Closing Recap

Thursday, April 29, 2021

Equity Market Recap

·     Stocks opened at fresh highs for both the S&P 500 and Nasdaq Composite following big EPS and revenue gains from tech giants AAPL and FB, only to see profit taking take markets lower before ending with a late day rally. Markets saw a big fade off the record highs with tech leading after Treasury yields touched highest levels in weeks at 1.69% for the 10-year. After falling more than 250 points from its peak levels of 14,211, the Nasdaq began its steady climb after European markets closed and Treasury yields being to fade, as stocks again found solid footing to inch higher throughout the afternoon back to record highs for the S&P 500 ahead of another round of earnings results tonight, led by AMZN. Investors still weighing improving economic data (better GDP and jobless claims today) and the threat of rising inflation with bond yields closely watched – but a strong batch of corporate earnings, the prospect of as much as $1.8 trillion in new government spending, and Fed Chairman Powell again noting that rates will stay low for the foreseeable future was enough to push stock again.

·     Stocks and sector top stories; FB soars as the latest big tech name to hit record highs after its earnings, while AAPL also beats but stock reaction was muted; in semis, CREE plummets after its weak guidance draws a JPM d/g, while QCOM jumps on its EPS beat and strong guide; online retail another area with diverging names after earnings, with EBAY plunging after its weak guidance leads to downgrades at Wedbush and Susquehanna, but OSTK spikes to its highest levels in over 2 months on its strong earnings with rev that nearly doubled from last year; some stay-home pandemic winners sink on earnings, with TWOU rolling to red despite its beat after opening higher, NOW guidance below estimates sends shares lower, and TDOC tumbles on its disappointing membership guidance as shares are now red over the past year; F touches its lowest price since February after its guidance misses estimates due to rolling back production to account for the current semi shortage; BMY, MRK both fall over 5% after their respective EPS misses in pharma, while food/beverage stocks outperform on their reports; BLMN, CAKE highest since 2017, MCD, DPZ, TAP strong; UBER, LYFT, GRUB, DASH drop after US Labor Sec says gig workers should be classified as employees.

Economic Data:

·     Strong data for U.S. economy in Q1 as Q1 GDP (initial estimate) rose +6.4% annualized vs. +6.5% estimate (estimates varied from 6.1%-6.6%) and +4.3% in Q4; the PCE price index rose +3.5% vs. +2.5% consensus and +1.5% in previous quarter and core PCE prices +2.3% vs. +2.4% consensus and +1.3%

·     Weekly jobless claims fell to 553,000 in latest week vs. est. 549,000 and vs. 566,000 prior week; continued claims rose to 3.660M from 3.651M (est. 3.614M); the U.S. insured unemployment rate unchanged at 2.6% and the 4-week moving average fell to 611,750 from 655,750 prior

Commodities

·     Gold prices pare intraday losses to settle at $1,768.30 an ounce, slipping -$5.60 or 0.3% on the day, as the precious metal slides for a 3^rd straight day amid a bump in the U.S. dollar as well as Treasury yields, as inflation concerns begin to creep back into markets. Despite the Fed continuously assuring markets that they will let the economy run “hot” and that the uptick in prices (commodities) is “transitory”, bond markets are telling a different story again. Oil prices quietly edge higher, adding to yesterday gains, with WTI crude up $1.15, or 1.8% to settle at $65.01 per barrel. Prices extend gains bullish forecasts of recovering demand outweighed concerns about the impact of rising COVID-19 cases in Brazil, India, and Japan. Helping prices yesterday was bullish inventory data as a bullish analyst call on oil at Goldman Sachs.

Currencies & Treasuries

·     The U.S. dollar edged higher following a recent bout of selling pressure, as the USD-CAD hit fresh three-plus year lows of 1.2281 early, down from Wednesday’s peak of 1.2418, the euro held above the 1.21 level after its recent bounce and the dollar/yen stayed around the 109 level. Treasuries were heavy early, with the yield on the 10-year touching 1.69% early before sliding the remainder of the day to around 1.64% late day in the wake of the run up in price pressures in the GDP data and given the strength in risk appetite.

