Early Look

Friday, October 30, 2020

Futures	Up/Down	%	Last
DJ Industrials	-229.00	0.86%	26,328
S&P 500	-26.50	0.81%	3,275
Nasdaq	-137.50	1.21%	11,205

 

 

Stock futures are lower, dragged down by mixed earnings results in the tech space, along with ongoing fears of a second wave Covid-19 virus and its impact in the global economy. Apple, Amazon, Facebook all slide following results overnight while Alphabet (GOOGL) advances on its results. Outlooks hit by COVID, valuation fears, regulatory scrutiny and election uncertainty all seemed to come back to the fore, after a session that saw stocks rebound from the worst selloff in four months. In Asian markets, The Nikkei Index dropped -354 points to move below the 23,000 level, the Shanghai Index dropped -48 points to 3,224 and the Hang Seng Index plunged 479 points to 24,107. In Europe, the German DAX slides around -50 points to 11,540, while the FTSE 100 is down around -30 points to 5,550. Oil futures extend weekly losses on slowing demand fears, supply issues and a rising dollar on the week. Stronger-than-expected GDP data helped curb losses in European stock markets on Friday (following better GDP readings in the U.S. on Thursday). European stocks had looked set for a fresh rout on Friday as infection rates and new lockdown curbs in France and Germany spooked investors, with futures contracts down sharply before markets opened. But flash estimates for third-quarter GDP in leading European economies beat analysts’ expectations and quickly reined in losses on Friday morning.

 

Four of the members of “FAANG” (AAPL, AMZN, FB, GOOGL) reported earnings overnight, with all major headlines’ numbers easily topping consensus estimates, but investors found something they didn’t like for some of them pressuring shares. 1) For Apple (AAPL), top and bottom-line beat helped as Q4 sales from services and Mac computers hit record highs but fell on a worse-than-expected drop in iPhone sales during the third quarter, and a steep decline in sales in China (shares down over 3%); 2) for Amazon (AMZN) earnings handily beat on both the top and bottom lines for Q3 as operating income jumped 94% YoY to $6.2B, while AWS sales of $11.6B was just in-line with consensus – the negative was sees Q4 operating income of $1.0B to $4.5B below the $5.81B consensus (down -1.4%); 3) Alphabet (GOOGL) shares rose 6% after beating analysts’ expectations and providing a better look on digital advertising (EPS $16.40 on revs $38.01B vs. $11.42 and $35.35B) as Cloud Platform brought in $3.44B in the quarter compared to $2.38B same quarter last year (shares rise 6%); 4) for Facebook (FB) Q3 results beat (EPS $2.71 and revs $21.47B vs. est. $1.91/$19.82B) as DAUs and MAUs both rose 12% YoY, with costs and expenses rising 28%, operating margin fell to 37% from a year-ago 41%. (shares down -2%).

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 39.08 points, or 1.19%, to 3,310.11

·     The Dow Jones Industrial Average rose 139.16 points, or 0.52%, to 26,659.11

·     The Nasdaq Composite spiked 139.16 points, or 1.64%, to 11,185.59

·     The Russell 2000 Index advanced 18.30 points, or 1.19% to 1,561.58

 

Economic Calendar for Today

·     8:30 AM EST      Personal Income MoM for September…est. 0.4%

·     8:30 AM EST      Personal Spending for September…prior 0.7%

·     8:30 AM EST      PCE Price Index MoM for Sept…prior 0.3%

·     8:30 AM EST      PCE Price Index YoY for Sept…prior 1.4%

·     8:30 AM EST      Core PCE Index MoM for Sept…est. 0.2%

·     8:30 AM EST      Core PCE YoY for September…est. 1.7%

·     9:45 AM EST      Chicago PMI for October…est. 58.0

·     10:00 AM EST    University of Michigan Confidence, Oct-F…est. 81.2

·     1:00 PM EST       Baker Hughes Weekly Rig Count

 

Earnings Calendar:

·     Earnings Before the Open: AON, BAH, CBOE, CHTR, CL, ITT, LHX, MMP, PNM, PNW, POR, PSXP, UAA, WY, XHR

 

 

Macro	Up/Down	Last
WTI Crude	-0.12	36.05
Brent	-0.08	37.57
Gold	5.40	1,873.00
EUR/USD	-0.0001	1.1673
JPY/USD	-0.19	104.42
10-Year Note	-0.016	0.82%

 

 

Big Four Earnings overnight (AAPL, AMZN, FB, GOOGL)

·     Apple (AAPL) Q4 EPS 73c on revs $64.70B above est. 70c and $63.7B; does not provide Q1 guidance; Q4 iPhone revenue $26.44B vs. estimate $27.06B and services beat at $14.55B vs. estimate $13.87B; Q4 4Q wearables, home and accessories $7.88B; 4Q cash and cash equivalents $38.02B; Q4 Mac revenue $9.03B

