Morning Preview: August 29, 2019

Auto PostDaily Market Report

Early Look

Thursday, August 29, 2019

Futures

Up/Down

%

Last

DJ Industrials

267.00

1.03%

26,304

S&P 500

28.50

0.97%

2,917

Nasdaq

96.50

1.27%

7,695

 

 

U.S. futures are jumping, tracking European markets higher after China Commerce Ministry spokesman Feng eased trade-war tensions by saying the country would not immediately respond to the latest tariffs imposed on it by the U.S. He also said that China remained in contact with Washington and that discussions should move toward removing tariffs to prevent escalation. The headlines helped propel stocks higher after a strong day of gains Wednesday on no specific news or headlines. Stocks are looking to further pare their losses for the month with only two trading days remaining. U.S. Treasury yields bounced off session lows as the two-year and 10-year yields inched higher overnight, while gold remains steady at the $1,550 level and oil prices edge higher. Market volumes remain subdued on this big vacation week for markets ahead of the Labor Day holiday weekend, with the SPDR S&P 500 ETF trading just over 55M shares, well below its 30-day volume average of 81.8M shares yesterday.

 

In Asian markets, The Nikkei Index fell -18 points to 20,460, the Shanghai Index dipped -2 points to 2,890 and the Hang Seng Index gained 88 points to finish at 25,703. In Europe, the German DAX is higher by 140 points to 11,840, while the FTSE 100 is up about 80 points to move back near the 7,200 level. Italy markets helped pace the advance in Europe, with the FTSE MIB jumping over 400 points (or 2%) after President Sergio Mattarella gave Prime Minister Giuseppe Conte a mandate to form a new government. The country’s Democratic Party and the populist 5 Star Movement agreed to form a new coalition on Wednesday, leaving former Deputy Prime Minister Matteo Salvini on the sidelines.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 18.78 points, or 0.65%, to 2,887.94

·     The Dow Jones Industrial Average rose 258.20 points, or 1.00%, to 26,036.10

·     The Nasdaq Composite climbed 29.94 points, or 0.38%, to 7,856.88

·     The Russell 2000 Index advanced 16.67 points, or 1.15% to 1,472.71

 

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 214K

·     8:30 AM EST      Continuing Claims…est. 1.687M

·     8:30 AM EST      Gross Domestic Product (GDP) Annualized for Q2-S…est. 2.0%

·     8:30 AM EST      Personal Consumption, Q2-S…est. 4.3%

·     8:30 AM EST      GDP Price Index for Q2-S…est. 2.4%

·     8:30 AM EST      Core PCE QoQ for Q2-s…est. 1.8%

·     8:30 AM EST      Advance Goods Trade Balance for July…est. (-$74.4B)

·     10:00 AM EST    Pending Home Sales MoM for July…est. 0.0%

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

 

Earnings Calendar:

·     Earnings Before the Open: ANF, BBY, BBW, BURL, DBI, DG, DLTR, GMS, HAIN, MBUU, MEI, PDCO, SAFM, TECD, TITN

·     Earnings After the Close: AMBA, AOBC, DELL, MRVL, ULTA, WDAY, YEXT

 

Other Key Events:

·     Jefferies Healthcare Services Back-to-School Bus Tour, 8/28-8/29, in Nashville, TN

·     Simmons European Energy Conference, 8/27-8/29, in Scotland

·     William Blair 12th Annual West Coast MedTech Field Trip, 8/26-8/30, in San Diego, CA

 

 

Macro

Up/Down

Last

WTI Crude

0.51

56.29

Brent

0.04

60.53

Gold

-1.10

1,548.00

EUR/USD

-0.0004

1.1074

JPY/USD

0.12

106.24

10-Year Note

+0.006

1.486%

 

 

World News

·     Treasury Secretary Steven Mnuchin said the U.S. is considering issuing ultra-long bonds and said the government wasn’t soon about to embark on a plan to weaken the U.S. dollar. In an interview, Mnuchin said the Treasury could issue bonds with a 50-100-year maturity.

