Morning Preview: July 18, 2019

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Early Look

Thursday, July 18, 2019

Futures

Up/Down

%

Last

DJ Industrials

-26.00

0.10%

27,205

S&P 500

-1.50

0.06%

2,983

Nasdaq

-13.50

0.17%

7,871

 

 

Stock futures are trending lower (but off their worst levels of the night), on track for a third day of losses following disappointing metrics out of Netflix last night weighing on large cap tech along with continuing worries over trade with China. Japanese markets fell particularly hard on a negative export reading, as the Nikkei Index dropped -422 points or nearly 2% to 21,046, the Shanghai Index dropped -30 points to 2,901 and the Hang Seng Index slipped -131 points to 28,461. In Europe, the German DAX is lower by roughly -100 points to 12,240, while the FTSE 100 is down about 30 points to 7,500. European markets were dragged down on Thursday as trade talks between the U.S. and China ground to a halt over Huawei. Another heavy dose of earnings today and tomorrow likely to move the needle on many names. Stocks dropped for a second straight session on Wednesday, pulling back further from record intra-day highs on Tuesday, led by a decline in transportation stocks on weaker earnings and guidance (CSX, KNX, CVTI) and energy stocks on lower oil. Stock selling accelerated into the close after the WSJ reported progress toward a U.S.-China trade deal has stalled as the Trump administration debates a request to ease restrictions on Huawei Technologies. Large cap tech may we weak today after NFLX shares dropped over 10% last night on weaker Q2 paid membership growth, missing company guidance, though IBM and EBAY shares rallied overnight after results.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -19.62 points, or 0.65%, to 2,984.42

·     The Dow Jones Industrial Average fell -115.78 points, or 0.42%, to 27,219.85

·     The Nasdaq Composite slumped -37.59 points, or 0.46%, to 8,185.21

·     The Russell 2000 Index declined -11.22 points, or 0.72% to 1,550.78

 

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 216K

·     8:30 AM EST      Continuing Claims…est. 1.70M

·     8:30 AM EST      Philly Fed Business Outlook…est. 5.0

·     10:00 AM EST    Leading Index for June…est. 0.1%

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

·     2:15 PM EST       Fed’s Williams speaks on Monetary Policy

 

Earnings Calendar:

·     Earnings Before the Open: ALLY, AUB, BBT, BMI, BX, DHR, DOV, EWBC, GATX, GPC, GTLS, HOMB, HON, ICBK, IIIN, MS, MTB, PBCT, PM, POOL, PPG, SNA, SON, STBA, STI, UNH, UNP

·     Earnings After the Close: AEHR, CHWY, COF, CRWD, ETFC, EXPO, MSFT, OZK, RECN, SCX, WAL

 

 

Macro

Up/Down

Last

WTI Crude

0.33

57.11

Brent

0.56

64.22

Gold

-1.10

1,422.20

EUR/USD

0.0005

1.1229

JPY/USD

-0.19

107.76

10-Year Note

0.008

2.053%

 

 

World News

·     Japan’s exports tumbled for the seventh straight month in June, hit by a sharp drop in shipments of chip-making tools and automobile parts to China. Japan’s exports fell by 6.7% in June compared with a year ago, and was larger than the consensus 5.4% drop

·     British retail spending was surprisingly strong in June, as sales rose 1% in June, for a 12-month growth rate of 3.8%, the U.K. Office for National Statistics reported. That was much stronger than the 2.6% year-over-year gain anticipated by economists

 

Sector News Breakdown

Energy

·     SM Energy (SM) raises its full year production to 129 to 131 mboe/d, from 126 to 131 mboe/d while cut the top end of 2019 capital spending view to $1 billion to $1.05 billion from $1 billion to $1.07 billion

·     Kinder Morgan (KMI) Q2 adjusted EPS 22c/$3.21B vs. est. 24c/$3.59B; backs FY19 adjusted EBITDA view of roughly $7.8B

·     Seadrill Limited (SDRL) has secured a nine well contract with three options, each for two wells, for the West Gemini in West Africa. Total contract value for the firm portion of the contract is expected to be approximately $84 million with commencement expected in early Q4 2019 and running through Q4 2020.