Sector News Breakdown

Consumer

·     Retailers; OSTK reports a 94% surge in Q1 revenue to $660M (vs. est. $582m), while adj EBITDA of $33.9M compared vs. $6.5M loss a year ago and said order deliveries increased 66% to 3.6M from a year ago, while avg order value was $183, up 17%; FLWS reported Q3 adj EPS 2c on its record quarterly revs $474.2M (+70.1%), and said it expects double-digit rev growth will continue in its next fiscal year, guiding Q4 rev growth to +10-15% and +40% for the full year; TPX Q1 adj EPS 64c topped est. 52c on revs $1.04B that also topped est. $1.01B, increased its buyback program to $400M, and lifted its FY21 guidance for rev growth to more than 20% from +15-20%

·     Auto sector; Ford (F) shares slipped after guiding FY adj EBIT $5.5-$6.5B, below the $6.82B estimate saying it now plans to lose about 50% of planned 2Q production to account for semiconductor shortage, implies 2Q will be trough of the issue; in auto retailers, ORLY with a Q1 EPS and sales beat on 24.8% comp sales and guides year EPS and revs above consensus (AAP, AZO move in sympathy); UBER, LYFT, DASH decline after Reuters reported U.S. labor secretary Marty Walsh says most U.S. gig workers should be classified as employees

·     Consumer Staples; HSY 1Q adj EPS $1.92 tops est. $1.80 on sales $2.296B above est. $2.11B while sees FY adj EPS $6.79-6.92 vs. est. $6.75; CHD Q1 adj EPS 83c vs. est. 81c; Q1 revs $1.24B vs. est. $1.2B; sees year sales up 5%-6% and EPS $3.00-$3.06 vs. est. $3.03 with organic sales growth to be 4%-5%; MO 1Q adj EPS $1.07 on revs $6.0B, cigarette shipment volume -12%; says expects adj EPS growth in last 3 qtrs of year and reaffirms FY earnings guide; in food, KHC beat on quarter driven by higher sales, better gross and EBITDA margins, and favorable below the line items ($0.06 of upside) – margins boosted by pricing; KDP 1Q EPS beat (33c v est. 32c) on revenue upside across all segments and a benefit from lower tax rate. Gross margins missed by 100bps; PPC with Sales slight miss but EBITDA ($254m v est. $224m) and EPS well above

·     Restaurants; MCD Q1 EPS $1.92 vs. est. $1.81 and revs $5.12B vs. est. $5.03B; global comparable sales increased 7.5% in q1 as systemwide sales increased 12% (8% in constant currencies) and U.S. comp sales up 13.6%; CAKE Q1 revenue beat and current-quarter growth saying Q2 comp sales rose over 2019 levels, as COVID-19 dining restrictions eased and consumer spending increased; DPZ reported Q1 EPS $3 vs est. $2.94 on revs $983.7M that was shy of estimated $985.2M, with US comp sales +13.4% and international same-store sales +11.8% both topping respective estimates of +9.7% and +6%; BLMN Q1 adj EPS 72c more than doubled expected 30c on revs $987.5M that were above est. $953.2M with US comp sales +3.3% for the quarter (est. +2.1%) that have drastically accelerated over the past 4 weeks (ending April 25) to +155.8% YoY, and guided Q2 adj EPS to above 60c and revs to above $1.03B

·     Casinos, Gaming, Lodging & Leisure sector; positive for cruise lines (CCL, NCLH, RCL) as the WSJ reports the CDC said cruise operations could begin again in the U.S. by mid-July and can proceed to passenger sailings without test cruises if they can assure 98% of crew and 95% of passengers are fully vaccinated – WSJ https://on.wsj.com/3eDcE4t ; MGM posts a smaller than expected Q1 loss on revs of $1.65B, topping the $1.59B estimate; in leisure, BC posts Q1 EPS/rev beat and said sees 2Q revs approx +50% vs est. +32%, though says 2H comparisons challenging

Energy

·     Energy stock movers; energy stocks again leading in the S&P with oil prices rising further; CLR topped Q1 earnings and revenues, reinstated its quarterly dividend and raised its cash flow guidance as now expects to generate $3.1B of cash flow from operations and $1.7B of free cash flow for the full year; MTDR reported higher than Street estimated earnings driven by better than expected natural gas production/pricing among other things. 2021 spending & production guidance remained unchanged; AR reported higher than estimated earnings/FCF driven by notably higher natural gas and NGL prices and said while 2021 production and CAPEX remained unchanged, remains confident in its upcoming FCF

