Mid-Morning Look

Tuesday, March 29, 2022

U.S. stocks open sharply higher, adding to the massive gains realized over the last 2-weeks as peace-talk hopes between Ukraine and Russia lead to a global stock market spike to start the day, while rising interest rates from global banks around the world is not scaring investors at this point. After all the hype about 2022 starting out as one of the worst starts to the stock market in its history, with the S&P falling as much as 11% and the Nasdaq over 20% at one point, the S&P is now 4.6% below its all-time closing high and the Dow 5% shy of its record highs. Stocks jumped this morning amid hopes for a cease-fire rise in Europe, with talks going on today and tomorrow in Turkey between Ukraine and Russian parties and reports coming out of there calling the talks “constructive.” Markets are seeing an unwind of the names/sectors that have surged during the conflict, as oil prices tumble, along with commodity related prices such as aluminum) – shares of energy stocks, metals (AA), potash (NTR, MOS) seeing a big unwind this morning after strong gains this month as sanctions imposed on Russia over its invasion of Ukraine have disrupted oil supplies, and driven prices higher. Oil prices dropped, with WTI crude falling below $100 per barrel after Russia called peace talks with Ukraine constructive, while China’s new lockdowns to curb the spread of the coronavirus hit fuel demand. Ukrainian and Russian negotiators met in Turkey for the first face-to-face talks in nearly three weeks. Macro picture remains main stock market mover.

Economic Data

·     JOLTS Job Openings Actual 11.266M vs. previous 11.263M

·     S&P Case-Shiller Jan 20-City Home Price Index Up 19.1% Year Over Year; Jan 20-City Home Price Index Up 1.4% Month Over Month; U.S. National Home Price Index Up 1.1% Month Over Month

·     Consumer Confidence index for March at 107.2 vs. consensus 107.0 and above February revised 105.7 (previous 110.5); the present situation index 153.0 in March vs Feb revised 143.0 and expectations index 76.6 in March vs Feb revised 80.8 (previous 87.5)

Sector Movers Today

·     Metals & Materials; shares of aluminum producers AA, CENX, uranium CCJ copper FCX, fertilizer MOS, CF, iron ore/steel CLF, VALE, X, STLD and industrial metals in general tumble with prices on signs of improvement between Ukraine talks; BLL announced that it is immediately reducing its operations at its three beverages can plants in Russia and that it is pursuing a sale of its Russian business which represented roughly 4% of total sales in 2021, but 8% of adjusted EBIT; REYN was downgraded to Sell from Buy at Goldman Sachs and cut tgt to $26 from $34 as they revisit estimates, price targets across the majority of HPC coverage, effectively marking-to-market for recent commodity and currency moves while also embedding curtailed activities in Russia

·     Retailers; ASO Q4 topped consensus with EPS $1.61 ahead of est. $1.37 on revs $1.81B vs est. $1.76B and comp sales +13.1%, and they see FY23 adj EPS $6.70-7.25 vs est. $6.14 on sales $6.56-6.77B vs est. $6.69B, comp sales down (-4%) to (-1%); CONN shares slide after top and bottom line miss as Q4 total revenue rises more than 9% to $402.5M but below ests. $409.1M and EPS of $0.33 missed the $0.46 estimate; DTC Q4 adj EPS 45c vs est. 32c on revs $176.5M vs est. $174.4M, sees Q1 revs $82-85M below est. $92.3M and FY revs $540-570M vs est. $554.3M; Credit Suisse downgraded REAL to Neutral after last week’s Analyst Day included 2025 EBITDA forecasts below consensus and a significantly longer path to profitability that requires much more GMV vs its initial IPO model, as well as their view of an unlikely shift in sentiment

·     Software movers; general strength in software names as investors continue to pile into high growth stocks despite the fact of a rising interest rate environment; FTNT was upgraded to Overweight from Equal weight and raise tgt to $395 from $364 at Barclay’s while the firm downgraded SentinelOne (S) to Equal Weight; NLOK downgraded from Overweight to Equal weight at Morgan Stanley saying slowing topline and macro suggest downside risk to FY23 consensus rev estimates, while NLOK faces an uncertain regulatory path for closing the proposed Avast transaction

Stock GAINERS

·     AAPL +1%; on track for its 11th straight day of gains

·     ASO +7%; Q4 topped consensus with EPS $1.61 ahead of est. $1.37 on revs $1.81B vs est. $1.76B and comp sales +13.1%, and they see FY23 adj EPS $6.70-7.25 vs est. $6.14 on sales $6.56-6.77B vs est. $6.69B, comp sales down (-4%) to (-1%)

·     DNA +16%; delivered a Q4 revenue consensus beat ($148M vs cons: $95M) and guided to 2022 revenue of $325-$340M (cons: $306M

·     HOOD +18%; said it is extending hours to trade from 7 A.M. To 8 P.M. ET

·     IGMS +35%; following a collaboration with SNY

·     LHCG +7%; after UNH agreed to buy the in-home healthcare service provider, in a deal worth $5.4 billion, with holders to receive $170 per share (vs. Monday closing price of $157.23); UNH said its subsidiary Optum will combine with LHC Group https://on.mktw.net/3tPSg97

·     LOVE +21%; Q4 sales rose 51.3% to $196.2M vs est. $174.3M, total comp sales +50%, and EPS $2.03 crushed est. $0.58

·     NLSN +21%; agreed to sell itself to a consortium led by Elliott Management Corp.’s private-equity arm and Brookfield Asset Management Inc. in a deal valued at $16B, with holders to receive $28 a share for the company https://on.mktw.net/3JUfCjm

Stock LAGGARDS

·     AA -8%; seeing follow through weakness in commodity related sectors as unwind of Ukraine conflict winners continues with signs of getting closer to cease fire – CLF, CF, OXY, NTR slide

·     AVAH -17%; slides as 2022 guidance of $190M – $205M about 15% below consensus, following top/bottom line Q4 miss

·     BLL 3%; after announced that it is immediately reducing its operations at its three beverages can plants in Russia; recall earlier KeyBanc said Russia accounted for ~4% of BLL’s sales (~ $550M), ~5% of its beverage can shipments, and a substantial ~8% of its adj. EBIT

·     CONN -4% shares slide after top and bottom line miss as Q4 total revenue rises more than 9% to $402.5M but below ests. $409.1M and EPS of $0.33 missed the $0.46 estimate

·     FANG -4%; energy another casualty of lower oil prices on hopeful peace talks in Ukraine, as COP, DVN, MRO, HES among top decliners in the S&P along with other commodities

·     NEO -36%; following the departure of CEO and Board member Mark Mallon, effective immediately, company suspended its revenue and EBITDA guidance for 2022 and said it may miss the low end of its Q1 revenue guide and will miss its Q1 EBITDA guide

·     PINS -3%; downgraded to Equal Weight at Morgan Stanley at Morgan Stanley amid challenging user trends and cuts tgt to $30 from $53