Closing Recap

Friday, May 07, 2021

Equity Market Recap

·     The S&P 500 and Dow Jones Industrial average each made new respective all-time highs today despite the biggest miss in non-farm payrolls since at least 1998. The Nasdaq was the best performer among the three major indices today, spiking on the jobs miss amid the assumption of continued dovish monetary policy, supporting high-growth names. However, the tech-heavy index finished lower for the third consecutive week. The Dow Transports index continued its incredible run, also hitting record levels and extending its streak of consecutive weekly gains to 14. Earnings season marched on but is nearing its end as 438 of the S&P 500 companies have now reported. FactSet reported that these quarterly reports have stood out to the upside as 86% of the S&P 500 have beat their EPS estimates, which would be the highest since they started tracking the metric in 2008. Additionally, they note the S&P’s blended earnings growth of 49.4% in the quarter would be the highest YoY earnings growth rate since 1Q2010 if it holds. Infrastructure stocks saw a bounce in the morning after Speaker of the House Pelosi and the White House each pushed for an infrastructure bill to respond to the tepid jobs growth.

·     Stock and Sector movers: S&P and Dow touch new record highs, while Nasdaq outperforms as a disappointing jobs report tempers fears of the Fed tightening its policy. PTON bounces after falling the last 2 sessions on its treadmill recall after it reported a top and bottom line beat with strong subscriber growth; ROKU another stay-home beneficiary surging on earnings as its quarterly profit, revenue, and guidance all top expectations; SQ follows PYPL earnings yesterday, with both reporting strong beats on crypto demand; Food/beverage names falling on earnings include BYND hitting 52-week lows after its EPS and revs were weaker than estimates, SHAK on its rev miss, and MNST as the worst performer in the S&P on its EPS and margin misses; in theaters, AMC jumps on its optimistic outlook and CNK moves higher after its revenue topped estimates, while EXPE soars on its strong beat though TRIP shares show little reaction to its rev beat in online travel, PLNT slides on its disappointing EPS/revs miss, and LYV spikes on its EPS beat and optimistic outlook for 2022 among reopen-related earnings; DDOG NET soar in cybersecurity on their beat-and-raise reports.

Economic Data:

·     Monthly Jobs data much weaker than expected: Nonfarm payrolls for April rose 266K vs. est. 978K (revisions – March +770,000 (previous +916,000), February +536,000 (previous +468,000); private payrolls rose 218K vs. est. 893K, and manufacturing payrolls rose fell -16K vs. est. 55k; the unemployment rate rose to 6.1% vs. est. 5.8%

·     U.S. March wholesale sales +4.6% vs. est. +1%; vs. Feb unchanged (previous -0.8%); March wholesale inventories revised to +1.3% vs. est. 1.4%

Commodities, Currencies & Treasury’s

·     Gold prices rose $15.60, or +0.9%, to settle at $1813.30/oz and cap off its best week since October, rising on the day, while the Dollar index (DXY) slides (down -0.65% to around 90.25) as the weak jobs report contributes to the notion that the Fed will continue implementing a dovish policy. Oil prices moved higher by 19 cents, or 0.3%, to settle at $64.90 per barrel, erasing early declines on the jobs miss and despite India reporting yet another record rise on Covid cases today. Treasury yields tumble initially after the weak jobs report, with the 10-year hitting a morning low around 1.47% but fights back all day to end up 2 bps at 1.58%.

Sector News Breakdown

Consumer

·     Retailers; PTON posts record quarterly revenue of $1.26B, topping estimates, while did not offer an outlook for the year (recently plunged after it voluntarily recalled some of its treadmills and offered refunds); Adidas (ADDYY) raised its outlook as now sees sales growing at a high-teens percentage rate in 2021, compared with a March forecast for mid-to-high teens growth, with a jump of around 50% expected in the second quarter; FNKO reported 1Q21 EPS of $0.24, better than the Street at $0.11, and up from ($0.04) with growth was across all segment, lapping easy 1Q20 comparisons; FOXF reported 1Q21 EPS beat on stronger gross margin and lower tax and guidance raised by more than beat; RVLV sales beating by $20M (or +22% Y/Y), and indicated April trends were not only up 100% Y/Y but +30% vs. 2019

