Mid-Morning Look

Thursday, February 04, 2021

Groundhogs’ Day? U.S. stocks building on recent rally as major averages once again closing in on all-time highs, led by a strong earnings season, bullish stimulus hopes, strong economic data (mixed today however), and FOMO, as investors and PM’s continue to chase performance. The narrative hasn’t changed, with investors taking advantage of last week’s decline (biggest weekly drop since October) to jump back into stocks while volatility (VIX) comes crashing down after a 45% jump in January. Market leaders may change on day-to-day basis (tech early week, energy yesterday, banks today), but path of least resistance for stock markets remains firmly higher. Markets also remain bolstered by additional stimulus relief talk as U.S. President Joe Biden pushed ahead with efforts saying would not back down on including $1,400 checks. We are at peak earnings season, with slightly more than half the S&P 500 companies having reported thus far, with big beat rate. Oil prices take a small breather after solid run to 1-year highs, while Treasury yields keep inching higher, boosting banks, but at what point does the broader market notice remains a question? The dollar surges again and gold plummets over 2%.

Economic Data

·     Weekly Jobless Claims fell to 779,000 in latest week below the consensus 830,000, while prior week was downwardly revised to 812,000 from 847,000; the 4-week moving average fell to 848,250 from 849,500 prior week; continuing claims fell to 4.592M vs. est. 4.7M; U.S. insured unemployment rate fell to 3.2% from 3.4% prior

·     U.S. Q4 non-farm productivity dropped -4.8%, below the consensus -2.8% vs Q3 +5.1%; Q4 non-farm unit labor costs jumped +6.8%, above consensus +4.0% and vs. Q3 -7.0%

·     December Factory Orders rose +1.1%, topping the +0.7% consensus while the prior month was revised up to +1.3% from +1%; shipments rose +1.7%.

Sector Movers Today

·     Insurance; busy night of earnings as ALL posted a more than $2.00 beat on earnings at $5.87 while revenues of $12.0B blew past estimates; AFL Q4 profit rose 22% with EPS of $1.35, up from $1.06 YoY and above estimates of $1.04 and an improvement in revs to $5.91B; LNC posted a miss on the top and bottom line ($1.78/$4.14B vs. est. $1.93/$4.61B); MET Q4 earnings of $2.03 beat the $1.52 estimate – insurers benefitted from the stay-at-home restrictions as customers drove less boosting earnings for their segments; CB announced a $1B stock buyback plan; THG beat on Higher investment income & reserve releases, as well as a lower CLR and Cat

·     Retailers; RL Q3 Non-GAAP EPS $1.67 misses by $0.06 and GAAP EPS of $1.61 misses by $0.08, revenue $1.43B (-18.3% YoY) misses by $40M, and comparable store sales -21% miss consensus -9.2%; KSS sees Q4 EPS to exceed company expectations with significant improvement from the third quarter, as the projected comparable sales decrease of 11% would mark the third consecutive quarter of sequential improvement; TPR reported Q2 adj EPS $1.15 vs est. $1.00 on sales $1.69B vs est. $1.63B; GOOS delivered a strong quarter with Q3 adj EPS C$1.01 topping est. C$0.86 on revs C$474M that also beat est. C$413.1M, boosted by a surge in online sales and demand for luxury parkas in China as global e-commerce rev increased over 39% and DTC rev in mainland China rose over 41%; BKE posted January net sales $63.1M (+34% YoY) and comp store sales +35.3%; SBH reported Q1 EPS 50c vs est. 47c on revs $936M vs est. $968M, and comp sales -3.7% YoY vs est. -0.9%; LB increased its Q4 EPS guidance to $2.95-$3.00 from $2.70-2.80 and expects comp sales to increase 10% following its strong January results; RCII sees EPS and adj EBITDA ahead or prior guidance and also announced an offering of $450M of senior notes; BBY upgrade to Buy at Bank America as 1) it should come out of COVID stronger 2) there is steady room for growth in multiple segments and 3) valuation is attractive at 14x

·     Consumer Staples; CLX 2Q EPS $2.03 vs. est. $1.78 on sales $1.84B vs. est. $1.75B; sees FY21 sales +10-13% vs. est. +9%, sees FY21 EPS $8.05-8.25 incl $0.45-0.50 from increased stake in Saudi JV vs. est. $8.18 (but now expects back-half sales to be about flat when it starts to lap some very tough comparables); HSY sales beat forecasts, as North America strength offsets international weakness; PM revenue fell in the fourth quarter, but profit rose as costs decreased; UL shares slip after eps, dividend cut, restructuring; COST reported January net sales $13.64B (+17.9% YoY), comp sales +15.9% (est. +11.7%, ex gas comps +15.7%), and net sales $79.11B for the 22 weeks ending Jan 31

