Closing Recap

Thursday, May 02, 2024

U.S. stocks with a full-blown rally with NYSE breadth over 3 to 1 advancers leading decliners, with 9 of 11 S&P sectors finishing higher (and three of the sectors with 1% gains), ahead of key Apple (AAPL) earnings tonight in the tech sector (last of Mag 7 to report) and ahead of key jobs data tomorrow morning. Stocks rallied after a brief blip lower shortly after the open but saw no profit taking like we did late Wednesday after the Fed meeting into AAPL earnings after the close tonight (shares +2%). Estimates for April Nonfarm Payrolls Friday morning (8:30 AM ET) are for 243K added jobs (prior 303K), Private Payrolls est. 190K (prior 232K) and manufacturing Payrolls for April est. 5K (prior 0K), the Unemployment Rate expected to hold steady at 3.8% and wages to rise +0.3% M/M. The economy has been showing some hiccups of late, but jobs have remained strong (ADP this week beat). Treasury prices rallied as yields pulled back (10-yr below 4.58%), while gold was steady, and Bitcoin bounced after weeks of selling. Basically, the hangover from yesterday’s less hawkish than feared FOMC press conference continued to define trade today. Dow Transports outperformed (+2.7%) behind CAR, CHRW earnings results; semis rebounded behind QCOM, MPWR results, and consumer staples outperformed behind gains in food (K, UTZ, SFM). All eyes on AAPL and jobs for the next clue to direction of markets.

• March exports -2.0% vs Feb +2.2%, imports -1.6% vs Feb +2.3%; U.S. March exports $257.62B vs Feb $262.93B, imports $326.99B vs Feb $332.39B; U.S. March capital goods imports $75.73B vs Feb imports $75.67B; U.S.-China March trade deficit $17.17B vs Feb deficit $19.88B.
• March factory orders +1.6% in-line with consensus +1.6% and vs Feb +1.2%; factory orders ex-transportation +0.5% vs Feb +1.1% (prev +1.1%); factory orders ex-defense +1.4% vs Feb +1.6%; March Durables orders unrevised at +2.6% and March nondurables orders +0.6% vs Feb +1.7%; nondefense cap orders ex-aircraft revised to +0.1% from +0.2%.

• Treasuries rose ahead of a barrage of US data that may support bets the Federal Reserve will still cut interest rates this year, despite signs the downtrend in inflation has stalled. The yield on 10-year Treasuries fell as much as four basis points to 4.59%, extending gains that followed Fed Chair Jerome Powell’s remarks on Wednesday.

• In Retail: UBS a few rating changes as they upgraded BURL to Neutral from Sell and tgt to $212 from $126 and TJX to Buy (raise tgt to $132) as believes Off-Price retailers like BURL will take more share from Department Stores than previously thought. The firm also said macro risks have lessened and BURL has more EBIT margin expansion potential than previously modeled.
• In Food: Kellanova (K) shares rise initially on results adds to gains on Reuters report TOMS Capital has taken stake; shares of PPC, SAFM, UTZ among names in food space all rising on earnings results this morning; SHAK shares rose following earnings results in restaurants.

• In Home Furnishing: Wayfair (W) forecasts Q2 sales flat to slightly positive, est. down 2%; Active customers increased 2.8% on year to 22.3 million as of March 31 and customer growth accelerated from the prior quarter; Q1 revs $2.73B beat $2.64B though revs in U.S. decreased 1%, while international revenue fell 5.8%.

