Early Look

Wednesday, July 27, 2022

U.S. futures are pointing to a solid rebound, especially for the beaten-up tech names after yesterdays near 2% pullback, as earnings and guidance results from Microsoft and Alphabet (GOOGL) overnight lift the Nasdaq roughly 1.45% and the S&P +35 points to around 3,460. GOOGL and MSFT are both looking higher by around 4% with another heavy dose of earnings on deck this morning. Meanwhile the FOMC interest rate decision is on tap for later this afternoon at 2:00 PM ET. Recently, the CME FedWatch tool puts a probability of 75.1% on a 75-bp rate hike to 2.25%-2.5% for the July meeting and a 24.9% probability for a 100-bp increase. For September, markets are pricing in a 49.6% probability for a 50-bp hike on top of that and a 42.0% chance of a 75-bp increase. The aggressive rate hikes are expected in response to recent inflation data where the consumer price index jumped 9.1% in June from a year ago, its fastest rate in more than 40 years, accelerating from 8.6% in May. And the producer price index surged 11.3% in June Y/Y, up from 10.9% in May. In Asian markets, The Nikkei Index rose 60 points to 27,715, the Shanghai Index was little changed, down -1 point to 3,275 and the Hang Seng Index fell -238 points to 20,670. In Europe, the German DAX is up 40 points to 13,135, while the FTSE 100 rises 33-points to 7,340. In energy markets, Russia delivered less gas to Europe on Wednesday in a further escalation of an energy stand-off between Moscow and the European Union. Stocks dropped on Tuesday after U.S. data continued to show sluggish growth with the FOMC rate decision looming on Wednesday and US second quarter GDP release coming on Thursday. Walmart Inc.’s selloff dragged down retail industry peers, while UPS slumped as package deliveries fell more than expected.

Market Closing Prices Yesterday

• The S&P 500 Index dropped -45.79 points, or 1.15%, to 3,921.05
• The Dow Jones Industrial Average fell -228.50 points, or 0.71%, to 31,761.54
• The Nasdaq Composite tumbled -220.09 points, or 1.87%, to 11,562.57
• The Russell 2000 Index declined -12.53 points, or 0.69% to 1,805.25

Economic Calendar for Today

• 7:00 AM ET                  MBA Mortgage Applications Data
• 8:30 AM ET                  Durable Goods Orders for June
• 8:30 AM ET                  Durable Goods Ex Transportation for June
• 8:30 AM ET                  Advance Goods Trade Balance for June
• 10:00 AM ET                Pending Home Sales M/M for June
• 10:30 AM ET                Weekly DOE Inventory Data
• 2:00 PM ET                   FOMC Policy Meeting – 75-100 bps rate hike expected

Earnings Calendar:

• Earnings Before the Open: ADP AEP APH AVY BA BG BLFY BMY BOKF BSX BXMT CFFN CHEF CME COOP DRVN EVR EXTR FSS GD GPC GPI HES HESM HLT HUM IART IVZ KHC LW MHO MNRO MPX NSC NYCB OC ODFL OPCH OTIS PAG PB PRG R ROK ROL SAIA SCL SHOO SHW SLAB SLGN SRDX STRA TDY TEL TMHC TMUS TPB TPX TRN TZOO USAP VBTX WM WNC WRLD
• Earnings After the Close: ACHC ALGN AMED AR ASGN ASPN ATNI AVB AWK BELFA BOOT CAKE CASH CCS CHDN CHE CHRW CINF CNMD COLM COUR CSL CTSH CUBO CYBE CYH DRE EGHT EQIX EQT ESI ESRT ETSY F FBHS FLEX FLS FORM FTAI FWRD GGG GL GLAD GTY HBNC HOLX HP INFA INVH JAKK LC LOB LRCX MAA MC META MKSI MMSI MOH MTH MUSA MXL NDLS NLY NOV NOVA NOW NTGR NEW OII OIS ORLY PEGA PI PLXS PPC PTC QCOM QS RBBN RJF SLM SNBR SSNC STAG TDOC TROX TYL UPWK URI VICI VKTX WHG

