Closing Recap

Wednesday, February 09, 2022

Equity Market Recap

·     It was a steady day for U.S. equities with the major indices “melting” higher most of the session, holding strong overnight gains as they continue to shed January losses. The Nasdaq reached levels more than 10% off its January 24 intraday lows and the S&P has rebounded more than 8% since that day’s lows. Unlike several days last week, there was no mega cap name single-handedly moving markets after its earnings, though Chipotle, Enphase, and Lyft all outperformed after their reports and Disney reports tonight along with Uber. Tomorrow morning’s news flow will be dominated by the much-anticipated CPI data for January. The current Reuters estimate expects to show consumer prices increased +7.3% in January, an acceleration from December’s +7% in what would be the highest reading since February 1982. The S&P topped its 100-day MA resistance of 4,571 and topping and holding its 200-day earlier this week.

·     Stocks & Sector movers: ENPH spikes after a strong quarter and guide to lift other solar names TAN, SEDG, RUN, SPWR; CMG soars after its strong beat while upping its long-term goal for North American restaurants to reach 7k from prior 6k goal, OMC, PAYC, FLT, FOXA also pacing the S&P after their earnings reports; LYFT opens lower after seeing sequential decline in Q1 revenue due to Omicron, but shares rebounds to end solidly in the green, UBER shares climb into their report tonight; XPO beat with guidance range fully above consensus boosts IYT Transport sector, MJ MSOS Cannabis sector bounces after CGC quarterly loss was narrower than expected; CVS posted a top/bottom line beat, but shares slid on reaffirmed FY EPS guidance with consensus near the top-end of its range and a lower cash flow outlook, BIG rolls to lowest since July 2020 after JPM downgrades to UW due to downside risk to estimates; NEWR plummets almost 30% after its EPS.

Commodities

·     Oil prices finish higher as WTI crude gains 0.3% to $89.66 a barrel after a weekly EIA report showed a bullish drop in US inventories. The data showed declines in stockpiles in everything from crude-oil to gasoline to diesel fuels, and US crude oil inventories now stand at just 410M barrels, the lowest since 2018. Gold prices advanced $8.70, or 0.5%, to settle at $1,836.60 in its fourth-consecutive positive day with a pullback in bond yields and the dollar ahead of tomorrow’s inflation data. Natural gas prices fall again, ending 5.6% lower at $4.009/MMBtus, the lowest closing price in more than two weeks and has now fallen around 27% since last Wednesday’s closing price on warmer weather/slowing heating demand.

Currencies & Treasuries

·     Treasury yields and the dollar not much doing as traders’ position ahead of tomorrow’s key January CPI inflation reading. Goldman Sachs upwardly revised their U.S. Treasury yield forecasts to account for the economic backdrop and the Fed’s hawkish turn as now see 10y UST yields ending this year at 2.25% (up from 2% previously), and next year at 2.45% (up from 2.3%). The 10-year yield around 1.93% most of the day while the dollar was mixed.

Sector News Breakdown

Consumer

·     Retailers; BIG downgraded to Underweight at JPMorgan and cut tgt to $31 as lower FY22 EPS to $4.34 or ~23% below Consensus at $5.60, embedding 1H22 EPS ~27% below Consensus noting incremental potential downside to our 2H22 view; GES issues statement in response to letter from Legion Partners saying its board and management will continue to engage with legion partners and evaluate all opportunities to create value for all shareholders; TCS shares sink on weaker Q1 outlook as guides Q4 EPS $0.24 vs. est. $0.30 and sees Q4 sales decline about 11% y/y

·     Auto sector; GM downgraded to Neutral from Buy at Nomura (a day after Morgan Stanley downgraded) and lowers PT to $56 from $66 saying GM’s lowered forward guidance because of EV transition limits bottom line growth; XPEV shares rise after saying its Class A ordinary shares have been included as eligible stocks in the Shenzhen-Hong Kong Stock Connect, effective on Feb. 9 ; the NHTSA said TSLA is recalling as many as 26,681 vehicles due to a software issue that could cause inadequate windshield defrosting; TM lowered its sales forecast by 3.5% for the FY saying semiconductor shortages dampened production (now sees 8.5M cars produced down from its prior forecast of 9M) while revenue last quarter fell 4.5% y/y; Foxconn will launch an $8 billion investment in Indonesia in the third quarter of this year to manufacture electric vehicles (EVs) and batteries, an Indonesian minister; auto retailers LAD, PAG also out with earnings as both reported Q4 profit and revenue above analysts’ estimates

