Mid-Morning Look: February 22, 2019

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Mid-Morning Look

Friday, February 22, 2019

Index

Up/Down

%

Last

 

DJ Industrials

121.47

0.47%

25,972

S&P 500

9.40

0.34%

2,784

Nasdaq

34.86

0.47%

7,494

Russell 2000

8.04

0.51%

1,583

 

 

U.S. equities are moving higher to end the week, with investors remaining hopeful on a possible trade deal with China, offsetting fears of the trade concerns with the EU (which threatened this morning to counter US trade tariffs on autos), the softer economic readings yesterday (Philly Fed, Existing Home Sales and LEI declines), and the weakness in the food sector after a big miss and lower guide from KHC (among other issues with the company). U.S. stocks rallied in early trading amid news President Donald Trump plans to meet with China’s top trade negotiator Friday afternoon. Energy shares led gains in the S&P 500 as oil headed for a second weekly increase on trade optimism. The top stocks story remains food giant Kraft (KHC) after the company missed earnings estimates, cut its quarterly dividend and disclosed an SEC subpoena surrounding its accounting practices. Still several Fed speakers on the calendar today which could potentially move markets…but markets closely watching for any trade related headlines into the weekend.

 

Treasuries, Currencies and Commodities

·     In currency markets, the US dollar little changed vs. the euro and yen while the British Pound recovers off earlier losses amid a day of no economic data. U.S. Treasury’s are higher, driving both the two-year and 10-year yields 3 bps and 4 bps lower to 2.50% and 2.65%, respectively. Commodity prices mixed with oil looking to rebound while gold looks to rebound after dropping the tail end of the week from 10-month highs.

 

 

Macro

Up/Down

Last

 

WTI Crude

0.63

57.59

Brent

0.29

67.36

Gold

4.40

1,332.20

EUR/USD

0.0002

1.3339

JPY/USD

-0.03

110.67

10-Year Note

-0.034

2.654%

 

 

Sector Movers Today

·     Semiconductors; overall sector mostly higher with broader market; INTC was upgraded at Morgan Stanley and raised tgt to $64 on the belief that shares can rerate higher given that the company has put a more financially oriented CEO; Morgan also downgraded LRCX to equal-weight saying that weakness in memory chips seemed likely to drive further downward revisions to spending for 2019 and 2020; AVGO downgraded to market perform at Cowen; OLED shares soar and tgt raised by three analysts after better quarterly profit

·     Media & Telecom movers; telecom carriers USM and TDS both came under pressure following earnings releases; ATNI was upgraded at Maxim and Raymond James as believe the sharp pullback following earnings yesterday was an overreaction to near-term results and not reflective of a healthy long-term outlook; ATUS mixed Q4 as beat on profit but missed on revenues

·     Consumer Staples; KHC the big story today, as shares fall over 25% as Q4 results miss and guided FY19 EBITDA 14% below Consensus (~$6.4B vs. $7.45B est., recorded a $15B impairment charge for cheese and deli brand assets, and cut its dividend by 36% – also says SEC probing procurement accounting policies (food stocks fell in reaction GIS, CPB, K)

·     Casino & Leisure movers; BYD 4Q and 2019 outlook were stronger than expected sending shares higher while CZR 4Q results with 18% y/y LV EBITDA growth offsetting Regionals, which were down 6% y/y; in gyms, PLNT was upgraded to buy at Jefferies with $75 tgt

·     Biotech movers; OPTN said Phase 2 clinical trial evaluating OPNT001 did not meet the primary endpoint of reducing the number of binging days from baseline to week 8; BLUE reported 4Q18 with $18.4M in revenue ($52M for FY18) and a net loss of $149M ($556M for FY18)/operating expenses continue to increase due to advancing clinical programs; ACHV rises after announcing final data from their Phase I/II multi-dose, clinical study of cytisinicline in smokers; ICPT was initiated at underweight and $170 tgt at Leerink

·     Industrial & Machinery; CAT shares slipped after Bloomberg reported the EU is drafting a retaliatory tariff list to include CAT (and XRX if Trump imposes auto tariffs; in the waste sector, ADSW Q4 EPS in-line on slightly better revs while year guidance missed the mid-point of views; CWST mixed Q4 as EPS missed by 2c on better revs and was downgraded at Stifel; ITT shares jumped on mixed Q4 results (EPS beat, revs miss); in E&C, FLR Q4 earnings beat estimates, while new awards strong

 

Stock GAINERS

·     ACIA +15%; reported Q4 results that beat expectations and gave a Q1 outlook that topped estimates, prompting several analysts to raise their price targets on the stock

·     BOOM +30%; delivered better-than-expected 4Q EPS (46c vs. 36c est.) while revenue and operating income also beat projections in certain segments

·     BYD +10%; 4Q and 2019 outlook were stronger than expected sending shares higher while CZR 4Q results with 18% y/y LV EBITDA growth offsetting Regionals, which were down 6% y/y

·     NEM +5%; Bloomberg reports GOLD has studied a bid for the company as it looks for ways to boost production (Barrick confirmed this morning it has reviewed bid) https://bloom.bg/2BLZlvG

·     ROKU +16%; posted better than expected 4Q revenue results, driven by player sales while initial FY19 guidance was slightly better than expected, and implies >35% y/y growth

·     TTD +25%; as posted a strong Beat on Q4 results as revenue of $160.5MM grew 56% Y/Y and exceeded Street estimates $148MM

·     VYGR +16%; in response to its collaboration and option agreement with ABBV aimed and developing and commercializing vectorized alpha-synuclein-targeting antibodies for the treatment of Parkinson’s disease

·     W +29%; reported a smaller than expected Q4 EPS loss as revs of $1.99B topped consensus and reports 15.2M active customers, up 37.9% year-over-year

 

Stock LAGGARDS

·     AAOI -12%; 4Q report that included weak guidance for 1H19 with poor visibility regarding 2H19/mgmt suggests web scale customers need to absorb excess inventory of 100G optical transceivers (downgraded by a few analysts)

·     APPN -8%; as Q4 beats with 19% Y/Y revenue growth trampled beneath the mixed Q1 outlook

·     CASA -23%; after Q4 results that beat estimates despite a 43% Y/Y revenue drop but came with downside FY19 outlook (sees revs $250M-$300M below est. $313.08M) and weaker EPS

·     DPLO -40%; after postponed its Q4 release because it may need to record an impairment charge related to its pharmacy benefit managers business

·     KHC 25%; Q4 results miss and guided FY19 EBITDA 14% below Consensus (~$6.4B vs. $7.45B est., recorded a $15B impairment charge for cheese and deli brand assets, and cut its dividend by 36% – also says SEC probing procurement accounting policies

·     MDRX -14%; after Q4 top/bottom line missed and guides Q1 and year below views (sees Q1 revenue $430M-$440M vs. est. $513.95M)

·     STMP -52%; while 4Q results beat, STMP’s decision to discontinue its exclusive partnership with the US Post Office drove very poor relative 2019 guidance (well below consensus) – estimates (’19 revs seen $540M to $570M vs. $689M consensus)

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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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