Closing Recap

Thursday, August 05, 2021

Equity Market Recap

·     It was another record run for the Nasdaq Composite (taking out its July record) while the S&P and Dow also knocked on the door for new highs. The Russell 2000 Smallcaps outperformed ahead of tomorrow’s nonfarm payroll report, while Dow transports rebounded following yesterday’s sell-off. Ten of the 11 major S&P 500 sector indexes were higher, with only healthcare stocks in the red as Cigna and Cardinal Health declined on earnings results. Energy saw a rebound as oil prices snapped their 3-day losing streak. While most sectors were higher, the moves came on extremely light volume as investors await the jobs report. In today’s data, the number of Americans filing new claims for unemployment benefits declined further last week. Trading ranges were narrow, volumes low ahead of another big round of earnings tonight.

·     Stock/sector movers: FVRR, FSLY plunge almost 25%, ETSY falls as much as 13% at today’s lows on weak guidance, LMND drops over 13% on wider EBITDA loss, ROKU slides almost 10% at the morning lows after its weaker active accounts and streaming hours; Healthcare names CI, CAH were the worst S&P performers after their earnings as CAH misses estimates and CI doubled the estimated FY hit from the pandemic; casinos outperformed today with WYNN, MGM among the S&P leaders after their earnings beat, PENN joining them as a top gainer after acquiring SCR for $2B; MRO, ALB, HBI, LNC, MELI, W, DDOG, HUBS, BKNG all soar after earnings/guidance, and REGN, YETI also rise after reporting results; UBER opens lower after adj EBITDA miss, but bounces to recover yesterday’s losses after LYFT earnings, while MRNA touches ATHs in the morning after its results but then goes red; HOOD plummets after shareholders filed to sell up to 97.9M shares, but holds above $60, still well above $38 IPO price.

Economic Data:

·     Weekly jobless claims fell to 385K in latest week, mostly in line w estimates (prior week to 399K from 400K); the 4-week moving average fell to 394,000 from 394,250 prior week; continued claims fell to 2.930M in latest week from 3.296M; the U.S. insured unemployment rate fell to 2.1% from 2.4% prior week

·     June International Trade in Goods and Services showed a deficit (-$75.7B) vs. (-$74.0B) consensus and (-$71.0B) prior (revised from -$71.2B); June exports were $207.7B, $1.2B more than May exports and June imports were $283.4B, $6.0B more than May exports

Commodities, Currencies & Treasuries

·     Oil prices rise as WTI crude +$0.94 or 1.38% to settle at $69.09 per barrel, while Brent gains $0.91 or 1.29% to settle at $71.29 per barrel after coming into the day on track for its worst trading week in more than nine months. Into Thursday, WTI was down 8.2% since Friday’s close as the combination of U.S. crude stockpiles rising 3.6M barrels versus the -3.1M consensus on Wednesday and news that the COVID-19 Delta variant is spreading throughout China (raising demand fears) didn’t add up well for oil prices.

·     Gold prices slide -$5.60 or 0.3% to settle at $1,808.90 an ounce, failing to post its first back-to-back gains since mid-July as Treasury yields inched higher and investors again sought riskier assets with stocks moving higher most of the day. The 10-year Treasury note was yielding around 1.20% after hitting its lowest intraday level since Feb. 10 at 1.1255%, a day earlier. The rise in Treasury yields can also undercut the appeal of gold compared against precious metal.

Sector News Breakdown

Consumer

·     Retailers; COST July core comps increase of 8%, with two-year stacked comps up a "robust" 24% – in line with June’s growth; WEBR 18M (which was cut down from 46.8M) share IPO priced at $14.00; WMT was upgraded to Outperform at Wells Fargo saying normalizing consumer behavior should allow Walmart to recapture share lost to conventional grocers during the pandemic; HBI rises after earnings as Q2 EPS $0.47 beat the $0.39 est. on better sales $1.75B while boosted its year EPS and sales forecasts; BOOT stood out with its update on demand trends during its conference call after earnings beat

