Mid-Morning Look

Thursday, May 06, 2021

U.S. stock markets are lower led by another decline in technology (Nasdaq down for a 5^th day – would be longest losing streak since October), while strength in financials and defensive consumer staples and healthcare names contain S&P losses. The Dow Jones Industrial meanwhile slips from record highs the day prior, helped by strength in big banks (GS record high, JPM). Investors are also piling into precious metals with gold and silver outperforming as a hedge against rising inflation fears (playing catch-up to strength in crypto-currency names). Biotech space hammered a second day, led by vaccine makers (MRNA, PFE, BNTX, NVAX) after world leaders including U.S. President Joe Biden called for vaccine intellectual property waivers (the WTO has discussed waiving patent rights to boost COVID vaccine supply to developing countries). Energy stocks slide after recent outperformance as oil pulls back further. The Bloomberg Commodity Spot Index returned to its highest level since 2011 with big gains in corn, copper, precious metals. Fed speakers have been overly dovish over the last few days (Mester, Evans, Rosengren, Clarida) – but the lone hawk in the group, Kaplan, speaking today and spooking markets a little, saying he wants the central bank to start talking about reducing policy accommodation “sooner rather than later, saying the economy has improved faster than he expected, and citing worries about excesses and imbalances in markets. Earnings season has been overly bullish with massive EPS beats, but stocks have not reacted favorably – seeing a pullback over the last 2-weeks.

Economic Data

·     Weekly Jobless Claims fell to 498,000 in the latest week, below consensus of 540,000 while prior week revised to 590,000 from 553,000; continued claims rose to 3.690M from 3.653M prior; the 4-week moving average fell to 560,000 from 621,000 prior week; the U.S. insured unemployment rate unchanged at 2.6% from 2.6% prior

·     U.S. Q1 non-farm productivity rose a greater than expected +5.4%, topping the +4.3% estimate and was above Q4 decline of -3.8%; Q1 Unit labor costs fell -0.3%, better than the -0.8% est.

Sector Movers Today

·     Retailers; COST reported total comparable sales for Apr. +32.5% vs. estimate +30.3%; ASO 14M share Secondary priced at $32.00; TPR 3Q adj EPS $0.51 vs. est. $0.31 on revs $1.27B vs. est. $1.22B; says on track to exceed FY19 EPS for FY; guides FY revs +mid-teens vs est. +10%; KTB 1Q adj EPS $1.43 vs. est. $0.87 on revs $652Mm vs. est. $605.9Mm; guides FY revs +low-teens vs. est. +13.7%, sees FY adj EPS $3.70-3.80 vs. est. $3.68; BKE reported net sales for Apr. $93.6M (+718% YoY); GIL Q1 EPS 48c and revs $590M easily beat consensus of 18c and $490.5M, and UBS was one of several brokers to raise their price target in response as they raised theirs to $46 from $43 on increased conviction that Gildan’s “Back-to-Basics” strategy will help the company beat the market’s earnings expectations; Gun makers VSTO (Q4 adj EPS $1.02 on revs $596.5M) and RGR (Q1 EPS $2.16 on revs $184.4M) both reported results that topped consensus; Cowen raised their pt on BOOT to $86 from $68 after upping their 4Q21E EPS to Street high $0.52

·     Casinos, Gaming, Lodging & Leisure sector; PENN reported Q1 EPS 55c vs est. 29c on revs $1.27B vs est. $1.14B, adj EBITDAR $447M vs est. $394.9M; LESL put up a monster beat and raised full year guidance to account for both a stronger just completed quarter as well on momentum into the next quarter; NCLH reported a wider-than-expected first-quarter loss and revenue that fell more than forecast, while cash burn was in line with forecasts and said it was preparing to return to service this summer; EVRI op- and bottom-line beats versus consensus estimates driven by strength in both its Games and FinTech segments; VAC Q1 adj EPS loss (49c) vs. est. loss (27c) on revs $759M vs. est. $794.77M; SEAS posted a Q1 EPS loss of (57c) that was narrower than expected (78c) loss on revs $171.9M vs est. $125.4M and adj EBITDA $25.2M vs est. ($5.22M) loss; GOLF Q1 EPS $1.13, sales $580.9M, and adj EBITDA $135.3M each beat even the most optimistic analyst estimate, and sees full-year adj EBITDA $255-285M (est. $258.4M) and net sales $1.8-1.88B above est. $1.75B