• In Food delivery: DASH declines after guiding Q2 profit below expectations (EBITDA $325M-$425M vs. est. $393.8M) saying higher costs were offsetting some of its gains from rising groceries and food orders; shares of UBER declined initially in sympathy.
• In Casinos: BALY posted a larger Q1 EPS loss (-$3.61) vs. est. loss (-$1.11) on weak revs $618.5M vs. est. $626.8M saying casinos and resorts revenue was up 4.1% in Q1, while international interactive revenue was down 4.4%; MGM Q1 adj EPS and revs ($0.74/$4.38B vs. est. $0.62/$4.24B) topped consensus as Las Vegas Strip Resorts net revenue rose 3.6% y/y to $2.26B and Q1 MGM China net revenue +71% y/y to $1.06B. PENN posted a Q1 loss while revs slipped -4% to $1.61B just below the $1.63B estimate – said “ESPN BET continued to attract new users while maintaining a disciplined approach to promotions and marketing expenses; however, our financial results were impacted by lower-than-expected hold and spend per user”
• In Leisure: PTON shares jumped initially before falling after saying Barry McCarthy is stepping down as chief executive and that the company will reduce its global workforce by 15%, or about 400 employees.

• In Solar: FSLR reported 1Q results ahead of estimates and reaffirmed 2024 guidance broadly in line with expectations. The Company is awaiting a response to a petition from a coalition of U.S. solar manufacturers calling for AD/CVD tariffs and an end to the bifacial exemption from the Commerce Department; NOVA shares rallied despite Q1 revs missed at $161mm vs. $194mm and EBITDA came in at $46mm vs. $50mm while lowered customer additions to 140-150k vs. 185-195k prior.

• In Lending/Consumer Services: SYF & BFH both upgraded to OP from MP at KBW Inc. as believe much of the uncertainty related to the late fee regulation for the private label card issuers is diminishing along with recent positive developments on the court front. When we incorporate conservative assumptions, we still get significant upside potential from current levels for the stocks that compensate investors enough for the associated risks. In Mortgage Service, RDN and MTG both posted quarterly earnings beats.

• AFL Q1 adj EPS $1.66 vs. est. $1.58; Q1 revs rose 13% y/y to $5.4B vs. est. $4.3B; Q1 U.S. net premium income $1.5B, +7.1% y/y, above est. $1.45B; average yen/dollar exchange rate in the first quarter of 2024 was 148.67, or 11.0% weaker than the average rate of 132.30 y/y.
• ALL Q1 adj EPS $5.13 vs. est. $3.94; Q1 revs $15.26B vs. est. $12.88B; Q1 Property-Liability earned premiums of $12.9 billion increased 10.9% y/y; Underwriting income of $898 million in the quarter increased by $1.9 billion y/y; Q1 Premiums written of $13.2 billion increased 11.9% compared to the prior year quarter.
• LNC shares tumbled following its Q1 revenue missing estimates.
• MET Q1 adj EPS $1.83 vs est. $1.82; Q1 revs $16.06B vs $15.39B last year; board approves new $3B share repurchase authorization; Q1 net investment income $5.4B and Q1 premiums, fees, other rev $12B; overall, KBW said posted Q1 headline Beat but group results are weaker.

• INN Q1 results beat consensus and management’s expectations on adjusted EBITDA and adjusted FFO while management affirmed 2024 adjusted EBITDA and adjusted FFO.
• MAA 1Q24 Core FFO was in line with expectations, and management tightened the range but affirmed the midpoint of 2024 Core FFO guidance.
• NSA reported Core FFO of $0.60, slightly below consensus of $0.61, though management affirmed its FY24 Core FFO guidance of $2.40-$2.56 as it remains early in the year.
• PLYM reported 1Q24 Core FFO of $0.45, which fell short of consensus by $0.02/sh. However, management maintained its full-year guidance and all the assumptions underlying its outlook, as the quarter appeared to play out as anticipated: cash SSNOI growth of 7% is at the low end of the FY forecast.
• RLJ Q1 adjusted EBITDA and adjusted FFO missed consensus expectations but were in line with management’s guidance, and 2024 guidance was affirmed. Management previously indicated 1Q24 RevPAR growth would fall below the low end of its full-year guidance range.
• VICI 1Q24 AFFO was in line with consensus of $0.56 and management affirmed its FY24 AFFO guidance.