·     Consumer Staples; CHEF 4Q adj EPS $0.26 vs est. $0.19 on sales $558.3Mm vs est. $508.2Mm; guides FY22 sales $2.1-2.2B vs est. $2.1B and adj EBITDA $99-111Mm vs est. $106.9Mm; PFGC 2Q adj EPS $0.57 vs est. $0.50 on revs $12.8B vs est. $12.8B, qtrly total case volume +40%; guides 3Q sales $12.9-13.1B vs est. $12.6B; sees FY sales $50-51B vs est. $50B; REYN Q4 adj EPS and revenue beat estimates, though Q1 and FY adj EPS outlooks were below consensus; LRLCY shares move higher intraday after reporting strong Q4 revenue and profit growth while targeting further growth in 2022 and raising its dividend by 20%

·     Restaurants; CMG reports Q4 EPS and sales above consensus as comparable sales growth of 15.2% for Q4 was above est. 14.8%, helped by higher online sales while qtrly digital sales +3.8% (41.6% of sales) and forecasts comparable sales growth in the range of mid-to-high single digits; YUMC 4Q adj EPS $0.03 vs est. $0.20, comps -11% (-12% KFC and -8% Pizza Hut); says January comps improved modestly vs 4Q

·     Casinos, Gaming, Lodging & Leisure sector; in ride hailing, LYFT reported a top/bottom line beat as revs per active rider $51.79 +14.1%, but guides Q1 adjusted EBITDA between $5M-$15M versus $75M in Q4 and Q1 revs $800M-$850M below est. $985.8M (ahead of UBER results tonight); in gaming, PENN, DKNG, CZR been edging higher this week as 31M Americans are expected to wager $7.6B on the Super Bowl this year, both new records (up 35% and 78% Y/Y); PENN was upgraded to Positive at Susquehanna with $65 tgt; CRSR Q4 results top expectations, sees FY revenue above estimates

Energy

·     Energy stock movers; Inventory data showed: the EIA said weekly crude inventories fell -4.8M barrels vs. +0.369M consensus, -1M last week, with gasoline stockpiles a draw of -1.6M barrels vs. +1.623M consensus and Distillates -0.9M vs. -1.739M consensus. Overnight, the API reported that crude inventories fell 2.025M barrels last week, Gasoline inventories fell 1.138M barrels and distillates fell -2.20M barrels

·     E&P and Majors; group was top laggard on Monday as investors sold 2022 winners amid rotation into cyclicals and technology; NBR shares jumped on mixed earnings; LBRT falls as reported Q4 EPS loss (-$0.31) vs. est. loss (-$0.17), while revenues rose 5% Q/Q to $684M, slightly above ests and Q4 net loss after taxes totaled $57M, compared to a $39M net loss in Q3

·     Utilities & Solar; solar stocks got a boost after ENPH posts EPS beat on stronger revenue and margins, shipping 1,082 MW DC in inverter capacity and just over 100 MWh in energy storage capacity (sees Q1 revenue $420M-$440M vs est. $409M)

Financials

·     Bank movers; CME Q4 adj EPS $1.66 vs. est. $1.64 on revs $1.1B vs. est. $1.17B, average daily volume 20.5M contracts, up 26% YoY; STEP Q3 EPS 42c vs est. 35c on revenue $173M vs est. $147.4M with AUM rising 58% to $127B and Morgan Stanley reiterated its Strong Buy rating as they see compelling value in a 15%+ EPS grower that trades at a 10% discount to its closest peer (HLNE); CNS prelim Jan. AUM $102.1B, down $4.6B from Dec. due to market depreciation of $5.4B and distributions of $200M, partially offset by net inflows $999M; SNV had its PT raised by several analysts (including JPM, Truist, RBC, DA Davidson, and Piper) after its Investor Day

·     Insurance; VOYA Q4 adj EPS $1.90 beat est. $1.52 and had ~$1.5 billion of excess capital as of Dec. 31, largely unchanged from Sept. 30; AIZ Q4 adj EPS $2.47 vs. est. $2.30 on revs $2.57B vs. est. $2.58B, expects 8%-10% adj EBITDA growth in 2022, excluding reportable catastrophes; CNOQ4 EPS 87c vs est. 61c on revs $1.07B, book value per share +8% YoY to $43.69; WTW downgraded to EW at Wells as its weak Q4 organic growth shows it will take time to get back to a level that is close to peers; JMP initiated HIPO at Outperform with a $4 target