·     Utilities & Solar; CNP announces sale of Arkansas and Oklahoma natural gas LDC businesses to Summit Utilities for $2.150 billion in cash – to receive $2.150 billion in cash, including recovery of approximately $425 million in cash of unrecovered storm-related costs; PEG upgraded to Buy from Neutral at Mizuho following approval by the New Jersey Commission of a three-year extension of the company’s nuclear subsidies (ZECs); PCG reported a top and bottom line miss for Q1 and weaker guidance of 95c-$1.05 vs. est. $1.22

Financials

·     Consumer Finance; MA follows good earnings from peers Visa and COF the day prior, as Q1 EPS and revs top consensus estimates ($1.74/$4.16B vs. est. $1.56/$4.05B) as gross dollar volume rises 8% on a currency neutral basis to $1.71T; LC boosted its 2021 targets for loan originations and total revenue as sees Q2 loan originations of $1.7B-$1.9B and total revenue of $130M-$140M (vs. consensus of $107.1M); expects Q2 consolidated net loss of $30M-$40M; ADS big Q1 beat $5.74/$1.08B vs. est. $3.16/$1.06B) while sees FY21 revenue ‘down low-single-digits compared to 2020

·     REITs; Realty Income Corp. (O agreed to buy the fellow real-estate investment trust VER in a stock swap worth about $11 billion https://bit.ly/2QFTjYm ; CONE boosts its 2021 revenue guidance range following a Q1 FFO beat as it increases its expectations for metered power reimbursements; KIM posted Q1 FFO 33c vs est. 30c on revs $282.3M vs est. $262.7M and raised FY21 FFO guidance to $1.22-1.26 from $1.18-1.24; PSA Q1 FFO $2.82 vs. est. $2.70 on revenue $647.8M vs. est. $731.88M; EXR Q1 FFO $1.50 vs est. $1.49 on revs $358.9M vs est. $308M, and issued FY21 guidance for core FFO $5.95-6.10 (est. $6.03); INVH reported Q1 FFO 36c on revs $475M, both beating estimates of 33c, $469.8M, and now sees full-year FFO $1.34-1.42 with same-store NOI growth 3.75-4.75%; AVB Q1 core FFO $1.95 vs. est. $1.94 on revs $502.26M (-9.1% YoY); COR posted Q1 FFO $1.40 (est. $1.33) on revs $157.6M vs est. $156.4M, and sees FFO $5.42-5.52 on revs $642-652M for the full year; DRE recorded in-line Q1 FFO 39c on revs $289.3M that bested est. $249.1M and raised its FY21 FFO to $1.65-1.71 from $1.62-1.68; EQIX reported Q1 FFO $6.98 vs est. $6.68 on revs $1.6B that matched the consensus view, and forecasted Q2 revs $1.63-1.66B (est. $1.63) and FY revs $6.56-6.62B (est. $6.63B) and FY FFO $26.73-27.27 (est. $27.19); Piper upgraded EQR to Neutral after the company’s earnings

·     Financial services; SPGI raises FY21 adjusted EPS view to $12.55-$12.75 from $12.25-$12.45 after Q1 EPS $3.39 on revs $2.02B topped the $3.03 and $1.93B est.; FMCC revenue rose 118% Y/Y, driven by higher net interest income and higher net investment gains and Q1 net revenue of $5.27B rose from $5.02B in Q4

Healthcare

·     Pharma movers; Dow component MRK reported an earnings and revenue miss and estimated negative impact its Q1 pharmaceutical revenue about $600 million due to Covid; BMY reported Q1 EPS $1.74 adj on revs $11.1B vs. est. $1.81 and $11.15B while raised year EPS view and guides FY rev rising in high-single digits; CARA plunges as topline results from its Phase 2 dose-ranging clinical trial of Oral Korsuva difelikefalin tablets for the treatment of moderate-to-severe pruritus in mild-to-severe atopic dermatitis patients missed its primary and secondary endpoints.

