Morning Preview: August 09, 2018

Terrie AmengualDaily Market Insights

Early Look

Thursday, August 9, 2018

U.S. futures are tracking higher, with corporate earnings, the ongoing trade spat between the U.S. and China and a round of inflation data in the U.S. (July PPI) highlight today’s action. Wall Street ended Wednesday mixed as a drop in energy stocks, following a 3% decline in WTI crude prices after bearish inventory data and the re-emergence of trade war fears, saw the S&P 500 end the day roughly flat while the Nasdaq Composite clocked its longest winning streak since March (7-days). Declines in consumer staples, energy and industrials offset modest gains in the technology, financials and health-care sectors. For the week, the Dow is set to gain 0.5%, the S&P 500 is on pace to advance by 2.6% and the Nasdaq is on track for a weekly return of 1.7%, as of Wednesday’s close. In corporate news, two merger deals fell apart last night as Tribune (TRCO) terminated its merger with Sinclair (SBGI) in the broadcasting space, while Albertson and Rite-Aid (RAD) ended their merger deal after investor pushback.

In Asian markets, The Nikkei Index slipped -45 points to settle at 22,598, the Shanghai Index jumped 50 points to 2,794 and the Hang Seng Index gained 248 points to close at 28,607. In Europe, the German DAX is up around 40 points at 12,670, while the FTSE 100 is down around -40 points at 7,730. The Turkish lira dropped, leaving the currency at a new historic low after US sanctions. The Russian rouble tumbled to a fresh low as well, after the Trump administration approved fresh sanctions on the country late Wednesday related to the Skripal nerve-agent poisoning case.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -0.75 points, or 0.03%, to 2,857.70

· The Dow Jones Industrial Average fell -45.16 points, or 0.18%, to 25,583.75

· The Nasdaq Composite gained 4.66 points, or 0.18%, to 7,888.33

· The Russell 2000 Index slipped -1.42 points, or 0.08% to 1,686.88

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 220K

· 8:30 AM EST Continuing Claims…est. 1.73M

· 8:30 AM EST Producer Price Index (PPI) MoM for July…est. 0.2%

· 8:30 AM EST PPI Ex: Food & Energy (core) MoM for July…est. 0.2%

· 8:30 AM EST PPI Ex: Food & Energy (core) YoY for July…est. 2.8%

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 58.6

· 10:00 AM EST Wholesale Inventories MoM for June-F…est. 0.0%

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

Earnings Calendar:

· Earnings Before the Open: GCI, LNG, NCLH, PRGO, PRTY, VIAB, WIN, WP

· Earnings After the Close: ACXM, AL, BKNG, DBX, ECOM, FSCT, LGF.B, MCHP, MIME, OLED, PCTY, SCOR, SNCR, SYNA, TRNC, TRUE, TTD

Other Key Events:

· Jefferies 2018 Global Industrials Conference, 8/7-8/9 in New York

· Canaccord 38th Annual Growth Conference, 8/8-8/9, in Boston

· JPMorgan Auto Conference, 8/8-8/9, in New York

Sector News Breakdown

Consumer

· Albertsons has pulled the plug on its multibillion-dollar takeover of Rite Aid (RAD) after executives failed to persuade investors that the tie-up was essential to head off competition. Last month, Institutional Shareholder Services Inc (ISS) had said that Rite Aid investors should vote down its $24 billion merger https://reut.rs/2KJY5Lg

· Costco (COST) reports July total company comparable sales up 8.3% vs. est. 7.4% and the company reported net sales of $10.59B for the retail month of July, the four weeks ended August 5, an increase of 10.1% from $9.62B last year

· e.l.f. Beauty (ELF) Q2 EPS 13c/$59.1M vs. est. 6c/$59.19M; cuts FY18 adjusted EPS view to 56c-61c from 59c-61c and cuts FY18 revenue growth view to up low single digits from 6%-8%

