Morning Preview: August 07, 2019

Auto PostDaily Market Report

Early Look

Wednesday, August 7, 2019

Futures

Up/Down

%

Last

DJ Industrials

99.00

0.38%

26,022

S&P 500

10.50

0.37%

2,886

Nasdaq

47.50

0.63%

7,563

 

 

U.S. futures are looking to rise a second day, trying to recover after suffering their worst day of the year on Monday. Stock investors are closely watching the currency markets, as the People’s Bank of China set the daily reference point for the yuan at 6.9996 per dollar, a bit weaker than expected but below the levels above 7 on Monday that caused a sharp sell reaction in stocks as it was seen as crossing the line and spurred the U.S. Treasury Department to label China a currency manipulator. While stocks are adding to yesterday’s gains, defensive and safe haven assets continue to climb to multi-year highs, as the price of gold trades above $1,500 for the first time since 2013, while the yield on the benchmark 10-year Treasury slides back t0 1.66% (the lowest since November 2016). China’s decision to allow its currency to stabilize the last 2-days suggests Beijing might hold off from aggressively allowing the yuan to weaken as a way to respond to U.S. tariffs on Chinese goods. Overall, global yields are falling as global easing is in full swing, with three rate-cut surprises today (RBNZ, RBI, and Thai central bank call cut rates). In Asian markets, The Nikkei Index dropped -68 points to 20,516, the Shanghai Index dipped 8 points to 2,768 and the Hang Seng Index gained 20 points to 25,997. In Europe, the German DAX is up 160 points to 11,730, while the FTSE 100 is up around 60 points at 7,230. In stock news, shares of Dow component Disney (DIS) fell overnight after reporting quarterly earnings that missed the lowest estimates on Wall Street.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 37.03 points, or 1.30%, to 2,881.77

·     The Dow Jones Industrial Average rose 311.78 points, or 1.21%, to 26,029.52

·     The Nasdaq Composite surged 107.23 points, or 1.39%, to 7,833.27

·     The Russell 2000 Index advanced 14.67 points, or 0.99% to 1,502.09

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     10:30 AM EST    Weekly DOE Inventory Data

·     3:00 PM EST       Consumer Credit for June…est. $16.1B

 

Earnings Calendar:

·     Earnings Before the Open: AMAG, ATKR, BV, BXC, CBAY, CNP, CORE, CVS, DNR, ELF, ETM, FUN, GOLF, HL, HZNP, ICPT, INGN, IONS, LL, LXP, NYT, ODP, OMI, PTLA, QEP, SPB, VER, WEN, WWW

·     Earnings After the Close: AAOI, ACMR, AIG, ALB, ANGI, ARNA, AZPN, BKNG, BREW, CDE, CECO, CLI, CTL, CVNA, DDD, DOX, DVAX, EB, FLO, FOSL, FOXA, G, GDOT, GLPI, HHC, IAC, INFN, LYFT, MNST, MRO, NUAN, QTWO, ROKU, RUN, RYAM, RYN, SFLY, SGMO, STMP, SWCH, SWKS, TLND, TRIP, UHAL, UPLD, ZG

 

Other Key Events:

·     Jefferies Global Industrials Conference, 8/6-8/8 in New York

·     Oppenheimer Technology, Internet Conference, 8/6-8/7 in Boston, MA

·     UBS Financial Services Conference, 8/6-8/7, in Chicago, IL

·     Flash Memory Summit 2019, 8/6-8/8, in Santa Clara, CA

·     Canaccord 39th Annual Growth Conference, 8/7-8/8, in Boston, MA

 

 

Macro

Up/Down

Last

WTI Crude

-0.10

53.53

Brent

-0.20

58.74

Gold

15.50

1,499.70

EUR/USD

-0.0012

1.1187

JPY/USD

-0.22

106.25

10-Year Note

-0.037

1.665%

 

 

