Morning Preview: July 26, 2019

Auto PostDaily Market Report

Early Look

Friday, July 26, 2019

Futures

Up/Down

%

Last

DJ Industrials

85.00

0.31%

27,181

S&P 500

10.50

0.33%

3,016

Nasdaq

37.50

0.47%

8,019

 

 

Stock futures are moving higher, bouncing back after yesterday’s pullback from record highs for the S&P 500 and Nasdaq Composite, led by a strong night of earnings results as GOOG (on better ad revs), INTC (also raised guidance), SBUX (beat on EPS/revs/comp/guidance), MGM, MAT and others are all pointing to higher opens after their results. AMZN is the one standout to the downside after its earnings missed views amid a surge in costs. In Asian markets, The Nikkei Index fell -98 points to 21,658, the Shanghai Index rose 7 points to 2,944 and the Hang Seng Index dropped -196 points to 28,397. In Europe, the German DAX rises 40 points to move above 12,400, while the FTSE 100 is up over 35 points to 7,525. U.S. stocks finished lower Thursday following a series of mostly disappointing earnings reports and fears that the Federal Reserve may be less aggressive than hoped in cutting interest rates next week after the European Central Bank’s policy decision. Federal Reserve Chairman Jerome Powell is up next, with U.S. markets widely anticipating a 25-bps cut at the FOMC next week, with the outside possibility of a 50-bps cut taking place. An important day of data coming up as well with GDP, personal consumption and core PCE data at 8:30 AM EST. All 11 sectors of the S&P 500 finished in negative territory Thursday, led by a 1.2% slide in energy shares, while the technology sector firmly retreated led by TSLA, chips and several software firms after lower guidance, with the S&P 500 tech sector 0.8% lower. So far about a third of S&P 500 index companies have reported earnings with roughly 75% having beat on profit according to FactSet data, though many have failed to raise guidance and second-half estimates are being cut due to slower global growth concerns.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -15.89 points, or 0.53%, to 3,003.67

·     The Dow Jones Industrial Average fell -128.99 points, or 0.47%, to 27,140.98

·     The Nasdaq Composite slumped -82.96 points, or 1.00%, to 8,238.54

·     The Russell 2000 Index declined -18.97 points, or 1.20% to 1,561.45

 

Events Calendar for Today

·     8:30 AM EST      GDP Annualized Q0Q, Q2-A…est. 1.8%

·     8:30 AM EST      Personal Consumption for Q2-A…est. 4.0%

·     8:30 AM EST      GDP Price Index for Q2-A…est. 2.0%

·     8:30 AM EST      Core PCE QoQ, Q2-A…est. 2.0%

·     1:00 PM EST       Baker Hughes Weekly Rig Count

 

Earnings Calendar:

·     Earnings Before the Open: ABBV, ABG, AVX, B, CHTR, CL, COG, GT, ITW, LEA, MCD, MOG/A, NLSN, TWTR, VTR, WY, ZBH

 

 

Macro

Up/Down

Last

WTI Crude

0.37

56.39

Brent

0.35

63.74

Gold

3.90

1,418.60

EUR/USD

-0.0012

1.1135

JPY/USD

0.02

108.65

10-Year Note

-0.014

2.066%

 

 

Sector News Breakdown

Consumer

·     Amazon.com (AMZN) Q2 EPS $5.22/$63.4B vs. est. $5.57/$62.48B; Q2 AWS net sales $8.38B vs. $6.11B a year ago and Q2 AWS operating income of $2.12B vs. $1.64B a year ago; sees Q3 revenue $66.0B-$70.0B vs. est. $67.27B; says guidance anticipates an unfavorable impact of approximately 30 basis points from foreign exchange rates. Operating income is expected to be between $2.1B-$3.1B, compared with $3.7B YoY

·     Mattel Inc. (MAT) shares rose 4%; Q2 EPS loss (25c)/$860.1M vs. est. loss (40c)/$813.3M; excluding currency changes, sales grew 5% vs 2Q18; said Q2 GM’s 39.9%; cumulative improvement in reported operating income over the past four quarters is $677M, the largest improvement in any four consecutive quarters in more than 15 years; Q2 net sales in North America rose 2% y/y as reported and 3% in constant currency

