Morning Preview: July 25, 2019

Auto PostDaily Market Report

Early Look

Thursday, July 25, 2019

Futures

Up/Down

%

Last

DJ Industrials

55.00

0.20%

27,292

S&P 500

-1.00

0.03%

3,020

Nasdaq

-26.50

0.33%

8,011

 

 

Stock futures are mixed, with the Dow futures getting a lift behind better earnings from MMM, while the Nasdaq Comp futures are lower following a rough night of earnings and guidance, especially in the software and chip sector, with shares of NOW, PTC, XLNX, CTXS all sliding, though FB shares rallied behind a strong gains in quarterly sales and users, as TSLA shares dropped over 11% on its results. Outside of another busy morning of corporate earnings (tonight as well with AMZN, GOOGL, INTC reporting), markets will closely watch today’s monetary policy decision from the European Central Bank at 7:45 AM EST (followed by Draghi press conference at 8:30 AM) where an interest rate cut is expected and may signal an additional cut at its September meeting. Stocks finished strong on Wednesday, with the S&P 500 and Nasdaq Comp each trading to fresh all-time records, while the Dow Industrials slumped behind results/weak guidance from Boeing and Caterpillar. The dollar was mixed, breaking a four-day uptrend, while the EUR fell as investors wait on the ECB meeting Thursday. Oil surrendered gains sparked by a drop in U.S. crude stockpiles and production on news that Kuwait and Saudi Arabia will coordinate to resume oil output from the neutral zone shared by the neighboring nations. In Asian markets, The Nikkei Index rose 46 points to 21,756, the Shanghai Index rose 14 points to 2,937 and the Hang Seng Index gained 70 points to 28,594. In Europe, the German DAX is flat at 12,525, while the FTSE 100 is up 15 points around 7,515.

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 14.09 points, or 0.47%, to 3,019.56

·     The Dow Jones Industrial Average fell -79.22 points, or 0.29%, to 27,269.97

·     The Nasdaq Composite spiked 70.10 points, or 0.85%, to 8,321.50

·     The Russell 2000 Index surged 25.50 points, or 1.64% to 1,580.52

 

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 218K

·     8:30 AM EST      Continuing Claims…est. 1.688M

·     8:30 AM EST      Durable Goods Orders, June-P…est. 0.7%

·     8:30 AM EST      Durable Goods: Ex Transportation, June-P…est. 0.2%

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

·     11:00 AM EST    Kansas City Fed Manufacturing Activity for July…est. 3

 

Earnings Calendar:

·     Earnings Before the Open: AAN, AB, AFL, APD, AXTA, BC, BMY, CMCSA, CMS, DBD, DECK, DOW, EHTH, FCN, FDC, FLEX, FTV, GPI, GRA, HBAN, HSY, IP, IVZ, KIM, KKR, LAZ, LH, LUV, MHK, MNRO, NEM, ODFL, OMCL, ROK, ROP, RS, RTN, SAH, SAVE, TPX, TREE, TSCO, VC, VLO, VMC, WM

·     Earnings After the Close: AJG, BABY, BJRI, COOM, CHE, COLM, CSTR, CVA, DECK, EMN, EXPE, FII, FISV, FWRD, GOOGL, INTC, JNPR, LOGM, MAT, MGM, PFG, PFPT, POWI, RMD, RRC, RSG, SBUX, SNBR, SYK, TCO, TILE, UHS, VRSN, WERN

 

 

Macro

Up/Down

Last

WTI Crude

0.52

56.40

Brent

0.64

63.82

Gold

3.70

1,427.20

EUR/USD

0.0006

1.1146

JPY/USD

-0.12

108.07

10-Year Note

-0.012

2.03%

 

 

World News

·     North Korea fired two short-range missiles into the sea Thursday, South Korea’s military said, the first weapons launches in more than two months and an apparent pressuring tactic aimed at Washington as North Korean and U.S. officials struggle to restart nuclear negotiations.