World News

·     The Reserve Bank of India trimmed interest rates by 35 basis points, larger than market expectations, marking the fourth rate cut this year

·     New Zealand’s central bank aggressively cut its benchmark policy rate to an all-time low on Wednesday, prompting the local currency to fall sharply

·     Investor Intelligence Poll shows equity newsletter writers considered bullish sank to 48.1% from 57.2% last week, while newsletter writers expecting a correction surged to 34% from 25.7% last week, 29.0% two weeks ago and 25.2% three weeks ago. Bearish newsletter writers stood at 17.9% in the latest period vs 17.1% last week

 

Sector News Breakdown

Consumer

·     Wynn Resorts (WYNN) reported Q2 EPS $1.44/$1.66B vs. est. $1.39/$1.60B; Q2 adjusted property EBITDA up 0.9% at $480.6M; adjusted Property EBITDA increased $2.9 million and $13.2 million at Wynn Macau and our Las Vegas Operations, respectively, and decreased $12.1 million at Wynn Palace.

·     Beacon Roofing Supply (BECN) Q3 adjusted EPS 92c/$1.92B vs. est. $1.25/$1.99B; cuts FY19 adjusted EPS view to $2.30-$2.50 from $2.90-$3.35 and cuts year adjusted Ebitda while narrows FY19 revenue view to $7.1B-$7.2B from $7B-$7.35B (est. $7.19B)

·     Capri Holdings (CPRI) Q1 adjusted EPS 95c/$1.35B vs. est. 90c/$1.37B; announces new $500M share repurchase program; lowers year sales outlook to $5.8B, down from $6B prior and sees Q2 sales $1.45B below $1.47B est.

·     Lumber Liquidators (LL) Q2 EPS 7c/$288.57M vs. est. 7c/$291.49M; net sales in comparable stores were flat as compared to Q2 of 2018, as growth of installation services was offset by a slight decline in merchandise sales; sees FY19 comparable store sales up 1.4%-1.9%

·     Hertz (HTZ) Q2 adjusted EPS 74c/$2.5B vs. est. 28c/$2.48B; Global revenue grew to a record $2.5B, up 5%, up 7% on a constant currency basis

·     Host Hotels (HST) Q2 AFFO 53c vs. est. 54c; cut its AFFO/share forecast for the full year to $1.73-$1.78 from $1.76-$1.84 (est. $1.81) and sees FY comparable hotel RevPAR -1% to 0% vs. prior view 0% to +2%

·     KAR Auction (KAR) shares fell -15%; Q2 adjusted EPS 30c/$719.1M vs. est. 37c/$691.54M; guides year EPS $1.24-$1.34 vs. est. $1.29

·     Nu Skin (NUS) Q2 EPS 83c/$623.5M vs. est. 83c/$622.43M; sees Q3 EPS 74c-81c on revs; sees Q3 revenue $595M-$615M vs. est. $615.55M

·     Planet Fitness (PLNT) Q2 adjusted EPS 45c/$181.7M vs. est. 41c/$168.23M; system-wide same store sales increased 8.8%; Adjusted EBITDA was up 31% to $76M during the quarter and expects full-year revenue growth of +18% vs. +15% prior view

·     Papa John’s (PZZA) Q2 adjusted EPS 28c/$399.6M vs. est. 29c/$394.39M; Q2 system-wide North America comparable sales decrease of -5.7% and Q2 international comparable sales increase of 0.3%; company-owned restaurant margin was 19.4% of sales vs. 16.9% consensus; sees North America comparable sales to fall between 1% and 5% vs. -1% to -4% prior view

·     Weight Watchers (WW) shares rose 14%; Q2 EPS 78c/$369.02M vs. est. 64c/$376.11M; total paid weeks in Q2 were down 0.6% versus the prior year period. End of Period Subscribers in Q2 were up 1.5% versus the prior year period; raises FY19 EPS view to $1.55-$1.70 from $1.35-$1.55 (vs. est. $1.52)

