Early Look

Tuesday, October 31, 2023

Futures	Up/Down	%	Last
Dow	118.00	0.36%	33,135
S&P 500	9.25	0.22%	4,194
Nasdaq	5.50	0.04%	14,422

 

 

U.S. stock futures are holding near their overnight highs, with S&P futures (Spuz) nearing the 4,200 level, looking to continue Monday’s upward momentum as Treasury yields sink to overnight lows (10-yr 4.81%) ahead of a busy day of earnings and economic data. Stocks kicked off the week in solid fashion, in fact, yesterday marked the 23rd out of 25th Monday that major averages closed higher, an impressive statistic. Stocks rose, oil fell over -3% and Treasury yields dipped while the S&P 500 added over 1%, rebounding from near technical correction levels (last week the S&P and Nasdaq hit correction territory or 10% off highs and the Russell 2000 Smallcaps fell over -20% from its best levels (defined as “bear market” territory). Still, with only two trading days left, equities remain on track for their third monthly slump — the longest since March 2020. Overnight, the Japanese yen weakened to 150.65 vs. the dollar after the Bank of Japan raised upper bound reference for 10-year JGB yield to 1% from 0.5% previously while maintaining the target at 0% with an 8-1 majority vote. In Asian markets, The Nikkei Index advanced 161 points to 30,858, the Shanghai Index fell -2 points to 3,018, and the Hang Seng Index declined -293 points to 17,112. In Europe, the German DAX is up 85 points to 14,800, while the FTSE 100 rises 38 points to 7,365. A big day for earnings in a week chock full of potential market moving catalysts including FOMC meeting tomorrow, jobs data, central bank policy meetings, over 30% of the S&P reporting this week and Treasury refundings/announcements.

 

Economic Calendar for Today

·     7:45 AM ET                  ICSC Weekly Retail Sales

·     8:30 AM ET                  Employment Cost Index for Q3…est. +1.0%

·     8:55 AM ET                  Johnson/Redbook Weekly Sales

·     9:00 AM ET                  Monthly Home Prices M/M for August

·     9:00 AM ET                  CaseShiller 20-city index for August…est. +0.7%

·     9:45 AM ET                  Chicago PMI for October…est. 45.0

·     10:00 AM ET                Consumer Confidence for October…est. 100.0

·     4:30 PM ET                   API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AGCO AME ARDX BEN CAC CAT CEIX CGNX COCO CVLT DORM ECL EPD ETN ETRN FNMA GEHC GPK GPN GPRE GVA HAYW HNI HUBB IGT INCY IPGP JBLU LDOS LGIH LXP MAC MBUU MPC MPLX MSCI NBIX NPO NSP PEG PFE RGEN SFM SIRI SSTK ST SYY TECH TREE WEC XYL ZBRA

·     Earnings After the Close: AEIS AIZ AMD AMGN APAM BCC BGFV BLKB BXC CHK CZR DEI EQH EQR FLXS FSLR GPOR HRZN HUN KTCC LFUS LTHM LUMN MCY MTCH MTG MTH NE NR OI OKE PAYC PECO PRO SAFE SKY SON TCS UNM VOYA WTTR XHR ZWS

 

Other Key Events:

·     China Caixin manufacturing PMI for October

 

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 49.45 points, or 1.20%, to 4,166.82.

·     The Dow Jones Industrial Average jumped 511.37 points, or 1.58%, to 32,928.96.

·     The Nasdaq Composite gained 146.47 points, or 1.16%, to 12,789.48.

·     The Russell 2000 Index advanced 10.35 points, or 0.63% to 1,647.29.

 

 

Macro	Up/Down	Last
Nymex	0.79	83.10
Brent	1.06	88.51
Gold	0.90	2,006.50
EUR/USD	0.0049	1.0661
JPY/USD	1.61	150.71
10-Year Note	-0.063	4.814%

 

 

World News

·     The yen weakened to 150.65 vs. the dollar after the Bank of Japan raised upper bound reference for 10-year JGB yield to 1% from 0.5% previously while maintaining the target at 0% with an 8-1 majority vote. The central bank reiterated that the upper bound is a reference rather than rigid limits. The BoJ maintained its negative Policy Balance rate and guidelines for asset purchases while raising the core CPI forecast to 2.8% (range of 2.7% – 3.0%) from 2.5% for FY 2023, and to 2.8% (2.7% – 3.1%) from 1.9% for FY2024 previously in July.

