Mid-Morning Look

Friday, November 01, 2024

U.S. stocks recovering after yesterdays tumble, as solid earnings results from Amazon (AMZN) overnight lift shares, though this morning’s rally very broad based with ten of eleven S&P sectors in the “green” (only utilities lagging). Jobs data also adding to market volatility as job creation in October slowed to its weakest pace since late 2020, widely missing economic estimates (12K jobs added vs. est. 113K) as the impacts of storms in the Southeast and a significant labor impasse dented hiring plans. The BLS noted in its report that the Boeing strike likely subtracted 44,000 jobs in the manufacturing sector, which lost 46,000 positions overall. Along with that, the report noted the impact of hurricanes Helene and Milton but said “it is not possible to quantify the net effect” of the storms on the jobs total. In Energy, oil prices rose more than 2% following reports that Iran was preparing a retaliatory strike on Israel from Iraq in the coming days, though benchmarks were still set for a weekly decline. In earnings, both Exxon and Chevron beat analysts’ estimates as higher output from the US Permian Basin offset a drop in oil prices and a weak period for refining. Apple (AAPL) reported mixed results last night with better iPhone and Mac revenues, but all other segments were weaker along with guidance. A very busy day of economic data (recap below) moving markets, but after the busiest earnings week of the quarter just passed, possibly the most volatile week of the quarter is upcoming with the Presidential Election Voting on Tuesday, followed by the FOMC interest rate meeting late next week, where a 25-bps rate cut is widely anticipated.

• Average hourly earnings for October increased 0.4% for the month, slightly higher than the +0.3% estimate, though the 4% 12-month gain was in line. The average work week held steady at 34.3 hours
• U.S. ISM manufacturing activity slumped to a 15-month low in October, falling to 46.5 last month, the lowest level since July 2023, from 47.2 in September. The ISM survey’s forward-looking new orders sub-index increased to 47.1 last month from 46.1 in September. The production index fell to 46.2 from 49.8 in September. The survey’s measure of prices paid (inflation component) by manufacturers jumped to 54.8 from 48.3 in September, which was the lowest level since December 2023. Its gauge of supplier deliveries dipped to 52.0 from 52.2 in the prior month.
• US Sept construction spending +0.1% (vs. consensus unchanged) to $2.149 trln, vs Aug +0.1% (prev -0.1%); US Sept private construction spending unchanged, public spending +0.5%.
• S&P Global October final manufacturing PMI at 48.5 (vs flash 47.8).

• ADMA +21%; disclosed that it has executed an agreement with KPMG to serve as its independent registered public accounting firm, effective following the September 30th, 2024, 10-Q filing.
• AMZN +6%; as Q3 EPS of $1.43 topped forecasts of $1.14, while net sales of $158.9B beat expectations of $157.3B; Amazon Web Services (AWS) cloud business sales rose 19% to $27.5B (in-line with ests) while capital spending rose significantly in the quarter to $22.6B from $12.5B y/y as the company builds its AI services.
• BA +2%; after the plane maker reached a deal for a new tentative offer for its striking workers in the Pacific Northwest. The union has slated a vote for Monday. The new deal includes 38% wage increases over four years and a $12,000 ratification bonus. Union members have rejected two deals.
• CAH +6%; raised its FY25 adj EPS forecast to $7.75-$7.90 from prior $7.55-$7.70 which followed a both top and bottom line beat for Q1 results.
• CHTR +14%; after posting better-than-expected profit and revenue for Q3 and said it lost fewer internet customers than expected (lost -110K customers vs. FactSet est. -250K).
• GSAT +30%; after the company agreed to deliver expanded services to AAPL over a new mobile satellite services network, including a new satellite constellation, more ground infrastructure and increased global licensing
• INTC +3%; offered a better than consensus guide for the December Q ($13.8B/$0.12 vs cons $13.5B/$0.08), lifting shares higher overnight. Business trends are modestly better, with DCAI/NEX better than expected in 3Q and tracking flattish in 4Q, while CCG is expected to accelerate and drive the ~4% Q/Q overall topline growth into 4Q
• TEAM +16%; delivered a strong beat to kick off FY25, driven by significant upside in Cloud growth and continued strength in Datacenter growth; Q1 results as cloud growth of +31% y/y meaningfully outperformed, leading to raised guidance.
• WAT +17%; hit its best levels since Sept 2021 after Q3 top and bottom-line beats and raised FY adj EPS view to $11.67-$11.87, from prior $11.55-$11.65 and guides sales at constant exchange rates -0.3% to -0.9%.

• BJRI -6%; Q3 rev rose 2% y/y to ~$326M, in-line with consensus but posted a surprise Q3 adj EPS loss of (-$0.13) vs. est. for profit of $0.02; Restaurant level operating margin in qtr was 11.7%, down from 11.9% y/y.
• EPIX -69%; after saying it was throwing ending its Phase 2 study of masofaniten in prostate cancer after determining the study was unlikely to meet its primary endpoint.
• FOXF -8%; following another disappointing quarter and downward guidance revision; guided FY24 EPS $1.27-$1.42 below consensus $1.57 and sees FY24 revenue $1.34B-$1.38B below consensus $1.43B
• LXRX -33%; after the FDA voted 11-3 against recommending Lexicon’s add-on treatment to insulin therapy for managing blood glucose levels in adults with type 1 diabetes and chronic kidney disease.
• SMCI 2%; down a 3rd straight day since noting Ernst & Young resigned as the company’s auditor, citing concerns about governance and transparency.
• TREE -14%; shares have rolled since the open, erasing initial gains on beat and raise quarter now down -14.5% at $48.75 (off earlier highs $59.31); PT was raised to $78 at Needham and to $70 at OpCo post earnings.
• W -2%; as Q3 EPS and revs topped consensus views, but shares reversed lower after guiding on its c/c that sees Q4 revenue down low single digits and sees Q4 gross margin at lower end of 30%-31% range.