Mid-Morning Look

Thursday, January 30, 2025

U.S. stocks open higher, partially offsetting yesterday’s declines as Wall Street digests several important earnings reports overnight/this morning, as well as key economic data. Stocks got a boost overnight, reacting to positive results in tech from META, TSLA, LRCX, and IBM while MSFT, NOW, slumped in software following their results. This morning saw more of a mixed bag with machinery giant CAT falling on weak guidance, UPS in transports tumble -15% on guidance and commentary about biggest customer (sinks Dow Transports), and Cigna (CI) dropped in managed care on weak results. U.S. economic growth slowed in Q4 in first estimate of quarter to 2.3% from the 3.1% pace in Q3 and compared to estimates of 2.6% growth. Consumer spending, which accounts for more than two-thirds of the economy, grew at a 4.2% rate last quarter after expanding at a 3.7% pace in the July-September quarter.

Treasury yields sunk to lows of 4.49% (it hasn’t closed below 4.5% for the 10-year Treasury since December 12^th) but have since bounced back to 4.52%. Bitcoin prices rise (above $106K) along with gold also nearing all-time highs. Seeing broad base strength early as 10 of 11 S&P sectors are higher, with the biggest bounces in REITs and Utilities. Seeing selective strength in technology after strong AI capex commentary from META and MSFT, with both co’s reiterating increases through CY25/26, and w/ META sticking to its $60-65B (+61% YoY) guide for CY25; helping boost the likes of AVGO, ANET, etc. All eyes on Apple (AAPL) tonight with earnings after the bell.

The European Central Bank (ECB) cut interest rates on deposit facility to 2.75% vs 3.00% (as expected), cuts benchmark refinancing rate to 2.90% vs 3.15% and cuts interest rate on marginal lending facility to 3.15% vs 3.40% (all expected) noting inflation has continued to develop broadly in line with staff projections and is set to return to ECB’s 2% medium-term target in course of this year. Notes domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to past inflation surge with a substantial delay.

• Weekly Jobless Claims fell to 207,000 from 223,000 prior (consensus 220,000) from 223,000 prior week (previous 223,000); the 4-week moving avg fell to 212,500 from 213,500 prior week (previous 213,500); continued claims fell to 1.858M from 1.900M prior week (est. 1.89M).
• December Pending Home sales index -5.5% (consensus unchanged) to 74.2 while December Pending Home sales -5.0% from Dec 2023.

• In Staffing/Employment Services: shares of RHI and MAN both decline early after quarterly results/guidance disappoint; RHI Q4 EPS $0.53/$1.38B vs. est. $0.55/$1.39B and Q4 net income $54.29M vs. est. $56.8M; MAN also disappoints as Q4 EPS beat slightly but guided Q1 EPS $0.47-$0.57 vs. est. $0.77 saying they anticipate diluted earnings per share in Q1 will be between $0.47 and $0.57, which includes an estimated unfavorable currency impact of 6 cents and a 36% effective tax rate.
• In Home Improvement Retail: TSCO misses Q4 net sales ($3.77B vs. $3.78B) and profit estimates (EPS $0.44 vs. est. $0.46) citing tepid demand for its garden equipment and power tools; guided FY25 EPS $2.10-$2.22 vs. ests $2.20, and net sales growth of 5% to 7%, compared with expectations of 4.9% growth. Goldman Sachs upgraded shares of RH to Neutral from Sell (tgt to $374 from $261) saying they see a shift in demand trends despite a depressed housing environment, driven by new products and heavy marketing. The firm downgraded FND to Sell from Neutral with an unchanged price target of $79 citing the well understood expectation that housing turnover will remain muted with mortgage rates at higher levels for the downgrade. Lastly raised tgt for WSM to $224.
• In Homebuilders: PHM Q4 EPS $4.43 vs. est. $3.25 and revs $4.92B, vs. est. $4.64B; average selling price of homes closed in the period was $581,000 compared to $547,000 in the prior year period and announced its board approved a $1.5 billion increase to its share repurchase; MTH with slight Q4 rev beat at $1.6B with orders of 3,304 while midpoint of guidance misses for revs (see FY25 revenue $6.6B-$6.9B, vs. consensus $6.87B); CCS also reported earnings and revenues mostly in-line with expectations. A report from RDFN showed the typical home is taking nearly 2 months to sell. that’s the slowest pace in 5 years.

