Morning Preview: November 05, 2019

Auto PostDaily Market Report

Early Look

Tuesday, November 5, 2019

Futures

Up/Down

%

Last

DJ Industrials

61.00

0.22%

27,441

S&P 500

5.75

0.19%

3,081

Nasdaq

21.00

0.26%

8,236

 

 

U.S. stock futures are adding to yesterday record highs, led by more positive trade sentiment after the Financial Times reported that U.S. officials are considering removing tariffs on $112 billion worth of Chinese goods as a concession to seal a “phase one” trade deal. The 15% tariffs on items such as clothing, appliances and flat-screen monitors were put into effect on Sept. 1. The FT said the U.S. would expect something in return, such as tougher intellectual-property protections for U.S. companies. The latest trade headlines also had a positive effect on Asian markets as The Nikkei Index gained 401 points (1.76%) to settle at 23,251, the Shanghai Index gained 16 points to close at 2,991 and the Hang Seng Index gained 136 points to 27,683. In Europe, the German DAX is up a few points at 13,140 (after touching its best levels in 17-months yesterday) while the FTSE 100 is up around 15 points to 7,385. The Wall Street Journal reported similar news Monday night, saying that removing tariffs would likely be a part of any initial trade deal and that both countries have agreed in principle to the deal. The latest headlines are coupled with a very busy night and morning of quarterly earnings and fairly busy morning of economic data in the U.S. with trade balance data, manufacturing and services data for October. Defensive assets under pressure this morning as gold slips along with Treasury prices as yields rise.

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:30 AM EST      Trade Balance for September…est. (-$52.4B)

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     9:45 AM EST      Markit US Services PMI, Oct-F…est. 51.0

·     9:45 AM EST      Markit US Composite PMI, Oct-F

·     10:00 AM EST    ISM Non-Manufacturing Index for October…est. 53.5

·     10:00 AM EST    JOLTs Job Openings for September…est.7063

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AGN, ARNC, BDX, BMCH, CARA, CHFS, CHH, CHK, CNK, CTLT, EMR, EXPD, FIS, FTDR, GEO, GSKY, HSIC, ICPT, IPI, JLL, KAR, LPX, MNK, MYL, NEM, OCN, PBI, PINC, PPL, PTON, REGN, RGNX, RPD, RRR, SXC, USFD, VIRT, WLK, ZBH

·     Earnings After the Close: ACHC, AINV, AIZ, ALRM, ANDE, BEAT, CARG, CBAY, CENX, CNO, COHR, CPS, CSOD, CZR, DVA, DVN, EVH, FANG, FATE, FTR, HST, HUBS, INGN, INN, LC, LGND, MBI, MCHP, MTCH, NUS, OAS, PAA, PE, PKD, TWO, VOYA, WLL, XNCR

 

Other Key Events:

·     Gabelli Annual Auto Symposium, 11/4-11/5, in New York

·     JPMorgan Global Oil & Gas CEO Conference, 11/4-11/5, in London

·     Maxim California Restaurant Tour, 11/4-11/5, in California

·     RW Baird Global Industrial Conference, 11/5-11/7, in Chicago

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 11.36 points, or 0.37%, to 3,078.27

·     The Dow Jones Industrial Average rose 114.75 points, or 0.42%, to 27,462.11

·     The Nasdaq Composite surged 46.80 points, or 0.56%, to 8,433.20

·     The Russell 2000 Index advanced 8.07 points, or 0.51% to 1,597.40

 

 

Macro

Up/Down

Last

WTI Crude

0.43

56.97

Brent

0.61

62.74

Gold

-4.30

1,506.80

EUR/USD

-0.0007

1.1121

JPY/USD

0.24

108.82

10-Year Note

+0.037

1.814%

 

 

World News

·     Financial Times reported that some White House officials are discussing whether to cancel certain existing China trade tariffs as a concession to help facilitate a trade deal as soon as this month. The report states that the Trump administration may roll back the tariffs on $112B in China imports launched on September 1st at a rate of 15%

·     The Australian dollar held steady after the Reserve Bank of Australia (RBA) left monetary policy unchanged, as expected, and said the main uncertainty continues to be the outlook for consumer spending.