·     Alphabet (GOOGL) Q3 EPS $16.40 beat est. $11.29 and revs $46.17B vs. est. $42.9B; Q3 Traffic Acquisition Costs $8.17B vs. $7.49B a year ago; Q3 Google Cloud revenue $3.44B vs. $2.38B a year ago; Q3 Google advertising revenue $37.1B vs. $33.8B a year ago and Q3 YouTube ads revenue $5.04B vs. $3.8B in same quarter of prior year

·     Amazon.com (AMZN) 3Q EPS $12.37 vs. est. $7.41 on sales $96.1B vs. est. $92.7B; guides 4Q sales $112-121B vs. est. $112.3B; says seeing more customers than ever shopping for holiday early; Q3 operating income jumped 94% YoY to $6.2B, while AWS sales of $11.6B was just in-line with consensus; sees Q4 operating income of $1.0B to $4.5B below the $5.81B consensus

·     Facebook (FB) Q3 EPS $2.71 vs. est. $1.91 on revs $21.47B vs. est. $19.82B; DAUs were 1.82 bln on average for September 2020, an increase of 12% year-over-year; MAUs were 2.74 bln as of September 30, 2020, an increase of 12% year-over-year; Q3 operating margin 37% vs 41% reported last year; sees 2021 capital expenditures to be in range of $21-23 bln

 

Sector News Breakdown

Consumer

·     Columbia Sportswear (COLM) Q3 EPS 94c on revs $701.1M below est. $1.16 and $767.13M; Q3 operating income decreased 44% to $85.6 million, or 12.2% of net sales, compared to Q3’19 operating income of $152M; sees Q4 EPS $1.07-$1.32 on revs $850M-$880M below est. $1.59 and $914.39M.

·     Decker’s Brands (DECK) Q2 EPS $3.58 on sales $623.5M well above the $2.63 and $553.62M estimates; not providing full year guidance for fiscal year 2021; Gross margin was 51.2% compared to 50.4% for the same period last year; UGG(R) brand net sales for the second quarter increased 2.5% to $415.1M, HOKA ONE ONE(R) brand net sales for the second quarter increased 83.2% to $143.1M and Teva(R) brand net sales for the second quarter increased 20.5% to $27.7M

·     Gaming and Leisure Properties (GLPI) 8M share Spot Secondary priced at $36.25

·     Hertz Global Holdings Inc. (HTZ) soon plans to line up a $4 billion financing package to refresh its vehicle fleet, on top of a $1.65 billion loan to carry itself through bankruptcy, WSJ reports. Separately, the NYSE announces decision to suspend and remove Hertz Global Holdings, inc. (HTZ) from the list, to suspend trading in common stock from NYSE

·     Lear (LEA) Q3 adj EPS $3.73 on revs $4.9B vs. est. $3.14 and $4.66B; reinstates FY20 revenue view $16.35B-$16.65B (est. $16.45B), while guides FY20 free cash flow $125M-$175M

·     MGM Resorts (MGM) Q3 adjusted EPS loss ($1.08) on revs $1.1B vs. est. ($1.04) and $1.24B; has temporarily reduced its dividend to an annual dividend of $0.01 per share; said domestic liquidity, excluding MGP and MGM China, remained substantial at $4.5B; Las Vegas Strip Resorts net revenue fell 68% y/y to $481M, Regional net revenue fell 40% y/y to $557m

·     Mohawk (MHK) Q3 adjusted EPS $3.26 on revs $2.57B vs. est. $2.14 and $2.49B; sees Q4 EPS $2.75-$2.87 above consensus $1.99; said internal investigation relating to allegations in a class action suit against Mohawk concluded without merit

·     Skecher’s (SKX) Q3 adj EPS $0.41 vs. est. $0.36 on sales $1.3B vs. est. $1.22B, says qtrly china sales +23.9%; not providing further guidance

·     Walmart (WMT) pulls guns, ammo from shelves ahead of potential ‘civil unrest’

 

Energy

·     Bloom Energy (BE) Q3 rev of $200.3M vs. consensus view of $221.3M, while adj loss of (4c) narrower than expected loss of (12c); reports adj EBITDA of $277M

·     Cabot Oil & Gas (COG) Q3 adjusted EPS 9c on revs $291.04M vs. est. 6c and $351.72M; q3 2020 daily production was 2,406 mln cubic feet equivalent (mmcfe) per day; q3 2020 natural gas price realizations, including impact of derivatives, were $1.57 per thousand cubic feet; reaffirmed its q4 2020, 2020 production guidance range

·     Devon Energy (DVN) Q3 EPS loss (4c) vs. est. loss (10c); Revenue of $1.07B (-38.9% Y/Y) misses by $40M; net production averaged 326,000 Boe/day, compared to consensus of 335.3 Mboe/day; oil production reached 146,000 barrels per day, exceeding midpoint guidance by 6,000 barrels per day

