Mid-Morning Look: February 07, 2019

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Mid-Morning Look

Thursday, February 07, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-89.46

0.35%

25,300

S&P 500

-13.76

0.50%

2,717

Nasdaq

-44.11

0.61%

7,330

Russell 2000

-6.60

0.43%

1,511

 

 

U.S. equities are broadly lower, falling for a second straight session amid slowing growth fears after the European Commission cut its euro-area growth forecast to 1.3% for 2019 from 1.9%, warning Brexit and China may worsen the outlook, which is spilling into US markets. Treasuries extended gains as yields fall amid the rotation back into safe haven instruments and out of riskier assets such as stocks which until yesterday had rallied 5-straight sessions on Fed dovish commentary and better corporate earnings. In the UK, the Bank of England retreated from plans for multiple interest rate rises as it downgraded its economic outlook amid mounting Brexit uncertainty and slowing global growth. Tech space under pressure following pullbacks in TWTR, GRUB, MRVL after lower outlooks. Retailers mixed as TPR falls on a Q2 miss, hitting luxury names while HBI rises on results. Banks a focus today after regional banks STI and BBT announce a $66B merger (now 6th largest bank), raising consolidation expectations in the space. Earnings season still in full gear, while markets await key deadlines that could affect the macro picture: 1) February 15 deadline for Congress to reach a border-security agreement and 2) the expiration of the US/China trade truce (set for March 1st).

 

Treasuries, Currencies and Commodities

·     In currency markets, the US dollar looking to make it a 6th straight day of gains vs. counterparts, rising early amid weakness in the euro after the EC cut its growth expectations citing Brexit and China fears. The British pound dropped initially before rebounding after the Bank of England warns that Brexit-related uncertainties and softer activity abroad could lead to “greater-than-usual short-term volatility” in U.K. data, making the medium-term outlook difficult to read. The Bank of England’s Monetary Policy Committee maintains its benchmark bank rate at 0.75%

·     Commodity prices are mostly lower across the board as oil, precious metals, industrial metals, grains are all under pressure following a strong dollar and global growth slowing fears; oil prices drop over 1.5% while precious metals look to snap recent losing streak. Treasury market’s rally amid rotation into safe-haven assets as stocks slide.

 

Economic Data

·     Weekly Jobless Claims fell 19K to 234K, but was above the 221K estimate with prior week claims unrevised at 253K; the 4-week moving avg. rises 4,500 to 224.75K; continuing claims fell 42k to 1.736m in the week ending Jan. 26; unadjusted initial claims filed by federal employees fell 8,070 to 6,669 in the week ending Jan. 26

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.83

53.18

Brent

-0.47

62.22

Gold

-0.70

1,313.70

EUR/USD

-0.0017

1.1345

JPY/USD

-0.20

109.78

10-Year Note

-0.035

2.663%

 

 

Sector Movers Today

·     Retailers; TPR shares fall after a rare miss in the luxury retail space of late (CPRI, RL recent beats) as Q2 EPS missed and issues weaker year guidance for FY19 revenue growth at a low to mid-single-digit pace and FY19 EPS of $2.55 to $2.60 vs. $2.78 consensus (also soft comps with Coach +1% vs. 1.8% est. and Kate Spade -11%); LB posted a smaller-than-expected Jan comp sales lows of down (1%) vs. est. (-2.7%), but also cut its dividend in half to 30c from 60c (January Victoria’s Secret comp sales -1% vs. +4% YoY but vs. estimate -6.5%); HBI posted Q4 beat with organic sales growth of 6% in constant currency during while guides both Q1 and year revs above consensus; GES was upgraded to buy at Jefferies citing the recent pullback in shares putting multiples below history/peers presents an opportunity to own; ZUMZ reported January comp sales of 3.5% increase, better than the -2% that was implied by the company’s 4Q comp guidance of +3%

·     Consumer Staples; HAIN plunges after Q2 missed estimates and offered guidance that was below consensus; guides q2 EPS 60c-70c and Ebitda $44.9M below the $1.13 and $60.4M estimate; Kellogg (K) posted a slight Q4 profit beat and favorable guidance as sees full-year revenue growth of 3% to 4% and currency-neutral EPS growth of -5% to -7%; TSN falls as posts mixed results and guidance as sales fell (-0.4%) and operating income fell 12% to $807M on weaker margins (operating margin fell to 8.3% vs. 9.2% a year ago) – but better sales view for year; PM Q4 EPS and sales top consensus though 4Q cigarette shipment volume -3.1%