 

Sector News Breakdown

Consumer

·     Uber Technologies (UBER); shares down 6%; Q3 EPS loss (68c)/$16.47B gross bookings vs. est. loss (63c)/$16.7B; said ride sharing rev bookings $12.55B (est. $12.51B), Uber eats bookings $3.66B vs. est. $3.89B and Q3 adjusted Ebitda loss $585M vs. est. loss $805M; guides year Ebitda loss to $2.8B-%$2.9B better than the $3B-$3.2B loss prior view

·     Chegg (CHGG) 3Q adj EPS $0.18 vs est $0.08 on revs $94.2Mm vs est $89.2Mm; guides FY adj EBITDA $121-123Mm vs prior $117-120Mm; raises FY19 revenue view to $407M-$409M from $398M-$402M (est. $402M)

·     Hertz (HTZ) Q3 adjusted EPS $1.60/$2.8B vs. est. $1.47/$2.84B; U.S. RAC Transaction Days up 5%, Total RPD up 1%; U.S. RAC Depreciation Per Unit Per Month decreased 5%; Adjusted Corporate EBITDA improved 12%

·     Aaron’s Rental (AAN) 3Q adj EPS $0.73 vs est $0.82 on revs $963.8Mm; guides FY adj EPS $3.75-3.85 vs prior $3.85-4.00, est $3.94; Narrows FY19 revenue view to $3.905B-$4.01B from $3.905B-$4.065B (est. $3.98B)

·     Marriott (MAR) Q3 adj EPS $1.47 vs est $1.49 on revs $5.28B vs est $5.12B; guides FY EPS $5.87-5.90; guides 4Q NA REVPAR ex-fx about +0-1%, sees 4Q worldwide REVPAR ex-fx about +1%; guides FY NA REVPAR ex-fx about +1% vs prior +1-2%, sees FY worldwide REVPAR ex-fx about +1% vs prior +1-2%; sees FY EPS $5.87-5.90 vs prior $5.97-6.19, est $6.01

·     International Flavors (IFF) Q3 EPS $1.53/$1.27B vs. est. $1.52/$1.29B; still sees FY adjusted EPS excluding amortization $6.15-$6.35 vs. est. $6.15

·     Ethan Allen (ETH) Q1 EPS 35c/$173.9M vs. est. 34c/$175.13M

·     Hasbro (HAS) announces offering of $875.0M of common stock

·     Shake Shak (SHAK) 3Q adj EPS $0.26 vs est $0.21 on revs $157.8Mm vs est $157.9Mm, comps +2% vs est +2.9%; guides FY comps about +1.5% vs prior about +2%, sees FY revs $592-597Mm vs prior $585-590Mm; reports same-shack sales increased 2.0% in Q3 to fall short of the consensus estimate for a gain of 2.9%. Traffic was up 1.2% during the quarter; restaurant-level operating margin fell to 23.1% of sales vs. 25.8% a year ago and 24.1% consensus

 

Energy, Industrials & Materials

·     Cabot (CBT) miss and guide below ests – 4Q adj EPS $1.05 vs est $1.11 on revs $827Mm vs est $849.4Mm; guides 2020 adj EPS $3.60-4.10 vs est $4.31

·     Callon Petroleum (CPE) Q3 adjusted EPS 19c/$155.38M vs. est. 18c/$151.93M; Sees FY production 39.2 to 39.6 mboe/d, up from prior 38 to 39.5 and sees FY lease operating expense per boe $5.75 to $6.25, from prior $5.50 to $6.50; 3Q avg production 37,837 boe/d, +8.4% YoY

