Morning Preview: February 07, 2019

Auto PostDaily Market Report

Early Look

Thursday, February 7, 2019

Futures

Up/Down

%

Last

DJ Industrials

-149.00

0.59%

25,178

S&P 500

-16.50

0.60%

2,713

Nasdaq

-41.50

0.60%

6,954

 

 

Stock futures are lower, adding to yesterday losses when markets snapped their 5-day win streak, as several concerns and fears over the next few days overshadow another round of good earnings overnight. Several macro factors remain for broader markets including Brexit, the expiration of the US/China trade truce (set for March 1st) and a possible new government shutdown as the February 15 deadline for Congress to reach a border-security agreement looms and both sides still appear far apart. The top Democrat working on the deal said a bipartisan agreement by the end of this week should be possible, but President Donald Trump’s refusal to sign a bill. In Asian markets, The Nikkei Index fell -122 points to settle at 20,751, while both the Shanghai and Hang Seng markets remains closed for holiday. In Europe, the German DAX is lower by more than -100 points (1%) at 11,200, while the FTSE 100 is down a few points at 7,160. The Stoxx 600 marched lower for the first time in eight sessions. Natural gas sank to the lowest in more than 10 months amid warmer-than-usual weather forecasts along the U.S. east coast while gold prices slide for a 4th day as the dollar rises (up a 5th day). Also today, a big M&A deal in the banking space as regional banks BBT and STI combine in $66B deal.

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -6.09 points, or 0.22%, to 2,731.61

·     The Dow Jones Industrial Average fell -21.22 points, or 0.08%, to 25,390.30

·     The Nasdaq Composite dropped -26.80 points, or 0.36%, to 7,375.28

·     The Russell 2000 Index declined -2.20 points, or 0.15% to 1,518.02

 

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 221K

·     8:30 AM EST      Continuing Claims…est. 1.733M

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

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

·     3:00 PM EST       Consumer Credit for December…est. $17.0B

·     7:30 PM EST       Fed’s Bullard speaks

 

Earnings Calendar:

·     Earnings Before the Open: ADNT, ADS, AMAG, ARW, BR, BV, CAH, CCR, CDW, DNKN, DTE, EIGI, EPC, GRA, GRUB, HAIN, ICE, K, LEE, LH, MAC, MAS, MMS, MPC, MPW, ODFL, PBH, PENN, PM, PTEN, SEE, SNA, SPB, SPGI, TGI, TKR, TPR, TSN, TWTR, WMS, WWE, YUM

·     Earnings After the Close: ANGI, ATEN, BECN, BRS, CARB, CBL, COLM, CSL, EXPE, FISV, FTV, FWRD, G, HUBG, IAC, KN, LGF/A, LGND, MAT, MHK, MSI, MTD, NCR, NUAN, NWSA, POWI, PRO, QRVO, RPD, RSG, SGEN, SYNA, TDC, VRSN, VRTU, WTS, VVI, ZAYO

 

Other Key Events:

·     The Bank of England (BOE) sets interest rates and updates its economic forecasts

 

 

Macro

Up/Down

Last

WTI Crude

-0.36

53.65

Brent

-0.27

62.42

Gold

-3.50

1,310.90

EUR/USD

-0.003

1.1332

JPY/USD

-0.12

109.85

10-Year Note

-0.028

2.67%

 

 

World News

·     Fed Chairman Jerome Powell told teachers the central bank is striving to earn the trust of the American people in an era where public mistrust in institutions is growing

·     Wall Street is the next target for Democrats’ tax plans. Senator Brian Schatz is working on a levy on financial trades to curb high-frequency trading and add revenue. A tax set at 0.1% of the value of a trade may raise $777 billion over a decade, the CBO estimated – Bloomberg

·     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. All major economies from Germany to France, Italy and Spain were lowered. Italy’s revision to 0.2% from 1.2% was the worst

 

