Mid-Morning Look

Thursday, August 08, 2024

U.S. stocks bouncing out of the gate, much like yesterday’s early action, with major averages up more than 1% across the board after better jobless claims data (though major averages began tumble around 11:00 AM yesterday). Treasury yields bounced behind the better weekly jobless claims data as well, with the 10-yr yield back above 4% (20-bps move off this week lows), boosting confidence that the U.S. economy is less likely to face an imminent recession. Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Aug. 3, the largest drop in about 11 months. Japanese stocks fell, halting a two-day rally, as a rebound in the yen and a rapid retreat in US shares damped demand for riskier assets. A tremendous amount of earnings results again today, with obesity drug maker LLY a standout to upside rising 10% on beat and raise, as we have reached roughly 450 of the S&P 500 earnings out this quarter, with a few key retailers and straggling software names out the next 2-weeks (details of some of the biggest earnings-related moves overnight/this morning listed below). No other data on the calendar today and Fed speakers light as focus on technical levels. The S&P 500 5,300 level has been tough to break the last 2 days, markets about 25 points away from that level currently. Most S&P sectors higher to start with the defensive Utility index the lone laggard.

• June wholesale sales -0.6% (consensus +0.3%) vs May +0.3% (prev +0.4%) as June stock/sales ratio 1.37 months’ worth vs May 1.35 months; U.S. June wholesale inventories unrevised at +0.2% (consensus +0.2%).

• In Restaurants: BROS reported solid 2Q results, but disappointing guidance as did not reaffirm its long-term mid-teens growth rate or unit potential while the comp store outlook implies flattish results through the balance of the year; QSR posted far weaker-than-expected Q2 earnings with EPS $0.86 adj vs. est. $1.18 as revs rose to $2.08B from $1.775B y/y but well below the $2.88B est. as consolidated same-restaurant sales rose +1.9% vs. est. +2.8% gain. DNUT mixed earnings with revs a touch ahead of consensus and guidance somewhat soft; DIN downgraded to Hold from Buy at Benchmark with no price target after the company reported Q2 results that reflected below plan revenue and same-store sales results and mgmt reduced prior FY24 same-store sales growth guidance by a wide margin.
• In Warehouse/Discount/Specialty retail: COST upgraded to Buy on traffic outperformance at Gordon Haskett with $925 tgt; WRBY posts solid 2Q beat and FY guidance raise as 2Q EBITDA of $20M vs Consensus $17M on revenues about 1% better. Gross margins beat by 100 bps and EBITDA margins by 120 bps. YETI with broad-based Q2 beat and guidance raise as EPS beat ($0.70 vs. $0.64 cons) on better revs ($463MM vs. $452MM cons) and FY guidance increase for EPS and revenues growth (now +8-10% vs. 7-9% prior and +9.5% cons). SN 2Q EPS of $0.71 beat consensus $0.60 and EBITDA 13% above on sales well above consensus while raises FY EBITDA now $935M (mid) vs prior $855M.
• In Energy: OXY Q2 PS $1.03 tops est. $0.78 on mostly in-line revs $6.88B as production came in at 1258 Mboe/d vs. Consensus 1257.3 mboe/d; beat Midstream guidance by +$180mn due to lower losses on equity investments, timing of LCV spends, and natural gas transportation optimization; MUR Q2 EPS beat by 8c on better Ebitda while guides Q3 production lower at 181.5-189.5 Mboe/d vs. Consensus 192.3 Mboe/d (impacted by 9.4 MBOEPD of total downtime) and reaffirms FY production guide of 180-188 Mboe; EONGY upgraded to Outperform at Bernstein on the back of valuation, improving regulatory framework and strong networks growth; SM 2Q earnings print came in well ahead of us and consensus, as well as news of a “reloaded’ $500M repurchase program with high-quality beat on oil production, oil realizations, and cash unit expense. TALO posted earnings beat and an unchanged outlook for 2024.

