Mid-Morning Look

Tuesday, April 30, 2024

U.S. stocks down only slightly, very resilient amid a mixed round of earnings (EAT, LLY, MMM, NXPI, TREE higher and COUR, FFIV, GEHC, MSTR, SBAC, YUMC down on results), and overly disappointing economic data as employment cost index (ECI) rises in Q1, while Chicago PMI and consumer confidence broadly missed estimates. The data comes ahead of tomorrow’s FOMC policy meeting (expected to indicate rates to stay “higher for longer”). Today marks the last day of trading for April, with major averages on track to post declines (into the final trading day of April, the S&P is -2.6% for the month, the Nasdaq -2.4% MTD, the Dow -3.55% MTD and Russell 2000 -5.1% MTD). Slate of top earnings movers listed below, while AMZN is the headline report tonight after the close. Note all three major indexes are on track for their worst monthly performances of the year. Treasury bonds gave back some gains, with yields rising after fresh wage-growth data as the 10-yr yield hits 4.66%). China’s stock indexes were little changed after data showed its manufacturing sector had lost some steam. Consumer Dow components KO and MCD mixed following earnings results/commentary. Stock futures turned lower around 8:30 this morning after another inflation report came in hotter; the Q1 employment cost index rose +1.2% topping consensus +1.0% and above Q4 +0.9% as benefit costs rose from Q4 and wags were in-line. It marked the 3^rd data point in recent weeks (CPI, PCE) that has shown a rise in prices/wages which markets have generally shaken off. The data comes ahead of tomorrow’s FOMC rate meeting where no rate changes are expected. Jobs data also coming up with ADP private payrolls Wednesday, JOLTs Thursday and Nonfarm payroll on Friday. Bitcoin prices fall -3% below $61K.

• Chicago PMI data was very weak, reported at 37.9 (worst since Nov 2022) below consensus of 45.0 and prior 41.4 reading.
• April Consumer Confidence index 97.0 below consensus 104.0 in another weak reading.
• S&P CoreLogic home price metric bounced 0.9% to 320.0 for the February 20-City index, a record high level, after dipping -0.1% to 317.0 (was 317.1) in January. The annual rate of appreciation accelerated to 7.3% y/y from 6.6% y/y. The 10-City measure climbed 1.0% to 336.0 after dipping fractionally to 332.7 (was 332.8) previously; index is up 8.0% y/y from 7.4% y/y.

• In Food & Beverage: KO Q1 adj EPS $0.72 beats $0.70 est. as Unit case volume +1% vs. est. +1.27%and adj organic revenue rose +11% vs. est. +6.13%; said now expecting organic sales growth of 8% to 9%, up from the previous range of 6% to 7% while maintains annual comparable EPS (non-GAAP) growth of 4% to 5%; raised forecasts on strong global demand for sodas/juices. TAP 1Q beat net sales ($2.6B/est. $2.5B), underlying EBITDA ($476M vs. est. $418M), and underlying EPS ($0.95 beats the $0.74 estimate) while maintained 2024 guidance, but 1Q, on strike-related shipment timing, is expected to be the best y/y period. 1Q variable costs were improved, and fixed cost leverage was strong; SYY mixed with EPS beating/sales miss while saying higher volumes improved Sysco’s gross margin, though they also contributed to a 5.5% increase in operating costs.
• In Restaurants: MCD Q1 EPS $2.70 missed the consensus $2.72 on weaker Q1 comp sales of +1.9% vs. +2.33% estimate while revs of $6.17B narrowly beat the $6.16B expected; global comparable sales growth slid for the fourth straight quarter noting weakness in international comps de to Israel-Hamas war; has raised prices by roughly mid- to high-single-digit percentage over the past year in response to a rise in costs of eggs and other raw items. QSR said it is committing another $300 million to remodeling Burger King’s U.S. restaurants, while Burger King’s same-store sales grew 3.8% in Q1, shy of ests; overall, QSR beat expectations for Q1 sales and profit, helped by a rebound in demand Tim Hortons chain as overall quarterly same-store sales growth of 4.6% also tops estimates of a 3.78% rise. EAT raised its annual guidance after posting higher sales in Q3 as guides FY EPS $3.80-$4 above prior $3.45-$3.70 a share and better revs. YUMC Q1 EPS $0.71 vs. est. $0.65; Q1 revs $2.96B vs. est. $3.05B; Q1 operating profit reaches $374M with core operating profit growing to $396M.

