Morning Preview: July 31, 2019

Auto PostDaily Market Report

Early Look

Wednesday, July 31, 2019

Futures

Up/Down

%

Last

DJ Industrials

62.00

0.23%

27,226

S&P 500

4.50

0.15%

3,016

Nasdaq

26.50

0.33%

7,989

 

 

Stock futures are edging higher ahead of a big day for U.S. markets, as technology shares get a boost overnight following AAPL quarterly results which came in better than expected, though service revs were down slightly from expectations and iPhone revenue dropped 13% YoY. Also helping markets this morning are reports China and U.S. negotiators discussed China imports of agricultural products from the U.S. as talks are ongoing in Shanghai. But the pressure is on Fed Chairman Powell and the rest of the FOMC to deliver the first interest rate cut in a decade of at least 25-bps, though pressure has been ramped up from the White House demanding a larger cut of 50-bps. Expect steady markets into the 2:00 PM EST FOMC meeting later today. The Dow Jones industrial Average has gained 2.5% in July as the market priced in a Fed rate cut. Any deviation from the Fed’s dovish path could see a fair amount of those gains reversed. Even if the Fed cuts as expected, the market reaction will be tied more to what it says than what it does. In Asian markets, The Nikkei Index fell -187 points to 21,521, the Shanghai Index fell -19 points to 2,932 and the Hang Seng Index dropped -365 points to 27,777. In Europe, the German DAX is rises over 20 points to 12,170, but comes a day after plunging over 2%, while the FTSE 100 is down over 30 points, but holding above the 7,600 level. Stocks finished mostly lower on Tuesday after President Trump renewed his attacks on China, warning them against waiting out his first term in office to finalize any trade deal, saying if he wins re-election in the November 2020 U.S. presidential contest, they will get no agreement or a worse one. The day’s lows were shortly after the open, as investors remained in wait and see mode ahead of Apple’s earnings and the FOMC’s rate decision on Wednesday. Sectors ending with gains included energy (as oil prices rose for a 4th day), real estate and materials, while utilities, IT and consumer discretionary paced the declines.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -7.79 points, or 0.26%, to 3,013.18

·     The Dow Jones Industrial Average fell -23.33 points, or 0.09%, to 27,198.02

·     The Nasdaq Composite slipped -19.71 points, or 0.42%, to 8,273.61

·     The Russell 2000 Index advanced 16.57 points, or 1.06% to 1,585.60

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:15 AM EST      ADP Employment Change for July…est. 150K

·     8:30 AM EST      Employment Cost Index (ECI) for Q2…est. 0.7%

·     9:45 AM EST      Chicago PMI for July…est. 51.0

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       FOMC Rate Decision (25 bps cut expected)

 

Earnings Calendar:

·     Earnings Before the Open: ADP, AMT, APO, BG, BLMN, BTU, CG, CME, CRL, D, DAN, DIN, ETR, GE, HEP, HES, HPP, HUM, LHX, MCO, MDC, MEET, MTOR, MYL, NI, NLSN, NYCB, SAIA, SBH, SMG, SO, SPR, TAP, TKR, UTHR, WNC

·     Earnings After the Close: ACAD, AEGN, APA, AVB, BAND, BOOT, CAKE, CF, CHDN, CONE, CTSH, CRUS, DRE, DXCM, EPR, ETH, FICO, FIT, FLS, FORM, GDI, H, HOLX, LNC, MCK, MET, MPWR, MTDR, MUSA, NLY, OI, PK, PRU, QCOM, RDN, SPWR, TIVO, TWLO, TYL, VAC, VNDA, VRTX, WDC, WLL, WMB, ZNGA

 

 

Macro

Up/Down

Last

WTI Crude

0.31

58.36

Brent

0.40

65.12

Gold

2.20

1,431.90

EUR/USD

-0.0009

1.1146

JPY/USD

-0.06

108.55

10-Year Note

-0.01

2.047%

 

 

World News

·     North Korea fired two short-range ballistic missiles off its east coast Wednesday in defiance of U.N. resolutions, South Korea’s military said, less than a week after Pyongyang’s first weapons tests in more than two months.