 

Financials

·     Cathay General (CATY) Q2 EPS 90c/$156.1M vs. est. 88c/$154.0M; Q2 net interest margin 3.58% vs. 3.83% YoY;

·     Cohen & Steers (CNS) Q2 EPS 62c/$101.8M vs. est. 63c/$102.17M; Q2 AUM of $62.4B; average AUM of $63.0B

·     Eagle Bancorp (EGBN) Q2 EPS $1.08 with non-interest income $6.36 million, +15% YoY and provision for credit losses $3.6M vs. $1.65M YoY

·     Ellington Financial (EFC) 3.5M share Spot Secondary priced at $17.66

·     Essential Properties Realty Trust (EPRT) 22.86M share Secondary priced at $19.75

·     New York Mortgage (NYMT) 20M share Spot Secondary priced at $6.11

·     RLI (RLI) Q2 EPS 66c vs. est. 59c; 2Q net premiums earned rose 5.6% YoY to $207.5M and 2Q net premiums written up 1.9% YoY to $231.1M

·     SL Green (SLG) Q2 FFO per share $1.82/$313M vs. est. $1.74/$306.3M; Q2 net rental revenue of $216.5M, up 2.4% Y/Y; same-store cash net operating income, including SLG’s share of same-store cash NOI from unconsolidated joint ventures, decreased by 2.7% for the quarter

·     Texas Capital (TCBI) Q2 EPS $1.50 misses the $1.52 est.; said Q2 net interest income was $243.6M vs. $235.6M QoQ and $231.7M YoY

·     Triumph Bancorp (TBK) Q2 EPS 48c (in-line) with net interest income of $63.4M compared to $61.3M for the quarter prior; announces additional $25M to repurchase authorization

·     Umpqua (UMPQ) Q2 EPS 51c/$348.9M vs. est. 38c; Q2 provision for loan losses jumped 45% YoY to $19.4M, while net interest margin dipped to 3.70% from 3.93% YoY; net charge-offs down by one basis point to 0.26% of average loans and leases

 

Healthcare

·     UnitedHealth (UNH) Q2 EPS $3.60/$60.6B vs. est. $3.45/$60.59B; raises FY19 adj. EPS view to $14.70-$14.90 from $14.50-$14.75 (est. $14.70) led by strength in the largest U.S. health insurer’s pharmacy benefits management business and its insurance plans; sales in its main business of selling health insurance plans rose nearly 6% to $48.59B

·     Fulcrum Therapeutics (FULC) 4.5M share IPO priced at $16.00

·     Forty-Seven (FTSV) 9.38M share Secondary priced at $8.00

·     Mirum Pharmaceuticals (MIRM) 5M share IPO priced at $15.00

·     Genmab (GMAB) 28.5M share IPO priced at $17.75 per ADS       

·     Amarin (AMRN) announces $400M American depositary share offering

 

Industrials & Materials

·     Ashland Global (ASH) the latest chemical maker to cut forecasts; guides Q3 EPS 76c-78c, below consensus 86c citing lower-than-anticipated sales in personal care and certain industrial end markets within Specialty Ingredients led to weaker-than-expected results for Ashland; cuts FY19 adjusted EBITDA for Specialty Ingredients to $560M-$570M from $585M-$610M

·     Alcoa (AA) Q2 EPS loss (1c) on Ebitda $455M vs. est. loss (16c) and $430.7M; said global aluminum demand growth for 2019 is estimated to range between 1.25%-2.25%, down from 2%-3% in the previous quarter, driven by lower demand in both China and the world ex-China due to trade tensions and macroeconomic headwind; sees FY global aluminum deficit 1.0 million to 1.4 million metric tons, from prior 1.5 million to 1.9 million

·     Honeywell (HON) Q2 EPS $2.10/$9.24B vs. est. $2.08/$9.35B; organic sales +5% vs est. +6.69% and raises FY EPS $7.95-8.15, had seen $7.90-8.15, est. $8.11