Sector News Breakdown

Consumer

·     Chipotle (CMG) shares rose over 10%; Q4 EPS $1.72/$1.23B vs. est. $1.39/$1.19B; 4Q comparable sales +6.1% vs. est. +4.5%; 4Q restaurant level operating margin 17% vs. 14.9% YoY; sees 2019 comp sales up mid-single digit range; approved added $100M buyback; sees 140-155 restaurant openings in 2019

·     Costco (COST) reported total comparable sales for the January up +5.2% vs. +6% YoY and estimate +5.7%; January U.S. comparable sales excluding fuel, currencies +7.3% vs. +7.10% MoM

·     Callaway Golf (ELY) Q4 adjusted EPS loss (32c)/$181M vs. est. loss (32c)/$176.38M; sees FY19 adjusted EPS 93c-$1.03 on revs $1.67B-$1.7B vs. est. $1.05/$1.66B; sees FY19 gross margin 47%

·     GoPro (GPRO) Q4 adjusted EPS 30c/$377M vs. est. 25c/$374M; reports Q4 adjusted gross margin 38%, up from 33% in Q3; 4Q adj. operating expenses reduced by $22M, or 18% YoY; FY18 revenue $1.15B, down 3% YoY; says cash and investments totaled $198M at end of 4Q

·     iRobot (IRBT) shares rose 18%; Q4 GAAP EPS 88c/$384.7M vs. est. 52c/$379.7M; sees 2020 revenue percentage growth in mid- to high teens including tariff effects vs estimate 15%; Sees FY revenue $1.28 billion to $1.31 billion vs. estimate $1.29 billion

·     O’Reilly Automotive (ORLY) Q4 EPS $3.72/$2.31B vs. est. $3.75/$2.33B; sees 1Q EPS $3.92-$4.02 vs. estimate $4.06 and sees 1Q comparable sales +3% to +5% after Q4 comps rose 3.3% vs. est. 3.7%; sees FY EPS $17.37-$17.47, below estimate $17.80

·     Sonos (SONO) Q1 EPS 55c/$496.4M vs. est. 41c/$490.4M; says elevated channel inventory and production schedule with IKEA starting in 3Q instead of 2Q and the elevated channel inventory and production schedule will impact 2Q revenue; reaffirming FY19 guidance

·     Zumiez (ZUMZ) increases guidance to $1.10-$1.12 from previously expected 4Q EPS $1.08-$1.10, cites stronger than expected sales for the quarter; comparable sales rose 3.5% for four-week period ended Feb. 2

 

Energy

·     Carrizo Oil & Gas (CRZO) announces FY19 DC&I capital spending plan of $525M-$575M and guides FY19 production 66.8K-67.8K BOE/D; said currently plans to reduce its rig count in the Eagle Ford Shale from four to one by the end of the first quarter.

·     SRC Energy (SRCI) sees FY19 production 59,000Boe/d – 62,000Boe/d; said the company’s 2019 budget was developed using a flat $50 NYMEX oil and $3 Henry Hub natural gas price assumption, anticipated gas processing expansion in the D-J Basin and assumed continued gas processing allocations as the system reaches designed capacity

·     National Oilwell Varco (NOV) Q4 EPS 3c/$2.4B vs. est. 8c/$2.19B; said expects “lower orders in December, combined with equipment sales that were pulled forward near year-end, will lead to lower sequential revenue during 1Q19 in all three segments

 

Financials

·     SunTrust Banks Inc. (STI) and BB&T Corp. (BBT) 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. Under the terms of the deal, SunTrust shareholders will receive 1.295 shares of BB&T for each SunTrust share they own. BB&T holders will own approximately 57% and SunTrust holders will own approximately 43% of the combined company https://on.mktw.net/2HY5x9G

·     Société Generale SA’s (GLE.FR) cut its 2020 RoTE target as fourth-quarter net profit rose sharply from a year earlier, when results were hit by one-offs, and beat analysts’ expectations; said it now targets a RoTE of between 9%-10% in 2020, down from a previous estimate of 11.5%

