy (VNOM) Q4 EPS loss (1c) 4Q loss per unit 1.0c, Q4 average realized prices were $48.73 per barrel of oil, $2.41 per Mcf of natural gas and $22.13 per barrel of natural gas liquids, resulting in a total equivalent realized price of $39.17/boe; 4Q natural gas production 1,773 MMcf vs. 1,088 y/y

·     Suncor (SU) announces additional $2B stock buyback program

·     Atmos Energy (ATO) Q1 EPS $1.40/$877.78M vs. est. $1.33/$970.27M; sees FY19 EPS $4.20-$4.35 vs. est. $4.28 and sees FY19 capital expenditures $1.65B-$1.75B

·     Southwestern Energy (SWN) sees FY19 production 750Bcfe-785Bcfe and sees FY19 capex $1.08B-$1.18B

·     The American Petroleum Institute (API) reported that U.S. crude supplies rose by 2.5M barrels for the week ended Feb. 1; showed that gasoline stockpiles climbed by 1.7M barrels, while distillate inventories edged up by 1.1M barrels.

 

Financials

·     Allstate (ALL) Q4 EPS $1.24 vs. est. $1.10; Q4 catastrophe losses $963M vs. $599M last year

·     BNP Paribas SA (BNP.FR) cut its revenue guidance and said it would increase cost savings as Q4 net profit rose 1.1% on year to 1.44 billion euros ($1.64 billion)

·     Carlisle (CSL) authorizes buyback of additional 5M shares of common stock

·     Chubb (CB) Q4 EPS 76c vs. est. $1.95; Q4 property & casualty combined ratio 93.1%, 4Q net premiums written $7.35 billion and 4Q book value per share $109.56

·     Torchmark (TMK) Q4 net EPS $1.56/$1.06B vs. est. $1.56/$1.09B; sees FY19 EPS $6.50-$6.70, vs. consensus $6.61

·     Unum (UNM) Q4 operating revenue $2.88B vs. est. $2.92B; sees FY operating EPS +4% to +7%; 4Q book value per share $40.19

·     Voya Financial (VOYA) Q4 adjusted EPS $1.32 vs. est. $1.22; said $694M of positive Institutional net flows in Investment Management in Q4; assets under management $203.46 billion; 4Q adjusted book value per share $48.26

 

Healthcare

·     Eli Lilly (LLY) Q4 EPS $1.33/$6.44B vs. est. $1.34/$6.29B; said to launch an exchange offering to holders in the 1H’19 to divest remaining stake in Elanco (ELAN); lowers 2019 EPS to reflect pending Loxo deal

·     Regeneron (REGN) Q4 EPS $6.84/$1.93B vs. est. $5.61/$1.72B

·     Boston Scientific (BSX) Q4 EPS 39c/$2/56B vs. est. 36c; sees Q1 EPS 35c-36c vs. est. 37c and year EPS $1.53-$1.58 vs. est. $1.58

·     Cerner (CERN) Q4 EPS 63c/$1.366B vs. est. 63c/$1.39B; sees Q1 EPS 60c-62c on revs $1.365B-$1.415B vs. est. 64c/$1.39B; sees FY19 EPS $2.57-$2.67 on revs $5.65B-$5.85B vs. $2.69/$5.8B; 4Q bookings $1.96 billion and 4Q backlog $15.25 billion

·     Healthcare Services (HCSG) Q4 diluted EPS 42c/$496.4M vs. est. 37c/$508.89M; increases quarterly dividend

·     Myriad Genetics (MYGN) Q2 EPS 38c/$216.8M vs. est. 41c/$216.73M; sees Q3 EPS 42c-44c on revs $216M-$218M vs. est. 42c/$215.9M; sees FY19 EPS $1.70-$1.75 on revs $855M-$865 M, vs. est. $1.74/$863.69M

·     Neurocrine (NBIX) Q4 EPS 19c/$131.5M vs. est. 17c/$131.6M; balance sheet at December 31, 2018, reflected total assets of $993.2M, including cash and investments of $866.9M, compared to total assets of $817.6M at December 31, 2017.