·     FirstEnergy (FE) terminated CEO Charles Jones, as well as two senior VPs, effective immediately, after an internal review related to government investigations determined that the executives violated company policies

·     Range Resources (RRC) Q3 adjusted EPS loss (5c) on revs $510M vs. est. loss 92c); 3Q nat gas production 1.55 million mmcfe/d, -0.6% YoY, 3Q avg oil production 7,134 b/d, -30% YoY and 3Q NGL production in B/D 99,745, -3.5% YoY; cuts FY20 production view to roughly 2.24 Bcfe/d from 2.25 Bcfe

 

Financials

·     LPL Financial Holdings (LPLA) Q3 Non-GAAP EPS of $1.44 beats by $0.21; GAAP EPS of $1.29 beats by $0.18; revenue of $1.46B (+2.8% Y/Y) beats by $30M; total Advisory and Brokerage Assets increased 13% Y/Y to $810B

·     Radian Group (RDN) said it will wind down its traditional appraisal business, which offers residential real estate appraisal services through a panel of independent contractor appraisers, to focus on core mortgage and real estate businesses

·     Western Union (WU) Q3 adjusted EPS 57c on revs $1.3B vs. est. 46c and $1.25B; sees FY20 adjusted EPS $1.80-$1.85 vs. est. $1.78 and sees FY20 revenue growth high-single digit decline

 

Healthcare

·     AstraZeneca Pharmaceuticals (AZN) was awarded a ~$286.93M firm-fixed-price contract for the delivery of 200 million doses of AZD1222 vaccine for COVID- 19.

·     Axovant Gene Therapies (AXGT) shares fell as it delays in manufacturing process that will potentially postpone the start of enrollment in AXO-Lenti-PD trial, and it seems unlikely to enroll patients by the end of calendar year 2021.

·     Atea Pharmaceuticals (AVIR) 12.5M share IPO priced at $24.00

·     SQZ Biotechnologies (SQZ) 4.412M share IPO priced at $16.00

·     NuVasive (NUVA) Q3 net sales increased 1.5% to $295.3M, and 1.2% on a constant currency basis; U.S. Spinal hardware sales witnesses slight increase of 0.8% Y/Y to $161.2M, while U.S Surgical Support sales fell 3.4% to $69.4M; gross margin was down ~300bps to 71.3%

·     PerkinElmer (PKI) announced emergency use authorization to allow sample pooling with its New Coronavirus Nucleic Acid Detection Kit, and help increase the number of individuals who can be tested without increasing resources

·     Quidel (QDEL) Q3 adj EPS $5.78 on revs $476.1M above est. $4.75 and $450.39M; Total sales of COVID-19 products were $375.7M

·     Stryker (SYK) Q3 adjusted EPS $2.14 on revs $3.7B vs. est. $1.41 and $3.41B; does not provide Q4, FY20 sales or earnings guidance; organic net sales increased 3.3% — Reported operating income margin of 23.0% — Adjusted operating income margin expanded 260 bps to 28.0%

 

Industrials & Materials

·     Avis (CAR) 3Q adj EPS $1.13 vs. est. $0.15 on revs $0.53B vs. est. $1.45B; says expect to be adj EBITDA, adj free cash flow positive excluding return of vehicle equity in 4Q

·     Honeywell (HON) 3Q adj EPS $1.56 vs. est. $1.49 on revs $7.8B vs. est. $7.65B, aerospace sales -25% yr/yr vs est -28.9%, qtrly segment mgn 19.9%; guides FY adj EPS $7.00-7.05 vs. est. $6.87, sees FY sales $31.9-32.2B vs. est. $32.1B

·     Hub Group (HUBG) Q3 EPS 74c on revs $924.8M vs. est. 63c and $878.94M; expects capital expenditures for the rest of FY20 to range from $70M-$75M, and primarily consist of investments to support growth in the business, including containers and tractors, as well as investments in technology

·     MasTec (MTZ) Q3 adjusted EPS $1.83 on revs $1.7B vs. est. $1.68 and $1.92B; sees Q4 EPS $1.64-$1.73 on revenue $1.7B-$1.9B vs. est. $1.72 and $2.09B; Q3 18-month backlog as of September 30, 2020 was $7.7 billion, a $179 million increase compared to the same quarter last year.

