Mid-Morning Look

Tuesday, November 07, 2023

U.S. stocks looking to add to recent gains, with the S&P currently flat (rising a 6-day win streak) and the Nasdaq, behind gains in software post earnings results, remains on track for an 8^th straight day of gains. Oil prices hit fresh 2-1/2-month lows as mixed economic data from China offset the impact of Saudi Arabia and Russia extending output cuts. Energy stocks have tumbled along with the decline in oil prices as the S&P 500 energy sector hits 3-month lows. Commodity prices in general were weak with Materials tumbling alongside energy and gold prices slid over 1% to $1,967 an ounce as the dollar rebounds following last week’s decline. Treasury yields dip with the 10-year back down below 4.6% ahead of more Fed speakers on the calendar today (already heard from Kashkari, Goolsbee today) and the first of three Treasury bond auctions this week (at 1:00 PM today a $48B 3-year note auction to be followed by a $40B 10-year note auction on Wednesday and $24B in 30-year bonds on Thursday). Technology seeing strength behind some earnings with DDOG, AYX shares boosting software, but industrials/materials slide behind results from APD, CNHI, EMR. Used cars went down another 2.2% last month and is now down YoY 14 consecutive months. Smallcaps continue to lag broader markets.

Economic Data

·     September International Trade in Goods and Services showed deficit widens to (-$61.5B) vs. (-$60.3B) consensus and (-$58.7B) in August (revised from -$58.30B); Imports rose 2.7% to $322.7 billion in September while exports moved up a smaller 2.2% last month to $261.1 billion, just a hair below an all-time high.

Sector Movers Today

·     In Software: AYX Q3 ARR $914M up 21% topped consensus and guidance $903M, even with a $6M q/q headwind from FX relative to guidance which comes after disappointing Q1 and Q2; AZPN posted modestly lower F1Q ACV growth of 10.9% y/y, vs Street’s expectations of 11.6% and reiterated its FY24 ACV growth guidance of at least 11.5% and FCF guidance of at least $360M; DDOG shares soar as delivered a better-than-expected forecast as sees year EPS $1.52-$1.54 above prior $1.30-$1.34 and revs $2.10B-$2.11B vs. prior $2.05B-$2.06B (helping boost shares of MDB, ESTC, SNOW; DSP reported solid 3Q23 results as gross revenue, contribution ex-TAC, and EBITDA came in 1%, 6%, and $2.2M (29%) above the high end of guidance. EVCM shares slid as reported mixed Q323 results with adjusted EBITDA beat and revs light including payments growth of 28% y/y, down from 32% y/y last quarter. RNG delivered solid Q3 results, beating revenue and margin expectations and raised the midpoint of its full-year guidance.

·     In E&P: FANG beat 3Q oil production by 1% and beat EBITDAX by 4%. 4Q oil is guided 1% above estimates, in part due to the inclusion of VNOM’s GRP acquisition and capex guided 4% above estimates on higher well costs from the recent water JV. CPG agreed to acquire Hammerhead Energy for 21 Canadian dollars per share, the equivalent of about $15.33, in cash and stock. In a deal valued at C$2.55 billion, including debt. CTRA 3Q production/capex/CFPS beat consensus by 4%/5%/5%, posted a 3% increase to 2023 production guidance that included an initial 4Q forecast that was 2%/6% above Street total/oil production estimates.

·     In MedTech/Services: ATEC reported a solid beat on both revenue and AEBITDA and increased the outlook for both metrics for FY2023. HIMS posts Q3 revs $226.7M topping consensus $220.1M, growing 57% Y/Y an the $12.3M EBITDA also beat the Street estimate of $11.5M; FY23 guidance raised with revs $868-873M vs $830-850M prior and EBITDA moving to $43-46M vs the prior guide of $35-40M. NEO reported better than expected 3Q results and raised guidance for the remainder of 2023. QTRX reported 3Q23 revenue of $31.3M vs. est. $28M; 3Q adj gross profit of $15.2M compares to consensus $11.6M; non-GAAP gross margin increased to 48.6% vs 3Q22 adj. gross margin of 35.0% and raised FY23 revenue expectations. ROVR reported beat and raise Q3 results w/total bookings growth accelerating, revenue coming in 5% above the high end of guidance, and EBITDA $3.5M above the high end of guidance. WAT 3Q showed better growth in US and Europe offset by weaker than expected results in China; lowered its FY23 organic cc sales guidance to a decline of -2% to -1%; lowers year EPS view to $11.65-$11.75 from $12.20-$12.30 prior) and Q4 implied EPS guide below views. ZBH in ortho reported 3Q revenues inline and better margins driving an EPS beat; incorporated a slightly higher FX impact, though reiterated the underlying components of its 2023 guidance.