 

Energy, Industrials & Materials

·     PDC Energy Inc. (PDCE) is in talks to merge with rival explorer SRC Energy Inc. (SRCI) in a deal that would create a larger oil and gas player in Colorado, Bloomberg reports, citing people familiar with the matter. https://bloom.bg/2M2FjE0

·     Smart Sand (SND) Q2 EPS 36c/$67.9M vs. est. 13c/$56.97M; overall tons sold were approximately 741,000 in the second quarter, compared with approximately 648,000 tons in the first quarter and 839,000 tons for the second quarter of 2018.

·     Callon Petroleum (CPE) Q2 EPS 23c/$167.05M vs. est. 18c/$161.24M

·     Devon Energy (DVN) Q2 EPS 43c/$1.92B vs. est. 34c/$2.17B; said they are delivering this incremental volume growth with lower capital and operating costs, positioning Devon to generate higher free cash flow in the second half of the year; Q2 production -3.7% YoY to 521 Mboepd; lowers year cap-ex by $50M to $1.8B-$1.9B

·     Diamondback (FANG) Q2 adjusted EPS $1.70 vs. est. $1.78; 2Q production 280.4 mboe/d, -97% YoY; Q2 adjusted Ebitda $772M million vs. $370.2M

·     Parsley Energy (PE) Q2 EPS 32c/$498.5M vs. est. 32c/$475.3M; boosted its production forecast for the full to 134.0-139.0 mboe/d, from 124-134 and sees FY capital expenditure $1.4B-$1.49B from prior $1.35B-$1.55B; 2Q production 12,749 mboe/d, +30% y/y

·     Pioneer Natural (PXD) Q2 adjusted EPS $2.01 vs. est. $1.91; cut its capital expenditure forecast for the full year to $3.05B-$3.25B from prior view $3.1B-$3.4B; sees 3Q Permian Basin production 333 to 348 mboe per day; said Q2 avg production 334,167 boe/d, +2% YoY; boosts dividend

·     SolarEdge (SEDG) Q2 EPS 94c/$325M vs. est. 83c/$315.5M; sees 3Q revenue $395M-$410M vs. est. $320.4M; sees 3Q gross margin 32% to 34%; said they see strong customer demand for our products worldwide and we are building the needed capacity both in China and outside of China to meet the needs of our customers

·     Southwestern Energy (SWN) Q2 adjusted EPS 8c vs. est. 9c; 2Q production 186 bcfe, -21% YoY; 2Q adjusted Ebitda $186M vs. est. $193.2M

 

Financials

·     Burford Capital (BRFRF) shares plunged overseas after Muddy Waters Research said it went short. Muddy Waters alleged the company has “egregiously misrepresented its ROIC and IRRs, as well as the state of its overall business.” https://on.mktw.net/2TawXeq

·     FleetCor (FLT) Q2 adjusted EPS $2.85/$647.1M vs. est. $2.80/$634.18M; said raising our full year revenue guidance by $20 million at the mid-point to reflect our over performance in the second quarter and the acquisition of Sole Financial early in the Q3; sees FY19 revenue $2.625B-$2.675B vs. est. $2.64B

·     Voya Financial (VOYA) Q2 adjusted operating EPS $1.52 vs. est. $1.45; assets under management $214.23 billion, +47% YoY and Q2 adjusted book value per share $46.94 vs. $46.40 YoY

 

Healthcare

·     Cambrex (CBM) to be acquired by Permira Funds for $60.00 per share in cash or $2.4B which represents a 47.1% premium to the August 6 closing stock price

·     Allakos (ALLK) 4.54M share Secondary priced at $77.00

·     Evolent Health (EVH) Q2 EPS loss (26c)/$192.0M vs. est. loss (23c)/$192.61M; sees Q3 revs $213.5M-$225.5M vs. est. $214.1M and sees year revs $825M-$850M vs. prior view $805M-$880M