• CLS +13%; after results as posted quarterly beat and raise while said they have been awarded a 1.6 Terabyte switching program with a second Hyperscaler customer.
• IBM +13%; delivered a solid quarter overall, as results were highlighted by strong outperformance in FCF, GenAI bookings and Red Hat growth as all three came in above expectations, building momentum into 2025 highlighted by guidance for $13.5B FCF.
• LVS +9%; shares jumped on better earnings, helped as Marina Bay Sands positively surprised the market by delivering a Q4 EBITDA significantly above $500M.
• META +4%; reported a quarterly beat and raised guidance, laid out a host of new product and monetization drivers into 2026, and was compelling in defending and reiterating its ambitious AI spending plans given the recent DeepSeek controversy. Q4 revenue of $48.4B grew 21% FXN Y/Y, above the high end of the guide.
• TECX +98%; after announced positive results from an early-stage study of a drug to treat a form of hypertension caused by heart failure.
• TSLA +1%; despite weak results as investors focus on autonomous comments from Musk; Q4 results missed as EPS of $0.73 missed the $0.75 estimate on revs $25.7B vs. est. $27.27B but had a record $36.6B of cash and cash equivalents, up $3B QoQ while Free cash flow was $2B in Q4

• CI -8%; weak results as Q4 adj EPS $6.64 below est. $7.82 while revs beat ($65.65B vs. $63.18B) but forecasts 2025 adj EPS of at least $29.50, below estimates of $31.50; Q4 medical care ratio came in at 87.9%, up from 82.2% a year ago vs. expected a ratio of 84.84% for the reported quarter.
• CMCSA -10%; Q4 revenue rose 2.1% y/y to $31.92B, vs. est. $31.62B (EPS beat by 10c), helped by holiday releases, including “Wicked”, and unveiled a $15B share buyback program; Comcast lost -139,000 broadband customers in Q4 vs. ests for -91,000 loss (said hurt by hurricanes); said Peacock’s revs rose 27.8% on price hikes.
• CRGX -76%; downgraded by several Wall Street analysts after saying its phase 2 study of firi-cel, FIRCE-1, has been discontinued following an inadequate risk benefit with suboptimal durable complete responses and reports of grade (3-5) immune effector cell-associated hemophagocytic lymph histiocytosis-like syndrome (IEC-HS).
• IP -2%; reports Q4 revs $4.58B, below ests $4.74B as both Industrial Packaging net sales $3.87B and Global Cellulose Fibers net sales $662M fell below consensus (follows weaker PKG results the day prior).
• MSFT -6%; reported Q2 ahead on Revenue, Operating income while Q3 guide falls short; FQ2 Revenue of 69.6B grows 12% y/y and lands 1% above consensus; However, Q2 Azure growth lands at 31% CC, at the low-end of Microsoft’s guided range of 31-32% and guides FQ3 (March) Azure growth to 31-32% CC, below consensus of 33%.
• NOW -11%; shares tumble as reported another good quarter but cRPO growth of 22% Y/Y, while 50bps above guidance, fell short of typical upside levels due largely to less early renewals than usual (150bps last quarter); NOW guided to cRPO growth of 20.5% Y/Y CC for Q1, in line with the Street’s estimate.
• UPS -16%; Q4 results mixed (EPS beat/revs just miss), but guidance weak as sees year revenue to be approximately $89.0B (below est. $95B) and op margin to be approximately 10.8%; also said reached an agreement in principle with its largest customer to lower its volume by more than 50% by the second half of 2026.
• WHR -16%; shares tumbled on results as Q4 mixed (EPS beat/revs miss $4.57/$16.607B vs est. $4.32/$16.714B while guides FY sales $15.8B, vs est. $16.261B and adj EPS $10.00 (down -18% y/y) vs est. $11.60; said the drop is due largely to the end of the low tax rate it enjoyed for several years.