·     German business sentiment continued to worsen in July, as the Ifo business-climate index fell to 95.7 points in July, down from a revised 97.5 points in June and was below the 97 estimates. Companies’ expectations fell to 92.2 points in July from a revised 94.0 points in June.

 

Sector News Breakdown

Autos

·     Ford (F) shares fell -6%; Q2 EPS 28c misses the 30c est.; sees FY EPS $1.20-$1.35 vs. est. $1.39 and sees FY adj. EBIT $7.0B-$7.5B vs. est. $7.07B; Q2 North America Ebit $1.7B vs $1.8B y/y and margin in the region fell to 7.1% from 7.4% last year; Q2 China loss before interest, taxes narrowed $328M y/y to $155M

·     Tesla (TSLA) -11%; Q2 EPS loss ($1.12)/$6.35B vs. est. loss (31c)/$6.43B; 2Q cash and cash equivalents $4.95B vs. $2.20B QoQ and capex -11% QoQ to $249.7M; Auto gross margin at ~19% in spite of reductions in vehicle ASP and lower regulatory credit revenue; says on track to launch Gigafactory Shanghai by end of 2019 and Model Y by fall of 2020; cuts year cap-ex to $1.5B-$2B from prior $2B-$2.5B

·     O’Reilly Automotive (ORLY) -4%; Q2 EPS $4.51/$2.59B vs. est. $4.67/$2.61B; Q2 comps came in light of ests (+3.4% vs +4.6% consensus) and gross margin (52.8% vs. 52.9% consensus) saying unseasonably cool and rainy weather held back traffic and caused delays in new store openings

 

Consumer

·     Las Vegas Sands (LVS) Q2 adjusted EPS 72c/$3.33B vs. est. 78c/$3.39B; Sands China business recorded revenue growth of 1.4% to $2.14B vs. $2.15B consensus and property EBITDA of $765M vs. $788M consensus

·     Meritage Homes (MTH) Q2 EPS $1.31/$864.61M vs. est. $1.03/$805.7M; total orders for Q2 increased 22% year-over-year; raises FY19 EPS view to $5.20-$5.50 from $4.65-$4.95 (est. $4.76)

·     Allegiant Travel (ALGT) Q2 EPS $4.33/$491.76M below est. $4.61/$505.24M and narrows FY19 EPS view to 13.50-$14.25 from $13.25-$14.75 (est. $13.58)

·     Spirit Airlines (SAVE) Q2 EPS $1.69/$1.01B vs. est. $1.65/$1.01B; sees Q3 TRASM -1% to up 1% and sees Q3 CASM ex-fuel 7%-8% YoY

·     Unilever (UN) blamed poor weather in early summer for a drop in ice-cream sales as it revealed it had missed profit estimates for the first half of the year

 

Energy

·     Helmerich & Payne (HP) Q3 adjusted EPS 40c/$687.97M vs. est. 35c/$690.27M

·     TechnipFMC (FTI) Q2 adjusted EPS 39c/$3.43B vs. est. 35c/$3.26B; sees FY19 Subsea revenue $5.6B-$5.8B, and sees FY19 Surface Technologies revenue $1.6B-$1.7B

 

Financials

·     PayPal (PYPL) shares fell -6%; Q2 EPS 86c/$4.31B vs. est. 74c/$4.33B; reports 9M net new active accounts, bringing total active accounts to 286 million accounts, up 17%; 3.0B payment transactions, up 28%; $172B in total payment volume, up 24%, or 26% on an currency-neutral basis; sees Q3 EPS 69c-71c on revs $4.33B-$4.38B vs. est. 70c/$4.44B; cuts year revs to $17.60B-$17.80B from $17.85B-$18.1B (est. $17.92B)

·     Ameriprise (AMP) Q2 adjusted operating EPS $4.06/$3.25B vs. est. $4.04/$2.94B; Q2 assets under management $468 billion, -2.9% YoY