·     Chemours (CC) Q3 adjusted EPS 59c/$1.39B vs. est. 58c/$1.37B

·     McDermott (MDR) Q3 revs down-8.3% YoY to $2.1B vs. est. $2.46B as 3Q adjusted loss per share ($1.80) with Q3 adjusted Ebitda loss $71 million

·     Mistras Group (MG) Q3 EPS 11c/$192.2M vs. est. 22c/$194.8Ml cuts year rev outlook to $740M-$750M from prior $765M-$785M and Ebitda view to $70M-$75M from $90M-$93M

·     Mosaic (MOS) Q3 adjusted EPS 8c/$2.75B vs. est. 23c/$2.67B; cuts FY19 adj. EPS view to 50c-60c from $1.10-$1.50 (est. 98c) and also cuts FY19 adjusted EBITDA view to $1.4B-$1.5B from $1.8B-$2.0B which reflects the impact of historically low potash sales volumes due to delays in Canpotex shipments to India and China, and expectations that phosphates margins and pricing remain consistent with September 2019 levels

·     Occidental Petroleum (OXY) Q3 EPS 11c vs. est. 38c; 3Q results include a $285 million write-off of unproved domestic leases in areas where Occidental no longer plans to pursue exploration activities and a $40 million impairment charge; said Q3 total average daily production volume was 1,155,000 barrels of oil equivalent, which included legacy Anadarko continuing operations of 377,000 BOE and discontinued Africa operations of 41,000 BOE

·     Pioneer Natural (PXD) Q3 adjusted EPS $1.99 vs. est. $1.93; is lowering the top end of its 2019 Permian drilling, completions and facilities capital budget range by an additional $150 million, or approximately 5%, to a new range of $2.80 billion to $2.85 billion – reduction in the Company’s capital budget is primarily attributable to improvements in drilling and completions efficiencies, combined with reducing facilities spending ahead of schedule

 

Financials

·     Hartford Financial (HIG) Q3 core EPS $1.50/$5.35B vs. est. $1.24/$5.24B; reports book value per diluted share was $43.13, up 23% from Dec. 31, 2018; book value per diluted share excluding accumulated other comprehensive income rose 8% to $42.55

·     Prudential Financial (PRU) Q3 operating EPS $3.22 vs. est. $3.06; said Q3 assets under management $1.52 trillion, +7.7% YoY, 3Q adjusted book value per share $99.67 vs. $95.20 YoY

 

Healthcare

·     Endo Pharma (ENDP) 3Q adj EPS cont ops $0.60 vs est $0.53 on revs $729Mm vs est $709.2Mm; guides FY revs $2.86-2.89B vs prior $2.76-2.96B, sees FY adj EPS cont ops $2.10-2.25 vs prior $2.00-2.25; implements CEO succession plan

·     Luminex (LMNX) Q3 EPS loss (12c)/$78.7M vs. est. loss (4c)/$81.76M; said although total revenue was slightly lower than expected due to order timing in Flow Cytometry in the third quarter, is pleased with the significant progress made to return the company to sustained growth and profitability; guides year revs $334M-$337M below prior $337M-$343M

·     Myriad Genetics (MYGN) plunges as 1Q adj EPS $0.08 vs est $0.33 on revs $186.3Mm vs est $202.3Mm; cut its adjusted earnings for year to $1.00-$1.10 from prior view $1.80-$1.90 (est. $1.83) on revs $800M-$810M rom $865M-$875M; guides Q2 EPS 30c-32c on revs $210M-$212M below the 47c/$220.6M view

·     Neurocrine (NBIX) 3Q EPS $0.56 vs est $0.66 on revs $222.1Mm vs est $212Mm; 3Q net Ingrezza product sales $198.1Mm

·     Steris (STE) 2Q adj EPS $1.32 vs est $1.26 on revs $736.8Mm vs est $718Mm; guides FY adj EPS $5.50-5.65 vs prior $5.38-5.53, est $5.58; sees FY revs +7.5-8.5%