·     China October Manufacturing below expected; 49.5 vs. 50.2 consensus; China October Services below expected; 50.6 vs. 51.8 consensus.

·     Japan factory output 0.2% vs 2.5% est., retail sales -0.1% vs 0.2% est. Japan’s industrial production fell by 4.6% in September from a year earlier (est. -2.3%; prev. -4.4%).

·     Eurozone core inflation dropped to 4.2% year-on-year in October from 4.5% in September. The euro zone economy contracted by 0.1% in the third quarter, according to flash estimates, below consensus estimates for GDP to be unchanged from the previous quarter.

·     Euro-area inflation eased to its lowest level in more than two years as the bloc’s economy shrank following an unprecedented ramp-up in interest rates. Consumer prices rose 2.9% in October — down from the previous month’s 4.3% and better than the 3.1% median estimate.

·     UK business confidence grew in October to 39% after a drop in September at 36%; October rose to its second-highest level of 2023.

 

Sector News Breakdown

Consumer

·     Chegg Inc. (CHGG) Q3 adj EBITDA $38.8Mm vs est. $35.22Mm on revs $157.9Mm vs est. $152.14Mm; guides Q4 revs $185-187Mm vs est. $185.7Mm, gr mgn 73-74% and adj EBITDA $62-64Mm vs est. $61.8Mm; CFO Andrew Brown plans to retire.

·     Leggett & Platt (LEG) Q3 adj EPS $0.36 vs. est. $0.40; Q3 revs $1.18B vs. est. $1.24B; guides Q4 EPS and revs below consensus and cuts FY23 adj EPS view to $1.35-$1.45 from $1.45-$1.65 and lowers FY23 revenue view to $4.7B-$4.75B from $4.75B-$4.90B (est. $4.85B); FY guidance does not include impacts from UAW strike beyond what we have experienced so far.

·     PriceSmart (PSMT) Q4 adj EPS $0.65 vs est. $0.85 on revs $1.089B vs est. $1.097B; says do not expect to continue share repurchase or adopt a new repurchase plan currently.

·     Trex Co (TREX) Q3 adj EPS $0.57 vs est. $0.50 on revs $304Mm vs est. $289.89Mm, adj EBITDA $95.559Mm vs est. $84.77Mm; guides Q4 revs $185-195Mm vs est. $187.54Mm, sees FY revs $1.09B at midpoint vs est. $1.702B and prior guide $1.04-1.06B; sees FY adj EBITDA mgn 29.0-29.5% vs prior guide 28-29%.

·     VF Corp. (VFC) Q2 adj EPS $0.63 vs est. $0.65 on revs $3.03B vs est. $3.003B, adj gr mgn 51.3%, adj EBIT mgn 12%; says vans’ performance is not anticipated to improve in 2H24, withdraws previous guidance for FY revs and earnings, says transformation plan, reinvent, commits to lowering cost structure by $300Mm.

 

Energy

·     BP Plc (BP) Q3 earnings were below consensus forecasts despite producing more oil and gas, seeing higher realized refining margins and strong oil sales, and wasn’t able to meet market expectations of $4.01 billion for underlying replacement cost profit.

·     Comstock Resources (CRK) Q3 adj EPS $0.04 vs. est. $0.07; Q3 revs $376.74M vs. est. $355.12M; Continued weak natural gas prices weighed heavily on the third quarter results; natural gas and oil sales, including realized hedging gains, were $316M; Q3 operating cash flow was $167M, adjusted EBITDAX for the quarter was $209M.

·     Transocean (RIG) Q3 adj EPS loss (-$0.36) vs. est. loss (-$0.23); Q3 revs $713M vs. est. $722.56M; said increased its backlog for the 6^th straight quarter, ending Q3 at $9.4B.

 

Financials

·     AGNC Investment (AGNC) Q3 EPS loss (-$0.68); Q3 tangible net book value per common share $8.08 as of September 30, a decrease of 14.0% for the quarter; $59.3 billion investment portfolio as of September 30, 2023.

·     Arch Capital Group (ACGL) Q3 EPS $1.88 vs est. $1.61, gr premiums written $4.527B vs est. $4.38B, combined ratio 77.9%, adj combined ratio 77%.

·     Brixmor Property (BRX) Q3 FFO/shr $0.50 vs est. $0.50; total leased occupancy 93.9%, anchor leased occupancy 95.7%, record small-shop leased occupancy 89.8%; same-property NOI +4.8%.

