Closing Recap

Thursday, November 07, 2024

The party on Wall Street continues, as stocks initially entered the week near record highs but with potential land mines including election uncertainty, another 20% of S&P 500 companies reporting earnings, and several central bank meetings including the FOMC. However, with 4-days down this week, the land mines have been averted and U.S. stocks have pushed to record highs for the S&P 500 and Nasdaq surging the last two days as the election was resolved in a night with a clear winner, earnings have continue to come in strong, and the Fed offered no surprises at all by cutting rates by 25 bps and still looks like another 25 bps rate cut is coming in December. Treasury yields tumbled on the day along with the dollar, while gold and Bitcoin prices jumped. Eight of the eleven S&P sectors finished higher, led by Technology, Communications, and Consumer Discretionary as the Mag7 mega cap tech names outperformed. Financials fell over 1% on the day, but only after surging 6% on Wednesday following the election of Donald Trump as next President, as he is seen as pro-business, lower taxes, and less regulation, good for M&A which is seen as positive for banking.

The Federal Reserve cut interest rates by a quarter of a percentage point (as expected) as policymakers took note of a job market that has “generally eased” while inflation continues to move towards the U.S. Central bank’s 2% target. The FOMC said “economic activity has continued to expand at a solid pace.” In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Jerome Powell said there is currently a good balance between stable prices and full employment but that rates are not yet in a neutral position. This implies there will be future rate cuts to maintain this fragile balance.

• U.S. Q3 non-farm productivity +2.2% (consensus +2.3%), vs Q2 +2.1% (prev +2.5%); U.S. Q3 non-farm unit labor costs +1.9% (consensus +1.0%), vs Q2 +2.4% (prev +0.4%).
• U.S. Sept wholesale inventories revised to -0.2% (consensus -0.1%) from -0.1%; U.S. Sept wholesale sales +0.3% (consensus +0.2%); U.S. Sept wholesale sales +0.3% (consensus +0.2%) vs Aug +0.2% (prev -0.1%); U.S. Sept stock/sales ratio 1.34 months’ worth vs Aug 1.35 months.
• U.S. mortgage rates increased to a four-month high this week; the average rate on the popular 30-year fixed-rate mortgage increased to 6.79%, the highest level since July 2024, from 6.72% last week, mortgage finance agency Freddie Mac said on Thursday. It averaged 7.50% during the same period a year ago.

• The benchmark 10-year yield fell from morning highs of 4.46% to lows 4.34% ahead of Fed Chairman Powell comments post FOMC meeting statement where they cut rates by 25bps as expected, then fell a bit more to lows of 4.32%. The U.S. dollar fell as much as -0.9% against a basket of its peers before paring losses after logging its biggest one-day gain in more than two years on Wednesday following the Presidential election outcome. The euro bounced to $1.0824 after Wednesday’s -1.8% decline as investors also digested political turmoil in Germany where Chancellor Olaf Scholz sacked his Finance Minister Christian Lindner.

• LYFT shares jumped as reported a strong quarter in Q3, with gross bookings, revenue, and adj. EBITDA all solidly above ests, while Active riders were in line. Both total rides and gross bookings increased in the mid-teen’s y/y, as the company saw strong engagement from both riders and drivers. Guidance for $4.28B-4.35B in Q4 bookings was above Street at $4.23B prior, and EBITDA guidance for $100M-$105M was above Street forecasts.
• NSANY announced a $2.6B cost saving plan, including 9,000 job cuts and a 20% reduction in global production capacity after cutting its operating profit outlook by 70% and its global production capacity to be cut by a fifth.