·     Updated results from Amicus Therapeutics’ (FOLD) Phase 1/2 study of AT-GAA in Pompe disease showed patients continued to experience improvements in motor function and muscle strength

·     Vertex (VRTX) Q4 EPS $1.30/$870.1M vs. est. $1.06/$819.12M; 4Q Orkambi revenue $315M, 4Q Kalydeco revenue $259M, 4Q Symdeko revenue $294M; sees total CF product revs $3.45B-$3.55B for 2019

 

Industrials & Materials

·     Ashland (ASH) preliminary Q1 adjusted EPS 14c/$576M vs. est. 15c/$584.98M; backs FY19 adjusted EPS view $3.10-$3.40 vs. est. $3.30

·     Jacobs Engineering (JEC) Q1 EPS $1.14/$3.08B vs. est. $1.03/$3.82B; raises FY adjusted EPS view to $5.10-$5.50 from $5.00-$5.40

·     Owens-Illinois (OI) Q4 EPS 61c/$1.6B vs. est. 62c/$1.68B; sees FY adjusted EPS $3.00 vs. est. $2.96; sees cash provided by continuing operating activities for 2019 to be approximately $740 million and adjusted free cash flow to be approximately $400 million

 

Technology, Media & Telecom

·     Disney (DIS) Q1 EPS ex-items $1.84/$15.3B vs. est. $1.55/$15.18B; revenue breakdown: Q1 media networks operating income $1.3B, Q1 consumer/interactive operating income $743M, 1Q Cable Networks operating profit $743M

·     Electronic Arts (EA) shares fell -11%; Q3 EPS $1.93/$1.61B vs. est. $1.94/$1.75B; lower FY19 adj. revenue about $4.875B down from $5.2B (est. $5.19B); sees FY19 adj. EPS $3.85 vs. est. $4.57; sees 4Q adj. EPS 90c on revs $1.17B vs. est. $1.59/$1.47B; cuts FY19 net bookings view to $4.75B from $5.2B and consensus $5.21B

·     Microchip (MCHP) Q3 EPS $1.66/$1.416B vs. est. $1.58/$1.41B; sees 4Q adjusted EPS $1.26-$1.53 on revs $1.25B-$1.40B vs. est. $1.54/$1.39B; sees 4Q adjusted gross margin 61.2% to 61.8%, vs. estimate 61.3%

·     Skyworks (SWKS) Q4 EPS $1.83/$972.0M vs. est. $1.82/$970.01; sees Q2 EPS $1.43/$800M-$820M below est. $1.53/$853.87M; Q1 adjusted gross margin 51%, estimate 51.2% and announces new $2B stock buyback program

·     Snap (SNAP) 4Q adjusted EPS loss (13c)/$390M vs. est. loss (8c)/$375.82M; Q4 free cash flow up $49M to ($149M); reports Q4 DAUs 186M vs.187M last year and 186M last quarter; sees Q1 revenue $285M-$310M vs. est. $307.18M and sees Q1 adjusted EBITDA between ($165M) and ($140M) vs. ($218M) last year; said it does not see a sequential decline in daily active users in 1Q

·     Viavi (VIAV) Q2 adjusted EPS 22c/$306.9M vs. est. 16c/$281.11M; sees Q3 adjusted EPS 11c-13c on revs $247M-$267M vs. est. 12c/$256.61M; said expects to see a typical seasonal spend decline in fiscal 3Q from North American service providers and consumer electronics customers

·     Arlo Technologies Inc. (ARLO) shares fell -21%; forecast Q1 revenue of $48M-$52M below est. $126.5M and year sales $380M-$420M below the $606.5M est.; CEO said “we saw the market growth slow significantly late in 2018 which led to channel inventory buildup and both of these factors will affect our growth expectations for 2019

·     Brooks Automation (BRKS) Q1 EPS 17c/$179.4M vs. est. 12c/$174.5M; sees 2Q revenue $190M-$200M vs. est. $199.5M

·     Macom (MTSI) Q1 EPS 20c/$150.7M vs. est. 20c/$153.1M; sees 2Q adjusted EPS 4.0c-12c on revs $134M-$142M below est. 22c/$158.6M; CEO said “our second quarter outlook reflects the confluence of macroeconomic and trade-related cross currents that are impacting all three of our target end markets and multiple geographies”

·     Tableau (DATA) Q4 adjusted EPS loss (3c)/$275.7M vs. est. loss (8c)/$271.75M; said results based on ASC 605; 4Q license rev. $151.8 million vs. $129.2 million y/y

·     Zendesk (ZEN) Q4 adjusted EPS 10c/$172.2M vs. est. 3c/$165.6M; sees Q1 revenue $178M-$180M vs. est. $172.76M; sees FY19 revenue $795M-$805M vs. est. $779.29M

_________________________________________________________________

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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