·     Public Storage (PSA) Q3 FFO/shr $4.33 vs. est. $4.19; Q3 revs rose 5.1% y/y to $1.14B, in-line with consensus; Q3 same-store net operating income $667.3M, +5.5% y/y; sees 2023 Core FFO/Shr $16.60-$16.85 above prior guidance of $16.40-$16.80; sees 2023 Same-Store Revenue Growth 4%-4.75%

·     Simon Property (SPG) Q3 FFO/shr $3.20 vs est. $2.97; qtrly occupancy 95.2% vs 94.5% year ago; guides FY FFO/shr $12.15-12.25 vs est. $11.88 and prior guide $11.85-11.95.

·     Vornado Realty (VNO) AFFO $0.62 vs est. $0.65; total occupancy 89.9%, total same-store NOI.

·     Welltower Inc. (WELL) Q3 FFO/shr $0.92 vs. est. $0.89; Q3 revs $1.66B vs. est. $1.63B; Q3 total portfolio y/y same store NOI growth of 14.1%, driven by SSNOI growth in our Seniors Housing Operating portfolio of 26.1%; raises FY23 normalized FFO view to $3.59-$3.63 from $3.51-$3.60 and sees FY23 Same Store NOI up 11.5%-13.5%.

 

Healthcare

·     Sarepta (SRPT) said a trial of its gene therapy for Duchenne muscular dystrophy did not meet its main goal in a trial, a setback for the company as it seeks to widen approval for the treatment. SRPT announced topline results from EMBARK, a global, randomized, double-blind, placebo-controlled, Phase 3 clinical study of ELEVIDYS in patients with DMD between ages of 4-7 years. (shares remain halted after ruling).

·     Catalent Inc. (CTLT) shares tumbled on SRPT. Recall RBC Capital discussed in its May 3rd scenario analysis, it estimated a commercial launch of SRP-9001 would contribute an incremental $300M+ of gene therapy revenue to CTLT in FY24 (up from $50M in FY23), and to $600M+ in FY26.

·     Eli Lilly (LLY) is buying rights from Beam Therapeutics (BEAM) to develop and commercialize treatments for heart disease that make use of an experimental gene-editing technology; BEAM will receive a $200 million upfront payment and $50 million equity investment. Beam is also eligible to receive up to $350 million in potential future development-stage payments.

·     Pfizer (PFE) reports Q3 adjusted EPS loss (-$0.17) vs. est. loss (-$0.32); Q3 revs $13.23B vs. est. $13.34B; launched enterprise-wide cost realignment program expected to deliver annual net cost savings of at least $3.5B; reaffirms full-year 2023 non-covid operational revenue growth expectation of 6% to 8% vs. 2022.

·     Axonics Inc. (AXNX) Q3 EPS $0.08 vs est. ($0.06) on revs $93.1Mm vs est. $89.59Mm, gr mgn 74.2%, adj EBITDA $14.0Mm vs est. $3.185Mm; guides FY revs $362Mm vs est. $358.71Mm.

·     Tenet Healthcare (THC) Q3 adj EPS $1.44 vs est. $1.20; Q3 revs $5.07B up from $4.8B last year and above consensus $5.02B; raises FY23 EPS view to $5.43-$6.05 from $5.18-$6.03 and boosts FY23 revenue view to $20.3B-$20.5B from $20.1B-$20.5B.

 

Industrials & Materials

·     Caterpillar (CAT) Q3 adj EPS $5.52 vs. est. $4.77; Q3 revs rose 12% y/y to $16.81B, vs. est. $16.6B; Financial segment revenue $822M, +15% y/y, Machinery, Energy & Transportation segment revenue $15.99B, +12% y/y, and Machinery, Energy & Transportation segment operating income $3.39B, +48% y/y; expect slightly higher fourth-quarter 2023 sales and revenues vs fourth-quarter 2022.

·     Air Lease Corporation (AL) announced long-term lease placements for two new Boeing (BA) 737-8 aircraft with LOT Polish Airlines. Both aircraft are scheduled to be delivered to LOT in mid-2024, and will add to the 11 Boeing 737-8s and one 787-9 Dreamliner aircraft already on lease from ALC.

·     Eaton (ETN) Q3 adj EPS $2.47 vs. est. $2.34; Q3 revs $5.9B vs. est. $5.89B; raises FY23 adjusted EPS view to $8.95-$9.05 from $8.65-$8.85 vs. est. $8.80.