·     Euro area GDP grew by 0.2% in Q2, meeting expectations and slower than the 0.4% growth in the first quarter. Compared to a year ago, GDP grew by 1.1%. Unemployment fell to 7.5% in June from 7.6%, which is the lowest since July 2008. Annual inflation is expected to be 1.1% in July 2019, down from 1.3% in June

 

Sector News Breakdown

Consumer

·     Mondelez (MDLZ) Q2 EPS 57c (in-line) on revs $6.06B vs. est. $6.03B; guides year organic revenue at least +3% from prior +2% to +3% and sees FY adjusted EPS +5% (up from 3% to +5% prior); 2Q organic revenue +4.6% vs. +3.50% y/y; boosts dividend

·     Yum China (YUMC) Q2 EPS 46c/$2.12B vs. est. 39c/$2.16B; 2Q comparable sales +4% vs. estimate +3.1% as 2Q KFC comp sales +5% vs. est. +3.9% and Q2 Pizza Hut Casual Dining comps +1% vs. est. +0.4%; 2Q digital payments as share of sales 90%; sees full year 2019 gross new store openings to be between 800 and 850 units; Q2 restaurant margin 14.7% vs. 15.1% a year ago

·     Boyd Gaming (BYD) Q2 EPS 46c/$846.1M vs. est. 47c/$840.21M; backs FY19 total adjusted EBITDAR of $885M-$910M; reports Q2 EBITDAR of $232.6M vs. $163.4M a year ago, led by strength in the Las Vegas Locals business as well as the Midwest & South segment from M&A activity

·     Hawaiian Holdings (HA) Q2 revenue passenger miles were up 3.6% during the quarter to outpace the 2.7% increase in capacity. Passenger revenue per ASM was down 2.8% to $0.1268; expects Q3 unit revenue to be -4.5% to -1.5% on capacity growth of -0.5% to +0.5%

·     2U (TWOU) shares fell -25%; Q2 adjusted EPS loss (43c)/$135.5M vs. est. loss (35c)/$124.36M; sees FY19 adjusted EPS ($1.25)-($1.16) on revs $565.7-$575.7M vs. est. (32c)/$533.22M

 

Energy

·     The American Petroleum Institute (API) said U.S. oil inventories fell by -6.024M barrels last week, saw gasoline stocks fall -3.135M barrels, while inventories of distillates were down 890,000 barrels

·     Enphase Energy (ENPH) Q2 EPS 18c on revs $134.1M vs. est. $121.2M; sees Q3 revs $170M-$180M on margins 33%-36% after 34.1% GM in Q2

·     MDU Resources (MDU) Q2 EPS 31c vs. 27c est.; Q2 revs $1.3B up 22% YoY and raises year outlook to $1.45-$1.60 from prior $1.40-$1.55 (est. $1.49)

·     TC Energy (TRP) announced that it has entered into an agreement through its wholly-owned subsidiary, TransCanada Energy Ltd., to sell interests in three Ontario natural gas-fired power plants to a subsidiary of Ontario Power Generation Inc., for approximately $2.87B

·     Viper Energy (VNOM) Q2 EPS 4c vs. est. 13c; said Q2 average realized prices were $54.81 per barrel of oil, 65c per Mcf of natural gas and $18.33 per barrel of natural gas liquids, resulting in a total equivalent realized price of $39.50/boe, up 12% quarter over quarter from $35.26/boe in Q1 2019; sees Q3 production 23K-25K Mboe/d

 

Financials

·     Allstate (ALL) Q2 adjusted EPS $2.18 vs. est. $1.52 and Q2 combined ratio reported 95.8% vs. est. 97.2%; 2Q net investment income up 14% YoY to $942M, Q2 book value per share $67.28 vs. $59.16 YoY and 2Q catastrophe losses $1.07 billion

·     Boston Properties (BXP) Q2 FFO $1.78/$733.7M vs. est. $1.74/$728.3M; Q2 portfolio occupancy 93.4%, up 50bps from Q1 and up 300bps from last year; raises FY19 FFO view to $7.02-$7.08 from $6.95-$7.02