·     Housing & Building Products; BECN strong Q2 as strong residential roofing demand, higher prices, and improved operating performance are driving EBITDA/cashflows; BLDR tgt raised to $60 at BMO after calling it a remarkable Q1 and saying strong single-family housing demand and record-high lumber prices will turbocharge Q2 EBITDA; in furnishing, ETH upgraded to Buy from Hold with $40 tgt at Argus saying the co is recovering from the pandemic and recently posted fiscal 3Q21 sales and earnings that topped consensus expectations; FND posts EPS of 65c beat on stronger comps (+31 vs est. +25) and OMs

·     Consumer Staples; BYND slides after missing on top and bottom line (Q1 adj EPS loss (42c) vs. est. loss (19c); Q1 revs $108.2M below est. $113.67M); MNST reported 1Q21 pro forma EPS of $0.59 (+14% YoY), which was below consensus of $0.61 driven by weaker-than-expected profit margins, which were partially offset by higher-than-expected net sales growth; SFM reported a strong quarter, with continued improvements in traffic towards the end of 1Q and going into 2Q. E-commerce sales continue to grow at a robust pace and now represent 12.5% of company sales; BRBR Beat and raise, sales a little better, GM a little worse, guides net sales growth of +18% to +21% vs. prior +8% to +13

·     Restaurants; SHAK mixed Q1 as margin miss despite comp sales growth upside as adj. EPS of $0.04 was above ($0.03) consensus on comp sales growth of +5.7% vs -0.5% consensus; EAT was upgraded to Overweight at JPMorgan with an unchanged $78 target following recent pull back; WING downgraded to neutral at Northcoast; CHUY 1Q EPS of $0.42 exceeded consensus by $0.21 largely owing to stronger comps and margins. AUVs relative to 2019 improved exiting the quarter to an ~4% decline and accelerated further to near flat vs. 2019 in April.

·     Casinos, Gaming, Lodging & Leisure sector; DKNG raises 2021 revenue guidance; sees FY revenue $1.05B-$1.15B from $900M-$1b prior after q1 revs of $312M tops the $236.1M est.; said monthly unique payers for B2c segment increased 114% compared to q1 of 2020; on average; PLNT memberships in 1Q grew by 600K from 4Q while EPS missed by 8c; AGS upgraded to Buy from Hold as Q1 EBITDA handily beat our/Street estimates by +22%/+24%; CNK Q1 revenue tops estimates, but posts wider-than-expected loss per share, while AMC posts weaker quarterly revs but co expects business to improve in coming months

Energy

·     E&P and Majors; EOG posted Q1 adj earnings that topped estimates, nearly tripling from a year ago, and declaring a surprise special dividend/said Winter Storm Uri reduced Q1 production by 3%, as total output for the quarter fell 3% Y/Y to 778.9K boe/day; NFG posted Q2 adj EPS $1.34 vs est. $1.20 on revs $551.1M vs est. $604.9M and raised its full-year EPS forecast to $3.85-4.05 from $2.65-3.95; Raymond James upgraded COP to Strong Buy with an $85 target from Outperform with an $80 target as the company generated almost $1B in FCF during Q1 despite a one-time $1B cost related with its CXO acquisition, resulting in RayJay estimating the company generating nearly $2B in FCF every quarter for the next two years; Tudor Pickering upgraded EQT to Buy with a $24 pt

·     Pipelines: ET Q1 adjusted EBITDA nearly doubled from a year ago to $5.04B and easily topped $2.72B analyst consensus estimate and now expects to realize a $2.4B total impact from the Texas winter storm, prompting it to raise full-year adjusted EBITDA guidance to $12.9B-$13.3B from $10.6B-$11B; Credit Suisse reiterated its Outperform rating on LNG and raised its pt to $103 from $86 and lifted its pt on CQP to $35 from $32 as LNG prices have risen to $9/mmbtu with European/Asian imports exceeding 5-year highs with European storage levels below average, and expectations that this market should further tighten until 2024 given limited supply and growing demand

·     Utilities & Solar; NFE reported Q1 EPS (21c) vs est. 1c on revs $145.7M that also missed est. $162.4M; SR Q2 EPS $3.71 on revs $1.1B both topped estimates ($3.08 on $773.1M) and raised its full-year EPS guidance range by 30c to $4.30-4.50; ED Q1 adj EPS $1.44 vs est. $1.36 on revs $3.68B vs est. $3.42B and reaffirmed its 2021 adj EPS guidance $4.15-4.35; CLNE Q1 EPS loss (1c) matched expectations on revs $77.1M that beat est. $75.5M and sees a full-year loss totaling ($76M)

