Mid-Morning Look: November 06, 2019

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Mid-Morning Look

Wednesday, November 06, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-4.77

0.02%

27,481

S&P 500

-0.44

0.01%

3,074

Nasdaq

-28.88

0.35%

8,405

Russell 2000

-7.20

0.45%

1,592

 

 

U.S. equities edge lower at the open, as investors pause following the quick run-up to record highs for major averages (Dow, S&P 500, Nasdaq Comp and Dow Transports) following a three-day rally. There were a ton of earnings results and guidance for Wall Street to sift through this morning, with an early pullback in technology given the recent surge in a handful of sectors (semiconductors pullback from record highs), while defensive sectors receive a small bounce. Economic data disappoints as nonfarm productivity negative for the month, the lowest reading since December of 2015 (which follows a recent round of better results in jobs and manufacturing). Oil prices slip from highs after a bearish weekly inventory report, healthcare stocks active given earnings and abstracts/new data for a handful of names. U.S. stocks closed mixed on Tuesday, with the Dow hitting a new record high, as investors digested a set of upbeat data and the market was buoyed by continued hopes for improving U.S.-China trade ties.  

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar slips after a strong three days of gains (post good economic data the last few sessions, though today nonfarm data was notably weaker); oil prices slide off the highs following a bearish EIA weekly inventory report; gold prices a small bounce after dropping yesterday on the dollar spike; Treasury prices partially recover after the 10-year yield hits highest levels in over a month yesterday – back down to 1.83% today.

 

Economic Data

·     Nonfarm productivity for Q3-P reported at an unexpected decline of down (-0.3%), its first negative reading since December 2015 and vs. est at 0.9% (prior month upwardly revised to 2.5% from 2.3%) and unit labor costs surge 3.6%, well above the estimate of up 2.2%

 

 

Macro

Up/Down

Last

 

WTI Crude

0.11

57.34

Brent

-0.16

62.80

Gold

5.10

1,488.80

EUR/USD

0.0003

1.1077

JPY/USD

-0.15

109.00

10-Year Note

-0.024

1.833%

 

 

Sector Movers Today

·     Restaurants; WEN posted Q3 beat and FY forecast raise as revs and earnings rose from year-ago quarter as well, helped by strong performance in North America/revises adjusted EPS forecast range for 2019 to between ~1.5% fall and ~1.5% rise, from ~3.5% to ~6.5% fall; BLMN reported in-line EPS and revs while also announces that its exploring and evaluating strategic alternatives that have the potential to maximize value for shareholders, including looking at a possible sale; RRGB slides after mixed results (EPS miss, revs beat) as lowers year outlook; PZZA shares jump following earnings as system-wide North America comparable sales increased 1.0% in Q3 vs. -0.9% consensus and better int’l comps as well

·     Housing & Building Products; a deal in the housing sector as TMHC agreed to acquire smaller homebuilder WLH in a deal valued at $2.4B in cash/stock, offering $21.45 per share (including debt) – deal for $2.50 per share in cash and 0.8 shares of TMHC stock https://bit.ly/36DII37 ; LOW was upgraded to outperform at Credit Suisse and raise tgt to $129 from $114 as believe that LOW offers a compelling risk/reward; in building products, VMC pares early losses despite missing Q3 earnings expectations while revenues rose 14% Y/Y to $1.42B/Q3 Aggregates segment sales gained 15% Y/Y to $1.13B/reaffirms guidance for full-year earnings; flooring co LL bounces off lows despite EPS miss (8c vs. est. 23c) on light sales ($264M vs. $276M est.) and lowers 2019 total revenue growth percentage of flat to slightly positive compared with prior est of low single digits/sees year comp sales of negative 2% to flat from earlier est. of about flat

·     Pharma movers; SUPN shares fall as lowers FY19 net product sales to $390M-$395M from $400M-$410M and sees FY19 op earnings in range of $150M-$155M, vs. prior range of $150M-$160M/said SPN-810, its treatment for impulsive aggression in ADHD patients aged 6-11, failed a trial; PRGO raises lower end of 2019 adj. EPS forecast to $3.85 from $3.75, maintains upper end at $4.05 as Q3 sales of $1.2B was in-line on better EPS; MNK said in a regulatory filing that in August 2019, the company received a subpoena from the SEC for documents related to the company’s disclosure of its dispute concerning the base date average manufacturer price under the Medicaid Drug Rebate Program for Mallinckrodt’s Acthar Gel; ELAN reported 3Q results in-line operationally but core revenue guidance was lowered; GWPH rolls to lows after earnings as Piper noted Epidiolex 3Q sales of $86.1M was relatively in-line w/ expectations has some investors concerned about future growth prospects; ANIP slides on lower 2019 revenue outlook of $209M-$212M vs. est. $222.3M)