·     Credit Suisse (CS) said Q2 profits rose 45% helped by robust wealth management performance and a standout quarter for its trading revs which helped offset a slump in traditional investment banking. CS said net profits for the period were 937m Swiss francs. Group revenues of CHF 5.5bn were flat, compared with a year ago

·     NCR Corp. (NCR) Q2 EPS 76c/$1.71B vs. est. 67c/$1.57B; said generated solid results in the second quarter and are raising our revenue outlook for the full year; raises 2019 revenue outlook to approximately 3% to 4% growth versus previous guidance 1% to 2% and reaffirms 2019 EPS

·     Unum Group (UNM) Q2 EPS $1.36/$3.02B vs. est. $1.35/$2.99B; book value per common share as of June 30 was $45.11, compared to $43.20 at June 30, 2018; continues to expect after-tax adjusted operating income growth per share for full-year 2019 to be within the range of 4%-7%

 

Healthcare

·     Amgen (AMGN) Q2 EPS $3.97/$5.9B vs. est. $3.59/$5.68B; raises FY19 adjusted EPS view to $13.75-$14.30 from $13.25-$14.30 (est. $13.97) and raises FY19 revenue view to $22.4B-$22.9B from $22B-$22.9B; Q2 total product sales fell 2% YoY; 2Q Enbrel revs $1.36 billion, 2Q Aranesp revenue $436 million, Q2 Epogen revenue $223 million and 2Q Neulasta revenue $824 million

·     Gilead (GILD) Q2 EPS $1.82/$5.69B vs. est. $1.72/$5.53B; raises FY19 product sales view to $21.6B-$22.1B from prior $21.3B-$21.8B; Total product sales for Q2 were $5.6B compared to $5.5B YoY and HIV product sales were $4.0B vs. $3.7B YoY; Q2 Truvada revs -6% YoY to $718M, Genvoya revs -16% YoY to $980M

·     Humana (HUM) Q2 adjusted EPS $6.05/$16.25B vs. est. $5.30/$15.93B; to initiate $1B accelerated share repurchase program; raises FY19 adjusted EPS view to about $17.60 from $17.25-$17.50

·     NuVasive (NUVA) Q2 EPS 63c/$292.1M vs. est. 56c/$290.59M; raises FY19 non-GAAP EPS view to $2.25-$2.35 from $2.20-$2.30 while reaffirms FY19 revenue view $1.14B-$1.16B (est. $1.15B)

·     Acadia Healthcare (ACHC) Q2 adjusted EPS 61/$789.4M vs. est. 58c/$795.29M; narrows FY19 adj. EPS view to $2.15-$2.23 from $2.15-$2.30 while cuts FY19 revenue view to $3.15B-$3.175B from $3.15B-$3.2B (est. $3.16B)

·     Ironwood (IRWD) Q2 EPS 10c/$102.2M vs. est. loss (3c)/$89.6M; said flagship product, LINZESS, showed impressive year-over-year prescription demand growth of 13%, with strong growth continuing into the third quarter; still sees year revs $370M-$390M vs. est. $376M

 

Industrials & Materials

·     General Electric (GE) Q2 EPS 17c.$28.8B vs. est. 12c/$28.7B; raises year EPS view to 55c-65c from prior view 50c-50c and vs. est. 59

·     Ashland Global (ASH) Q3 EPS 77c (in-line with prior reduced view) and sees FY adjusted EPS from continuing operations $2.65 to $2.75 vs. est. $2.79; Q3 adjusted Ebitda $140M -26% YoY (and in-line with prior guidance on 7/17)

·     Airbus (EADSY) saw earnings more than double in the first six months of the year as a rise in commercial aircraft deliveries helped underpin a strong set of results

·     C.H. Robinson (CHRW) Q2 EPS $1.22/$3.9B vs. est. $1.22/$4.02B; said for Q2 achieved 3.5% net revenue growth, solid performance versus the year-ago period where net revenues increased%

·     FMC Corporation (FMC) Q2 adjusted EPS $1.66/$1.2B vs. est. $1.65/$1.2B; sees Q3 adjusted EPS 75c-85c on revs $960M-$990M vs. est. 88c/$977.84M; raises FY view to adjusted EPS $5.68-$5.88 from prior $5.62-$5.82

·     Glencore (GLNCY) reported a 2% fall in Q2 copper production and cut its full-year production guidance for the metal by 1%, citing problems at its copper business in Africa. Glencore said it produced 342,300 metric tons of copper in the three months ended June 30, compared with 350,800 tons in the year-earlier period.

