Closing Recap

Friday, May 06, 2022

Equity Market Recap

·     US equities again couldn’t hold a rally, finishing moderately lower after yesterday’s drubbing. After testing the support pivot levels pre-market, both the S&P and NASDAQ futures tried to go green a couple times in the morning but were met with selling pressure and unable to hold each time. A late push brought the indices off the lows but couldn’t get back to positive territory as Treasury yields held gains. 

·     Across S&P sectors, Energy, Utilities and Consumer Staples finished green. Communication, Materials and Consumer Discretionary were laggards in the -1% to -2% range.

·     Growth continued to lag as multiple compression remained the theme. Russell 1000 Growth lost about 1%, while Value slid by roughly 0.2%, as has been the recent pattern.

Economic Data:

·     US Nonfarm Payrolls added 428k vs forecast 380k and previous 431k, but labor force participation dipped to 62.2% vs expected 62.5% and prior 62.4% as the size of the labor force contracted for the first time in seven months.

·     US Unemployment Rate unchanged at 3.6% vs forecast 3.5%.

·     US Average Earnings MoM climbed 0.3% against forecast 0.4% and previous 0.4%.

Commodities

·     Gold finished moderately higher but still marked the third straight weekly decline, with Friday’s $1,882.80/oz settlement, or +$7.10 (+0.37%). Silver again lagged, settling -$0.076, or -0.34%, to $22.367/oz.

·     WTI crude closed the week with a gain. After trading in a $108-111 general range overnight and throughout the day, oil settled toward the middle at $109.77/bbl, or +$1.51 (+1.39%). Brent crude also rose, settling at $112.39/bbl, +$1.49 or 1.34%. Today’s gains capped a third consecutive up week for both WTI and Brent.

·     Natural gas slid after yesterday’s gain pushed to the highest level since August 2001. Futures settled at $8.043/mmbtu, -$0.74 or -8.4%.

Currencies & Treasuries

·     US 10-year yield crossed 3.13% and finished near the highs as economic data did little to shift opinions away for concerns about aggressive future rate moves.

·     US 30-year yield climbed to about 3.22%, the highest since 2018, while the 20-year hit 3.45%.

·     The dollar rallied in the afternoon to get back to about the unchanged level after lagging through the morning.

Sector News Breakdown

Consumer

·     Retailers; LESL 2Q adj EPS ($0.01) vs est ($0.02) on revs $228.1Mm vs est $210.7Mm, comps +13.3%; guides FY sales $1.575-1.61B vs est $1.519B and adj EPS $1.02-1.10 vs est $1.00. FND 1Q adj EPS $0.67 beat the est $0.65 on sales $1.03B vs est $1.00B. Company reaffirmed FY view for net sales $4.285-4.375B vs est $4.33B and adj EBITDA $575-610Mm vs est $579.1Mm; says remain on plan to open nine warehouse-format stores in the second quarter and 32 total warehouse-format stores in fiscal 2022, with projected path towards operating at least 500 warehouse-format stores over time, implying only 38% built out by the end of fiscal 2022. UAA was hit hard after disappointing results and guide; 4Q adj EPS of ($0.01) were soft vs est $0.06 on revs $1.3B vs est $1.3B; inventory -3%; guides FY revs +5-7% vs est +5.4%, gr mgn -150-200bps and adj EPS $0.63-0.68 vs est $0.83.

·     Housing & Building Products; BECN reported 1Q EPS $0.61, ahead of the est. $0.51, with 1Q revs +28% to $1.69B vs. est. $1.46B. Management indicated record 1Q net income and adj EBITDA margins were driven by productivity gains and resulting operating cost leverage. BCC posted upside results with 1Q sales of $2.33B vs est $2.19B, adj EBITDA of $426.1Mm vs the Street at $385.8Mm and EPS of $7.61 vs est $6.50. Company said continues to experience steady demand into 2Q across product lines.

·     Consumer Staples; MNST 1Q EPS of $0.55 missed the $0.60 est, but sales of $1.52B beat the $1.44B consensus. Company experienced significant cost increases for freight, fuel, packaging and ingredients and plans a market-wide US price increase in September to help offset the rising costs.

