Mid-Morning Look

Wednesday, March 09, 2022

A massive “risk-on” day for U.S. stocks thus far, with nearly all S&P sectors posting big gains, while recent leaders, energy, and utilities lag. Main indexes jumped higher after four straight sessions of losses, as oil prices ease and investors snapped up stocks hammered by concerns over Western sanctions on Russia following its invasion on Ukraine. Consumer discretionary names among the leaders in the S&P with oil falling 5% to $117.50 (group has been hardest hit over last week on recession fears amid commodity price surge). Oil prices fell as some investors took the view that the U.S. ban on Russian oil may not worsen a supply shock and the head of the International Energy Agency said the agency could further tap oil stocks to ease prices. Recall House Democrats unveiled legislation early Wednesday barring U.S. imports of Russian oil amid growing political pressure to punish Russia for its invasion of Ukraine. Financials/banks also rising as Treasury yields recover. There were no significantly negative events overnight in Europe, helping boost sentiment, leading to the market advance early. The U.S. dollar weakens on reduced demand for safe havens after positive Ukraine headlines. European markets seeing the biggest gains overnight with Germany jumping as much as 6% after recently slipping into bear market territory (defined as 20% move off all-time highs).

Sector Movers Today

·     Casinos, Gaming, Lodging & Leisure sector; Cruise lines (RCL, CCL, NCLH) rally with broader market and lower oil prices as well as lodging (ABNB, MAR, HLT), casinos (MGM, CZR), theme parks (SIX), etc.; BKNG upgraded to Outperform from Perform with $2,560 tgt at OpCo noting Booking’s EV is 13% below pre-COVID levels, underperforming EXPE’s +52% on Booking’s higher European exposure and Expedia’s cost-cutting execution; THO Q2 EPS $4.79 vs. est. $3.39; Q2 revs rose 42.1% to $3.88B vs. est. $3.56B; says remains long-term outlook remains very bullish for RV industry in 2022; Consolidated gross profit margin increased 220 basis points to 17.4% from 15.2%; CZR added to Jefferies’ Franchise Picks list

·     Consumer Staples; CPB Q2 sales of $2.209B fell from $2.27B y/y and below ests $2.24B on in-line earnings but said 2H’22 sees labor availability and service levels improve, better mitigation of inflation with pricing; OTLY reported higher-than-expected revenue in Q4 as revs rose 46% to $185.9M topping analysts’ expectations of $178M but guides year revs $880M-$920M (37%-43% y/y), below ests $1.01B and sees capex spending $400M-$500M; PPC approves $200M share repurchase plan; PM said to scale down manufacturing in Russia, while Ukraine accounted for under 2% of its total net revenues but said Russia accounted for almost 10% of total cigarette and heated tobacco unit shipment volume and around 6% of net rev in 2021; UNFI Q2 EPS $1.13 and revs $7.42B vs. est. $1.14/$7.41B and guides FY EPS $3.90-$4.20 (unchanged) and up sales view for the year to $28.2B from prior $27.8B-$28.3B; OLPX upgraded to Overweight from Equal-Weight, price target $17 from $29 at Barclay’s

·     Software movers; MDB accelerated revenue for the 5th consecutive quarter (to +56% Y/Y), driven by faster growth for both Atlas and Enterprise Advanced as Q revenue beat was on par with the larger-than-usual 3Q beat; GWRE Q2 results that beat expectations for ARR, revenue, bookings and profitability as cloud bookings mix remains high and the overall transition story maintains its momentum; ARR finished the quarter at $620mn, up 19% y/y, $4mn above guidance, and mgmt. raised its FY22 guide midpoint by $3.5mn; SUMO delivered strong results with both revenue and profitability metrics beating expectations as quarterly revenue growth accelerated to +24% and revenue guidance calls for a slight acceleration in FY/23 vs. FY/22; DV slightly better results as 4Q revs $105.5Mm vs est. $102.6Mm; guides 1Q revs $89-91Mm vs est. $89Mm and adj EBITDA $21-23Mm vs est. $22.2Mm