·     Biotech movers; ADVM downgraded to Sector Perform at RBC Capital and lowers tgt to $6 after ADVM announced a serious adverse event of hypotony (decreased intraocular pressure), panuveitis and loss of vision in a DME patient; GRTX released data from a trial of its GC4419 in certain pancreatic cancer patients – said median overall survival in the treatment arm was nearly twice as long as observed in the placebo arm, 20.1 months compared to 10.9 months, respectively; SELB drops after saying its application to start trial of its gene therapy candidates, MMA-101 and ImmTOR, to treat methylmalonic acidemia, will be delayed until at least Q1

·     MedTech Equipment; ABMD Q1 EPS of $1.24 beat by 14c on better revs $241.2M vs. est. $231M and issues higher guide for year revs of $990M-$1.03B vs. est. $998.1M – said worldwide Impella heart pump revs up 17% YoY; BAX raises FY21 adjusted EPS view to $3.47-$3.55 from $3.35-$3.43 and ups FY21 revenue view to up 8%-9% from 7%-8% after Q1 top/bottom line beat (Q2 guide below); IART announced Q1 revenue coming in above the high-end of management’s guidance range and adjusted EPS also came in above expectations with consolidated organic revenue growth of 2.9%; TMO reported 1Q results, with revenue slightly ahead ($9.91B vs. $9.72B) as total organic growth slightly ahead of street, with focus on Specialty Diagnostics miss

·     Healthcare Services; TDOC Revenue and adjusted EBITDA in the quarter were ahead of FactSet consensus expectations and management notched up 2021 revenue guidance slightly, but several analysts lowered their price tgts noting TDOC left FY 2021 membership guidance unchanged at 52-54 mln and that may weigh on the stock; AMED posted 1Q adjusted EBITDA of $78.6M, comfortably ahead of both our estimate ($70.0M) and consensus ($73.0M) driven by better expense management and the company raised 2021 guidance aided by the suspension of sequestration; ICLR positive earnings, with beats across the P&L, raised 2021 guidance (standalone), and impressive bookings as revenue beat by 6%

Industrials & Materials

·     Aerospace & Defense; NOC posted Q1 EPS $6.57 vs est. $5.48 on revs $9.15B vs est. $8.53B and raised FY21 adj EPS guidance to $24-24.50 from $23.15-$23.65 and sales forecast to $35.3B-$35.7B from $35.1B-$35.5B; TXT Q1 adj EPS 70c vs est. 47c on rev $2.88B vs est. $2.73 and raised its FY21 adj EPS guidance by 10c to $2.76-3.00; GD was upgraded at Baird to Outperform as order growth has returned at Gulfstream, which provides a cyclical kicker to a defense business that continues to quench budget concerns; Dow Jones reported U.S. air-safety regulators have launched an audit into how a BA factory tweak led to a safety problem with the plane maker’s 737 MAX, two years after a pair of fatal crashes prompted other fixes to the jet.

·     Industrial & Machinery; Dow component CAT reported Q1 adj EPS $2.87 vs est. $1.94 on sales $11.9B vs est. $11.09B as dealers increased inventories by $700M vs $100M YoY; AGCO posted Q1 EPS $2 vs est. $1.11 on net sales $2.38B vs est. $2.21B, and now sees FY sales $10.6-10.8B vs previous range $10.2-10.4B; PH Q3 adj EPS $4.11 vs. est. $3.78 and revs $3.75B vs. est. $3.73B, sees year EPS $12.96-$13.26 vs. est. $14.20 and 2021 organic sales flat YoY; GNRC Q1 adj EPS $2.38 and sales $807M beat estimates that called for $1.87 on $729.3M, and raised its FY sales guidance to +40-45% (est. +29.9%) from prior +25-30%; ATKR recorded Q2 EPS $2.79 on revs $639.54M above consensus $1.83 on $556.8M and raised its full-year projections for net sales growth to +40-50% from +16-20% and for adj EPS to $10-10.70 from $5.65-5.95; AIMC Q1 adj EPS 86c (est. 76c) on sales $472.1M (est. $462.5M) and raised FY21 adj EPS guide to $3.09-3.24 from $2.95-3.15 and sales to $1.82-1.85B from $1.79-1.83B; AOS Q1 EPS 60c vs est. 57c on in-line revs $769M (+21% YoY) and sees FY21 EPS $2.55-2.65 (est. $2.53) with sales growth +14-15% from January’s guide of +10%; CFX Q1 adj EPS 44c beat est. 40c on sales $879.2M that were also above est. $841.1M and sees Q2 adj EPS 48-53c and raised the low-end of its full-year guidance, now seeing FY adj EPS $2.05-2.15 from $2-2.15; CMCO reported prelim Q4 results with rev $184-187M (est. $178.4M) and adj EBITDA $25-27M, and sees full-year revs $647-651M (est. $642.5M), and separately announced it launched a $150M offering; IR reported Q1 adj EPS 45c vs. est. 35c on revs $1.4B vs. est. $1.31B, raised its FY21 revenue growth expectation to low double digits and adjusted EBITDA to $1.23-1.26B from $1.12-$1.15B