· Flowers Foods (FLO) Q2 EPS 25c/$941.3M vs. est. 27c/$934.34M; lowers FY18 adj EPS $1.00-$1.07 from $1.04-$1.16 (est. $1.07)

· Jack in the Box (JACK) Q3 EPS $1.00/$187.98M vs. est. 88c/$184.29M; cuts FY18 system SSS growth view to 0%-0.5% from 0%-1% and backs FY18 CapEx view of roughly $30M-$35M and FY18 adjusted EBITDA view of $260M-$270M

· Monster Beverage (MNST) Q2 EPS 48c/$1.02B vs. est. 47c/$1.02B; announces new $500M share repurchase program

· Mazda, Suzuki and Yamaha Motor joined a growing list of Japanese manufacturers admitting to improper testing of vehicles for fuel economy and emissions

· American Public Education (APEI) Q2 EPS 39c/$72.8M vs. est. 33c/$73.14M; net course registrations at APUS declined by less than 1% year-over-year in Q2. Net course registrations by returning students decreased by less than 1% year-over-year; sees Q3 EPS 28c-33c vs. est. 38c

· Darling Ingredients (DAR) Q2 EPS 11c/$846.6M vs. est. 11c/$869.55M

· Grand Canyon (LOPE) Q2 EPS 95c/$236.8M vs. est. 85c/$203.73M; end-of-period enrollment increased 9.6% between June 30, 2018 and June 30, 2017, as online enrollment increased 10.1% and ground enrollment increased 3.9% over the prior year; raises year EPS and sales view

· Zumiez (ZUMZ) July comp sales up 9.1% and July net sales of $83M; raises Q2 EPS to 13c-14c, from prior 4c-9c (est. 7c)

· PlayAGS (AGS) 5.5M share Secondary priced at $29.25

Energy

· Diamondback Energy (FANG) Q2 EPS $1.59/$526.27M vs. est. $1.63/$479.13M; Q2 production of 112.6 Mboe/d, up 10% over Q1 2018 and 46% year over year; increasing its full year 2018 production guidance to a range of 115.0 Mboe/d to 119.0 Mboe/d, up 4% from the midpoint of the prior range; entered into a definitive purchase agreement to acquire all leasehold interests and related assets of Ajax Resources for $900M in cash and 2.58M shares of Diamondback common stock

· Occidental Petroleum (OXY) Q2 EPS $1.10 vs. est. $1.21; exceeded high end of Permian Resources production guidance at 201,000 BOE per day, a 46% boost year-over-year; selling non-core U.S. Pipelines business for $2.6B

· Murphy Oil (MUR) Q2 EPS 36c/$618.19M vs. est. 35c/$620.52M; raises FY18 production view 1,000 BOE/d to 168,500-170,500 BOE/d and boosts full year capital expenditure guidance by 6% from $1.11B to $1.18B

· Apache Corporation (APA) and Kayne Anderson Acquisition Corp. (KAAC) have announced an agreement pursuant to which Apache will contribute its midstream assets at Alpine High to Altus Midstream, a partnership jointly owned by Apache and KAAC

· Energy Transfer Equity (ETE) Q2 EPS 31c/$14.12B vs. est. 46c/$12.72B

· Energy Transfer Partners (ETP) Q2 revenue $9.41B vs. est. $8.92B

· Ring Energy (REI) Q2 EPS 9c/$29.92M vs. est. 12c/$29.48M; for the three months ended June 30, 2018, oil sales volume increased to 469,446 barrels, compared to 306,402 barrels for the same period in 2017, a 53.2% increase

· Viper Energy (VNOM) Q2 EPS $1.35 vs. est. 40c; reports Q2 production of 16,323 boe/d, up 16% over Q1 2018 and 56% year over year; raising its full year 2018 production guidance to 16,500 to 17,000 boe/d, up 5% from previous full year 2018 guidance