• BOOT +11%; reported Q1 beat t as sales and earnings were above plan as comps turned positive in the quarter and the margin structure improved as EPS in the quarter came in at $1.26, well above our $1.05 forecast. Guidance for FY25 EPS was raised to a range of $5.05 to $5.35.
• CF +6%; on results; beat on top/bottom line while 1H’24 average selling prices were lower than in 1H’23; ammonia production was 2.6 million tons in the reported quarter, compared to 2.4 million tons in the year-ago quarter.
• DUOL +8%; reported Q2 DAU, MAU, and subscription bookings growth reaccelerated with results coming in ahead of guidance and consensus – though guidance calls for a slowdown in DAU, bookings, revenue, and EBITDA growth as 2H23 comps are tougher.
• HUBS +3%; upgraded to Sector Weight at Keybanc following earnings – Highlights from Q2 included 1) a continuation of Multi-Hub & large deal momentum, 2) success w/ attracting Starter-tier customers onto the platform, 3) maintaining gross retention in the high 80s%, & 4) solid op margin performance. Guidance moves slightly higher.
• KVYO +23%; posted a strong 2Q w/ rev growth of 35%, above Street at 29%, and raised FY guide 1pt to 30-31% as strength was broad-based, w/ GTM efforts up-market starting to pay off.
• LLY +8%; raises FY guidance by $3B to $45.4B-$46.6B, above prior forecast $42.4B-$43.6B primarily driven by the strong performance of Mounjaro and Zepbound, as well as the company’s non-incretin medicines; posted Q2 Zepbound revenue of $1.24B, above est. $818.9M; also raises FY24 EPS view to $16.10-$16.60 from $13.50-$14.00.
• PH +9%; as Q4 profit topped estimates amid strong demand for its aircraft systems and components with EPS of $6.77 above $6.22 estimate and revs $5.19B vs. est. $5.08B.
• ZG +15%; after CEO Rich Barton steps down and is replaced by Chief Operating Officer (COO) Jeremy Wacksman and reported a top/bottom line Q2 beat and guides Q3 revenue $545M-$560M vs. est. $552.89M.

• BMBL -35%; after reported a mixed 2Q (weaker topline, better adjusted EBITDA) and slashed its FY24 revenue view to 1%-2% from 8%-11% and lowers FY24 adjusted EBITDA margin growth view to at least 200 basis points from 300 basis points (weighed on shares of comp MTCH).
• BROS -25%; reported solid 2Q results, but disappointing guidance as did not reaffirm its long-term mid-teens growth rate or unit potential while the comp store outlook implies flattish results through the balance of the year.
• FROG -29%; reported disappointing 2Q results and is lowering the full-year guide across the board, with Cloud growth now expected at ~40% vs. mid-40s% previously citing a challenging macro environment.
• FSLY -15%; after posting an in-line 2Q report and substantial guide down for 3Q and 2024 that implies flat growth in 4Q vs. 17% in CY23, 8% in 2Q24, and prior discussions of LT DD% top-line growth targets in the 20% range by Fastly.
• MCK -10%; as Q1 results were mixed, with the adj EPS beat of $7.88 vs est. of $7.21 being driven by non-operational items, and with adj EPS guidance being raised ($31.75-$32.55 vs prior $31.25-$32.05) by less than the FQ1 beat.
• MNST -11%; Q2 sales $1.9B missed the $2.0B estimate Net sales for the Company’s Monster Energy Drinks segment rose 3.3% to $1.74B; Net sales for the Alcohol Brands segment decreased 31.9% to $41.6M.
• OM -62%; shares tumbled as Q2 results missed consensus and management lowered its 2024 revenue guidance to ~$110MM (down 15.6% y/y) from $145-153MM (up 12-18% y/y).
• SEDG -7%; reported Q2 revenue results in line with its guidance and issued a Q3 forecast below and consensus expectations while mgmt pushed out the expected revenue and margin normalization timeline.
• WBD -11%; after Q2 revenue of $9.71B missed ests of $10.07B which included a Q2 loss of $9.99B, including a $9.1B goodwill impairment charge, vs loss of $1.24 and said Q2 direct-to-consumer revenue of $2.57B vs est. of $2.68B.