• In Food & Beverage: HSY trimmed its annual revenue and profit forecasts on Thursday after missing Wall Street estimates for Q3, as repeated price hikes have dampened demand for products; KLG raises 2024 adjusted EBITDA guidance to 5%-6% after Q3 revs and profit beat citing  robust consumer demand for its ready-to-eat cereals; TAP Q3 sales fell -7.8% that missed expectations and said it now expects a decline for the year, amid weakness in the U.S. beer industry; financial volume sank 12.3% and price and sales mix rose 4.5%, including, in the Americas, a 15.6% drop in volume and a 4.9% increase in price and mix
• Discount/Hardline: COST Solid October sales; trends remain largely consistent – US comps were +5.8% (ex-fuel/FX) in Oct, below the +9.3% in Sept, and total comps (ex-fuel/FX) were +6.5% vs +8.9% in Sept. DLTR and FIVE both downgraded to Sector Weight at Keybanc based on acute China import exposure after election noting the potential for 60-100% China tariffs creates elevated risk for import businesses and the dollar stores.
• In Apparel: GOOS posted a surprise quarterly profit and topped Wall Street estimates for revenue noting revs rose 2.5% in Greater China in the second quarter while Selling, general and administrative expenses fell about 8%; lowered Fy25 rev view to low-single-digit decline to a low-single-digit increase, vs. prior forecast of low-single-digit growth. RL boosted its yearly revenue outlook and forecasts Q3 rev. ex-FX about +3% to +4%, vs. est. +1.81%; Revenue increased 6% year over year to $1.7 billion, also coming in slightly ahead of forecasts for $1.68 billion; Sales growth in North America turned positive this quarter, at 3%. TPR boosted FY25 annual revenue and earnings forecasts, helped by full-price sale of its handbags and accessories as now sees revenue up 1% to 2% growth vs prior year and raises EPS by $0.05 on top/bottom line after Q1 beat.
• In Athletic/Footwear: CROX downgraded from Buy to Hold at Loop Capital and cut tgt to $110 from $150; SHOO forecasts FY revs to rise +13% to +14%, above prior forecast +11% to +13%; UA boosted FY25 adjusted profit forecast to $0.24-$0.27 from prior $0.19-$0.21 view, helped by lower input expenses and cost-cut initiatives and guides FY gross margin to increase by 125 to 150 basis points vs prior target of a 75 to 100 basis point rise driven by reduced promotions and discounts in DTC biz.
• In Beauty: COTY was downgraded to Underweight from Equal Weight at Barclay’s, concerned Coty’s negative sales revision this quarter may not be its last and that the company is pushing too hard to achieve its bottom-line targets. ELF reported Q2 sales up +39.7% vs Street estimate of +34.3% and EPS easily beat at $0.77 vs. est. $0.43 and said continued to gain share in the color cosmetics category in the tracked channel with +195 bps of share in Q2: announced Spring 2025 expansion in TGT and WBA in addition to testing the expansion into DG this month. ODD reported another top- and bottom-line beat with raised full-year guidance, outshining its competitors in D2C beauty & wellness markets (who are seeing a consumer slowdown)

• In Furnishings: ARHS shares dropped after results (W, WSM, RH possibly as comps); FBIN reported 3Q24 EPS beat forecast on better operating margin, management lowered 2024 EPS guide -2% at the midpoint; FBIN missed on revenues and lowered 2024 guidance due to softer POS, delayed digital sales & the impact of hurricanes.

• In Energy: HAL posted a Q3 EPS and rev miss citing a slowdown in drilling activity in North America that weighed on demand for its oilfield services and equipment (EPS $0.73/$5.7B vs. est. $0.75/$5.83B); APA shares declined after results were mixed on lower capex and general weakness in energy complex today; DVN was downgraded to Hold from Buy at Truist with a price target of $43, down from $49, after reported better than expected results with guidance in-line.

• In Crypto: Crypto prices surged yesterday in the wake of the presidential election as Bitcoin in particular rose ~9% and reached a new all-time high. Piper noted early in the election cycle, President Elect Trump came out in support of crypto and was viewed as the most crypto friendly candidate in the race. Given this shift in sentiment Piper expects to see comprehensive crypto legislation passed in the coming quarters and believe regulatory clarity will result in further mainstream crypto adoption.

• GNL reported 3Q24 AFFO of $0.32, which was in line with consensus. Importantly, management maintained its FY24 AFFO guidance range of $1.30-$1.40 (~3% above consensus estimates of $1.31) as well as its disposition guidance range of $650M-$800M.
• PLYM reported disappointing 3Q24 results that included a $0.04 quarterly miss vs. consensus, which led management to reduce its FY24 Core FFO guidance by ~2.6% at the midpoint.
• RLJ’s quarterly results included a 3Q24 adj. EBITDA and adj. FFO beat, with RevPAR growth and hotel EBITDA margins exceeding our and management’s expectations. RevPAR growth increased 2% in 3Q24, and hotel EBITDA margins modestly decreased.
• SKT produced another quarterly beat, with 3Q Core FFO of $0.54 exceeding consensus by $0.01/sh. The beat in the quarter was high quality in nature, driven by stronger than expected SSNOI growth of 4.3% y/y, which led management to raise both its FY24 SSNOI growth forecast (+65 bps at the midpoint) and FY24 Core FFO guidance.
• TRNO reported 3Q24 FFO of $0.62, which is in line with consensus (+$0.01). SSNOI growth decelerated as expected to 6.8% y/y from last quarter’s print of 8.1%, though underlying fundamentals across TRNO’s portfolio remain relatively steady despite the difficult operating environment.
• XHR reported disappointing 3Q24 results, which included an Adj. EBITDA and Adj. FFO miss, and management decreased 2024 guidance for these line items by 4.4% and 6%, respectively.

• ALT announced the successful completion of its End-of-Phase 2 Meeting with the U.S. FDA and agreement on the design of a Phase 3 registrational program for its product candidate, pemvidutide, in the treatment of obesity.
• AUPH announced a strategic restructuring to focus on its lupus nephritis treatment Lupkynis and the development of AUR200; Reiterates 2024 net product revenue forecast range of $210M-$220M.
• GILD Beat and raise on Veklury and HIV. 3Q beat with total revenue of $7.5bn (vs. est. $6.91B) and non-GAAP EPS of $2.02 (vs. est. $1.63) on higher-than-expected Veklury and HIV (noting favorable pricing dynamics) sales – offsetting lower oncology sales – and lower OpEx. Management raised FY24 total product sales guidance.
• MRNA 3Q revenue $1.86B vs $1.25B est. 3Q RSV vaccine sales $10M. Still sees revenue $3 billion to $3.5 billion, estimate $3.21B. Per MRNA, this growth was primarily driven by higher sales in the U.S. market, following the earlier launch of the updated COVID-19 vaccine.
• SRPT Q3 revenues beat company-compiled consensus (both ELEVIDYS and PMO business), coming in at ~$430M vs $400M and Cantor upgraded to Overweight saying with the stock down -24% since the full label was granted, the entry point is starting to become much more attractive. SRPT shares fell however after the co said it will discontinue development of its new experimental drug, SRP-5051, that was being studied to treat patients with a type of Duchenne muscular dystrophy