· Warrior Met Coal (HCC) files to sell 2.2M shares of common stock for holders

Financials

· Dun & Bradstreet (DNB) has agreed to a $5.4 billion buyout by an investor group led by CC Capital, Cannae and Thomas H. Lee-affiliated funds, the Wall Street Journal reported. DNB holders will receive $145 in cash for each share https://on.mktw.net/2KEMXzp

· Cohen & Steers (CNS) announces preliminary AUM $60.5B as of July 31, an increase of $320M from June 30, 2018

· Green Dot (GDOT) Q2 EPS 74c/$258.3M vs. est. 63c/$250.74M; raises FY18 EPS view to $3.03-$3.08 from $2.93-$3.30 (est. $3.01) and raises FY18 revenue view to $1.02B-$1.03B from $1.00B-$1.01B (est. $1.02B); guides Q3 EPS 41c/$222M vs. est. 52c/$220.7M

· MBIA (MBI) Q2 adjusted EPS loss (58c)/$12M vs. est. loss (34c)/$38.3M; 2Q adjusted book value per share $27.24; 2Q book value per share $12.16

· Amalgamated Bank (AMAL) 6.7M share IPO priced at $15.50

· Kilroy Realty (KRC) 5M share Spot Secondary priced at $72.10

Healthcare

· Acadia (ACAD) Q2 EPS loss (51c)/$57.1M vs. est. loss (45c)/$58.63M; lowers FY18 NUPLAZID net sales guidance to $210M-$225M from $255M-$270M

· Celldex (CLDX) Q2 EPS loss (11c)/$2.76M vs. est. loss (14c)/$2.3M; said exploring the potential of combining CDX-1140 with our dendritic cell mobilizer, CDX-301, and plan to begin enrolling those cohorts in September

· Endo (ENDP) files automatic mixed securities shelf

· La Jolla (LJPC) Q2 EPS loss ($2.02) vs. est. ($1.95); for the three and six months ended June 30, 2018, La Jolla recognized GIAPREZA net product sales of $1.6M and $2.4M, respectively.

· Natera (NTRA) Q2 EPS loss (55c)/$63.1M vs. est. loss (55c)/$61.24M; sees FY18 revenue $250M-$275M vs. est. $258.7M

· Reata Pharmaceuticals (RETA) Q2 EPS loss ($1.08) vs. est. loss (73c); said incurred operating expenses of $34.2 million for the quarter ended June 30, 2018, with research and development accounting for $23.4 million

· Regenxbio (RGNX) files to sell $175M in common stock

· Spring Bank Pharmaceuticals (SBPH) 3M share Spot Secondary priced at $12.50

· Sangamo Therapeutics (SGMO) announced ‘positive’ preliminary data from the Phase 1/2 clinical trial evaluating SB-525, a cDNA gene therapy candidate for Hemophilia A.

· Sarepta Therapeutics (SRPT) announced that it has made a strategic investment and entered into a license and option agreement with Lacerta Therapeutics, a gene therapy company; Q2 EPS (71c)/$73.5M vs. est. loss (89c)/$71.59M

· Wave Life Sciences’ (WVE) treatment of Duchenne muscular dystrophy treatment was granted FDA orphan status

· Wright Medical (WMGI) Q2 EPS (3c)/$205.4M vs. est. loss (6c)/$197.096M; sees 2018 EPS (14c)-(21c) on revs $808M-$820M from $800M-$812M vs. est. loss (14c)/$811.32M

Industrials & Materials

· Freeport McMoRan (FCX) files automatic mixed securities shelf

· GrafTech (EAF) 23M share Secondary priced at $20.00

· Flowserve (FLS) Q2 EPS 41c/$973.1M vs. est. 33c/$923.89M; backs FY18 EPS view $1.50-$1.70 (est. $1.61)

· UAL’s July 2018 consolidated traffic (revenue passenger miles) increased 6.9 percent and consolidated capacity (available seat miles) increased 4.0 percent versus July 2017. UAL’s July 2018 consolidated load factor increased 2.4 points compared to July 2017