·     FMC Corp. (FMC) Q3 adj EPS $0.44 vs. est. $0.45; Q3 revs $982M vs. est. $1.11B; said in qtr results were significantly below prior year driven by volume headwinds; said destocking was much worse than anticipated in Brazil in qtr; guides FY revs $4.48B-$4.72B vs. est. $4.69B and reduces FY free cash flow outlook to a range of negative $860M-to negative -$640M.

·     Forward Air (FWRD) Q3 adj EPS $0.99 vs. est. $1.11; Q3 revs $413.45M vs. est. $419.57M; sees Q4 adjusted EPS 98c-$1.02 vs. est. $1.13.

·     JetBlue (JBLU) Q3 EPS loss (-$0.39) vs. est. loss (-$0.25); Q3 revs $2.4B vs. est. $2.38B; sees Q4 adjusted EPS (55c)-(35c), vs. consensus loss (15c); sees Q4 revenue growth (10.5%)-(6.5%), consensus $2.37B; sees Q4 ASMs up 0.5%-3.5%, CASM 8.5%-10.5%.

 

Technology, Media & Telecom

·     Arista Networks (ANET) Q3 adj EPS $1.83 vs est. $1.58 on revs $1.51B vs est. $1.48B, adj gr mgn 63.1%; sees Q4 revs $1.5-1.55B vs est. $1.474B, adj gr mgn approx 63% and adj operating margin approx 42%.

·     Harmonic (HLIT) Q3 adj EPS 0c vs. est. $0.01; Q3 revs $127.2M vs. est. $132.88M; guides Q4 EPS $0.07-$0.14 below est. $0.18 and FY adj EPS $0.30-$0.38 vs. est. $0.42.

·     Lattice Semiconductor (LSCC) Q3 adj EPS $0.53 vs est. $0.52 on revs $192.169Mm vs est. $192.1Mm, adj gr mgn 70.6%; sees Q4 revs $166-186Mm vs est. $192.1Mm, gr mgn 69.5-71.5%, adj op exp $57-59Mm.

·     Monolithic Power Systems (MPWR) Q3 EPS $3.08 vs. est. $3.07; Q3 revs $474.9M vs. est. $474.12M; guides Q4 revenue $442M-$462M vs. consensus $451.69M; announces new $640M stock repurchase program; sees Q4 gross margins 55.2%-55.8%.

·     Pinterest (PINS) Q3 EPS $0.28 vs. est. $0.20; Q3 revs $763M vs. est. $743.4M; Q3 MAU up 8% from last year to 482M; sees Q4 revenue up 11%-13% from last year vs. est. $976.6M; expect Q4 2023 Non-GAAP operating expenses to decline in the 9-13% range year over year.”

·     Rambus (RMBS) Q3 EPS $0.93 vs est. $0.41 on revs $105.3Mm vs est. $124.6Mm; guides 4Q product revs $52-58Mm, contract and other revs $17-23Mm, licensing billings $56-62Mm.

·     SolarWinds Corp. (SWI) and its chief information-security officer was charged with fraud by the SEC for the failure to fully disclose cybersecurity weaknesses, following a historic cyberattack disclosed in 2020 that was purportedly backed by Russia.

·     Varonis Systems (VRNS) Q3 EPS $0.08 vs. est. $0.02; Q3 revs $122.31M vs. est. $125.35M; sees Q4 EPS $0.22-$0.24 vs. est. $0.18 and revs $150M-$154M vs. est. $151.9M; sees Q4 operating income $25M-$27M.

·     Workiva Inc. (WK) Q3 adj EPS $($0.65) vs est. $0.04 on revs $158.2Mm vs est. $155.54Mm; adj EBIT $5Mm; sees Q4 revs $164-165Mm vs est. $127.57Mm and adj EPS $0.21-0.23 vs est. $0.16.

·     Western Digital (WDC) files to sell $1.3B in convertible senior notes due 2028.

·     Wolfspeed (WOLF) Q1 adj EPS ($0.53) vs est. ($0.67) on revs $197.4Mm vs est. $207.65Mm, adj gr mgn 15.6%; guides Q2 revs $192-222Mm vs est. $220.16Mm and adj EPS ($0.70)-($0.56) vs est. ($0.69); says on track to meet 20% utilization goal at the mohawk valley fab in Q424.

·     ZoomInfo (ZI) Q3 adj EPS $0.26 vs. est. $0.24; Q3 revs $313.8M vs. est. $310.76M; raises low end of FY23 revenue guidance to $1.232B-$1.235B from $1.225B-$1.235B (est. $1.23B); Q3 GAAP operating income margin of 20% and Adjusted Operating Income Margin of 40%.