·     Ex-premier Giuseppe Conte accepted a fresh mandate to try and piece together a new government backed by the populist 5-Star Movement and the center-left Democrats, aimed at blocking right-wing League leader Matteo Salvini’s power grab

 

Sector News Breakdown

Consumer

·     Dollar General (DG) Q2 adjusted EPS $1.74/$6.9B vs. est. $1.57/$6.89B; Q2 comp sales rose 4% above the 2.4% estimate; raises FY19 EPS view to $6.36-$6.51 from $6.30-$6.50 (est. $6.47) while raises FY19 revenue growth view to approximately 8% from 7%; also raised year comp sales view to low-to-mid 3% range

·     Five Below (FIVE) Q2 EPS 51c/$417.4M vs. est. 50c/$421.06M; reports Q2 comparable sales increased by 1.4% vs. est. 2.6%; sees FY19 EPS $3.08-$3.19 on revenue $1.87B-$1.89B vs. est. $3.16/$1.89B

·     Guess (GES) Q2 adjusted EPS 38c/$683.2M vs. est. 29c/$671.42M; guides 3Q adj EPS $0.15-0.18 vs est. $0.26; Sees Q3 revenue growth up 2%-3% and up 4.5%-5.5% in constant currency; sees Q3 operating margin 3.0%-3.5%; raises year EPS to $1.28-$1.36 from prior $1.19-$1.30 and ups year op margin to 5.3%-5.6% from 4.8%-5.2%

·     Ollie’s Bargain Outlet (OLLI) Q2 adjusted EPS 35c/$333.87M vs. est. 46c/$339.5M; Q2 comparable store sales decreased (-1.7%) following a 4.4% increase YoY; cuts FY19 adjusted EPS view to $1.95-$2.00 from $2.13-$2.17 (vs. est. $2.16) and also lowers FY19 revenue view to $1.42B-$1.43B from $1.44B-$1.45B

·     PVH Corp. (PVH) Q2 adjusted EPS $2.10/$2.36B vs. est. $1.88/$2.33B; cuts FY19 adj. EPS view to $9.30-$9.40 from $10.20-$10.30 (est. $9.98) saying revenue in 2019 is projected to increase approximately 1% (increase approximately 3% on a constant currency basis) YoY

·     Shoe Carnival (SCVL) Q2 EPS 80c/$268.2M vs. est. 78c/$269.96M; Q2 comparable store sales increased 1.4%; narrows FY19 EPS view to $2.77-$2.83 from $2.73-$2.83 (est. $2.74) and cuts FY19 revenue view to $1.028B-$1.033B from $1.035B-$1.043B

·     Tilly’s (TLYS) Q2 EPS 31c/$161.7M vs. est. 20c/$155.87M; Q2 comparable sales +0.6% vs. +4.40% YoY; sees 3Q EPS 18c-22c vs. est. 20c and sees 3Q comparable sales +1% to +4%; Q2 E-commerce net sales increased 15.7% and represented approximately 14.1% of total net sales this year, compared to an increase of 8.1% and a 12.5% share of total net sales last year

·     Williams-Sonoma (WSM) Q2 adjusted EPS 87c/$1.37B vs. est. 84c/$1.32B; Q2 comp sales rose 6.5% vs. est. 3.4% and vs. 4.6% YoY (Pottery Barn comps +4.2% and WSM comps -1.1%); said Q2 operating margin expanded and EPS grew double digits; raises FY19 adj. EPS view to $4.60-$4.80 from $4.55-$4.75 (est. $4.69) and ups FY19 revenue view to $5.74B-$5.90B from $5.67B-$5.84B (est. $5.77B)

 

Energy, Industrials & Materials

·     Greif (GEF) Q3 EPS $1.26/$1.25B vs. est. $1.18/$1.34B; still sees FY19 EPS $3.70-$4.00 vs. est. $3.76; said in light of external headwinds, we are implementing additional optimization measures in parts of our portfolio to lower costs and better navigate challenging market conditions

