Mid-Morning Look: February 20, 2019

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Mid-Morning Look

Wednesday, February 20, 2019

Index

Up/Down

%

Last

 

DJ Industrials

18.96

0.07%

25,910

S&P 500

2.43

0.09%

2,782

Nasdaq

16.93

0.23%

7,503

Russell 2000

1.70

0.11%

1,576

 

 

U.S. equities struggle for direction early as markets await the Fed Minutes from the January FOMC meeting later today (2:00 PM EST) and as trade talks continue in Washington between the U.S. and China. The talks follow U.S. and Chinese negotiator discussions last week in Beijing that failed to generate a specific deal, but both sides noted progress. U.S. stocks have jumped over the last 2 months (Dow and Nasdaq Comp come into the week riding 8-week winning streaks) on hopes the U.S/China could resolve the trade, while a dovish Fed has also pushed investors back into stocks. The dollar looks to snap its recent losing streak, while gold prices extend recent gains (trading at 10-month highs). Note yesterday, President Trump said there was nothing “magical” about a March 1 deadline for negotiations, which was taken as a sign that tariffs on imports of Chinese goods might not automatically be raised to 25% from 10% on that date. Airlines are lower given lower RASM guidance from LUV this morning, while tech stocks are mixed following a heavy dose of earnings today.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar is little changed after recent weakness, steady vs. the euro as the Pound stalls in its recent spike vs. the greenback; currencies await results of the Fed minutes later. Commodity prices have been strong on the dollar decline, with gold holding at 10-month highs while oil prices look to make it a 6th straight session of gains (trading at best level in 3-months). Treasury market’s slip slightly as yields inch off lows ahead of FOMC minutes.

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.01

56.08

Brent

-0.05

66.40

Gold

2.50

1,347.30

EUR/USD

-0.0006

1.334

JPY/USD

0.22

110.85

10-Year Note

-0.012

2.65%

 

 

Sector Movers Today

·     Auto’s; TSLA active today on two stories: 1) last night, CEO Elon Musk tweeted overnight, “Tesla made 0 cars in 2011, but will make around 500k in 2019…Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k; 2) this morning, TSLA said general counsel Dan Butswinkas was leaving after just two months on the jobs and is returning to trial practice at a firm in Washington, D.C.; KAR 4Q:18 adj. EBITDA of $206.6M beat est. $$205.3M while revs light but gross margin was stronger; CNDT Q4 results with in-line EPS and a revenue beat despite a 14% Y/Y revenue drop/upside FY19 view; KNDI rises as announces that its Model EX3 and Model K22 have been approved by the NHTSA to be imported and registered in the U.S.

·     E&P sector; very busy space with lots of earnings as DVN shares jump after its announcement to seek a monetization of the company’s Canadian Oil Sands and Barnett assets and on earnings; FANG Q4 CFPS was 13.6% below consensus on much weaker oil & gas price realizations while 4Q18 production was 6% above consensus as was 4Q18 oil production, while 4Q18 capex was 8% below consensus (also reduced cap-ex by 1.7%); CXO Q4 CFPS was 8% below consensus and capex was 6.5% above consensus while reduced its 2019 capex and production guidance (new capex guidance was 13% below consensus and new 2019 production guidance was 6% lower

·     Pharma movers; TEVA was downgraded to neutral at Mizuho and lowered tgt to $18 from $25 saying the investment thesis is “broken” after Teva’s “disappointing 2019 guidance and cautious longer-term outlook; TLRY signed a deal to acquire Hemp Hearts-maker Manitoba Harvest for up to $419 million in cash and stock as the two companies look to launch CBD-infused products; BHC Q4 revs and Ebitda topped views but the midpoint of year rev guidance ($8.3B-$8.5B missed the $8.45B est.); generic and specialty stocks lower

·     Software movers; INST solid F4Q results with revenue and adjusted operating income ahead of Street/CS expectations while FY19 guidance missed expectations (was downgraded at Morgan Stanley after guidance); CDNS rises as reported F4Q and guided F1Q above consensus, with F4Q benefitting from hardware shipment pull-ins from F1Q19 into F4Q; OSPN 4Q results beat on revenue ($64.8M vs. $59.9M est.) and (adj. EBITDA $9.1M vs $3.9M est.); FIVN Q4 results showed $5.8M of revenue upside on the third consecutive quarter of accelerating growth, which improved to 30.6% y/y vs. 30.4% y/y last quarter, driven by record enterprise bookings

 

Stock GAINERS

·     CDNS +4%; reported F4Q and guided F1Q above consensus, with F4Q benefitting from hardware shipment pull-ins from F1Q19 into F4Q

·     DVN +11%; after its announcement to seek a monetization of the company’s Canadian Oil Sands and Barnett assets and on earnings

·     GRMN +15%; beats with 4% Y/Y revenue growth and issued upside FY19 guidance at about $3.5B (topping the estimate $3.43B) and EPS at $3.70 above the $3.52 estimate

·     HST +5%; as beat 4Q expectations and issued stronger guidance than the Street anticipated

·     KNDI +35%; as announces that it’s Model EX3 and Model K22 have been approved by the NHTSA to be imported and registered in the U.S.

·     OSPN +25%; as 4Q results beat on revenue ($64.8M vs. $59.9M est.) and (adj. EBITDA $9.1M vs $3.9M est)/BTIG said top-line was aided by a $2M deal that was pushed to 4Q recognition

 

Stock LAGGARDS

·     CVS -8%; after guiding Q1 EPS $1.49-$1.53, below the $1.64 estimate (Q1 revs better) and said sees 2019 as a “year of transition” as it integrates Aetna

·     HSIC -6%; Q4 sales that missed expectations, with dental consumables growth in North America being impacted by “a soft end market in Nov/Dec (PDCO, XRAY shares also active)

·     LC -7%; offered FY19 guidance for revenue and adjusted EBITDA that was light versus the Street consensus for each metric/analyst flagged credit concerns and tighter lending standards

·     LUV -5%; cuts forecasts as sees 1Q RASM up 3%-4% (down from prior view of up 4%-5%) as sees negative effect from government shutdown $60M in 1Q; saw negative effect $10M-$15M prior

·     PSTG -2%; downgraded to market perform at Raymond James on worries that NVDAs slowing data center segment may mean bad news for PSTG’s FlashBlade and concerns that competition will heat up in memory storage

·     UBS -4%; shares fell after the bank was ordered to pay more than 4.5B euros ($5.1B) by a court in a French tax case

·     WIX -9%; Q4 results beat estimates but introduced downside FY19 guidance with revenue from $755M to $761M (vs. est. $761.8M) with FCF of $135M to $140M below the $146M est.

·     WWW -8%; after results missed (note shares came into the earnings print near 52-week highs just shy of the $40 level)

 

Syndicate

·     Arlington Asset Investment (AI) 6M share Spot Secondary priced at $8.33

·     ARMOUR Residential (ARR) 7.2M share Spot Secondary priced at $20.33

·     Camden Property (CPT) 3.375M share Spot Secondary priced at $97.85

·     New Residential (NRZ) 40.3M share Spot Secondary priced at $16.50

·     Ovid Therapeutics (OVID) 12.5M share Spot Secondary priced at $2.00

·     Sienna Biopharmaceuticals (SNNA) 8M share Spot Secondary priced at $2.50

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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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