·     FinTech & Payments; FLT Q4 adj EPS $3.72 vs. est. $3.60 on $802.3M vs. est. $766.9M, sees Q1 adj EPS $3.45-$3.55 vs. est. $3.52 on revs $740M-$760M vs. est. $746.1M; IIIV Q1 adj EPS 35c vs est. 32c on revenue $73.9M vs est. $70.1M, and raised its FY guidance for adj EPS to $1.28-1.42 from $1.25-1.40 and revs to $288-304M from $280-300M; XP posted a quarterly beat with AUC and active clients both +23% YoY; JKHY Q2 EPS $1.30 vs est. $1.13 on revenue $493.9M vs est. $468M and upped its guidance, now seeing FY adj EPS $4.75-4.82 from prior $4.64-4.73 and adj revs $1.889-1.892B from prior $1.87-1.875B; Mizuho said the fear in SQ after AAPL introduced a Tap to Pay feature on iPhones is unwarranted and the move is potentially more beneficial in the long-term, echoing Barclays’ reaction yesterday

·     Consumer Finance & Lending; CURO Q4 adj EPS loss (29c) vs. est. (35c) loss on in-line revs $224.32M; OpCo lowered their target on SOFI to $18 from $18 but maintained its Outperform rating with shares -47% in the past 3 months as they think it has a better business combination than other newly listed FinTechs; UBS slightly raised their PT on SPGI to $520 from $518 and continue to view as a top idea with the close of the INFO deal within reach and due to strong earnings growth from its healthy core business trends, aggressive buybacks, and upside to deal synergies that does not appear to be priced in; RBC lowered their estimates on MCO (reports tmrw AM) with a new $403 PT from $450 as they tend to guide conservatively compared to SPGI; MBA mortgage applications index fell 8.1% in week ended Feb. 4 after rising 12.0% in prior week, while purchases down 9.6% after rising 4.0% in prior week and refi’s fell 7.3% after rising 18.4% in prior week as the avg. 30-yr fixed rate 3.83%

·     REITs; Ahead of earnings in data center REITs, Cowen favors smaller cap OP-rated SWCH CYXT and are less positive on MP-rated EQIX, DLR but prefer DLR to EQIX in the near-term, and are incrementally negative on OP-rated GDS; UDR Q4 adj FFO in-line 54v on revs $348.2M vs est. $337.7M and its views for adj FFO in Q1 of 50-52c and FY $2.02-2.10 were short of est. 54c, $2.27; NNN Q4 FFO 77c vs est. 75c on revs $187.2M vs est. $181.8M, sees FY adj FFO $3.01-3.07 vs est. $3.09; EGP Q4 FFO $1.62 vs. est. $1.58 on revs $107.37M vs. est. $106.38M, same property NOI +6.4% on a cash basis and +8.1% on a Straight-Line Basis; PEAK Q4 adj FFO in-line 41c, guides FY adj FFO $1.68-1.74 vs est. $1.74; HIW Q4 FFO $1.06 vs est. $0.98 and EPS $1.19 vs est. $0.72 on revs $203.2M vs est. $199.8M, sees FY22 FFO $3.76-3.92 vs est. $3.86; DEI Q4 FFO 48c vs est. 49c, sees FY FFO $2.01-2.07 vs est. $2.06

Healthcare

·     Pharma movers; TEVA posted Q4 profit that topped expectations but rev that missed, as COVID-19 continued to impact patient behavior and prescribing patterns (swung to a net loss of $159 million) and guided FY22 PS $2.40-$2.60, below est. $2.67 and revs $15.6B-$16.2B vs. est. $16.1B; BMY in $5B aggregate accelerated buyback pacts; GSK reported higher net profit and sales for the final quarter of 2021; AVRO reported positive interim data for its ongoing phase 1/2 clinical trial of its gene therapy for cystinosis.; in cannabis, CGC Q3 results beat analysts’ estimates as Q3 net revenue declined by 8% to C$141M Y/Y, as strong growth in consumer products revenue was offset by the decline in Canadian cannabis sales; TLRY said SweetWater Brewing Company expands distribution across California

·     Biotech movers; VERU 1Q EPS ($0.08) vs est. ($0.12) on revs $14.1Mm vs est. $13Mm; cash & equivalent $116.1Mm, says phase 3 covid registration program receives FDA fast track designation with clinical results expected in 1H22; SLN reported positive data from its phase 1 single-ascending dose study of SLN360 in healthy adults with high Lipoprotein, or Lp(a).