·     Raymond James (RJF) Q3 EPS $1.80/$1.93B vs. est. $1.94B; assets under administration $824.2 billion, +9.3% YoY

·     SLM (SLM) Q2 core EPS 31c vs. estimate 30c; 2Q private education loan originations $532 million, +9.2% YoY; cuts FY19 core EPS view to $1.21-$1.23 from $1.23-$1.26

 

Healthcare

·     Bristol-Myers Squibb (BMY) shares fell -4%; study goal misses; said Part 2 of the CheckMate -227 trial, evaluating Opdivo plus chemotherapy, did not meet the pre-specified primary endpoint of OS versus chemotherapy in patients with non-squamous histology, regardless of PD-L1 status/Part 1a of the CheckMate -227 trial met the co-primary endpoint of OS, demonstrating a statistically significant benefit for Opdivo plus low-dose Yervoy

·     Align Technology (ALGN) shares fell -20%; Q2 EPS $1.83/$600.7M vs. est. $1.51/$599.38M; sees Q3 EPS $1.09-$1.16 on revs $585M-$600M below est. $1.24/$623.65M; said Q2 revenues up 22.5% year-over-year to a record; Q2 Invisalign volume up 24.6% YoY to 377.1 thousand cases and scanner and services revenues up 82.4% YoY to $104.0 million; sees FY19 revenue at low end of 20%-30% growth target

·     Anika Therapeutics (ANIK) Q2 EPS 67c/$30.4M vs. est. 39c/$27.5M; Q2 Adjusted EBITDA $14.8M vs. $14.M last year; cash, cash equivalents and investments were $141.5 million

·     Cerner (CERN) Q2 EPS 66c/$1.43B vs. est. 64c/$1.44B; sees Q3 EPS 65c-67c on revs $1.41B-$1.46B vs. est. 69c/$1.43B; 2Q bookings $1.43 billion, -19% YoY while Q2 backlog $14.98 billion, +1.3% YoY; reaffirms year EPS and revenue outlook

·     Varian Medical (VAR) Q3 adjusted EPS $1.32/$826M vs. est. $1.13/$761.15M; narrows FY19 adj. EPS view to $4.58-$4.63 from $4.55-$4.70 and ups FY19 revenue growth range to 9%-10%

·     Zafgen (ZFGN) said it plans to implement an immediate corporate restructuring including a workforce reduction of about 25% in addition to other attrition in 2019

·     Cara Therapeutics (CARA) 5.5M share Spot Secondary priced at $23.00

·     Health Catalyst (HCAT) 7M share IPO priced at $26.00

·     Livongo Health (LVGO) 12.7M share IPO priced at $28.00

 

Industrials & Materials

·     Dow Inc. (DOW) Q2 operating EPS 86c/$11B vs. est. 84c/$11.24B; lowers FY19 CapEx view to $2B from $2.5B; said volume declined 3% versus pro forma results in the year-ago period, driven primarily by higher ethane feedstock usage and lower hydrocarbon co-product sales, due to increased ethylene integration from the startup of new downstream assets.

·     3M (MMM) Q2 adjusted EPS $2.20/$8.17B vs. est. $2.05/$8.03B; affirms FY19 organic growth and adjusted earnings expectations; backs FY19 adjusted EPS view $9.25-$9.75

·     Echo Global (ECHO) Q2 EPS 42c/$553.8M vs. est. 42c/$572.62M; sees Q3 revenue $530M-$570M, vs. consensus $619.33M; lowers FY19 revenue view to $2.10B-$2.25 from $2.30B-$2.50B

·     Freeport-McMoRan Inc. (FCX) upgraded to sector perform from underperform at RBC

·     Graco (GGG) Q2 adjusted EPS 50c/$428.3M vs. est. 53c/$444.9M; Q2 Gross margin decreased by 1 percentage point from the comparable periods last year; cuts FY19 view to low single digit organic revenue growth from mid-single digit organic revenue growth view prior