·     Auto sector; UBER follows LYFT shares lower the day prior as both ride-hailing company’s disappointed Wall Street as UBER posts wider losses even as trips and deliveries grow with Q2 adjusted $509M loss Ebitda missing the est. $324.5M; DRVN 12M share Secondary priced at $29.50; APTV raises FY guide, sees sales $16.115-16.415B vs est. $15.682B and adj EPS $3.63-387 vs est. $3.73, sees CAPEX $750Mm; QCOM offers to acquire VNE for $37 per share in cash, topping the prior bid from MGA of $31.25 per share, representing a total value of $3.8B, and an enterprise value of $ 3.3B; Eni said it had agreed to buy digital green utility Be Power in a bid to grow its electric vehicle charging service business in Italy and Europe.

·     Housing & Building Products; Wayfair (W) shares rise initially on earnings beat ($1.89 vs. est. $1.15) as the number of active customers reached 31.1M as of June 30, up 19.6% from a year earlier, but shares slipped after the CFO said the quarter is running down mid-teens this quarter vs Street at +5% (Hedgeye cautious comments too); FTDR reported mixed 2Q results with slightly lower revenues (largely due to slower RE channel) though stronger gross margins and EBITDA due to lower service costs than expected

·     Consumer Staples & Restaurants; ELF reported much stronger-than-expected quarterly sales and raised its fiscal 2022 guidance (prompts upgrade to Buy at Citigroup); Kellogg (K) Q2 EPS and sales topped consensus as now expects organic net sales for 2021 to be flat to up 1%, slightly up from previous guidance for flat sales; QSR 9.6M share Block Trade priced at $63.50; JACK delivered 3Q results well above expectations, however, guidance weighed on shares after hours (newly introduced FY22 capex guide, in particular); DENN a mover on earnings; THS Beat EPS by 1c but missed on Sales and GMs, which were offset by lower SG&A

·     Casinos& Gaming; group rebounds from recent weakness; MGM Revs missed at $2.3B vs est. $2.5B and property EBITDAR was $717m vs est. $800m while Vegas margins were nearly 40% (light of recent CZR); WYNN Q2 revenue of $990mm (+36% q/q) and Property EBITDA of $248mm (+142% q/q) were 7% and 45% above consensus (Consensus Metrix), respectively; PENN agreed to acquire SCR for about $2.0B in cash and stock as holders get $17 in cash and 0.2398 PENN shares https://on.mktw.net/3xqzcg6; GENI announced a new supplier agreement with DKNG for providing its full range of official sportsbook data and content and fan engagement solutions, including a complete suite of NFL-related products (GENI also named new “short” at SprucePoint)

Energy

·     E&P and Majors; MRO Q2 adj earnings topped analyst estimates and revenues more than quadrupled to $1.14B from the year-ago quarter; PBR swung to a Q2 profit from a loss in the prior-year quarter, as net profit totaled 42.86B reais ($8.3B), well above the consensus estimate of 30.7B reais; APA EPS was 7.6% above consensus due mainly to lower than expected current taxes and 2Q21 upstream capex was 13% below guidance. 2Q21 adjusted production was in line with its pre-reported estimate, but 2Q21 oil production was 0.6% below consensus; BE reported a loss in 2Q but maintained guidance despite inflationary pressures; EOG EPS was 3.3% above consensus on better production and higher realized prices, which was partially offset by higher cash taxes. 2Q21 capex was 5% below consensus, and 2Q21 oil production was 0.7% above consensus and raised its 2021 oil production guidance; PDCE EPS was 4.6% above consensus and 2Q21 capex was 6.3% below consensus but lowered its 2021 total production guidance by 1.3%, lowered its 2021 oil production guidance by 1.5%, and raised its 2021 capex guidance by 4.5%