·     United Rentals (URI) shares fell -6%; as Q2 EPS $4.74/$2.29B vs. est. $4.46/$2.27B; Q2 adjusted EBITDA $1.07B, up 18.3% from last year; sees FY revs $9.15-9.55B (was $9.15-9.45B); sees FY adj EBITDA $4.35-4.55B (was $4.35-4.5B); sees FY FCF ex merger & restructuring $1.3-1.5B (was $1.4-1.55B) – watch shares of HEES, WSC

·     Crown Holdings (CCK) Q2 EPS $1.46/$3.035B vs. est. $1.47/$3.03B; guides year EPS $1.50-$1.60 below estimates $1.70 and cuts year EPS view to $5.05-$5.20 from prior $5.20-$5.40 and est. $5.30 on lower adjusted free cash flow view of about $725M-$750M

 

Technology, Media & Telecom

·     Netflix (NFLX) shares fell -11%; Q2 EPS 60c/$4.92B vs. est. 56c/$4.93B; sees Q3 EPS $1.04 on revs $5.25B in-line with $1.04/$5.25B; said Q2 paid membership grew by 2.7M, less than the 5.5M in Q2 a year ago and below the co 5.0M forecast saying miss was across all regions, but slightly more so in regions with price increases; sees growing by 7 Million paid memberships in 3Q

·     IBM Corp. (IBM) Q2 adjusted EPS $3.17/$19.2B vs. est. $3.07/$19.16B; backs FY19 adjusted EPS view of at least $13.90 (est. $13.90) and said remains on track to achieve GAAP diluted earnings per share of at least $12.45

·     eBay (EBAY) shares rose 4%; Q2 adjusted EPS 68c/$2.7B vs. est. 62c/$2.68B; sees Q3 adjusted EPS 62c-65c on revs $2.61B-$2.66B vs. est. 63c/$2.68B; Q2 active buyers by 4% across its platforms, for a total of 182 million global active buyers; the Marketplace platforms delivered $2.2 billion of revenue and $21.5 billion of GMV. Marketplace revenue growth was 1% on an as-reported basis and 3% on a FX-Neutral basis, and GMV was down 5% on an as-reported basis and down 1% on a FX-Neutral basis; raises FY19 adjusted EPS view to $2.70-$2.75 from $2.64-$2.70 and lowers year rev view to $10.75B-$10.83B from $10.83B-$10.93B

·     German software giant SAP (SAP) blamed global trade tensions as its second quarter profits missed expectations, sending shares down over 5%

·     Adtran (ADTN) Q2 adjusted EPS 14c/$156.4M vs. est. 8c/$156.11M

·     Limelight Networks (LLNW) shares fall -20%; Q2 adjusted EPS loss (3c)/$45.9M vs. est. loss (2c)/$46.4M; guides FY19 adjusted EPS 0c well below prior view 10c-20c and cuts FY19 revenue view to $200M-$210M from $215M-$225M (est. $207.47M)

·     8×8 (EGHT) acquires Wavecell, a Singapore-based Communications Platform-as-a-Service (CPaaS) provider for $125M in cash and stock

·     Crown Castle (CCI) Q2 EPS 52c/$1.48B vs. est. 41c/$1.42B; Net income jumped 37% to $246M, on site rental revenues that grew 6% to $1.238B; says remain excited about our ability to continue to generate attractive growth and returns for our shareholders as we remain focused on delivering dividend per share growth of 7% to 8% per year; raises 2019 AFFO to $2.49B from $2.41B-$2.46B and Ebitda to $3.42B from $3.34B-$3.39B

·     Plexus (PLXS) Q3 EPS 81c/$799.64M vs. est. 81c/$783.3M; sees Q4 EPS 81c-91c on revs $760M-$800M below est. 96c/$813.22M

·     Taiwan Semiconductor Manufacturing (TSM) in line EPS for Q2 on better revs of $7.75B while sees Q3 revenue $9.1B-$9.2B, above estimates and gross profit margin is expected to be between 46% and 48%

·     Vodafone (VOD) secured antitrust approval from the European Union for its $22 billion bid to buy Liberty Global’s (LBTYA) cable networks in Germany and Central Europe after offering concessions in May – Reuters

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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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