·     Starbucks (SBUX) shares rose 6%; Q3 EPS 78c/$6.82B vs. est. 72c/$6.67B; 3Q comparable sales +6% vs. 4.2% est. driven by a 3% increase in average ticket and a 3% increase in comparable transactions; raises FY adjusted EPS $2.80 to $2.82, from prior $2.75 to $2.79 (est. $2.79); Q3 Americas comparable store sales increased 7%, driven by a 4% increase in average ticket and a 3% increase in transactions

·     Columbia Sportswear (COLM) Q2 EPS 34c/$526.2M vs. est. 1c/$506.89M; raises FY19 EPS view to $4.65-$4.75 from $4.40-$4.55 (est. $4.56) and raises FY19 revenue view to $3.00B-$3.04B from $2.98B-$3.04B (est. $3.01B)

·     Decker’s Brands (DECK) Q1 EPS loss (67c)/$276.8M vs. est. loss (1.12)/$260.71M; Q1 gross margins 47% vs. 45.9% YoY; raises year EPS to $8.40-$8.60 from prior $8.20-$8.40 (est. $8.70) and year sales upped to $2.1B-$2.13B from prior $2.1B-$2.12B (est. $2.13B)

·     Lear (LEA) Q2 EPS $3.78/$5B vs. est. $3.76/$5.05B, but cuts FY19 revenue guidance to $19.8B-$20.3B from $20.9B-$21.7B as well as cutting FY19 core operating earnings, adjusted EBITDA, adjusted net income guidance and FY19 free cash flow guidance

·     MGM Resorts (MGM) Q2 adjusted EPS 23c/$3.22B vs. est. 24c/$3.21B; said Q2 Las Vegas strip net revenues increased 1% YoY to $1.5B, MGM China net revenues increased 26% to $706M, primarily as a result of the continued ramp up of operations at MGM Cotai following its opening in February 2018 and an increase in main floor table games hold percentage; says confident’ in 2020 adjusted EBITDA target of $3.6B-$3.9B

·     Mohawk (MHK) shares fell -13%; Q2 EPS $2.89/$2.58B vs. est. $2.87/$2.65B; sees 3Q adjusted EPS $2.58 to $2.68 below estimate $3.05; said U.S. dollar strengthened compared to the prior year, reducing translated results for the quarter by approximately $9 million

·     Sleep Number (SNBR) shares rose 14%; Q2 EPS 14c/$356.0M vs. est. 3c/$336.3M; raises FY19 EPS view to $2.35-$2.75 from $2.25-$2.75 (est. $2.45)

·     Boston Beer (SAM) Q2 EPS $2.36/$318.4M vs. est. $1.95/$309.77M; raises 2019 non-GAAP EPS view to $8.30-$9.30 from $8.00-$9.00 and says full year 2019 capital spending is now estimated to be between $120M-$140M

 

Energy

·     Range Resources (RRC) Q2 adjusted EPS 2c/$690M vs. est. 1c/$702.9M; Production averaged 2,287 Mmcfe per day, despite unplanned third-party downtime

·     ONEOK (OKE) to expand its natural gas and natural gas liquids infrastructure through 2021. OKE plans a 200M cf/day expansion of its Bear Creek natural gas processing facility and related infrastructure in North Dakota’s Williston Basin, bringing capacity to more than 1.6B cf/day

·     Edison International (EIX) Q2 adjusted EPS $1.58 beat est. of $1.13 primarily due to the adoption of the 2018 GRC final decision, the timing of regulatory deferrals related to wildfire insurance and mitigation costs

·     Vista Oil & Gas (VIST) 10M share IPO priced at $9.25

 