• BLND +24%; after it reported a $150 million investment by Haveli Investments in the form of convertible preferred stock with a zero percent coupon.
• HSY +2%; up over $10 bucks last 2-days as cocoa prices pull back sharply from record highs.
• LLY +7%; mixed Q1 results as EPS beat ($2.58 vs. $2.46) and sales ($8.77B vs. $8.92B but up from $6.96B y/y) as gross margin 80.9% above 76.6% y/y; noted R&D expenses rose 27% y/y to $2.52B; raised full-year revenue expectations to between $42.4B-$43.6B from $40.4B-$41.6B, driven by Mounjaro and Zepbound sales.
• MMM +5%; Q1 EPS $2.39 vs. est. $2.10; Q1 revs $7.72B vs. est. $7.13B; posted a 21% rise in quarterly profit as price hikes and cost cuts offset the impact from slow sales; beat comes during a quarter when it finalized two major legal settlements.
• PRFT +4%; after Bloomberg reported is considering a potential sale https://tinyurl.com/bderzf5t
• ST +12%; shares jumped after Q1 adj EPS beat on higher revs and guided CQ2 about in-line with consensus while saying it had reached a cooperation and information sharing agreement with activist investor Elliott.
• THC +9%; Q1 beats and boosts FY adj. EPS forecast to range of $8.37-$9.41 from previous forecast of $5.76-$6.90 and raises FY revenue view to $20B-$20.4B vs. prior $19.9B-$20.3B.
• TREE +22%; reported Q1 revs $167.8M topping $162.8M estimate and raised its FY24 view to $690M-$720M from prior view $650M-$690M and guided Q2 revs above views as well at $175M-$190M vs. est. $168M.
• WGS +41%; Q1 revenue $62.42M, vs. consensus $49.46M; raises FY24 revenue view to $235M-$245M from $220M-$230M (est. $226.1M) and raises FY24 adjusted gross margin profile view to at least 60% from at least 50%.

• COUR -15%; as reported disappointing results, and 2024 revenue guidance was lowered by 5% on Consumer demand softening, as well as delayed content from an educator partner.
• FFIV -9%; after Q1 results were mixed with top-line metrics below expectations and lower than expected Q3 guidance, making a tougher Q4 setup/profitability remain a positive, with EPS beating expectations and getting a raise for FY guidance.
• GEHC -8%; shares tumble on top and bottom line miss as Q1 adj EPS $0.90 vs. est. $0.91; Q1 revs $4.6B vs. est. $4.8B; reaffirms FY organic revenue growth of approximately 4% y/y.
• MCD -1%; Q1 EPS $2.70 missed the consensus $2.72 on weaker Q1 comp sales of +1.9% vs. +2.33% estimate while revs of $6.17B narrowly beat the $6.16B expected; global comparable sales growth slid for the fourth straight quarter noting weakness in international comps.
• MED -15%; shares tumbled as Q1 adj EPS $0.66 missed ests $0.78 on better revs $174.74Mm vs. est. but Q2 guidance was below consensus for EPS/revs (Q2 revs $150-170Mm vs est. $175.1Mm).
• NRXP -21%; after saying its experimental suicidal bipolar depression drug reduced risk of suicide by 33%, which was not statistically significant, in a mid-to-late-stage trial comparing it to generic drug lurasidone.
• YUMC -7%; Q1 EPS $0.71 vs. est. $0.65; Q1 revs $2.96B vs. est. $3.05B; Q1 operating profit reaches $374M with core operating profit growing to $396M.