Sector News Breakdown

Consumer

• Boyd Gaming (BYD) 2Q EPS $1.33 vs est. $1.38 on revs $894.5Mm vs est. $870.42Mm
• Chipotle Mexican Grill (CMG) 2Q adj EPS $9.30 vs est. $9.04 on revs $2.2B vs est. $2.22B, qtrly comps +10.1%, qtrly digital sales mix 39% of food & beverage revs; qtrly restaurant level op mgn 25.2% vs 24.5% year ago; sees 3Q comps including planned price increase +mid-high-single digits; guides 235-250 new restaurant openings 2022
• F45 Training (FXLV) shares -50% after slashing its 2022 outlook amid ongoing macroeconomic uncertainty, announced job cuts and said its CEO will step down; cut 2022 revenue guidance to $120M-$130M from prior outlook of $255M-$275M (est. $266.07M) and also cut its 2022 adj. EBITDA guidance to $25M-$30M from prior forecast of $90M-$100M
• Mondelez (MDLZ) 2Q adj EPS $0.67 vs est. $0.64 on revs $7.27B vs est. $6.78B; guides FY 8+% organic revs growth and adj EPS growth of +mid-high single digit on constant currency basis; says estimates currency translation to decrease FY net revs growth by about 5% and adj EPS by about $0.22
• Skechers (SKX) 2Q EPS $0.58 vs est. $0.54 on sales $1.87B vs est. $1.77B; see 3Q sales $1.80-1.85B vs est. $1.81B and EPS $0.70-0.75 vs est. $0.82; sees FY sales $7.2-7.4B vs est. $7.3B and EPS $2.60-2.70 vs est. $2.85
• The U.S. auto safety agency said it was opening five investigations into more than 1.8 million Stellantis (STLA), Ford Motor (F) and General Motors (GM) vehicles over stalling and other issues.

Energy

• Enphase (ENPH) 2Q adj EPS $1.07 vs est. $0.84 on revs $530.2Mm vs est. $504.5Mm, adj gross margin 42.2%; sees 3Q revs $590-630Mm vs est. $548.8Mm
• The American Petroleum Institute showed a draw of 4.04M barrels of oil for the week ending July 22, gasoline inventories show a draw of 1.06M barrels, distillate inventories show a draw of 550K barrels and Cushing inventories show a build of 1.09M barrels.

Financials

• Visa Inc. (V) 3Q adj EPS $1.98 vs est. $1.75 on revs $7.3B vs est. $7.06B; cross-border travel volume surpassed 2019 levels for first time since pandemic began; payments volume +12% on constant-dollar basis
• PayPal (PYPL) rises after the WSJ reported Elliott Management now holds a stake of unknown size in PayPal. The company has attracted Elliott Management’s interest in the past – back in 2014 https://on.wsj.com/3ovobbi
• Credit Suisse Group AG (CS) is set to announce the departure of Chief Executive Thomas Gottstein, according to people familiar with the bank, part of an effort to turnaround the struggling fortunes of the Swiss bank. The timing of his departure couldn’t be determined, but an announcement could come as soon as Wednesday the WSJ reported overnight
• Equity Residential (EQR) boosted its full-year earnings guidance as now sees full-year normalized FFO per share to $3.48-$3.58 from its previous range of $3.40-$3.50; compares with est. of $3.47.
• Pzena Investment Management (PZN) announced that it has entered into an agreement to become a private company through a transaction in which holders of PZN Class A common stock will receive $9.60 per share in cash
• Navient (NAVI) 2Q adj core EPS $0.92 vs est. $0.78; NII $321Mm vs est. $255.9Mm