·     Restaurants; TXRH 1Q EPS $1.08 vs. est. $0.91; Q1 revenue $987.486M vs. est. $971.5M; 1Q comp sales rose 16.0% at company restaurants and increased 20.4% at domestic franchise restaurants; comparable restaurant sales at company restaurants for first five weeks of 2Q increased 9.3% compared to prior year. SG 1Q EPS loss (-$0.45) vs. est. (-$0.41); 1Q revs $102.6M vs. est. $101.55M; 1Q comp sales rose 35% vs. (26%) in the prior year period; reaffirms year revs and comp sales

·     Casinos, Gaming, Lodging & Leisure sector; VAC 1Q adj EPS $1.70 beat the est $1.53 on revs of $1.05B vs est $1.04B. Company reaffirms revs guidance and sees FY adj EPS $9.13-10.09 vs est $9.22.

Energy

·     E&P and Majors; EOG 1Q adj EPS $4.00 vs. est. $3.72; 1Q revs $3.98B vs. est. $5.78B; declares $1.80 per share special dividend; qtrly total crude oil equivalent volumes 883.3 MBoed; sees 2Q total crude oil equivalent volumes 864.3-927.0 MBoed and FY oil equivalent 858.3-933.7 MBoed.

·     Utilities & Solar; SPWR 1Q EPS $0.02, in-line with estimates; 1Q revs $336.1M vs. est. $334.1M; affirmed prior 2022 guidance of $2,000-$2,400 adjusted EBITDA per customer. NRG 1Q adj EBITDA $509Mm vs est $505Mm on revs $7.9B vs $8.1B yr ago; maintains FY adj EBITDA and FCFBG guide; says $301Mm completed on $1B share repurchase program through April 30, 2022.

Financials

·     Banks; ING reported 1Q miss with net income EUR429Mm vs est EUR679Mm and EUR1.01B year-ago. Results included incremental provision for bad loans related to Russia/Ukraine exposure, but results outside the Russia impact also were soft.

·     Insurance; AGO 1Q adj EPS of $1.34 beat by $0.49, with revs of $300Mm also ahead of the Street. Puerto Rico settlements benefit to adj operating income was $63Mm in the quarter.

·     FinTech & Payments; SQ 1Q adj EBITDA 195Mm vs est $184Mm on revs $3.96B vs est $4.16B; processed $43.5B GPV +31%; afterpay contributed $65Mm revenue to cash app; cash app generated $1.73B of bitcoin revs and $43Mm bitcoin gross profit during 1Q. MELI 1Q EPS of $1.30 beat est $1.25 on revs $2.2B vs est $2.0B; qtrly gross profit of almost $1.1B +81.5% in dollars and GMV $7.7B +31.6% in local currency.

·     Consumer Finance; TREE downgraded at Northland, says no easy fix to lack of EBITDA growth or margin improvement. Company had mixed report yesterday with soft guide.

·     REITs; APLE AFFO/shr $0.28 beats by $0.02; revs of $260.5Mm beats by $5Mm, says operations across hotel portfolio have sequentially improved each month this year. Positive momentum carried into April, with RevPAR for the month up vs April 2019.

Healthcare

·     Pharma; The FDA limited the use of the JNJ covid vaccine after nine deaths were confirmed related to a clotting condition among JNJ vaccine recipients. Per WSJ, “The agency said Thursday that the J&J shot’s authorization was now only for adults for whom other shots aren’t available or medically appropriate, or who won’t take another vaccine.” BHC will fall short of its target for the Bausch + Lomb Corp. IPO. The deal priced at $18/shr versus the target range of $21-24/shr.

·     Biotech; TWST 2Q beat on EPS ($1.13) vs est ($1.28) and revs $48.1Mm vs est $45.3Mm; guides FY revs $191-199Mm vs est $194.7Mm and net loss approx $260-265Mm vs est net loss $256Mm.