·     Kaiser Aluminum (KALU) Q2 EPS 1.40/$375M vs. est. $1.31/$387.85M

·     Kraton (KRA) sees FY19 adjusted EBITDA at lower end of $370M-$390M range

·     Landstar (LSTR) Q2 EPS $1.53/$1.05B vs. est. $1.53/$1.07B

·     Trinity Industries (TRN) Q2 EPS 29c/$736.0M vs. est. 31c/$781.4M; reiterates year

 

Technology, Media & Telecom

·     Facebook (FB) Q2 EPS $1.99/$16.89B vs. est. $1.88/$16.5B; DAUs were 1.59B on average for June 2019, an increase of 8% YoY and Monthly active users (MAUs) were 2.41B as of June 30, 2019, an increase of 8% YoY; says FTC opened antitrust investigation in June against company

·     Benchmark Electronics (BHE) Q2 non-GAAP EPS 36c/$602M vs. est. 32c/$569.44M; guides Q3 non-GAAP EPS 33c-39c on revs $525M-$555M below est. 38c/$579.9M

·     Celestica (CLS) Q2 EPS 12c/$1.45B vs. est. 12c/$1.44B; sees Q3 EPS 9c-15c on revs $1.4B-$1.5B vs. est. 17c/$1.56B

·     Citrix Systems (CTXS) guidance weak as sees Q3 eps $1.15-$1.30 on revs $700M-$720M below the $1.54/$761.7M est.; Q2 EPS $1.21/$749M vs. est. $1.34/$771.83M; says guidance reflects our expectation that subscription bookings as a percentage of product bookings will increase from just over 40% last year to approximately 60% to 65% in 2019, significantly above our original guidance range of 50% to 55% subscription bookings mix

·     F5 Networks (FFIV) Q3 adjusted EPS $2.52/$563.4M vs. est. $2.56/$554.96M; said quarter’s 4% total revenue growth and 91% software growth was driven by customer demand for the software form factors of our application services; sees Q4 adjusted EPS $2.53-$2.56 on revs $577M-$587M vs. est. $2.71/$578.88M

·     Netgear (NTGR) Q2 EPS 28c/$230.9M vs. est. 25c/$224.35M; sees Q3 revenue $265M-$280M vs. est. $267.11M, GAAP operating margin in the range of 5.2%-6.2% and non-GAAP operating margin in the range of 8.5%-9.5%; authorizes incremental repurchase of up to 4.5M shares

·     PTC (PTC) Q3 EPS 36c/$322M vs. est. 34c/$320.5M; sees Q4 EPS 42c-47c on revs $330M-$338M below est. 50c/$340.04M; Q3 recurring software revenue up 9% at $271M, 3Q license & subscription bookings $109 million, -3.5% YoY and cut year views

·     ServiceNow (NOW) Q2 adjusted EPS 71c/$833.9M vs. est. 63c/$832.37M; Q2 subscription revenues of $781 million in Q2 2019, representing 33% year-over-year growth; 39 transactions over $1 million in net new annual contract value in Q2 2019; 766 total customers with over $1 million in annual contract value, representing 33% year-over-year growth; 2Q billings growth +31% vs. +34% YoY; sees 3Q non-GAAP subscription billings $857M-$862M vs estimate $878.7M

·     Xilinx (XLNX) Q1 adjusted EPS 94c/$850M vs. est. 94c/$847.37M; sees Q2 revenue $800M-$850M below consensus $852.93M while sees Q2 adjusted gross margin ~66%-67%.

·     Charter Communications (CHTR) issued a proposal to the U.S. Justice Department to acquire telecom assets being sold under the T-Mobile (TMUS) and Sprint (S) tie-up, but never heard back from the department, Reuters reported late Wednesday

·     Salesforce (CRM) has partnered with Chinese ecommerce company Alibaba (BABA) as it seeks to expand its footprint in China’s software market

_________________________________________________________________

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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