Stock GAINERS

·     AYX +19%; Q3 ARR $914M up 21% topped consensus and guidance $903M, even with a $6M q/q headwind from FX relative to guidance which comes after disappointing Q1 and Q2.

·     BMRN +8%; after Reuters reported activist investor Elliott Investment Management has built a stake and has been in discussions for months about its future https://tinyurl.com/2bwzsyd4

·     CELH +6%; Q3 EPS $0.89 vs. est. $0.46; Q3 revs rose 104% y/y to $384.76M vs. est. $348.94M; North America revenue increased 107% to $371M, up from $180M in Q3 2022.

·     DDOG +24%; as delivered a better-than-expected forecast as sees year EPS $1.52-$1.54 above prior $1.30-$1.34 and revs $2.10B-$2.11B vs. prior $2.05B-$2.06B (helping shares MDB, SNOW); had 3,130 customers with ARR of $100,000 or more by the end of the quarter, up 20% y/y.

·     DHI +3%; posted a quarterly beat and guided FY revs $36B-$37B above the $36.08B estimate while saying despite continued higher mortgage rates and inflationary pressures, net sales orders increased 39% from the prior year quarter.

·     NXPI +3%; posted higher Q3 results and guided Q4 in line; Q3 results reflect solid demand in core-industrial and mobile, with auto largely in line and comm infra below; Q4 revenue is expected to decrease 1% q/q, largely in line and slightly below consensus.

·     PLNT +15%; Q3 revs $277.6M topped $268M estimate and raises 2023 revenue and profit growth outlook; sees FY revenue to increase by 14% vs previous expectations of 12% and guides FY adj EPS to increase by 35% vs earlier forecast of 34% – ends Q3 with 18.5M members.

·     TGI +16%; after boosting its 2024 outlook on continued strong commercial aftermarket demand and now sees sales $1.43B-$1.47B vs. prior $1.39B-$1.43B after Q2 rev beat.

Stock LAGGARDS

·     ADTN -25%; as Q3 EPS loss (-$0.14) vs. est. loss (-$0.09) on in-line revs $272.3M and guides Q4 revs $210M-$240M vs. est. $287M; downgraded to Neutral at Rosenblatt because of its high exposure to Telecom (large majority of total) and Europe (more than half of total).

·     APD -10%; reported Q4 revs $3.19B missing the $3.35B estimate, thought EPS of $3.15 beat by 3c, as revs impacted by lower fees for energy pass-through and unfavorable currency impacts.

·     AURA -30%; announced pricing of an underwritten public offering of 11M shares of common stock at a price to the public of $9.00 per share.

·     CHRS -22%; after cutting its net product revenue and combined R&D and SG&A expenses forecast for the full year.

·     CNHI -9%; mixed Q3 report as EPS of $0.42 misses but revs $5.98B slightly above and initiated restructuring program targeting 5% reduction in salaried workforce cost.

·     CPG -8%; after the Canadian oil producer said it will buy Hammerhead Energy for about C$2.55B, or 21 Canadian dollars per share, the equivalent of about $15.33, in cash and stock.

·     EMR -9%; Q4 adj EPS of $1.29 missed the $1.31 estimate and sales $4.09B missed the $4.19B est. and guided Q1 adj EPS $1.00-$1.05 vs. est. $1.15.

·     EH -6%; shares tumbled after noted short seller Hindenburg Research out negative on shares.

·     SANM -10%; Q3 results missed Wall Street’s estimates for its Q4 and guided much lower than views for the current period sending shares lower.

·     VTYX -82%; after saying it’s terminating its Phase 2 trial of VTX958 in plaque psoriasis and psoriatic arthritis as efficacy results did not meet the internal target to support further development.