• EBS shares surged after saying it would cut about 300 jobs across all areas of the company and shut down several manufacturing facilities as part of a restructuring plan; raises FY24 revenue view to $1B-$1.1B from $900M-$1.1B and boosts FY24 adjusted EBITDA view to $125M-$175M from $50M-$100M.
• JAZZ reported 1Q24 revenues of $902mn/Cons $954mn and EPS of $2.68/Cons $4.18, with new products maintaining double-digit growth trajectories (+12%); reaffirmed 2024 guidance of revenues of $4.0-$4.2bn/Cons $4.091bn (+7% at mid-point) and EPS of $18.15-$19.35/Cons $18.95.
• MRNA reported 1Q revenue ahead of street at $167M (vs $99M cons), led by Spikevax sales ($167M vs. $81M est.) though some appears a pull forward while operating costs also showed progress with SG&A and R&D well below.
• NVO raised its full-year guidance as sales of its weight-loss drug Wegovy more than doubled in the first three months of 2024; said Q1 net sales jumped 22% to 65.3B Danish kroner ($9.1B), beating estimates while sales of its popular diabetes treatment Ozempic rose 42% to 27.8B kroner, while sales of anti-obesity drug Wegovy surged 106% to 9.4B kroner.
• NVS reported results, raised guidance, and entered into an agreement to acquire US radiopharmaceutical company Mariana Oncology for $1 billion, which includes $750 million of potential further payments upon achieving certain milestones.
• SRPT shares rise on earnings and following its announcement that it will be provided with a draft label imminently regarding Elevidys’ potential expansion across ages/ambulatory status and conversion to full approval.
• SWTX reported a significant beat on 1Q24 product revenues of $21.0M vs. consensus of $11.9M.

• CI 1Q24 adj. EPS of $6.47 vs. est. $6.22, and the company raised its FY24 EPS guidance by $0.15 to >$28.40 (vs. >$28.25 prior) on a stronger Cigna Healthcare outlook (10bp lower MLR).
• OMCL said management committed to wind down of company’s MediMat robotic dispensing system product line and expects to reduce its international workforce by more than 80 employees and to close its production facility in Bochum, Germany.
• ZBH Q1 revenue of $1.89B (vs. $1.87B est.) was +4.4% constant currency, with better OUS Knees, S.E.T and Other Product Sales balancing slightly light Hips; operating margins were 60 bps ahead, aiding EPS of $1.94 and maintained its FY rev guide.
• ZTS Q1 revs of $2.19B vs. $2.14B est. with Companion Animal and Contract Manufacturing ahead, while Livestock came in below; Q1 EPS was $1.38 vs. $1.34 cons and operational rev growth guidance was raised to 8.5% to 10.5% (vs. 7% to 9% prior).

• In Industrials/Components: ENVX shares jumped as announced formal development agreement announced with a top-5 smartphone OEM, revealed that 2 “leading smartphone OEMs” would be first to market with Enovix batteries in 2025 and mgmt also unveiled that it expects its future lines to produce ~11.5M smartphone cells per year, more than previous expectations of 9.5M/year/line.
• In Transports: Truckers/Logistics get a much-needed bounce after CHRW results were better than feared, lifting shares and the group overnight, which had been reeling from lower results/commentary last 2-weeks (ODFL, SAIA, KNX); CHRW Q1 EPS $0.86 vs. est. $0.62; Q1 revs fell -4.3% y/y to $4.4B vs. est. $4.27B; Q1 adjusted operating margin down 420bps to 19.3%; said the decline in revenue was primarily driven by lower pricing in its truckload services. In car rental, CAR shares rise on mixed results with wider loss but Q1 revs $2.55B vs. est. $2.41B; said ended the quarter with revenues of $2.6B, driven by strong travel demand; Q1 net loss was $113M and adj EBITDA was $12M.
• In Aerospace & Defense: HWM boosted its 2024 revenue, profit forecast after Q1 and Q2 results/guide beat; FY revenue and adjusted EPS forecasts higher than previous outlook and higher than analysts estimate saying sees demand for air travel continuing to be robust, and exceeding pre-pandemic levels.