·     MedTech Equipment; INSP reported Q4 revenue of $78.4M, at the top end of their preliminary range and positive adjusted EBITDA for the first time in the Company’s history along with higher revenue guidance; QGEN 4Q revenue of $582mn beat consensus of $528mn, as 4Q EPS of $0.74 beat consensus of $0.60 and total revenue growth of 2% came in well above consensus of -7.5%

·     Healthcare Services; CVS shares slip as beat on top and bottom line for Q4 but only reaffirmed its year forecast; DOCS reported its biggest revenue outperformance to date as customers increased spend that converted to revenues more quickly; THC upgraded to Buy from Hold at Truist after earnings; HCSG falls as posts Q4 EPS miss of $0.03 vs. est. $0.13 while revs slightly better at $420M saying results reflect margin pressures from workforce availability, inflation, supply-chain disruption

Industrials & Materials

·     Aerospace, Industrial & Machinery; RSG agreed to buy ECOL for $48 per share in cash, or a total value of about $2.2B, including debt as deal represents a 70% premium to Tuesday close https://bit.ly/3GxNTlX ; TGI Q3 adj EPS 21c vs est. 20c on sales $319.2M vs est. $371.8M as increased margins and cash flow helped offset the short-term deferral of 787 sales, raised its FY adj EPS view to 80-90c from 68-88c and now sees sales ~$1.5B for the year from its prior $1.5-1.6B range; GEVO started at Buy at Citi as it is just months away from a potential inflection point in its CF generation profile, from negative over the past several years to positive by 2023/2024

·     Transports; HUBG Q4 exceeding expectations on the top & bottom line as exceptional freight demand drove pricing strength across the board despite the congestion in the network and ‘22 guidance came in well above previous forecasts; XPO reported a 4Q that came in above expectations and offering a first look into 2022 coming in well above consensus forecast; the Baltic Dry Index posted its biggest daily percentage gain since February 2021, boosted by stronger rates across vessel segments – the index rose 208 points, or 13.8%, to 1,711 (shares of DSK, EGLE, GNK, SHIP, SB, SBLK among names that move on data)

·     Metals & Materials; VALE upgraded to Outperform from Neutral at BNP Paribas; iron ore futures in China plunged more than 6% on Wednesday, snapping a five-session rally, after authorities pledged to strengthen supervision of the market and crack down on any irregularities; MP upgraded to Buy from Hold with $47 tgt at Benchmark; CCK reported 4Q adj EPS of $1.66 vs. est. of $1.54, with the beat largely driven by increases in BevCan and transit packaging sales unit volumes; in chemicals, FMC reported 4Q adjusted EPS/EBITDA of $2.16 / $377mm, above ests as ’22 guidance of ~7% revenue growth is a solid positive, though EPS guidance of $6.80- $8.10 (without buybacks) is wide range

Technology, Media & Telecom

·     Internet; BABA shares rebound early after Softbank Group Corp (SFTBY) said there was no link between Alibaba registering a U.S. share facility and any specific plans to sell down its stake in the Chinese e-commerce giant (recall shares fell Monday on speculation Softbank could be selling shares

·     Semiconductors; Per latest Mercury CPU data, AMD continued its unit share gains vs. INTC on the server side, though ceded some share to Intel on the client side on a q/q basis. In servers, AMD gained further share on both a q/q basis and on a y/y basis. On the client side, in desktops, Intel gained share on both a q/q and a y/y basis; GFS Q4 revenue and profit topped ests in Q4 (18c/$1.85B vs. est. 11c/$1.81B)and said in past year it entered into 30 "significant" long-term customer agreements that provide revenue visibility; IIVI 2Q adj EPS $0.92 vs est. $0.87 on revs $807Mm below est. $817Mm and guides 3Q revs $785-825Mm below est. $831.1Mm; AMD upgraded to buy from outperform at Daiwa Securities

·     Software movers; NEWR tumbles as qtrly revenue grew 22% y/y, accelerating from 18% in the September quarter and 8% in the year-ago quarter, but Q4 guide implies rev y/y growth of 19%, decelerating from the 22% growth in the December; PAYC posted strong Q4 results and provided 2022 guidance of 25% top-line growth, above consensus and buy-side expectations with strong Y/Y comparables; MODN delivered 1Q revenue & profitability ahead estimates and 2Q/FY22 guidance above for revenue & EBITDA as well with better Subscription revenue (+21% y/y), above guide profitability, and 37% y/y RPO

·     Hardware, Components & Services; PERI posts better-than-expected Q4 results with revenue/EBITDA coming in at $158M/$28.9M vs consensus $145M/$23.9M, driven by terrific demand in display as well as its diversified service offering, and raises outlook for FY22

·     Media & Telecom movers; Dow component DIS is expected to report earnings after the close tonight; FOXA reported higher revenue in Q4 to $4.44B vs. est. $4.27B on better EPS as advertising sales continued to improve, rising about 6% y/y due to pricing strength at its Fox network, as well as from live sports and Tubi, Fox’s entertainment streaming platform; MSGE quarterly results miss as revs of $516.4M misses the $544M estimate; in advertising, OMC shares jump on big earnings beat (ahead of IPG earnings tomorrow)