• CDMO to be acquired in an all-cash $1.1B transaction for $12.50 cash/share, representing a 13.8% premium to its close on 11/6 and a 21.9% premium to the 20-day VWAP.
• GH shares jump on results; raised 2024 revenue guidance to $720mn to $725mn from previous of $690mn to $700mn. GH continues to expect non-GAAP gross margin (excluding screening expense) to be in the range of 61-63% and non-GAAP operating expenses to be in the range of $720-$730mn.
• TNDM delivered a solid beat on the top line and came in ahead of EPS as well as sales of $243MM (up 25% y/y) were aided by strong execution, and portfolio expansion with Mobi; shares weak due to implied Q4 sales growth that assumes a step-down, and initial 2025 guide that will represent a base-case (like 2024).
• XRAY lowered year EPS view to $1.82-$1.86, down from its prior forecast range of $1.96 to $2.02 due to voluntary suspension of sales, marketing, and shipments of its Byte Aligners and Impression Kits.

• In Industrials: ROK said it expects its current-quarter results to be lower than the fourth quarter but sees a gradual improvement through the year; guided annual adjusted profit in 2025 to be between $8.60 and $9.80 per share, compared with estimates of $10.67.

• CTVA reported Q324 EBITDA of ($100M), compared to consensus of $12M; beat in Crop Protection (CP) while missing in Seed; low-end of management’s EBITDA guidance for 2024 remains intact; now expects 2024 EBITDA of $3,400M at the midpoint, down from $3,500M prior.

• In Media: WBD gained more subscribers for its Max streaming service than expected in the third quarter, boosted by its international expansion and suggesting its online business is picking up, but EPS and revs missed estimates.
• In Internet/Social: MTCH shares fell on results and now forecasts FY total rev growth about 4%; forecast about 5%. MELI shares tumbled after missing Q3 earnings and revenues.

• DDOG Q3 revs and EPS top consensus; Q4 guidance in-line and raised FY EPS and rev outlook.
• DV delivered a solid quarter particularly for adj-EBITDA which saw upside both in the quarter and guidance. Q4/24 revenue guidance was reduced tempering momentum in CY/25.
• EPAM shares soared after results topped views and guided FY24 EPS $10.73-$10.81 above consensus $10.29 on better revs.
• FRSH reported strong Q3 results with outperformance across key metrics, strong AI product adoption and profitability. Prelim ’25 outlook included 1) rev growth in the low-to mid-teens (likely conservative) and Operating margins/FCF margins above Street.
• HUBS reported a beat-and-raise quarter, as shares traded up on upside in revenue, billings, and operating margin that were roughly in-line with recent trends. Upmarket momentum accelerated, offsetting lower ASRPCs from the pricing model shift. 2024 revenue guidance was raised $28M, slightly ahead of the beat.
• KVYO reported 34% revenue growth and 14% non-GAAP operating margins, both easily clearing consensus estimates and net new customer additions were better than expected (6,000 in the quarter versus 5,000 in Q2 and the year ago period) but guided for Q4 growth in the 27-28% range, slightly below consensus on light margins.
• PANW downgraded to Negative from Mixed at OTR Global
• PLTR downgraded to Underperform at Jefferies saying at 38x CY25E rev makes PLTR the most expensive software name (>2x CRWD, next highest multiple) and insider selling has picked up on 10b5-1 plans. Jefferies believes fundamentals are alive, but downgrades on the unsustainable valuation.
• RPD reported Q3 miss and guide below as Q3 ARR missed consensus estimates by $2M and the 2024 ARR guide lowered $15M, which management attributed to longer deal cycles, particularly larger deals in North America.

• COHR 1Q revenue increased 28% y/y and came in modestly above guidance and consensus expectations. F2Q25 revenue guidance was also slightly above consensus estimates.
• MKSI reported 3Q24 non-GAAP EPS of $1.73, which beat cons. $1.45 and revenue of $896M was down 4% y/y compared to est. $874M. MKSI’s 4Q24 guide came in above consensus and indicates a slight sequential increase.
• QCOM posted strong F4Q results and higher F1Q guidance, which solidly beat with upside driven by Auto and IoT, while guidance reflects the ramp of Snapdragon 8 Gen 4, with China Android expected to grow 40% q/q
• WOLF shares tumble on weak results/guidance; Q1 EPS ($2.23) vs est. ($1.00) on revs $195Mm vs est. $200.39Mm, adj gr mgn 3%; guides Q2 revs $160-200Mm vs est. $214.58Mm.