• In Chemicals: CTVA reported 1Q24 EBITDA of $1,034B vs. est. $1.01B as beat in Seeds was driven by earlier planting vs. expectations, but also healthy pricing. The more challenged Crop Protection business performed ahead of forecasts with volume falling a less severe 18% vs. our -26% forecast and a 3% price decline vs. our 6% (Keybanc ests).
• Ag Chemicals: CF reported 1Q24 adjusted EBITDA of $459M, significantly below Street $603M, as miss was largely driven by higher costs as a result of planned and unplanned turnarounds and Ammonia production was also low enough to limit volumes of upgraded products; MOS Q1 top/bottom line miss saying selling price for potash fell to $241 per tonne in the quarter from $421 per tonne a year earlier, while phosphate prices fell 9.4% to $598 per tonne and lowers volumes for year.

• In Media: the sage for PARA continued as the New York Times reported Sony and Apollo express interest in buying Paramount in $26 Billion Deal; notes Paramount has been exploring a potential deal for months, talking to suitors including Skydance, producer of “Top Gun: Maverick.” https://tinyurl.com/y64b2y6n

• APPN shares slid after guiding Q2 revs $140M-$144M vs. est. $145M.
• CTSH reported stronger than expected Q1/CY24 results while maintaining CY24 guidance.
• FRSH tumbled as reported mixed Q124 results, with non-GAAP EPS of $0.10 (consensus $0.08) on revenue of $165M (consensus $164M), up 20% y/y (19% cc), flat sequentially; and billings of $175M (consensus $177M), up 14% y/y as reported (14% cc), down from 22% y/y as reported (20% cc) in Q4.
• FSLY shares tumble as missed revs slightly for the second straight qtr. & significantly cut CY24 guidance as growth outlook was lowered from +15-17% Y/Y to just +10-12% Y/Y as towards the end of Q1, sending shares lower.
• MDB and Google Cloud collaborate to Optimize Gemini Code Assist for developers building applications on MongoDB.
• PAYC posted a modest 1Q revenue beat and better EBITDA. Despite a slight 1Q outperformance, the Company is maintaining its 2024 revenue guidance.
• PTC delivered another solid quarter, with all key metrics above guidance Stret estimates, despite a still-mixed macro as growth remains balanced across geographies said Stifel.
• TENB delivered a strong Q1 with results beating the top and bottom lines while raising its FY24 guidance across the board as the co continues to build more momentum with its unified Tenable One platform across cloud, identities, VM, and IT/OT.
• Unity (U) announced the appointment of Matthew Bromberg as its new CEO. Mr. Bromberg will become Chief Executive Officer, President, and a Board member, effective May 15, 2024, six days after Unity reports its Q1:24 results.

• MPWR reported strong 1Q results and 2Q guidance, which exceeded expectations, as mgt noted that it saw improving booking trends throughout 1Q but remains cautiously optimistic regarding the outlook for the 2H.
• QCOM shares rose as posted strong F2Q (Mar) results and F3Q (Jun) guidance, which solidly exceeded expectations as high-end Android smartphone demand remains robust. Additionally, despite broader auto weakness, QCOM saw strength as its new platforms continue to ramp, while mgt increased its auto design win pipeline.
• QRVO shares tumbled after softer Q1 revs of $850M plus/minus $25M vs. est. $917.7M; and on the sequentially declining sales and contracting gross margin, the company guided to June quarter EPS of $0.60-$0.80, with a $0.70 mid-point that fell $0.57 consensus.
• TTMI was upgraded to Buy at Stifel and raise tgt to $19 following a solid Q1 report and increasing optimism on growth drivers over the next few quarters, including growing backlog in aerospace and defense (46% of sales), double-digit growth in data center due to AI demand and signs of a recovery in networking.
• WOLF shares tumble on lower guidance as sees Q4 EPS loss (86c) to (72c), vs. consensus loss (-$0.61) and revenue $185M-$215M vs. est. $225.8M as auto chip makers deal with high inventory levels amid slower-than-expected EV sales growth.