Technology, Media & Telecom

·     Hardware, Components and Services; AAPL reported its Q2 2021 earnings, blowing away analysts’ expectations on the top and bottom line as revenue rose 54% YoY on strong hardware sales as all segments topped estimates: revenue: $89.58B topped $77.3B estimate, iPhone revenue $47.9B vs. est. $41.5B, iPad revenue $7.8B vs. est. $5.6B and Mac revenue $9.1B vs. est. $6.8B; ROKU upgraded to outperform from neutral with $475 tgt at Wedbush as Roku continues to benefit from accelerated user expansion during the pandemic, a secular shift from linear TV to OTT, and the beginnings of international expansion; NTNX upgraded to Overweight from Neutral at Piper Sandler; IBM agreed to acquire Turbonomic, a provider of software that helps companies monitor the performance of their business applications

·     Internet; FB posts better than expected Q1 earnings as ad revenue soars, led by a 50% surge in advertising revenues overall revs $26.17B topped the $23.72B estimate, on better EPS of $3.30 (est. $2.61) on slightly better DAU’s of 1.88B vs 1.866.6B estimate and monthly Active Users (MAU) at 2.85B vs. est. 2.83B; EBAY 1Q results/2Q guide were largely in-line but with reopening uncertainties lingering, EBAY remains a show-me story according to analysts (was downgraded at Wedbush); TWTR earnings expected tonight

·     Semiconductors; QCOM reported a solid MarQ rev/EPS of $7.9B/$1.90 and guided JunQ well above consensus at $7.75B/$1.65, reflecting QCT and high-margin QTL strength; SLAB downgraded to Neutral from Overweight at JP Morgan; CREE was downgraded to underweight at JPMorgan citing mixed Q3 results and rich valuation

·     Software movers; NOW Q1 revenue inline with estimates, profit exceeds expectations on strength in its subscription revenue, but guidance disappoints as sees subscription revenue between $5.455B-$5.47B, representing 27% to 28% YoY growth in FY21, below some street estimates; CTXS shares slide as posts a 10% fall in Q1 rev to $776M, missing the $797M estimate citing the $129M YoY decline in Product and License rev as a result of discontinuing perpetual licenses for Citrix Workspace; PEGA delivered a quarter which beat the Street across the board; AZPN shares slides after weaker guidance; SWI slips after weaker profit forecast

·     Media & Telecom movers; DISCA receives three analyst upgrades this morning – Wells, UBS and Bank America a day after earnings results; CMCSA EPS of 76c beat by 17c as Q1 revenue rises 2.2% to $27.21B, topping ests of $26.7B and gained 461,000 broadband customers in Q1, topping estimates of 396,000 net additions; DISH Q1 EPS 99c vs. est. 81c; Q1 revenue $4.5B vs. est. $4.37B; Q1 net Pay-TV subscribers decreased approximately 230K compared to a net decrease of approximately 413K YoY; NOK rises after posted better-than-expected sales, profit led by networks, 5G equipment sales, while expecting 2021 margin at the upper end of the 7-10% range; AMT Q1 adj FFO $2.46 vs est. $2.30 on in-line revs $2.16B and lowered its FY revs guidance to $8.48-8.63B from $8.5-8.65B but upped FY adj FFO to $4.09-4.19B from $4.06-4.16B