·     Defense, Industrial & Machinery; GE board provided an authorization for up to $3 billion of common share repurchases; EMR upgraded to Outperform and establishing a $110 PT at Oppenheimer which reflects excellent persistent capital preservation characteristics in shares; ABM Q1 adj EPS $0.94 vs est. $0.78 on revs $1.9B vs est. $1.83B; raised FY adj EPS view to $3.50-$3.70 from $3.30-$3.55; defense stocks LHX, RTX, LMT slip while the broader market bounces, on news of talks between Russia and Ukraine

Stock GAINERS

·     BKNG +9%; upgraded to Outperform at Oppenheimer saying BKNG’s EV is 13% below pre-COVID levels, underperforming EXPE’s +52% on BKNG’s higher European exposure

·     BMBL +44%; reported better-than-feared 4Q21 results, with revenue within guidance and EBITDA near the high end of the range – both MTCH and BMBL were upgraded to Outperform at BMO Capital as think online dating should come back into favor

·     CANO +42%; as Third Point LLC reported a 6.37% holding, according to a new 13D filing as the stake is equivalent to $139.4 million

·     CCL +8%; Cruise lines (RCL, CCL, NCLH) rally with broader market and lower oil prices as well as lodging (ABNB, MAR, HLT), casinos (MGM, CZR), theme parks (SIX),

·     COIN +10%; crypto assets surge, shares of names leveraged to crypto including SI, MARA, MSTR, RIOT, COIN rising after Yellen and Biden crypto comments

·     FIGS +27%; GM and EBITDA handily beat expectations and added more customers in Q4 than ever before and plans to add more new customers in FY22 than in FY21

·     MDB +14%; accelerated revenue for the 5th consecutive quarter (to +56% Y/Y), driven by faster growth for both Atlas and Enterprise Advanced as Q revenue beat was on par with the larger-than-usual 3Q beat

·     THO +6%; Q2 EPS $4.79 vs. est. $3.39; Q2 revs rose 42.1% to $3.88B vs. est. $3.56B; says remains long-term outlook remains very bullish for RV industry in 2022; Consolidated gross profit margin increased 220 basis points to 17.4% from 15.2%

·     XPO +12%; said it intended to separate its tech-enabled brokered transportation services from its less-than-truckload business in North America; also plans to divest the European business and North American intermodal operations.

Stock LAGGARDS

·     CRCT -30%; on Q4 miss as EPS $0.05 misses est. $0.24 and revenue $387.8M vs est. $407.5M; EBITDA $31.8M (including $10.1M of stock-based compensation expense) vs consensus $76.0M; total users +48% y/y to over 6.4M (vs 5.7M in Q3)

·     LHX, RTX, LMT; shares slip while the broader market bounces, on news of talks between Russia and Ukraine

·     NTRA -14%; after Hindenburg Research released a short report alleging that Natera’s revenue growth has been fueled by deceptive sales and billing practices

·     OTLY -4%; reported higher-than-expected revenue in Q4 as revs rose 46% to $185.9M topping analysts’ expectations of $178M but guides year revs $880M-$920M (37%-43% y/y), below ests $1.01B and sees capex spending $400M-$500M

·     OTRK -19%; shares fall as 4Q adj EPS ($0.59) vs est. ($0.65) on revs $10.3Mm vs est. $12.8Mm; guides FY revs $25-30Mm vs est. $50.5Mm

·     SFIX -15%; price tgt cut by several analysts after issued F3Q guidance well below expectations and lowered its FY:22 revenue growth guidance to flat to slightly down y/y (+HSD% y/y previously)

·     YEXT -24%; revenue forecast for Q1 fell short of analyst expectations and announced a leadership transition wherein Michael Walrath will become CEO and chairman.