·     MetLife (MET) Q4 adjusted EPS $1.35/$15.66B vs. est. $1.29/$15.93B; 4Q book value $51.53, down 5% y/y, 4Q ROE 16.5%; adjusted ROE 12.6% and Q4 net investment income $3.5b, down 22% y/y

·     Lincoln National (LNC) Q4 operating EPS $2.15/$4.39B vs. est. $2.12/$4.23B; 4Q book value per share $69.71, 4Q return on equity +10.9% and 4Q annuities unit net $258 million

·     Prudential (PRU) Q4 adjusted EPS $2.44 vs. est. $2.81; Assets under management $1.38 trillion vs. $1.39 trillion y/y; 4Q adjusted book value per share $96.06 vs. $88.28 y/y; raises quarterly dividend to $1.00 from 90c

·     Apollo Investment (AINV) Q3 net investment income per share 45c vs. est. 46c; Q3 total investment income $64.0M; 3Q net asset value per share $19.03

·     Cincinnati Financial (CINF) Q4 operating EPS 98c vs. est. 87c; 4Q net premiums written $1.18 billion; 4Q book value per share $48.10

·     CoreSite Realty (COR) Q4 FFO $1.26/$139.1M vs. est. $1.26/$139.8M

·     FleetCor (FLT) Q4 adjusted EPS $2.78/$643.4M vs. est. $2.72/$620.93M; sees FY19 adjusted EPS $11.40-$11.70 on revs $2.57B-$2.63B vs. est. $11.71/$2.57B; sees Q1 adjusted EPS $2.55-$2.65 vs. est. $2.72

·     Golub Capital (GBDC) Q1 net investment income excluding capital gain incentive fee per share 32c (in-line w/est.); 1Q net investment income $19.8M and 1Q net asset value per share $15.97

·     Moelis & Co (MC) Q4 adjusted EPS 77c/$238.3M vs. est. 67c/$224.6M; declares special dividend of $1.25 per share

 

Healthcare

·     Biogen (BIIB) shares fell -4% as Patent Trial and Appeal Board said it will consider whether patent 8,399,514 should have been issued; Board found that Mylan (MYL) had established a “reasonable likelihood” of winning argument that the patent for multiple sclerosis drug was invalid

·     Lannett (LCI) Q2 adjusted EPS 86c/$193.7M vs. est. 67c/$162.43; raises FY19 revenue view to $615M-$635M from $585M-$615M (est. $598.79M)

·     OraSure Technologies (OSUR) shares fell -14% as Q4 EPS 16c vs. est. 11c; sees 1Q revenue $29.0M-$30.5M, well below the $44.4M est.; sees second half 2019 revenues ‘materially greater’ than first half

 

Industrials & Materials

·     Crown Holdings (CCK) Q4 adjusted EPS $1.00/$2.73B vs. est. $1.00/$2.81B; sees FY19 adjusted EPS $5.20-$5.40 vs. est. $5.70; sees FY19 adjusted effective income tax rate approximately 25%-26% compared to 24.7% in 2018

·     Echo Global (ECHO) Q4 EPS 47c/$583M vs. est. 38c/$586.78M; sees Q1 revenue $530M-$570M, vs. consensus $598.3M; sees FY19 revenue $2.35B-$2.55B vs. est. $2.44B

·     Rayonier (RYN) Q4 EPS 2c/$166.1M vs. est. 3c/$156.9M; said “we are pleased to conclude our strongest year of financial performance since the spin-off of the performance fibers business in 2014, with all four of our key operating segments generating post-spin highs in full-year Adjusted EBITDA”

·     Royal Gold (RGLD) Q2 EPS 36c/$97.6M vs. est. 33c/$98.8M; 2Q gold production 79,600 equivalent oz, and 2Q average gold price $1,226