·     Media & Telecom movers; MTCH shares rise as topped guidance, and guided above-Street on 2019 EBITDA as delivered an ARPU-driven revenue beat and topped the EBITDA guide despite a marketing ramp though 1Q revenue/EBITDA guide was soft vs. consensus; in telco, TMUS reports Q4 results with in-line revenue of $11.45B and upside EPS with FY guidance sees adjusted EBITDA of $12.7B to $13.2B (vs. est. $13.05B) with branded postpaid adds of 2.6M to 3.6M; WWE slipped despite solid beat and announced a buyback

·     Autos; outside of a few positive results (recently GM) automakers have generally seen weaker quarters and guidance, followed by FCAU today as its 2019 outlook missed expectations as said it expects to earn €6.7 billion ($7.6 billion) in 2019 vs. consensus of €7.3 billion ($8.3 billion) – which overshadowed a Q4 beat; results follow recent mixed or weak results from Ford, TM, and Daimler; shares of auto suppliers (BWA, LEA, VC, DLPH, MGA) active once again; in auto retail, ORLY reported mixed 4Q results, with revenues beating, but some comp and EPS softness

 

Stock GAINERS

·     CMG +14%; Q4 topped consensus EBITDA and EPS estimates as the December Free delivery event accelerated comp sales, holding 2-year traffic flat q/q, and expanding margin/solid +6.1% comp result and a 17% store-level margin

·     FLT +5%; following Q4 beat and strong C19 rev growth guidance while growth in the core Fuel Cards business is re-accelerating

·     HBI +14%; posted Q4 beat with organic sales growth of 6% in constant currency during while guides both Q1 and year revs above consensus

·     IRBT +13%; as Q4 GAAP EPS 88c/$384.7M topped the est. 52c/$379.7M and gave an upbeat outlook

·     MTCH +13%; topped guidance, and guided above-Street on 2019 EBITDA as delivered an ARPU-driven revenue beat and topped the EBITDA guide despite a marketing ramp though 1Q revenue

·     STI +8%; BBT and STI will combine in an all-stock merger of equals valued at approximately $66 billion, creating the sixth-largest U.S. bank based on assets and deposits, with approximately $442 billion in assets, $301 billion in loans and $324 billion in deposits. https://on.mktw.net/2HY5x9G

 

Stock LAGGARDS

·     ADS -13%; shares fall on mixed Q4 results as EPS beat while revs of $2.06B missed the $2.12B estimate and guides year core EPS $22, well below the $24.35 estimate

·     FCAU -10%; said it expects to earn €6.7 billion ($7.6 billion) in 2019 vs. consensus of €7.3 billion ($8.3 billion) – overshadows a Q4 beat

·     FEYE -11%; after Q4 results that beat EPS and revenue estimates but included downside guidance (FY19 guidance has downside revenue of $880M to $890M below est. $890.32M

·     GRUB -17%; on Q4 revenue and EPS misses as FY adjusted EBITDA from $235M to $265M, below the $302.4M consensus/Q4 adjusted EBITDA was $42.1M compared to the $47.2M consensus

·     HAIN -19%; after Q2 missed estimates and offered guidance that was below consensus; guides q2 EPS 60c-70c and Ebitda $44.9M below the $1.13 and $60.4M estimate

·     MRVL -5%; cut Q4 revenue view to $735M-$745M from $790M-$830M (est. $810.41M) saying the majority of the shortfall was due to a weaker than expected storage controller business

·     OSUR -23%; as Q4 EPS beat but Q1 revenue of $29.0M-$30.5M was well below the $44.4M est. (but sees second half 2019 revenues ‘materially greater’ than 1H)

·     SLDB -67%; after initial results from a Phase 1/2 dose-testing trial for its Duchenne muscular dystrophy (DMD) gene therapy showed minimal responses in a trio of patients, requiring the biotech to bump up the dose of the medicine to trigger a notable benefit.

·     SONO -13%; said reduced sell-through velocity towards the end of the first quarter created higher channel inventory levels and will impact 2Q revenue

·     TPR -17%; 2 EPS missed and issues weaker year guidance for FY19 revenue growth at a low to mid-single-digit pace and FY19 EPS of $2.55 to $2.60 vs. $2.78 consensus (also soft comps with Coach +1% vs. 1.8% est. and Kate Spade -11%)

·     TWTR -9%; Q4 beats with downside sales guidance and announces plans to stop disclosing MAUs/Q1 revs seen $715M-$775M (below est. $766.1M) while Q4 MAUs totaled 321M (vs. est. 323.8M

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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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