·     E&P and Majors; handful of E&P earnings as APA Q1 CFPS was 16% above consensus due to slightly higher production and much lower costs and 1Q21 Upstream capex was 19% below guidance; PDCE Q1 CFPS was 15% above consensus, but 2Q21 oil production guidance was 11% below consensus, capex was 13% below consensus and production was 5.3% below consensus; WLL Q1 CFPS was $0.91 above consensus, total production was 2% above consensus and 1Q21 oil production was 1% above consensus, but 1Q21 capex was $7M above consensus; XEC Q1 CFPS was 3.4% below consensus on slightly higher costs, oil production was 1.8% above consensus, but 1Q21 total production was 0.5% below consensus

·     Software movers; TWLO said losses widened in the first quarter on higher operating expenses, but sales climbed due to continued demand for online communication services; ZNGA raises FY bookings forecast to $2.9 bln from $2.8 bln, slightly above estimate of $2.84 bln and also says it will buy mobile game ad network Chartboost for $250 mln; CTSH Revenue and EPS beat expectations but tax-adjusted EPS was in-line; QLYS reported solid Q1 with revenue, margin, EPS and cash flow beating Street’s estimates and its guidance and also raised its FY21 guidance; TRMB reported 1Q EPS of 66c vs. street of 55c, with the beat driven by better than expected revenues and margins across all segments ex. Transportation; ANSS Q1 ACV of $319.4M, or 6.1% y/y growth on a reported basis, below consensus expectations of $333.4M, or 10.7% growth

Stock GAINERS

·     FOXA +4%; reported strong 3Q-FY21 results, with broad-based strength and upside driven by accelerating affiliate revenue growth, rebounding advertising trends, impressive momentum at Tubi and other digital assets

·     HOME +16%; after confirms WSJ report that Hellman & Friedman to buy the company in $2.8B deal, for $36 per share https://on.wsj.com/33fXtJf

·     K +7%; boosted its yearly forecasts (projected full-year organic net sales to be about flat, compared to its previous estimate of a decline of about 1%) after beating Q1 sales and profit estimates

·     NEM +2%; as gold miners outperform with spike in gold prices

·     RUN +7%; reported strong 1Q results that exceeded expectations on customer additions and value per subscriber and increased its full year solar energy capacity installed growth outlook to 25-30% (was 20-25%) and its total value creation guidance to greater than $750MM

·     SBH +19%; with Q2 sales beat at $926.3M vs. est. $825M with bigger Q2 adj profit amid increased consumer demand

·     W +16%; adj EPS $1 vs est. 29c on revs $3.48B vs est. $3.39B, adj EBITDA $205.8M vs est. $138.8M, active customers 33.2M (+57% YoY) vs est. 31.3M, and sees Q2 adj EBITDA at or above this quarters and gross margin 27-28%

·     ZNGA +5%; raises FY bookings forecast to $2.9 bln from $2.8 bln, slightly above estimate of $2.84 bln and also says it will buy mobile game ad network Chartboost for $250 mln

Stock LAGGARDS

·     BNTX -9%; extending yesterday losses along with other vaccine makers (NVAX, PFE, MRNA) after world officials including U.S. President Biden called for vaccine intellectual property waivers (the WTO discussed waiving patent rights to boost COVID vaccine supply to developing countries)

·     CAH -9%; on EPS and revs miss ($1.53/$39.3B vs. est. $1.55/$40.1B) amid flat performance in its pharmaceutical segment and higher effective tax rates, while also narrowed its FY21 outlook for adj. EPS to $5.90 to $6.05, from $5.85 to $6.10

·     ETSY -10%; shares fell despite a beat on the top and bottom line with attention on Q2 gross merchandise sales (GMS) growth decelerating to between 5% and 15% YoY

·     FSLY -21%; shares tumbled after its CFO departed and the CDN guided Q2 EPS loss wider than expected on lower revs ($84M-$87M vs. est. $91.7M)

·     MRNA -8%; posts Q1 revs miss at $1.94B vs. est. $2.22B as R&D expenses rise to $401M from $115.1M YoY (and also down on IP waiver story)

·     PCT -32%; shares tumble after named as short by Hindenburg research saying it represents the worst of SPACs

·     RKT -17%; as it reported quarterly results that disappointed investors, with in-line quarterly EPS, reported a margin of 3.74% in the first three months of the year, down from 4.41% in 4Q

·     THS -3%; said 1Q comparable sales fell 5% from the year earlier, and total sales for the period of $1.06B are weaker than forecasts from analysts. Volumes fell off compared with 1Q of last year

·     UBER -5%; reported Q1 adj. EBITDA loss of $359M, narrowing losses by nearly $100M from the previous quarter, but promised to be profitable on that metric by the end of the year/disclosed a $600 mln charge to provide UK drivers with benefits

·     USCR -15%; after posting weaker Q1 revenue of $285.7M missing the $305M estimate – drops below its 50-day MA support $63 with 100-day MA lower around $54.50