Early Look

Friday, December 8, 2023

U.S. futures are flattish following yesterday’s stock market “melt” higher, as investors await the important monthly jobs report at 8:30 AM, with estimates for +180K Nonfarm payroll jobs, +153K private payroll jobs and +30K manufacturing payrolls jobs added. Payrolls data this week have been market and interest rate friendly, with in-line to slightly weaker ADP/jobless claims data. The Spuz trade in a narrow 13-point range overnight, just shy of yesterday highs as the S&P 500 looks to top and move above the 4,600 level which has been resistance the last few weeks. The Nasdaq ended Thursday +1.4% higher, led by massive advances in GOOGL and AMD (5% and 9% respectively) following news, while the S&P snapped a 3-day losing streak. Data Thursday suggested that the labor market was gradually losing momentum as the number of Americans filing new claims for unemployment benefits increased moderately last week. Still, investors are anxious to see Friday’s U.S. monthly payrolls report for a better look at the U.S. employment picture and help determine the path of rates by the FOMC. In Asian markets, The Nikkei Index dropped -550 points to 32,307, the Shanghai Index rose 3 points to 2,969, and the Hang Seng Index slipped -11 points to 16,334. In Europe, the German DAX is gained 40 points to 16,669, while the FTSE 100 rose 27 points to 7,541.

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 36.25 points, or 0.80%, to 4,585.59.

·     The Dow Jones Industrial Average rose 62.95 points, or 0.17%, to 36,117.38.

·     The Nasdaq Composite spiked 193.28 points, or 1.37%, to 14,339.99.

·     The Russell 2000 Index advanced 16.20 points, or 0.87% to 1,868.25.

Economic Calendar for Today

·     8:30 AM ET                  Nonfarm Payrolls for November…est. 180K (prior 150k)

·     8:30 AM ET                  Private Payrolls for November…est. 153K (prior 99K)

·     8:30 AM ET                  Manufacturing Payrolls for November…est. 30K (prior -35K)

·     8:30 AM ET                  Unemployment Rate for November…est. 3.9%

·     8:30 AM ET                  Average Hourly Earnings M/M for November…est. +0.3%

·     10:00 AM ET                University of Michigan Confidence, Dec-Prelim…est. 62.0

·     10:00 AM ET                University of Michigan inflation expectations for 1-yr and 5-yr

·     1:00 PM ET                   Baker Hughes Weekly rig count data

Sector News Breakdown

Consumer

·     Lululemon (LULU) Q3 EPS $2.53 vs. est. $2.28; Q3 revs $2.20B vs. est. $2.19B; sees Q4 EPS $4.85-$4.93 vs. est. $4.94; sees Q4 revenue $3.135B-$3.17B vs. est. $3.18B; now expects full-year 2023 net revenue between $9.55B-$9.59B from prior $9.51B-$9.57B; inventories at the end of Q3 decreased 4% to $1.664B compared to $1.742B y/y.

·     RH Corp. (RH) Q3 EPS loss (-$0.42) vs. est. $0.95; Q3 revs $751.2M vs. est. $756.7M; continue to expect the existing housing market to remain frozen until interest rates and/or home prices fall meaningfully; narrows FY23 revenue view to $3.06B-$3.08B from $3.04B-$3.1B and lowers FY operating margin in the range of 13.6%-14.0% vs. prior forecast of 14.5% to 15.5%.

·     Smith & Wesson Brands (SWBI) Q2 adj EPS $0.14 vs est. $0.14 on revs $124.96Mm vs est. $123.9Mm, gr mgn 25.4%; says expect to be in very strong position to drive returns for shareholders throughout 2H24 and FY25.

·     Torrid Holdings (CURV) Q3 EPS ($0.03) vs est. ($0.05), adj EBITDA $19.4Mm vs est. $13.4Mm on revs $275.408Mm vs est. $245.83Mm, gr mgn 33.2%; guides Q4 net sales $267-283Mm vs est. $266.72Mm and adj EBITDA $9-13Mm vs est. $10.05Mm.

·     Vail Resorts (MTN) Q1 EPS ($4.60) vs est. ($4.52), EBITDA ($139.8)Mm vs est. ($138.39)Mm on revs $258.6Mm vs est. $271.01Mm; reaffirms FY24 EBITDA and net income guide.

Energy, Industrials and Materials

·     CMS Energy (CMS) files prospectus supplement for offering of up to $1 bln of common stock.

·     Honeywell International (HON) has struck a roughly $5 billion deal to buy Carrier Global’s (CARR) security business, according to people familiar with the matter, as the industrial giant embarks on a spending spree to bolster its portfolio, WSJ reports. https://tinyurl.com/2j3k3vj4

·     LyondellBasell (LYB) entered into an agreement to sell its Ethylene Oxide & Derivatives business along with the production facility located in Bayport, Texas to INEOS Oxide for $700M.