Financials

·     Aflac (AFL) Q2 adjusted EPS $1.13/$5.5B vs. est. $1.07/$5.5B; sees FY19 adj. EPS at the higher end of $4.10-$4.30 vs. est. $4.31; continue to anticipate that we’ll repurchase in the range of $1.3 to $1.7 billion of our shares in 2019

·     Fiserv (FISV) Q2 EPS 82c/$1.51B vs. est. 80c; 2Q adjusted operating margin 32.4% vs. 32.4% YoY; sees FY19 EPS $3.39-$3.52 vs. est. $3.46 and sees FY19 revenue growth of 4.5%-5.0%

·     LPL Financial (LPLA) Q2 EPS $1.71/$1.39B vs. est. $1.73/$1.4B

·     Principal (PFG) Q2 adjusted EPS $1.52 vs. est. $1.40 and had Q2 assets under management of $696.2B; said compared to year-end 2018, we’ve increased assets under management by nearly $70B, or 11%

 

Healthcare

·     eHealth (EHTH) shares rose 18%; Q2 EPS 10c/$65.8M vs. est. loss (36c)/$41.65M; raises FY19 adjusted EPS to $1.77-$1.97 from prior view $1.54-$1.73 (est. $1.64) and sees FY19 revenue $365M-$385M (up from prior $315M-$335M) vs. est. $329.22M

·     Stryker (SYK) Q2 EPS $1.98/$3.7B vs. est. $1.94/$3.6B; sees FY19 EPS $8.15-$8.25 vs. est. $8.15

·     Intersect ENT (XENT) announced that the company has received approval from the FDA for a new Straight Delivery System for use to place its PROPEL Mini steroid releasing sinus implant in the ethmoid sinus

·     Universal Health (UHS) Q2 EPS 2.66/$2.855B vs. est. $2.50/$2.81B; increases stock repurchase program by $1B; raises cash dividend to 20c from 10c per share

·     Zimmer Biomet (ZBH) Q2 EPS $1.93/$1.99B vs. est. $1.91/$1.98B; narrows FY19 adj. EPS view to $7.75-$7.90 from $7.70-$7.90 and also narrows FY19 revenue growth guidance to flat to up 0.5% from down 0.5% to up 0.5%

 

Industrials & Materials

·     Alaska Air (ALK) Q2 EPS $2.17/$2.29B vs. est. $2.13/$2.28B; reports Q2 traffic up 1.1% to 14.6BRPMs; Q2 capacity up 0.9% to 17B ASMs and Q2 load factor up 0.2 points to 86.2%

·     Eastman Chemical (EMN) Q2 adjusted EPS $1.99/$2.36B vs. est. $2.09/$2.55B; sees year EPS $7.50-$8.00 vs. est. $8.42; expects to approach $1.1B of Free Cash Flow in 2019

·     Fortive (FTV) Q2 adjusted EPS 90c/$1.86B vs. est. 89c/$1.91B; sees Q3 adjusted EPS 83c-88c below consensus 97c; cuts FY19 adj. EPS view to $3.45-$3.60 from $3.40-$3.50

·     Forward Air (FRWD) Q2 EPS 78c/$345.8M vs. est. 79c/$348.07M; said expect Q3 YoY revenue growth to be 7% to 11% and EPS 74c-78c vs. 76c YoY but below est. 84c

·     Republic Services (RSG) raises quarterly dividend to 40.5c per share; Q2 adjusted EPS 79c/$2.61B vs. est. 77c/$2.62B; backs FY19 adjusted EPS view $3.23-$3.28 and backs FY19 adjusted free cash flow guidance of $1.125B-$1.175B

·     Werner (WERN) Q2 EPS 63c/$627.5M vs. est. 64c/$636.95M; said expect approximately 100 truck growth in third quarter 2019 and no truck growth in fourth quarter 2019

 

Media & Telecom

·     T-Mobile (TMUS) Q2 EPS $1.09/$11B vs. est. 97c/$11.13B; Q2 total net subscriber additions came to 1.8M (up 11%), and branded postpaid net adds were 710,000 (up 3%, and likely industry-best); boosting subscriber guidance for the year, expecting branded postpaid net adds of 3.5M-4M (up from 3.1M-3.7M) and is targeting $12.9B-$13.3B in EBITDA (up from $12.7B-$13.2B).