·     Utilities & Solar; DUK Q2 adj EPS $1.15 vs est. $1.09 on revs $5.76B vs est. $5.73B and reaffirmed FY adj EPS view of $5-5.30; NRG Q2 results topped expectations with EPS 4.40 vs est. $0.88 on revs $5.24B vs est. $2.98B, adj EBITDA $656M vs est. $576M and maintained its FY guidance for FCF $1.44-1.64B and adj EBITDA $2.4-2.6B; AES reported Q2 adj EPS 31c vs est. 29c on revs $2.7B vs est. $2.34B and reaffirmed its FY guidance; ITRI quarterly results and full-year guidance disappointed as Q2 adj EPS 28c was short of est. 48c and revs $489.4M missed est. $536M, and its FY adj EPS $1-1.50 was below est. $2.42 and revs $2.05-2.15B was also shy of est. $2.26B; VST Q2 EPS 15c and revs $2.565B missed consensus of 68c on $3.67B; PNW Q2 EPS $1.91 vs est. $1.64 on revs $1B vs est. $947.8M; EVRG Q2 EPS 85c vs est. 74c on revs $1.24B vs est. $1.23B, kept FY adj EPS guidance $3.20-3.40; CNP Q2 adj EPS 36c vs est. 24c on revs $1.74B vs est. $1.63B and raised its FY21 Utility EPS view by 1c to $1.25-1.27; SR posted Q2 EPS 6c vs est. 3c on revs $327.8M vs est. $329.8M; SRE delivered Q2 adj EPS $1..63 vs est. $1.57 on revs $2.74B vs est. $2.53B and maintained its adj EPS outlook for FY21 $7.75-8.35 and FY22 $8.10-8.70; CPK Q2 EPS 78c vs est. 67c, revs $111M vs est. $106.2M; NJR Q3 adj EPS loss of (15c) was wider than expected (8c) loss, though revs $367.6M topped est. $300.5M; SJI Q2 EPS 2c vs est. (1c) loss on revs $311.8M vs est. $273.3M and reaffirmed FY21 EPS view $1.55-1.65 vs est. $1.62; PPL reported Q2 EPS 19c vs est. 24c on revs $1.29B vs est. $1.39B, announced plans to buyback $500M in shares in 2021 and set a 2050 net-zero carbon emissions goal and is targeting a 70% reduction in emissions by 2035; BE Q2 missed consensus as EPS loss (23c) was wider than est. (5c) loss and revs $228.5M missed est. $232.4M, and it leaves its FY21 sales guidance $950M-$1B unchanged vs est. $973.81M; AEIS was downgraded to Hold at Needham after yesterday’s earnings were in-line, but its guidance was well short of expectations with revenue 10% shy of consensus as component shortages will limit near-term shipments and pressure gross margins

Financials

·     Bank movers; HOOD filed with the SEC a prospectus related to the offer and sale from time to time of up to 97,876,033 shares of Class A common stock of Robinhood Markets, Inc. by certain selling stockholders; in insurance; MET Q2 earnings and revenues exceed consensus estimates (EPS $2.37 vs. est. $1.57; Q2 revs $18.52M vs. est. $15.77B) and announces $3B share buyback; LNC Q2 adj operating EPS $3.17 vs. est. $2.35; Q2 revs $4.85B vs. est. $4.72B; LMND shares slide as Q2 adjusted EBITDA loss of $40.4M widened from a loss of $18.2M in Q2 2020 and said it still has no date for launching its auto insurance product (did raise year revenue outlook); in finance, SQ touching news all-time highs just days after its $29B acquisition of AfterPay

Healthcare

·     Pharma movers; MRK said its Phase III KEYNOTE-716 trial investigating Keytruda, met its primary endpoint of recurrence-free survival (RFS); ACAD reported 2Q21 revenues of $115M (+8% QoQ, +5% YoY) and cash of $557M while revs came in below consensus ($125M) estimates, with NUPLAZID sales missing consensus estimates by ~8%-10%; ZTS reported 2Q results with revenue of $1.9B (vs. $1.83B cons) and EPS of $1.19 (vs. $1.08 cons), with U.S. Companion and International driving the beat, and raised guidance