·     Ironwood (IRWD) plans to offer $165M convertible senior unsecured notes due June 2024 and $165M convertible senior unsecured notes due June 2026

·     Invitae (NVTA) Q2 EPS loss (54c0)/$53.5M vs. est. loss (46c)/$50.2M; Q2 revs rose 43% YoY; 2Q cash and cash equivalents $247M vs. $48.6M YoY

·     Jazz Pharmaceuticals (JAZZ) Q2 adjusted EPS $4.05/$534.13M vs. est. $3.57/$508.62M; sees FY19 adjusted EPS $14.30-$15.00 vs. est. $14.81 and sees FY19 revenue $2.070B-$2.150B vs. est. $2.09B; announced that the Phase 1 study of its recombinant crisantaspase molecule, JZP-458, met its efficacy and safety objectives

·     GW Pharmaceuticals PLC (GWPH) reported that sales of its cannabis-derived epilepsy drug more than doubled from the previous quarter; Q2 sales of $68.4M for Epidiolex, which uses cannabidiol, topped estimates around $40.9M

 

Media & Telecom

·     Disney (DIS) Q3 EPS $1.35/$20.25B vs. est. $1.75/$21.47B; Q3 Media Networks revenue $6.71B vs. $5.53B a year ago; Q3 Studio Entertainment revenues for the quarter increased 33% to $3.8B and segment operating income increased 13% to $792M; 3Q Cable Networks revenue $4.46 billion, +6.6% YoY

·     Frontier Communications (FTR) Q2 adjusted EPS 98c/$2.07B vs. est. $2.07B; said although reached Q2 Ebitda $882M, continue to be challenged by ongoing revenue declines, content cost escalations, higher labor costs, and other pressures across the business; cuts FY19 adj. EITDA view to $3.35B-$3.42B from $3.45B-$3.55B reflects pressures on the business and planned incremental investments in both Consumer and Commercial during the 2H

·     Match Group (MTCH) Q2 EPS 43c/$498M vs. est. 40c/$488.96M; said Q2 average Subscribers increased 18% to 9.1M, up from 7.7M in the prior year quarter, while Tinder Average Subscribers were 5.2M in Q2 2019, increasing 503,000 sequentially and 1.5M YoY

 

Technology

·     Acacia Communications (ACIA) Q2 EPS 42c/$111.2M vs. est. 35c/$108.5M; 2Q adjusted gross margin 46.2%; will not host call or provide guidance for 3Q due to pending deal with Cisco

·     Microchip (MCHP) Q1 EPS $1.41/$1.32B vs. est. $1.37/$1.33B; sees Q2 EPS $1.37-$1.49 on revs $1.323B- $1.375B below est. $1.51/$1.38B; said net sales were 0.5% below the midpoint of our May 7, 2019 guidance and were adversely impacted by the Huawei shipment restrictions that were announced after our guidance was provided to investors.

·     New Relic (NEWR) beats Q1 estimates with 30% Y/Y revenue growth; guides Q2 outlook has revenue of $143-145M (vs. est. $146M) and the FY19 view expects $600-607M (vs. est. $606.2M); Q1 paid business accounts of $100K+ numbered 881, up from 748 in last year’s quarter; said ARR from enterprise paid business accounts was 62% versus last year’s 55%.

·     SailPoint (SAIL) Q2 EPS loss (1c)/$63.1M vs. est. loss (5c)/$60.41M; said Q2 results were ahead of our guidance, with total revenue increasing 18% year-over-year, and we added 59 net new customers during the quarter; sees 2019 EPS 12c-13c on revs $278.5M-$281.5M vs. est. 15c/$279.08M

·     Twitter Inc (TWTR) said that it may have used data for personalized ads without a user’s permission due to issues with the microblogging website’s settings. The company said it recently discovered those issues and fixed them on Monday

_________________________________________________________________

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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