·     Planet Labs (PL) Q3 adj EPS loss (-$0.05) vs. est. loss (-$0.08); Q3 revs $55.4M vs. est. $55.25M; sees Q4 revenue $56M-$59M, vs. est. $58.81M and sees Q4 adjusted gross margin 52%-56%; narrows FY24 revenue view to $218M-$221M from prior $216M-$223M.

·     Homebuilder/Building Product rating changes at Deutsche Bank:

·     For Homebuilders, the firm reiterates DHI and MTH as Top Picks and adds TOL following its strong earnings report earlier this week, upgraded NVR to Hold from Sell on more favorable valuation and TMHC to Buy from Hold on favorable relative valuation and expected momentum in the business due to its diversified buyer exposures. KBH was downgraded to Sell on valuation.

·     For Building Products, the firm sees the year ahead favoring stock selection, and has positive bias toward Residential Construction exposure and the Distributor business model. Reiterate Top Picks BLD, BLDR and CNM, and add BECN to Top Picks; upgrades OC to Buy from Hold on a combination of solid Roofing and Insulation prospects and attractive valuation and downgrades POOL to Hold from Buy as it worries that potential downside risks to earnings in ’24 are now not at all reflected in the stock’s multiple especially after the more recent rise in the shares. Other changes, AMWD upgraded to Hold from Sell, AZEK downgraded to Hold from Buy.

Financials

·     Digital Realty (DLR) and Blackstone (BX) announce $7 Billion hyperscale data center development joint venture to develop four hyperscale data center campuses across three metro areas on two continents expected to support approximately 500 megawatts (MW) of total IT load.

·     MBIA (MBI) declared an $8.00 per share special dividend.

Healthcare

·     Avid Biosciences (CDMO) lowers FY24 revenue view to $137M-$147M from $145M-$165M (est. $154.09M); Q2 EPS loss (-$0.15) vs. est. loss (-$0.06); Q2 revs $25.4M vs. est. $33.21M.

·     Bluebird Bio (BLUE) upgraded to equal-weight from underweight at Morgan Stanley ahead of the likely approval of its Lovo-cel therapy to treat sickle cell disease.

·     Cooper Companies (COO) board approved a 4 for 1 stock split; Q4 adj EPS $3.47 vs. est. $3.48; Q4 sales rose 9% y/y to $927.1M vs. est. $924.8M; sees FY 24 EPS $13.60-$14.00 vs. est. $14.04 and revs $3.80B-$3.87B vs. est. $3.86B.

Technology, Media & Telecom

·     The UK’s antitrust watchdog is considering whether Microsoft Corp. (MSFT) and OpenAI Inc.’s partnership should be called in for a merger probe. The Competition and Markets Authority said Friday it was seeking views from interested parties to comment on whether the two firms’ recent collaboration could have resulted in competition issues in the UK. – Bloomberg

·     Broadcom (AVGO) Q4 adj EPS $11.06 vs est. $10.98 on revs $9.295B vs est. $9.413B, adj EBITDA $6.048B vs est. $6.081B; guides FY24 revs approx $50B incl VMware vs est. $52.455B and adj EBITDA mgn approx 60%.

·     DocuSign (DOCU) Q3 adj EPS $0.79 vs est. $0.63 on revs $700.4Mm vs est. $690.13Mm, adj gr mgn 83%; sees Q4 revs $696-700Mm vs est. $693.73Mm, adj gross margin 81-82%, adj operating margin 22.5-23.5%.

·     Comtel Comm (CMTL) Q1 adj EBITDA $18.4Mm vs est. $17.35Mm on net sales $151.9Mm vs est. $151.87Mm; sees Q2 net sales +1-3% sequentially.

·     Guidewire Software (GWRE) Q1 adj EPS $0.00 vs est. ($0.18) on revs $207.4Mm vs est. $200.93Mm; guides Q2 ARR $793-798Mm, revs $237-243Mm vs est. $251.49Mm, adj op Inc $15-20Mm vs est. $25.93Mm; sees FY ARR $846-858Mm, revs $976-986Mm vs est. $982.97Mm, adj op Inc $82-92Mm vs est. $69.10 and op cash flow $115-135Mm.

·     HashiCorp (HCP) Q3 adj EPS $0.03 vs est. ($0.04), adj op Inc ($10.5)Mm vs est. ($24.34)Mm on revs $146.1Mm vs est. $143.2Mm; sees Q4 revs $148-150Mm vs est. $149.05Mm, adj op Inc ($16)Mm – ($13)Mm vs est. ($19.12)Mm and adj EPS $0.00-0.02 vs est. ($0.01).

·     Smartsheet (SMAR) Q3 adj EPS $0.17 vs est. $0.09 on revs $245.9Mm vs est. $241.69Mm; guides Q4 revs $254-256Mm vs est. $255.36Mm, adj op Inc $21-23Mm vs est. $13.53Mm and adj EPS $0.17-0.19 vs est. $0.11.

·     Crown Castle Inc. (CCI) said that Jay Brown informed the Company’s Board of Directors on December 6, 2023 of his decision to retire as Crown Castle’s President, Chief Executive Officer and a Director of the Company, effective January 16, 2024.