Financials

·     Insurance; AIG Q1 adj EPS $1.05 vs. est. 95c, net premiums written $6.48B (+9%), general insurance underwriting income $73M vs underwriting loss $87M that included $422M of catastrophe losses primarily related to winter storms, book value per common share was $72.37 as of March 31, 2021, down 5.3% from Dec 31, 2020; ATH Q1 adj EPS $3.80 vs est. $2.14 on revs $4.39B, gross organic inflows $8.2B; AGO Q1 EPS 55c vs est. 63c on revs $177M (-9.7% YoY), gross written premium $87M (+36% YoY); RGA posted Q1 EPS ($1.24) wider than anticipated (33c) on revs $4.12B above est. $3.65B; ESGR Q1 EPS $12.98, net premiums earned $92.9M (-41.7% YoY); ESNT Q1 EPS $1.21 and revs $244.8M slightly missed estimates of $1.22 on $246.1M and authorized a $250M share buyback plan; RBC downgraded MFC to Sector Perform while maintaining a $28 PT as they think the next catalyst for the stock is difficult to see and are skeptical of a re-rating of its valuation multiple

·     FinTech & Payments; SQ posts Q1 profit vs year-ago loss as sky-high demand for bitcoin drove a surge in cryptocurrency transactions on its peer-to-peer payment service, Cash App (says Cash App generated $3.51B of bitcoin revenue and $75M of bitcoin gross profit in Q1); Wells named AXP as their top pick for 2021 despite the stock trading at all-time highs due to their belief that the US travel and entertainment recovery is in a hockey stick phase and the company is exiting the pandemic in an even stronger global position; Wolfe upgraded FOUR to Outperform and upped their target to $110 from $95 after the stock fell 12% yesterday following its earnings report pre-market despite raising guidance; PAYA Q1 revs $55.3M vs est. $54.8M, sees FY revs $242-248M (est. $206M), adj EBITDA $64-68M; BILL Q3 EPS loss (2c) was narrower than consensus (7c) on revs $59.7M (+62% YoY) above est. $54.6M, total payment volume $35B (+44% YoY), transaction fees +112% YoY

·     Real Estate; BPY Q1 FFO 32c vs est. 23c on commercial property and hospitality revs $1.34B and investment revs $106M; CWK reported Q1 EPS 11c vs est. (2c) loss on revs $1.9B vs est. $1.77B; RMAX Q1 adj EPS 46c vs est. 45c on revs $12.3M vs est. $74M and sees Q2 sales $74-78M (est. $76.2M) and full-year sales $300-310M (est. $301.5M)

·     REITs; Bank of America downgraded EQC to Neutral on execution risks and valuation after it announced a tax-free stock-for-stock merger with net-lease Industrial REIT MNR, which they say is a smart strategy to transition into a better cash flow growth sector versus office, but valuation and transaction risks including the deal not closing drives the downgrade; LXP posted Q1 FFO 22c vs est. 19c on revs $92.6M vs est. $81.7M; HTA Q1 FFO 44c on revs $191.5M vs est. $189.8M and sees FY21 FFO $1.73-1.79 and updated its FY FFO guidance to $1.70-1.77 from $1.71-1.79; UNIT Q1 EPS (2c) vs est. 2c profit, adj FFO 41c, revs $272.6M vs est. $271.3M, and now sees FY sales $1.083-1.094B that sandwiches the est. $1.09B; PK Q1 adj FFO (48c), EPS (81c) vs est. (85c) on revs $165M and did not issue guidance due to economic uncertainty and travel restrictions continuing to depress hotel operating results; VTR Q1 normalized FFO 72c vs est. 70c on revs $910.3M vs est. $893.5M and sees Q2 EPS 0-7c and normalized FFO 67-71c in Q2 (est. 71c)

Healthcare

·     Pharma movers; CCXI plunges after FDA panel voted 10-8 that the drug’s safety profile was adequate for approval and that its benefits outweigh risks; but experts’ vote was split 9-9 on whether the efficacy data was adequate for approval; TLRY double upgraded to Buy from Underperform with $23 tgt at Jefferies saying when Aphria and Tilray combined, it was the perfect match

·     Biotech movers; IBIO surges as reports successful covid-19 vaccine toxicology study results and announces next-gen covid-19 vaccine program; NKTX and CRSP announce global collaboration to develop gene-edited cell therapies for cancer; NTLA upgraded to Buy with $75 tgt at Roth Capital as co will present first-in-human data from phase I study to treat, and in fact potentially functionally cure, patients with transthyretin amyloidosis (ATTR) in mid-2021.