·     Werner Enterprises (WERN) Q4 EPS 77c/$646.4M vs. est. 68c/$649.3M; sees FY capital expenditure $275M-$300M; Operating margin of 11.6% increased 370 bps due to revenue increases that exceeded cost increases, which benefited from a newer fleet and low driver turnover; says minimal truck growth planned for second half of 2019

 

Technology, Media & Telecom

·     Marvell (MRVL) lowers 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. Marvell believes that demand for its products was impacted primarily by macroeconomic uncertainty, reduction in cloud capital spending and PC CPU shortages

·     Blackbaud (BLKB) Q4 non-GAAP EPS 65c/$221.2M vs. est. 55c/$220.29M; Sees FY adjusted revenue $880M-$910M on EPS $2.11-$2.28 vs. est. $888.3M and $2.40

·     CSG Systems (CSGS) Q4 EPS 95c/$247.3M vs. est. 77c/$236.27M; sees 2019 EPS $3.15-$3.27 on revs $965M-$995M vs. est. $3.16/$942.13M; sees non-GAAP revenue $903M-$920M and adjusted operating margin 17.0%; boosts quarterly dividend by 6% to 22.25c

·     FireEye (FEYE) Q4 adjusted EPS 6c/$218M vs. est. 5c/$216.77M; reports Q4 billings $265M, up 10%; sees Q1 adjusted EPS (4c)-(2c) on revs $208M-$212M vs. est. 1c/$211.29M; sees Q1 billings $170M-$180M; sees FY19 adjusted EPS 17c-21c on revs $880M-$890M vs. est. 19c/$889.53M

·     Fortinet (FTNT) Q4 EPS 59c/$507.0M vs. est. 52c/$496.35M on Q4 billings growth up 22%; sees Q1 EPS 37c-39c on revs $465M-$475M vs. est. 41c/$470.4M; sees FY adjusted EPS 2.05-2.10 on revs $2.06B-$2.1B vs. est. $2.00/$2.05B

·     FormFactor (FORM) Q4 EPS 31c/$140.9M vs. est. 26c/$135.93M; Sees 1Q adjusted EPS 15c-21c vs. est. 22c; sees 1Q adjusted gross margin 41%-44%

·     Match Group (MTCH) Q4 adjusted EPS 39c/$457M vs. est. 38c/$448.43M; Q4 average subscribers of 8.2M vs. 7M in Q3; Tinder Average Subscribers were 4.3M in Q4 2018, increasing 233,000 sequentially and 1.2M year-over-year

·     New Relic (NEWR) Q3 EPS 19c/$124.0M vs. est. 12c/$120.11M; raises FY19 EPS view to 58c-60c from 42c-48c (est. 50c) and raises FY19 revenue view to $473.6M-$475.6M from $466.5M-$469.5M (est. $468.89M)

·     Netgear (NTGR) Q4 EPS 68c/$288.93M vs. est. 49c/$379.84M; sees Q1 revenue $235M-$250M, vs. consensus $264.67M

·     Presidio (PSDO) Q2 EPS 39c/$767.8M vs. est. 35c/$682.28M;

·     Trimble (TRMB) Q4 adjusted EPS 48c/$792.9M vs. est. 46c/$809.82M; sees Q1 adjusted EPS 44c-48c on revs $795M-$820M vs. est. 49c/$821.88M

·     Zynga (ZNGA) Q4 EPS 0c/$248.7M vs. est. 4c/$260.23M; reports Q4 DAUs 22M vs. 22M last year; reports Q4 mobile DAUs 21M vs. 20M last year and Q4 MAUs 85M vs. 86M last year; sees Q1 revenue $240M vs. est. $242.17M and Q1 bookings $325M and adjusted EBITDA ($29M); expect to deliver $1.15B in revenue, up $243M or 27% YoY, with bookings of $1.35B, up $380M

_________________________________________________________________

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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