Healthcare

• Cassava Sciences (SAVA) faces U.S. criminal probe tied to Alzheimer’s drug; sources say according to Reuters. The U.S. Justice Department has opened a criminal investigation into Cassava Sciences Inc involving whether the biotech company manipulated research results for its experimental Alzheimer’s drug, two people familiar with the inquiry said.
• Humana (HUM) Q2 adjusted EPS $8.67 vs, est. $7.67; Q2 revs $23.7B vs. est. $23.47B; raises FY22 adjusted EPS view to ‘approximately $24.75’from $24.50 and reaffirms FY 2022 expected individual Medicare Advantage membership growth range of approximately 150,000 to 200,000.
• Stryker (SYK) 2Q adj EPS $2.25 vs est. $2.28 on revs $4.5B vs est. $4.53B; sees FY organic net sales +8-9% vs est. $7.5% and adj EPS $9.30-9.50 vs est. $9.60; says net sal.es growth to be adversely impacted by foreign currency exchange rates by about 2-3%
• Teva Pharma (TEVA) Q2 adjusted EPS $0.68 vs. est. $0.57; Q2 revs -3.2% y/y to $3.79B vs, est. $3.81b; adj N.A. revenue $204 million, +17% y/y and adj EBITDA $1.13 billion; guides year revs of $15.0B-$15.6B vs. previous range of $15.4B-$16.0B (consensus $15.57B); said it had struck a deal with US state and local governments to pay more than $4 billion to settle thousands of lawsuits
• IDEAYA Biosciences (IDYA) has entered into a clinical trial collaboration and supply agreement with Amgen (AMGN) to evaluate MAT2A-PRMT5 synthetic lethality combination in MTAP deleted tumors, according to a statement.
• SIGA Technologies (SIGA), Chimerix (CMRX), and Emergent Biosolutions (EBS) among other monkeypox vaccine names rallied after hours in reports in the Washington Post that the Biden administration may require as much as $7B in order to deal with the current monkeypox outbreak in the country https://bit.ly/3oylx4C
• NextGen Healthcare (NXGN) lowered its FY23 revenue and earnings estimates; said revs now expected to be between $621M-$633M, down from between $628M-$640M and non-GAAP EPS is now projected at $0.92-$0.98, down from $0.95-$1.01.
• ObsEva (OBSV) rises 70% after the biopharmaceutical company said it plans to initiate a corporate restructuring given the commercial landscape and potential additional capital is needed to fund the completion of the linzagolix clinical development program.
• Legend Biotech (LEGN) 8.14M share Secondary priced at $43.00

Industrials & Materials

• Ashland (ASH) Q3 adjusted EPS $1.89 vs. est. $1.67; Q3 revs $644M vs. est. $622.79M; raises FY22 revenue view to $2.35B-$2.4B from $2.25B-$2.35B; now expects greater sales and Adjusted EBITDA in fiscal year 2022 compared to its previous outlook
• Idex Corp. (IEX) 2Q adj EPS $2.02 vs est. $1.89 on sales $796.1Mm vs est. $766Mm; sees FY organic revs approx +10% vs est. +10% and adj EPS $7.88-7.98 vs prior $7.50-7.63 and est. $7.63
• Teck Resources (TECK) announces $500M buyback

Technology, Media & Telecom

• Alphabet (GOOGL) 2Q advertising revs $56.388B, cloud revs $6.276B, total revs $69.685B vs est. $69.95B, EPS $1.21 vs est. $1.29
• Microsoft (MSFT) 4Q EPS $2.23 vs est. $2.29 on revs $51.9B vs est. $52.45B; intelligent cloud revs $20.9B +20%, more personal computing revs $14.4B +2% (+5% constant currency), productivity and bus process revs $16.6B +13%; shares rose after hours after saying it expected double-digit growth in sales and operating income in fiscal 2023, with margins roughly flat. Azure sales growth will be about 3% lower in the current quarter, the company said. It’s expecting Productivity sales to come in at $15.95B-$16.25B; Intelligent Cloud sales at $20.3B-$20.6B; and Personal Computing sales to arrive at $13B-$13.4B
• Texas Instruments (TXN) 2Q EPS $2.45 vs est. $2.12 on revs $5.2B vs est. $4.6B; sees 3Q revs $4.9-5.3B vs est. $4.97B and EPS $2.23-2.51 vs est. $2.26
• Tenable Holdings (TENB) 2Q adj EPS $0.05 vs est. $0.01 on revs $164.3Mm vs est. $163.3Mm; guides 3Q revs $169-171Mm vs est. $171.3Mm and adj EPS $0.03-0.04 vs est. $0.04; sees FY revs $673-679Mm vs est. $676.8Mm and adj EPS $0.17-0.20 vs est. $0.18
• Teradyne (TER) Q2 Non-GAAP EPS of $1.21 beats by $0.07 and revs of $841M (-22.8% Y/Y) beats by $11.38M; gross margin 60.2% vs. 59.6% last year; guides Q3 revenue of $760M-$840M vs. est. $891.53MM, with GAAP net income of $0.86 to $1.12 per diluted share
• Juniper Networks (JNPR) 2Q adj EPS $0.42 vs est. $0.45 on revs $1.27B vs est. $1.26B, adj op margin 13.9%; sees 3Q revs $1.3-1.4B vs est. $1.4B and EPS $0.45-0.55 vs est. $0.54