·     Tandem Diabetes (TNDM) Q3 EPS loss (9c) on sales $94.7M vs. est. $89.1M; raises low end of year revs to $358M-$365M from $350M-$365M

·     Tenet Healthcare (THC) 3Q adj EPS cont ops $0.58 vs est $0.35; guides FY adj EPS cont ops $2.25-2.91 vs prior $2.08-2.59 sending shares higher; Raises FY19 revenue view to $18.35B-$18.55B from $18B-$18.4B (est. $18.26B)

·     Becton Dickinson (BDX) Q4 adj. EPS $3.31/$4.58B vs. est. $3.30/$4.56B; sees FY20 adj. EPS $12.50-$12.65 vs. est. $12.94 and sees FY20 revenue up 4%-4.5% as reported, or 5%-5.5% on a currency-neutral basis

·     Mallinckrodt (MNK) Q3 EPS $2,07/$743.7M vs. est. $1.97/$770.81M; raises FY19 adj. EPS view to $8.50-$8.70 from $8.40-$8.70

·     Regeneron (REGN) Q3 EPS $6.67/$2.05B vs. est. $6.41/$1.99B; 3Q Praluent net product sales down 13% YoY to $69.7M, Q3 Eylea U.S. net product sales up 16% YoY to $1.19B and 3Q Dupixent net product sales at $633.1 M; says to buy back up to $1B in shares

·     Zimmer Biomet (ZBH) Q3 EPS $1.77/$1.89B vs. est. $1.75/$1.87B; backs FY19 adj. EPS view $7.75-$7.90 (est. $7.82) and backs FY19 revenue growth view flat to up 0.5%

 

Technology, Media & Telecom

·     Diodes (DIOD) Q3 EPS 81c/$323.7M vs. est. 77c/$324.74M; Q3 EBITDA was a record $78.3M, or 24.2% of revenue, compared to $72.0M, or 22.4% of revenue, in the third quarter 2018 and $77.1M, or 23.9% of revenue, in the second quarter 2019; sees Q4 revs $300M plus/minus $308.7M

·     EverQuote (EVER) Q3 EPS 1c/$67M vs. est. loss (8c)/$58.3M; sees Q4 revenue $67M-$69M vs. est. $51.65M and sees FY19 revenue $242M-$244M, above consensus $217.86M

·     Groupon (GRPN) 3Q adj EPS $0.01 vs est $0.029 on revs $495.6Mm vs est $523.7Mm; still sees FY adj EBITDA $270Mm vs est $267.9Mm;

·     Rambus (RMBS) drops 3.4% after the Q3 report misses revenue estimates with a 4% Y/Y drop; Q3 licensing billings totaled $63.1M; R&D expenses totaled $41.5M in the quarter; sees Q4 outlook licensing billings of $60-66M with royalty revenue of $15-21M, product revenue of $19-25M, and $10-16M in contract and other revenue

·     RealReal (REAL) Q3 EPS loss (27c)/$80.49M vs. est. loss (30c)/$75.92M; Q3 gross merchandise volume, or GMV, increased $81.8M to $252.8M, up 48% year over year; said Q3 was a very strong quarter and speaks to the health and vibrancy of our marketplace

·     Ring Central (RNG) Q3 adjusted EPS 22c/$233M vs. est. 19c/$221.4M; sees year revs $888M-$890M from prior $874M-$877M and raises EPS to 81c up from 77c-70c view

·     SAP SE (SAP) said late that its supervisory board has authorized an extra 1.5 billion-euro ($1.7 billion) capital return to shareholders in 2020, citing the German software company’s strong financial performance and balance sheet.

·     Workday (WDAY) announces a definitive agreement to acquire the cloud-based platform for strategic sourcing and supplier engagement; will pay a total consideration of about $540M in cash

_________________________________________________________________

Content is provided by Hammerstone Inc., which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the Hammerstone content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.

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