·     Live Nation (LYV) Q2 EPS 41c/$3.2B vs. est. 40c/$3.2B

 

Technology

·     Alphabet (GOOGL) shares rose 9%; Q2 EPS $14.21/$31.71B ex-TAC vs. est. $11.30/$30.84B; Paid clicks were up 28% Y/Y on Google Properties (vs. 39% QoQ and estimate: +43%). Cost-per-click was down 11% (estimate: -20%); Operating income was up 39% Q/Q to $9.18B. Other Bets losses were up 12% Y/Y to $162M; total TAC was $7.24B or 69% of total revenue, down from 71% in last year’s quarter; authorizes repurchase up to an additional $25B in Class C stock

·     Intel (INTC) shares rose 5%; Q2 adjusted EPS $1.06/$16.5B vs. est. 89c/$15.7B; sees Q3 adjusted EPS $1.24 on revs roughly $18B above est. $1.16/$17.72B; raises FY19 EPS view to $4.40 from $4.35 (est. $4.24) and raises FY19 revenue view to roughly $69.5B from $69B (est. $68.34B)

·     Intel (INTC) and Apple (AAPL) have signed an agreement for Apple to acquire the majority of Intel’s smartphone modem business. Approximately 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases. The transaction, valued at $1 billion, is expected to close in the fourth quarter of 2019

·     Expedia (EXPE) Q2 adjusted EPS $1.77/$3.15B vs. est. $1.63/$3.12B; Q2 gross bookings up 9% to $28.3B; Q2 room night growth 12%; raises quarterly dividend to 34c from 32c

·     Flex (FLEX) Q1 EPS 27c/$6.2B vs. est. 27c/$6.24B; sees Q2 EPS 29c-33c on revs $6.1B-$6.5B vs. est. 30c/$6.57B

·     LogMeIn (LOGM) Q2 EPS $1.17/$313.1M vs. est. $1.13/$310.95; sees Q3 EPS 1.35 -$1.37 vs. est. $1.32 and EBITDA is expected to be in the range of $80M-$81M

·     Omnicell (OMCL) Q2 EPS 67c/$217.4M vs. est. 63c/$214.13M; sees Q3 EPS 67c-72c on revs $227M-$233M vs. est. 72c/$232.2M; sees FY19 revenue $2.65-$2.82 on revs $886M-$900M, vs. est. $2.76/$891.95M

·     Proofpoint (PFPT) Q2 EPS 41c/$214.4M vs. est. 36c/$211.33M; sees FY19 EPS $1.61-$1.64 on revs $878.5M-$880.5M vs. est. $1.48/$876.95M; 2Q total billings were $232.1 M and raising FY19 billings, rev and profitability

·     Atlassian (TEAM) Q4 adjusted EPS 20c/$334.6M vs. est. 16c/$330.6M; sees Q1 EPS 24c on revs $349M-$353M vs. est. 21c/$349.58M; sees FY20 EPS $1.00 on revs $1.54B-$1.56B vs. est. $1.00/$1.55B; Q4 revenue breakdown: Subscription, $180.9M; Maintenance, $105.8M; Perpetual License, $22.8M; Other, $25.1M; operating margin was 17% versus the 13% consensus

·     Cypress Semi (CY) Q2 beats with revenue down 15% Y/Y while says not giving guidance or host earnings call due to its pending acquisition by Infineon

·     Smith Micro (SMSI) shares rose 28%; Q2 EPS 8c/$10.9M vs. est. 1c/$8.6M

·     VeriSign (VRSN) Q2 EPS $1.33/$306.3M vs. est. $1.29/$306.57M; narrows FY19 revenue guidance to $1.225B-$1.235B from $1.22B-$1.235B while sees FY19 non-GAAP operating margin of 68%-69%, raised from 67.5%-68.5%

_________________________________________________________________

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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