 

Technology, Media & Telecom

·     Apple Inc. (AAPL) shares rose 4%; Q3 EPS $2.18/$53.81B vs. est. $2.10/$53.35B; Q3 service revs up 20% YoY to $11.46B vs. est. $11.8B; sees Q4 revs $61B-$64B vs. est. $61.04B; Q3 iPhone revs $26B down 13% YoY; sees Q4 gross margin 37.5-38.5% vs. est. 37.8%

·     Advanced Micro (AMD) shares fell -7%; Q2 EPS 8c (in-line) on revs $1.53B vs. est. $1.52B; sees Q3 revenue $1.8B, plus/minus $50M vs. est. $1.95B up 18% QoQ and 9% YoY; the sequential and year-over-year increases are expected to be driven by Ryzen, EPYC and Radeon product sales; Computing and Graphics reported revenue of $940M (vs. est. $961M), down-13% Y/Y due to lower graphics channel sales but up 13% Q/Q on higher GPU sales

·     Akamai (AKAM) Q2 EPS $1.07/$705M vs. est. $1.00/$695.82 as posted 6% Y/Y revenue growth- Division revenue breakdown: Web Division, $380M, Media and Carrier Division, $325M; raises FY19 EPS view to $4.23-$4.30 from $4.05-$4.20 and ups revs to $2.84B-$2.87B from $2.82B-$2.86B

·     Electronic Arts (EA) Q1 revs $743M vs. est. $718.94M; said as a result of certain events, EA expects to recognize an income tax benefit of $1.700 billion; reaffirms year forecast as sees year adjusted revenue $5.10B vs. est. $5.16B and EPS $4.40 vs. est. $4.51; sees 2Q adjusted EPS 80c/$1.23B vs .est. 89c/$1.24B

·     FireEye (FEYE) shares fell -13%; Q2 EPS 1c/$217.6M vs. est. 1c/$215.2M; sees Q3 EPS 0c-2c on revs $217M-$221M below 7c/$228.38M while sees Q3 billings in the range of $245M-$255M

·     Groupon (GRPN) Q2 adjusted EPS 1c/$532.58M vs. est. 2c/$565.69M; backs FY19 adjusted EBITDA view of roughly $270M; Q2 North America Active Customers 28.6M at June 30, International Active Customers 17.6M

·     Lattice Semiconductor (LSCC) Q2 adjusted EPS 15c/$102.3M vs. est. 11c/$99.72M; sees Q3 revenue $101M-$105M vs. est. $101.36M and sees Q3 gross margin 59%, plus or minus 1%

·     Maxim Integrated (MXIM) Q4 adjusted EPS 57c/$557M vs. est. 57c/$559.98M; sees Q1 adjusted EPS 46c-52c on revs $510M-$550M well below consensus of 62c/$576.82M and sees Q1 Gross Margin 62%-64%; raises dividend

·     MKS Instruments (MKSI) Q2 EPS $1.09/$474.1M vs. est. $1.09/$483.1M; guidance light as Q3 EPS 69c-$1.02 on revs $415M-$465M vs. est. $1.25/$501.4M

·     Verisk Analytics (VRSK) Q2 EPS $1.10/$652.6M vs. est. $1.10/$642.33M

·     Paycom Software (PAYC) Q2 adjusted EPS 75c/$169.3M vs. est. 70c/$163.91M; raises FY19 revenue view to $728M-$730M from $718M-$720M;

·     Unisys (UIS) shares rose 14% as Q2 adjusted EPS 87c on revs $753.8M

·     Zendesk (ZEN) guide 3Q revs $206-208M vs. est. $207.2M, adj op income $2-4Mm; sees FY revs $807-811M vs. prior $802-810M, op income $16-19M vs prior $14-18M

_________________________________________________________________

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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