·     Biotech movers; MRNA reported 2Q results, with $4.4B revenue, of which $4.2B was vaccine sales (vs. $4.1B cons) and EPS of $6.46 (vs. $5.96 cons) and noted Advance Purchase agreements for product sales of $20B (vs. $19.2B as of the 1Q report and vs. $18.9B FY21 cons); REGN Q4 revs of $5.14B top $3.96B est. and slightly raised the low end of its Gross margin guidance to 88%-89% range and also announced its Phase III study for Libtayo in advanced NSCLC was stopped early for hitting its OS primary endpoint; BCRX rises to best levels in 15-years after Q2 revenue smashed estimates, thanks largely to $28.5M in ORLADEYO net revenue; EIGR granted FDA Breakthrough Therapy Designation for avexitide for treatment of congenital hyperinsulism; CRISPR stocks outperformed after NTLA earnings (did miss top and bottom line), while EDIT upgraded to Outperform at Evercore/ISI and raised tgt to $60 from $20

·     MedTech Equipment; NVRO slides after withdrawing FY forecast on COVID-19 concerns and guided Q3 sales between $90M-$93M which is below analyst estimates of $114.7M; ISRG announces a three-for-one stock split; BDX was 8% ahead on topline and 12% bottom line beat and raising FY revenue growth guidance to +16.5-17.0%; DGX added the Hedgeye best ideas list; TNDM 2Q EPS/EBITA/rev beat ($172.1M vs Street $143.4M) driven by stronger GMs and pump placements up 81% YoY and raised FY21 Revenue outlook

·     Healthcare Services; CI falls as doubled its estimate of the hit to full-year earnings from the pandemic as it reported a better-than-expected quarterly profit and maintained its annual adjusted earnings forecast; CAH 4Q adj EPS $0.77 vs est. $1.20 on revs $42.6B vs est. $40.43B, says disappointed in 4Q results; guides FY22 adj EPS $5.60-5.90 vs est. $6.17, says raising enterprise cost savings target by additional $250Mm to $750Mm by FY23; AMED slides on mixed Q2 results (EPS beat/sales miss) and guides year EPS $6.37-$6.49 below consensus est. $6.96; XRAY reported 2Q21 revenue/EPS that was 6%/7% ahead of consensus but only reaffirmed its 2021 revenue and EPS guidance; ONEM reported strong 2Q21 y/y membership growth of 31% and posted positive adjusted EBITDA in the quarter

Industrials & Materials

·     Industrials, Aerospace & Defense; MAXR plunges as Q2 revs topped views but noted that it’s delaying the launch of its WorldView Legion satellites to at least next March; PWR 2Q adj EPS $1.06 vs est. $1.04 on revs $3.0B vs est. $2.98B; guides FY adj EPS $4.32-4.68 vs est. $4.42; WCN Q2 adj EPS 81c vs est. 77c on revs $1.534B vs est. $1.5B, and now sees FY revs $5.98B from prior $5.8B and net income $690M for the year from $669M; SUM Q2 EPS 48c missed est. 52c on sales $618.5M that were also short of est. $647.1M; ROLL Q1 adj EPS $1.04 vs est. $1 on net sales $156.2M vs est. $158.8M, sees Q2 sales $158-162M vs est. $165.3M; PH Q4 adj EPS $4.38 (est. $3.86) and revs $3.96B (est. $3.76B) topped consensus views, though FY22 outlook disappointed as adj EPS forecast $16.20-17 missed est. $17.08, and it also expects organic sales growth 5-9% for the year; HII Q2 EPS $3.20 vs est. $2.49 on revs $2.23B vs est. $2.17B, new contract awards $1.2B in the quarter, and backlog at quarter-end $47.7B

·     Transports; after massive underperformance on Wednesday behind CAR earnings results (despite beating), and weakness in airlines on Covid variant fears, the main index bounced a bit today; AAWW Q2 adj EPS $4.45 beat est. $3.39 on revs $990.4M vs est. $949.5M, sees Q3 sales of nearly $1B vs est. $940M, and adj EBITDA of almost $250M; ULCC Q2 adj EPS loss of (24c) was narrower than est. (30c) as sales $550M also topped est. $538M, and lowered its guidance for Q3 as bookings have softened in the last week, which they believe is a result of rising Covid cases, and they now see net income between a loss of (5%) to a breakeven quarter; JPMorgan upgraded CAR to OW with a $100 target from $75 as they say investors should take advantage of yesterday’s 16% selloff post-earnings, and raised their 2021 EBITDA estimates after the company’s Q2 EBITDA $624M was 71% above the Street’s consensus of $363M