·     Leisure and Gaming; PENN Q4 EPS and revs fell short of consensus (7c/$1.02B vs. est. 24c/$1.08B) – Most importantly gave incrementally bullish color on Barstool/MI launch. MI did a $27.5m handle in first 10 days; Truist raising 2021 ests. for the three park operators (FUN, SEAS, SIX) to reflect the findings of a recently-conducted consumer survey. Not only did the park-going experience remain remarkably positive during 2020, but season pass renewal intention and park visitation plans for ’21 were each noticeably stronger; Cruise lines (RCL, CCL) early strength

·     Semiconductors; QCOM shares fell after posting slightly weaker Q1 sales of $8.24B below the consensus $8.27B saying semiconductor supply constraints that have roiled the industry contributed to fiscal Q1 sales; QRVO reported a good DecQ rev/EPS of $1.1B/$3.08 and guided to a strong MarQ at $1.04B/ $2.42 (cons. $944M/$2.01) ~10% above consensus but below peer SWKS guide of 24% above consensus; SIMO shares rising after Q3 eps beat – Q4 EPS 86c/$143.9M vs. est. 71c/$139M – and issued upbeat Q1 and FY guidance

Stock GAINERS

·     ALGN +14%; as reported above-consensus 4Q results with encouraging trends across revenue and case volume, but issued no year guidance

·     BABA +2%; after Reuters reported its financial affiliate Ant Group plans to divest its consumer-credit data operations as part of restructuring plans to get its suspended IPO back on track

·     DGII +16%; as reported top and bottom line beat but didn’t provide guidance but noted they hope to grow q/q in March

·     EBAY +10%; advanced after guiding Q1 revenue of $2.94B-$2.99B, well above the $2.53B estimate following a beat in Q4 as active buyers rose 7% to a total of 185 mln

·     GOOS +23%; delivered a strong quarter with Q3 adj EPS C$1.01 topping est. C$0.86 on revs C$474M that also beat est. C$413.1M, boosted by a surge in online sales and demand for luxury parkas

·     LB ; shares of retailers higher after positive earnings updates

·     PYPL +6%; after quarterly beat on higher revs with a year outlook calling for high 20s volume growth, 19% revenue growth and 17% adj. EPS growth

·     SIMO +12%; shares rising after Q3 eps beat – Q4 EPS 86c/$143.9M vs. est. 71c/$139M – and issued upbeat Q1 and FY guidance

·     SKLZ +19%; after signing a multi-year gaming agreement The National Football League

Stock LAGGARDS

·     APD -9%; posted a Q1 EPS miss of $2.12 vs. est. $2.19

·     BTU -12%; after saying sees 1q results lower vs 4q due to reduced volumes across all segments

·     CI -2%; EPS missed but beat on revs (+14.1% YoY) while Medical care ratio worsened to 85.8%, compared with 82.3% in the prior year quarter

·     CLOV -7%; shares tumble after being mentioned negatively by Hindenburg Research, formerly Social Capital Hedosophia Holdings Corp III

·     CLX -2%; better 2021 guidance and Q2 results but weaker 2H outlook hitting shares – now expects back-half sales to be about flat when it starts to lap some very tough comparables

·     GME -9%; as recent short interest “meme” stocks under pressure today – KOSS, AMC, AG, etc.

·     QCOM -8%; after posting slightly weaker Q1 sales of $8.24B below the consensus $8.27B saying semiconductor supply constraints that have roiled the industry contributed to fiscal Q1 sales

·     RL -3%; Q3 Non-GAAP EPS $1.67 misses by $0.06 and GAAP EPS of $1.61 misses by $0.08, revenue $1.43B (-18.3% YoY) misses by $40M, and comparable store sales -21% miss consensus -9.2%

·     XRX -3%; downgraded to underweight at Morgan Stanley saying it faces the conundrum of digesting a shrinking end market while needing to invest in new categories to drive long-term growth

Syndicate:

·     Albemarle (ALB) 8.5M share Secondary priced at $153.00

·     AquaBounty (AQB) 13M share Spot Secondary priced at $8.50

·     Aspira Women’s Health (AWH) 6M share Spot Secondary priced at $7.50

·     Atotech (ATC) 29.27M share IPO priced at $17.00

·     CuriosityStream (CURI) 6.5M share Secondary priced at $13.50

·     Durect (DRRX) 17.708M share Spot Secondary priced at $2.38

·     HyreCar (HYRE) 2.2M share Spot Secondary priced at $11.75

·     IsoRay (ISR) 36M share Spot Secondary priced at $1.25

·     Kaleido Biosciences (KLDO) 5.25M share Spot Secondary priced at $11.50

·     Landos Biopharma (LABP) 6.25M share IPO priced at $16.00

·     Quantum (QMCO) 13.14M share Spot Secondary priced at $6.85

·     Quanterix (QTRX) 3.6M share Spot Secondary priced at $70.00

·     Sana Biotechnology (SANA) 23.5M share IPO priced at $25.00

·     Sensei Biotherapeutics (SNSE) 7M share IPO priced at $19.00

·     Tyme Technologies (TYME) 9M share Secondary priced at $2.25