·     E&P sector; FANG shares drop as 3Q oil volumes missed already low expectations, combined with a downward revision to FY19 oil volumes, and initial 2020 oil guidance that is well below Street expectations on relatively in-line; WLL shares dropped initially after weak gas and NGL pricing realizations hurt 3Q results, posting Q3 EPS loss of (38c) vs. est. loss (12c); PE Q3 EPS was 1.9% above expectations, but 4Q19 oil production guidance was 2.2% below consensus. 3Q19 production was 3.3% above expectations

·     Media & Telecom movers; ATUS falls as lowers year rev outlook to up 2.5% from prior view up 3%-3.5%, while fell short of Street expectations with its Q3 earnings, with revenue growth dragged by a slowdown in news and advertising and telephony; MTCH shares slump as 3Q revenue/EBITDA beat slightly, but shares fell as co guided 4Q below Street ests (revs of $550M vs. Street’s $559M)/Jefferies said the expected step-down in Tinder net adds (437k to 236k) is the likely driver of the stock weakness; CTL was downgraded to sell at Guggenheim noting shares are up 41% since late May and industry data points are not encouraging; WIFI jumps on better Q3 results (Q3 EPS 0c/$64.7M vs. est. loss (10c)/$62.8M) and narrows year outlook; SBGI shares rolled early after Q3 results disappoint amid higher expenses

 

Stock GAINERS

·     AYR +16%; after the company agrees to be acquired by Marubeni and Mizuho Leasing, for $32 per share https://bit.ly/2POd6C9

·     CNST +147%; rises as abstracts show JAK-naïve myelofibrosis patients who have only received CPI-0610 in combination with Incyte’s Jakafi saw benefits

·     COTY +13%; Q1 results were mostly in-line with expectations as high-margin luxury fragrances power Coty’s profit beat

·     CVS +4%; boosted its full-year earnings outlook as it reported quarterly results that exceeded expectations, boosted by higher prices for brand name drugs

·     CYBR +10%; reports Q3 beats with revenue up 28% Y/Y and upside guidance for revs ($125-127M vs. est. $122.7M), and EPS and for year

·     DVA +11%; as tops Q3 revenue and profit expectations on kidney business strength, and raises FY20 adj. EPS forecast to $5.25-$5.75 from its prior range of $5-$5.50

·     HPQ +10%; after the WSJ reported XRX is considering making a cash-and-stock offer for HPQ at a premium to its market value https://on.mktw.net/2WLSbRs

·     WLH +8%; TMHC agreed to acquire smaller homebuilder WLH in a deal valued at $2.4B in cash/stock, offering $21.45 per share (including debt) – deal for $2.50 per share in cash and 0.8 shares of TMHC stock https://bit.ly/36DII37

 

Stock LAGGARDS

·     ATUS -15%; lowers year rev outlook to up 2.5% from prior view up 3%-3.5%, while fell short of Street expectations with its Q3 earnings, with revenue growth dragged by a slowdown in news and advertising and telephony

·     ARQL -14%; following an abstract on blood cancer candidate ARQ 531, a reversible BTK inhibitor, that will be presented at ASH next month.

·     FANG -13%; as 3Q oil volumes missed already low expectations, combined with a downward revision to FY19 oil volumes, and initial 2020 oil guidance that is well below Street expectations

·     MCHP -5%; posted mixed F2Q results and guided F3Q lower as demand decelerated meaningfully in September due to broad-based weakness across all major geographies and products

·     MNK -6%; said received a subpoena from the SEC for documents related to the company’s disclosure of its dispute concerning the base date average manufacturer price under the Medicaid Drug Rebate Program for Mallinckrodt’s Acthar Gel

·     MTCH -12%; as 3Q revenue/EBITDA beat slightly, but shares fell as co guided 4Q below Street ests (revs of $550M vs. Street’s $559M)/Jefferies said the expected step-down in Tinder net adds (437k to 236k) is the likely driver of the stock weakness

·     NUS -16%; shares slide as EPS beat but revenues miss on much weaker guidance citing China weakness, prompting a downgrade at Citigroup

·     PLT -38%; shares plunged on sharply lower guidance; Q2 EPS $1.24/$462M vs. est. $1.33 and $482.88M and sees 3Q revs $383M-$423M below est. $509M

·     SUPN -24%; lowers FY19 net product sales to $390M-$395M from $400M-$410M and sees FY19 op earnings in range of $150M-$155M, vs. prior range of $150M-$160M/said SPN-810, its treatment for impulsive aggression in ADHD patients aged 6-11, failed a trial

·     WW -15%; as Q3 sales and gross margins missed estimates, prompting a downgraded by Davidson; reported revs $348.6M vs. est. $352.5M and subs rose 6% YoY to 4.4M but was down from last quarter’s 4.6M

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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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