·     U.S. Steel (X) Q3 adjusted EPS loss ($1.21) on revs $2.34B vs. est. ($1.45) and $2.22B; said Q3 exceeded guidance with dramatically improved results in our Flat-rolled segment, positive EBITDA in U. S. Steel Europe, and cash from operations of $213M; 3Q adjusted Ebitda loss $49M vs. profit $144M YoY; Q3 steel shipments 3,016 tons, estimate 2.81 million

 

Restaurants:

·     Cheesecake Factory (CAKE) Q3 adj EPS loss 33c on sales $517.7M vs. est. loss (42c) and $490M; comparable sales at cheesecake factory restaurants are down approximately 7% in Q3; as of today, about 90% of co’s restaurants are operating with reopened indoor dining rooms with limited capacity

·     Shake Shack (SHAK) 3Q EPS ($0.15) vs. est. ($0.21) on revs $130.4Mm vs. est. $125.1Mm; says expects to reach a total of 18-20 new company-operated stores by end of FY20; expects any ongoing improvement in store-level op margin in 4Q to face pressure

·     Starbucks (SBUX) Q4 adj EPS 51c on sales $6.2B vs. est. 31c and $6.06B; sees 1q adj. eps 50c-55c vs. est. 63c and year revs $28.0b to $29.0b, vs. est. $28.04b; Q4 global comparable sales down 9%; Q4 Americas comparable sales down 9%; Q4 International comparable sales down 10% and Q4 China comparable sales down 3%

 

Technology, Media & Telecom

·     Activision Blizzard (ATVI) Q3 adjusted EPS 88c on revs vs. est. 65c

·     Atlassian (TEAM) shares fall as a weak outlook shoved aside fiscal Q1 beats on the top and bottom lines; forecasts $460-475M in Q2 revenue below consensus of $481.81M

·     Altice USA (ATUS) Q3 EPS (1c) on revs $2.43B below estimate of 24c profit and $2.48B; continues to expect revenue (ex-mobile) and Adjusted EBITDA growth for 2020, and maintains guidance for capex of less than $1.3 billion for the year

·     Five9 (FIVN) 3Q adj EPS $0.27 vs. est. $0.18 on revs $112.1Mm vs. est. $101.1Mm; sees 4Q revs $114.5-115.5Mm vs. est. $104.6Mm, sees 4Q adj EPS $0.22-0.24 vs. est. $0.22; guides FY revs $421.5-422.5Mm vs. est. $400.5Mm

·     Flex (FLEX) Q2 EPS 36c on revs $6.0B vs. est. 27c and $5.55B; sees Q3 EPS 34c-40c on revs $6.0B-$6.4B vs. est. 32c and $6.01B

·     Knowles (KN) Q3 EPS 24c (in-line) on revs $205.8M vs. est. $203.77M; delivered 35% sequential sales growth driven by stronger-than-expected MEMS microphone demand; sees Q4 EPS 27c-33c on revs $210M-$225M vs. est. 29c/$210.94M

·     LivePerson (LPSN) 3Q revs $94.8Mm vs. est. $92.6Mm; guides FY revs $362.5-364.5Mm vs. est. $359.7Mm

·     Motorola Solutions (MSI) 3Q adj EPS $1.95 vs. est. $1.78 on revs $1.9B vs. est. $1.83B, ending backlog $10.7B; guides 4Q revs down 5.5-6% vs. est. -5.7%, sees 4Q adj EPS $2.71-2.76 vs. est. $2.83; guides FY revs down about 6.5% vs. est. -6.8%, sees FY adj EPS $7.52-7.58 vs. est. $7.50

·     Proofpoint (PFPT) 3Q adj EPS $0.59 vs. est. $0.39 on revs $266.7Mm vs. est. $261.4Mm; guides 4Q adj EPS $0.41-0.44 vs. est. $0.39, sees 4Q revs $268-270Mm vs. est. $267.2Mm; FY adj EPS $1.88-1.91 vs. est. $1.68, sees FY revs $1.043-1.045B vs. est. $1.037B

·     Twitter (TWR) Q3 adj EPS $0.19 ($0.04 excluding net benefit from deferred tax asset valuation allowance) vs. est. $0.06; revs $936.2Mm vs. est. $777.2Mm; says improved demand continued throughout 3Q; Monetizable DAU grew 29% to 187M (consensus: 194.9M) with 36M from the U.S. (consensus: 37.6M) and 137M from International (consensus: 158M); costs and expenses increased 13% to $880M

·     WWE Networks (WWE) 3Q revs $221.6Mm vs. est. $222.3Mm, adj EPS $0.56 vs. est. $0.39, qtrly WWE Network avg paid subs 1.6Mm +6%; not reinstating guidance at this time but says anticipates $40-45Mm incremental 4Q expense sequentially

·     Zendesk (ZEN) 3Q adj EPS $0.17 vs. est. $0.11 on revs $261.9Mm vs. est. $253.7Mm; guides 4Q revs $274-279Mm vs. est. $273.6Mm, sees 4Q adj EBIT $16-20Mm vs. est. $14.4Mm; guides FY revs $1.02-1.025B vs. est. $1.01B, sees FY adj EBIT $69-73Mm vs. est. $55.9Mm