· ZTO Express (ZTO) Q2 revs $634.4M vs. est. $605.1M; 2Q adjusted Ebitda $229.7M vs. Bloomberg estimate $192.6M

Media & Telecom

· 21st Century Fox (FOXA) Q4 adjusted EPS 57c/$7.94B vs. est. 54c/$7.56B; 4Q revenue $7.94B, Q4 Cable Network Programming revenue $4.93B and Q4 TV revenue $1.14B

· CenturyLink (CTL) Q2 EPS 26c/$5.9B vs. est. 25c/$5.92B; raises FY18 adjusted EBITDA view to $9B-$9.15B from $8.75B-$8.95B and raises FY18 free cash flow view to $3.60B-$3.8B from $3.15B-$3.35B

· IAC Inc. (IAC) Q2 revs $1.06B vs. est. $1.02B; Q2 adjusted EBITDA $265.0M vs. $144.5M last year; 2Q operating income $168.4M, 123% y/y growth from $75.6M

· Tribune Media (TRCO) terminates merger pact with Sinclair Broadcasting (SBGI)

Technology:

· Carvana (CVNA) reported 2Q revenue of $475.3M vs. est. $424.2M and raised the revenue and unit sales guidance for the year; now sees year revenue of $1.85B-$1.95B vs. prior view of $1.75B-$1.85B and now sees year retail unit sales of 91,500-95,500, vs prior 90,000-94,000

· Roku (ROKU) Q2 EPS 0c/$156.8M vs. est. loss (15c)/$141.48M; Platform revenue up 96% year-over-year to $90.3M and reports active accounts up 46% year-over-year to 22M at quarter end and average revenue per user up 48% to $16.60; sees Q3 revs $164M-$172M vs. est. $165M; sees 2018 revenue $710M-$730M vs. est. $697.93M

· Angi HomeServices (ANGI) Q2 EPS 5c/$294.8M vs. est. 1c/$294.1M; 2Q marketplace revenue $204.7M, 31% growth y/y from $155.8M and 2Q advertising and other revenue $72.8M, 647% growth y/y/ from $9.7M

· Aspen Technology (AZPN) Q4 EPS 59c/$125.96M vs. est. 56c/$125.66M; 4Q subscription and software revenue $119.5M

· Avnet (AVT) Q4 EPS 99c/$5.06B vs. est. 98c/$4.85B; sees Q1 adjusted EPS 95c-$1.05 on revs $4.8B-$5.2B vs. est. 97c/$4.88B

· Cision (CISN) cuts FY18 adjusted EPS view to 83c-85c from 84c-86c vs. est. 86c and narrows FY18 revenue view to $722M-$730M from $722M-$732M

· MercadoLibre (MELI) Q2 EPS loss (25c)/$335.4M vs. est. loss (10c)/$346.37M

· Nuance (NUAN) Q3 EPS 27c/$502.9M vs. est. 27c/$495.9M; said non-GAAP revenue above the high end of our guidance; raises FY18 EPS view to $1.11-$1.15 from $1.09-$1.15 and backs year rev growth

· SailPoint (SAIL) Q2 adjusted EPS 3c/$54.6M vs. est. loss (2c)/$49.98M; sees Q3 revenue $54.5M-$55.5M vs. est. $53.17M; raises FY18 adjusted EPS view to 12c-14c from 7c-9c

· Stamps.com (STMP) said: “The USPS could decide to amend, renegotiate, discontinue or terminate one or more of our financial compensation arrangements that exist now or in the future

· Yelp (YELP) Q2 EPS 12c/$235M vs. est. 1c/$232.8M; sees Q3 revenue $242M-$246M vs. est. $247.25M; sees Q3 adjusted EBITDA $49M-$52M; raises FY18 revenue view to $952M-$967M from $943M-$967M

 

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Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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