Mid-Morning Look

Tuesday, May 09, 2023

U.S. stocks looking weaker to start following softer China trade data overnight and mixed earnings results this morning as investors take profits into potential upcoming key market catalysts. Currently all eleven S&P sectors are down on the day with Materials -1.2% and REITs -0.75 biggest to downside. President Joe Biden will sit down with House Speaker Kevin McCarthy at the White House today at 4:00 PM, their first meeting in three months as the two-face pressure for a debt-ceiling deal. At the same time, all eyes remain fixed on tomorrow’s April consumer price index (CPI) inflation report for more clues as to the next move, if any, by the Fed at its June meeting after raising rates 25-bps last week as expected. Currently, fed fund futures show rates at 5.1% (in line with current 5.00-5.25% rate), while end of 2023 showing terminal rate of 4.40%, indicating between 2-3 rate cuts by end of year. Treasury yields have inched higher in recent days, but the CPI tomorrow and PPI Thursday could shake things up. Oil prices are trading lower, paring some of the strong gains of the previous two sessions. List of top earnings-related movers down below in a busy morning of results.

Sector Movers Today

·     In the EV space, some disappointing results as FSR said it now sees 2023 production volume between 32k-36K vehicles, compared with 42,400 vehicles previously expected, while posted slightly smaller earnings loss. LCID shares slid after reported a 1Q23 revenue miss of ~$149.4M vs estimate $164.4M, an EBITDA loss of ~($643.9M) and FY23 annual vehicle production guidance revised to lower end of prior target and filed a $7.4B mixed security shelf. NKLA posted Q1 adj EPS loss (-$0.26) on revs $11.12M vs. est. $12.15M and said it would pause production to streamline the assembly line at its Coolidge, Arizona factory amid lower demand for its battery-powered trucks.

·     Housing: In home improvement, Wells Fargo said they see neutral to negative risk/reward into HD earnings noting sentiment is weak, checks are squishy, & trends likely slowed via uncooperative weather & muted demand. Considering the nuances, they prefer LOW to HD today. Homebuilders remain on a tear, adding to record highs with big gains in LEN, PHM, TOL early. TREX Q1 EPS $0.38 vs. est. $0.34; Q1 revs $239M vs. est. $237.4M; reported Q1 EBITDA of $69 million and EBITDA margin of 28.8%; Consolidated gross profit as a percentage of net sales, gross margin, was 39.6%

·     Consumer Staples: BRBR 2Q sales rose +22% (vs cons. +18%) resulting in 34% YoY EBITDA growth (vs cons. +21%) with consistent growth from Premier and stronger QoQ growth from Dymatize; gross margin rate improved 275bps offset by planned marketing spend resulting in EBITDA +150bps YoY. COTY Q1 EPS $0.19 vs. est. $0.03 and sales rose 8.7% y/y to $1.29B above ests. $1.23B; said it is reinvesting incremental profit from higher sales into new skincare initiatives. EPC said it now expects full-year sales to come in at the high end of its previously issued guidance and lowered its non-adjusted fiscal-year earnings outlook. HAIN Q3 EPS of $0.08 misses the $0.16 estimate as sales $455.2M below $484M estimate while guides 2023 adjusted net sales down 4%-3% vs. last year and adjusted EBITDA at constant currency to be down -15% to -13%. IFF posted Q1 sales slightly above expectations but guidance below for the group.

Stock GAINERS

·     BA +2%; said RYAAY places its biggest Boeing order for up to 300 737 MAX jets in a deal that includes 150 firm orders and 150 options for 737-10 model; shares of parts suppliers such as SPR also moved in sympathy.

·     DVA +13%; raised its 2023 profit forecast as demand for procedures pickup in the U.S. saying expects 2023 profit between $6.20-$7.30 vs. prior forecast of $5.45-$6.95 after Q1 beat.

·     FOXA +2%; reports Q3 $0.94 v $0.88 est., and revs $4.08B v $4.05B est.; authorized a $7B stock repurchase program.

·     MCK +7%; F4Q adj EPS 7.19 (23.3% y/y) beat consensus $7.14 driven by growth in Pharma while FY24 adj EPS guide of 26.10- 26.90 was much better than consensus 25.90.

·     NVAX +45%; to cut about 25% of its global workforce; announced global restructuring and cost reduction initiative with expected 2024 full-year R&D and SG&A reduction of approximately 40% to 50% vs 2022.

·     PINC +4%; announced that its Board has established a committee of independent directors to evaluate potential strategic alternatives, including a sale of part/all the company, recapitalization, or other partnership opportunities.

·     PLTR +22%; as posted unexpected quarterly profit with strong earnings forecast saying that demand for its new artificial intelligence tool due this month is “without precedent.”

·     SHLS +17%; upgraded by two analysts (Guggenheim, Northland) after quarter results exceed consensus estimates and raised FY23 guidance as backlog continued to expand meaningfully reaching 527.5mn.

Stock LAGGARDS

·     CHRS -15%; as quarterly results showed a revenue miss, driven by weakness at its Udenyca product; Q1 EPS loss (75c) vs. est. (57c) and revs $32.4M vs. est. $47.4M.

·     HAIN -9%; Q3 EPS of $0.08 misses the $0.16 estimate as sales $455.2M below $484M estimate while guides 2023 adjusted net sales down 4%-3% vs. last year and adjusted EBITDA at constant currency to be down -15% to -13%.

·     LCID -10%; reported a 1Q23 revenue miss of ~$149.4M vs estimate $164.4M, an EBITDA loss of ~($643.9M) and FY23 annual vehicle production guidance revised to lower end of prior target.

·     LITE -4%; after Q3 EPS $0.75 misses $0.85 on light revs $383.4M and guides Q4 EPS $0.45-$0.65 below est. $0.81 and revs $350M-$380M vs. est. $398M.

·     MRVI -6%; reported an inline quarter but lowered its guidance by $20m for the year, with most of that revenue coming out of 2Q.

·     PYPL -11%; Q1 results exceed expectations on both revenue and EPS and raised FY EPS guide, but shares slip as lowered operating margin expansion outlook from +125bps to +100bps.

·     SWKS -6%; reported in-line F2Q (Mar) results and guides F3Q (Jun) lower attributing weakness mostly due to Android and in the consumer/enterprise segments of Broad Markets, while GMs missed by 340 bps due to underutilization and are expected to remain depressed.

·     TASK -5%; Q1 results in line w/ consensus; lowered rev. guidance by ~$30 million, but reiterated EBITDA dollar guide and increased share repurchasing authority.

·     VTNR -15%; after saying renewable diesel facility startup is delayed due to a failure in feedstock pumping system and is now set to resume startup activities in the second half of May.

·     WAT -6%; after 1Q results below expectations and lowered its FY organic sales growth guidance to +3% to 5% (vs. 5% to 6.5% prior) though maintained its EPS guide.