·     MedTech Equipment; PODD reported 1Q EPS of $0.40, ahead of the est. $0.23. 1Q revs of $295.4M also beat the est. $288.2M. Company sees 2Q revs up 12%-15% vs est +12% and FY revs up 12%-16% vs est +13.2%.

·     Healthcare Services; MCK reported 4Q adj EPS $5.83, short of the est. $6.04 on 4Q revs of $66.1B vs. est. $63.61B; sees FY23 adjusted EPS 22.90-$23.60 vs. est. $23.11; continues its focused execution on company priorities including its planned exit from the European market.

Industrials & Materials

Industrial & Machinery; MTZ decent qtr, but cuts outlook; 1Q adjusted EPS loss ($0.03) vs. est. loss ($0.11); Q1 revs $1.95B vs. est. $1.79B; lowers FY22 adjusted EPS view to $4.22-$4.47 from $5.32 (est. $5.24); currently expects full year 2022 revenue to approximate $9.2B, down from prior view of $9.95B. STEM 1Q EPS ($0.15) vs est ($0.09) on revs $41.1Mm vs est $28.9Mm; reaffirms FY revs guide $350-425Mm vs est $379.6Mm and adj EBITDA ($20Mm)-($60Mm) vs est ($33.4Mm). TPIC reported 1Q EPS of ($0.71), beating the Street view of ($0.87) on sales of $384.9Mm vs est $389.6Mm.  Shares also saw an upgrade from Neutral to Buy with a $16 pt at Roth.

Technology, Media & Telecom

·     Internet; DASH 1Q EPS loss (-$0.48) vs. est. loss (-$0.41); 1Q revs $1.456B vs. est. $1.38B; 1Q orders grew 23% Y/Y to 404M. Marketplace GOV grew 25% Y/Y to $12.4B; said in 1Q, added more new consumers than any quarter since 1Q21.

·     Software & Services; FLT top and bottom line beat and guides above, with 1Q adj EPS $3.65 vs est $3.53 on revs $789.2Mm vs est $756.5Mm; guides 2Q revs $805-825Mm vs est $781.4Mm and adj EPS $3.80-3.90 vs est $3.72; sees FY revs $3.335-3.385B vs est $3.257B and adj EPS $15.45-15.75 vs est $15.49.  TWOU 1Q adj EPS ($0.24) vs est $($0.26) on revs $253.3Mm vs est $252.9Mm; affirmed revs guidance. HUBS ok qtr, but guides 2Q light; 1Q adj EPS $0.54 vs est $0.47 on revs $395.6Mm vs est $382.9Mm; sees 2Q revs $409-410Mm vs est $411.7Mm and adj EPS $0.42-0.44 vs est $0.51; sees FY revs $1.722-1.728B vs est $1.729B and adj EPS $2.40-2.42 vs est $2.41. TDC 1Q EPS $0.65 vs. est. $0.63; 1Q revs $496Mm vs. est. $489.2Mm; guides 2Q EPS $0.26-$0.30 vs. est. $0.51 and lowers its year EPS view to $1.55-$1.65 from $1.82-$1.92 (est. $1.89) – said ceasing operations in Russia is expected to have a negative impact to total ARR of $55Mm, total revenue of $60Mm, and non-GAAP diluted EPS of 29c.

·     Media & Telecom; FUBO results a bit soft and lowers subs guide, reported 1Q adj EPS ($0.69) vs est ($0.64) on revs $236.7Mm vs est $243Mm; sees 2Q N.Am revs $220-225Mm and FY N.Am revs $1.02-1.03B; guides North America subs 1.47 million to 1.49 million, saw 1.50 million to 1.51 million and rest of world subs 300,000 to 310,000, saw 270,000 to 280,000. WWE 1Q beat on EPS $0.77 vs est $0.63 and revs $333.4Mm vs est $328.8Mm; reaffirms FY guide. DISH reported pay-tv subs of 10.25Mm (-462,000) and sling tv subs of 2.5Mm, both below Street expectations. Rev of $4.33B was roughly in-line with the 4.38B estimate.