Technology, Media & Telecom

·     Internet; ETSY shares tumble after forecasting Q3 sales $500M-$525M, as the mid-point falls below the $524.9M estimate which overshadowed a Q2 rev beat; GDDY posted a Q2 profit miss and soft sales guidance for the current quarter and year (said domains sales increased 18% to $436.7M and hosting and presence revenue rose 9% to $318.5M); in the CDN space, FSLY shares plunged after mixed Q2 results (EPS beat/revs miss) as warned the significant outage that impacted Q2 results and will have an impact on Q3 and full year outlook; MELI delivered robust 2Q21 results, driven by strength in e-commerce; FVRR tumbles after Q3 guidance miss and lowered FY guidance noting people are traveling more and taking more vacations and spending less time online (Q revs $68M-$72M vs. est. $80M); BKNG better-than-expected 2Q21 results where bookings and revenue came in 37% and 15% above consensus, respectively, and travel demand improved each month through 2Q

·     Semiconductors; WDC reported results well ahead of Street consensus with revenue, margins, and earnings predominantly bolstered by higher flash ASPs and a robust increase in nearline drive shipments; QRVO Q1 EPS $2.83 vs. est. $2.45 on revs $1.11B vs. est. $1.08B, sees Q2 EPS $3.24 at midpoint vs. est. $3.02 on revenue $1.24B-$1.26B vs. est. $1.21B, and the stock was assumed with a Buy rating and $225 price target at Benchmark following the strong results and demand environment; Cowen said they would buy SWKS off the QRVO results as they believe the stock should outperform in the December quarter and they would also buy WDC on any weakness following its beat-and-raise as they do not see the stock trading at its peak EPS; KLIC shares rose after reports Q3 adj EPS $1.87 vs est. $1.36 on revs $424.3M vs est. $399.9M, and sees Q4 adj EPS $2 +/- 10% vs est. $1.17 on revs $445-485M vs est. $360.3M; UMC reported July net sales NT$18.37B (~$661M), +18.5% YoY, and sales for the 1^st 7 months of the year have totaled NT$116.37B (+13.9% YoY); QCOM submitted an offer to buy VNE for $37/share in cash, an 18% premium to VNE’s current offer from MGA to acquire it for $31.25/share

·     Software movers; EA shares rose after a Q1 sales beat ($1.34B vs. $1.28B) and forecasts current-quarter adjusted sales above estimates, betting on strong performance from titles such as "FIFA 21" and "Apex Legends;" DDOG following a Q2 top/bottom line beat along with strong Q3 guidance and raised full-year outlook (revs rose 67% YoY to $233.5M, topping analyst estimates by $21M); PING rises with Q2 EPS and rev beat as ARR growth accelerated to +18.9% (+18.2% organically); HUBS rises as Q2 earnings were highlighted by meaningful growth acceleration in revenue and billings, while approaching $1.3B revenue scale

·     Hardware, Components & Services; ROKU shares drop as reported a Q2 rev beat but addition of active accounts halved in Q2, compared with the same quarter last year and said streaming hours also stood at 17.4 bln hours, a decrease of 1 bln hours from Q1; TRMB reported 2Q EPS of $0.72 (20% ahead of street) driven by stronger than expected revenues and raised EPS guidance from $2.40 to $2.55 (though 2H guide is weaker than expected)

·     Media & Telecom movers; VIAC reported better-than-expected quarterly revenue, boosted by higher paying subscriber additions and strong advertising sales on its networks as live sporting events resumed; revenue rose 8% to $6.56 billion, beating estimates of $6.48 billion; ADTN Q2 revs came in up 11% y/y and 12% q/q to $143.2M, versus our $141.6M forecast on better margins at 43.8%; FOXA was upgraded to buy at Guggenheim as F4Q revenue of $2.89bn was ahead of our/consensus estimates of $2.84bn/$2.74bn while adjusted EBITDA of $717mm beat forecasts of $586mm/$657mm with outperformance at both Cable Networks and Television