·     Matrix Service (MTRX) Q4 EPS 47c/$398.7M vs. est. 42c/$376.6M; said the current economic environment creates uncertainty in the short-term with regard to the timing of future awards and the continuation of the high maintenance volumes we are experiencing; Sees 2020 EPS $1.10-$1.40 on revs $1.40B-$1.55B vs. est. $1.37/$1.47B

 

Financials

·     H&R Block (HRB) Q1 EPS loss (72c)/$150.4M vs. est. loss (75c)/$151.4M; 1Q operating expenses $345.5 million, +5.6% YoY

·     Toronto Dominion (TD) Q3 adjusted EPS C$1.79 vs. est. $C1.80; 3Q common equity Tier 1 ratio 12% vs. 11.7% y/y, and 3Q return on equity +15.8% vs. +16.9% y/y

·     Bank of America (BAC) downgraded to Market Perform from Outperform at Raymond James

 

Healthcare

·     Roche (RHHBY) announced that the European Commission has approved Tecentriq plus chemotherapy for the treatment of adult patients with unresectable locally advanced or metastatic triple-negative breast cancer whose tumors have PD-L1 expression and who have not received prior chemotherapy for metastatic disease.

 

Technology, Media & Telecom

·     Box (BOX) Q2 adjusted EPS 0c/$172.5M vs. est. loss (2c)/$169.53M; Q2 billings were $172.9M, an increase of 6% from the second quarter of fiscal year 2019; sees Q3 adjusted EPS (1c)-0c on revs $174M-$175M vs. est. loss (1c)/$174.51M while backs year EPS view

·     Elastic (ESTC) Q1 EPS loss (32c)/$89.7M vs. est. loss (41c)/$83.52M; Q1 billings $89.4M, up 51% and up 53% on constant currency, Q1 total subscription customer count over 8.8K and Q1 total customer count with ACV greater than $100,000 over 475; raises FY20 EPS view to ($1.40) to ($1.24) from ($1.49) to ($1.33) and ups FY20 revenue view to $406M-$412M from $397M-$403M (est. $400M)

·     Nutanix (NTNX) Q4 adjusted EPS loss (57c)/$299.9M vs. est. loss (64c)/$293.86M; Q4 subscription transition continues to be ahead of schedule with subscriptions growing from 52% of total billings in the fourth quarter of fiscal 2018 to 71% FY2019; sees Q1 adjusted EPS roughly (75c) vs. est. loss (57c) and sees Q1 software and support revenue $290M-$300M; sees Q1 software and support billings $360M-$370M

·     Okta (OKTA) Q2 EPS loss (5c)/$140.5M vs. est. loss (11c)/$131.18M; reports total calculated billings of $155.8M, an increase of 42% YoY; raises FY20 revenue outlook to $560M-$563M from $543M-$548M (est. $549.06M) while sees FY20 EPS (44c)-(42c) vs. est. loss (46c); 2Q adjusted operating margin -7.1% vs. -20.3% YoY and 2Q adjusted gross margin 77.2%

·     Semtech (SMTC) Q2 adjusted EPS 38c/$137.1M vs. est. 35c/$134.7M; sees Q3 adjusted EPS 38c-42c on revs $135M-$145M both below consensus of 46c and $149.26M

·     Zuora (ZUO) Q2 adjusted EPS loss (9c)/$69.7M vs. est. loss (14c)/$66.97M; said made progress with operational execution, product innovation and launched our Zuora Central Platform, all focused on delivering durable, long-term growth; raises FY20 EPS view to (40c)-(38c) from (44c)-(40c) and ups FY20 revenue view to $273.5M-$278M from $268M-$278M (est. $274.49M)

·     Micro Focus (MCRO.LN) shares fell over 20% after the software company warned full-year sales could drop 6-8% on last year’s, due to a deteriorating macro environment (which was more than the forecast of a 4-6% revenue drop previously

·     Tech Data (TECD) Q2 adjusted EPS $2.69/$9.09B vs. est. $2.31/$8.71B; announces $200M share repurchase program; sees Q3 adjusted EPS $2.85-$3.15 on revs $9.2B-$9.5B vs. est. $2.85/$9.25B

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Content is provided by Hammerstone Inc., which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the Hammerstone content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.

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