·     Healthcare Services, Equipment and Devices; TDOC slides after WMT agreed to buy telehealth provider MeMD; CI posts a beat on Q1 EPS and revs and raises both year sales and profit outlook as customer relationships increased to 189.9M from 167M; MCK provided first time FY22 EPS guidance of $18.85-$19.45, which came in entirely above the consensus (FactSet) estimate of $18.80 into the quarter; QDEL rebounds despite quarterly miss (had recently lowered guidance on Apr 22nd)

Technology, Media & Telecom

·     Internet; GRPN posted stronger-than-expected revenue and also raised its full-year 2021 guidance to $950M-$990M from $930M-$980M (also boosted year Ebitda); online travel active after EXPE and TRIP report results – EXPE rises early EBITDA came in well ahead due to the benefits of restructuring and disciplined marketing spend, while TRIP shares slid; CVNA reported strong 1Q21 results, beating on the top and bottom lines, as revs rose 105% y/y to $2.245b, ahead of consensus estimates of $1.96b, driven by 92.5k retail unit sales in the quarter; STMP did not provide 2021 guidance due to uncertainties related to the pandemic and ecommerce outlook, but reiterated a 20%+ increase in investment-related expenses.

·     Semiconductors; MCHP reported a solid MarQ (F4Q21) rev/EPS of $1.5B/$1.85, with price increases to customers and strong orders in the quarter. MCHP guided to a good JunQ better than consensus $1.5B/$1.81, with top-line up ~5.5% q/q and better than peer TXN’s flat q/q top-line guide; SYNA reported good MarQ rev/EPS of $326M/$2.03 and guided JunQ revenue to ~$325M (cons. $311M), flat q/q vs. consensus down 5% with solid GMs to 56.5% (cons. 52.4%), 410bps above consensus, reflecting IoT product mix

·     Software movers; DDOG topped Q1 estimates and raised its full-year forecast while saying customers with $100K+ ARR totaled 1,437 compared to 960 a year ago; NET rises after posting strong Q1 revenue and sales guidance (Q1 sales up 51% to $138.1M) with Q2 $143.5M-$146.5M vs. est. $138.8M; RPD Q1 ARR growth accelerated to 30% Y/Y and meaningfully exceeded the Street’s ~25% forecast while raised its 2021E outlook for ARR and revenue; PCTY reported FQ3 results in line with consensus on revenue and nicely ahead on EPS, with FQ4 guidance above expectations; CSOD exceeded total revenue expectations by delivering higher-than-expected professional revenue (beat by $3.6M), but beat only slightly on subscription revenue (by $1.5M) and guided Q2 revenue below consensus while raising 2021 guidance by $2M; APPN shares slide after eps miss and sees FY21 EPS (68c)-(65c) below consensus (59c)

·     Media movers; ROKU Q1 earnings showed yet another revenue beat and gross profit that more than doubled (revs rose 79% to $574.2M vs. est. $491M) and guided Q2 revs $610M-$620M vs. est. $546M – did note a slowdown in active accounts, which grew just 35% YoY to 53.6M; IAC reported a rev beat for qtr of $876M vs. est. $842M; NWSA revenue rises 3% to $2.34 bln, above analysts’ estimate of $2.2 bln, and says Wall Street Journal’s digital-only subscriptions jumped 29% to 2.63 mln average subscriptions in Q3, and represented 78% of its total subscriptions; VIAC upgraded by two analysts today (Wells Fargo and RBC); DISCA upgraded to Equal-weight at Barclay’s as believe this risk reward is adequately balanced from a valuation perspective; GCI Q1 revenue falls 18.1% to $777.1M missing the $791.7M estimate as same store sales decreased 16.5% due to unfavorable impacts and net loss for the quarter widened to $142.3M