Early Look

Friday, September 2, 2022

U.S. futures are little changed, with the S&P down -0.1% at 3,964 and in a narrow trading range overnight (high 3,974.75 and low 3,955.25) as markets await the jobs data at 8:30 AM. August Non-farm payrolls are expected to show gains of 300K jobs for both nonfarm and private payrolls, +20K for manufacturing, unemployment rate to hold at 3.5% and average hourly earnings to rise +0.4%. Equity investors may be hoping for a softer non-farm payrolls report, potentially allowing the Fed to ease its fight to tame inflation by raising interest rates higher and for longer – a policy that could push the U.S. economy into recession. The U.S. dollar paring back gains slightly from fresh 20-year highs as the euro bounces back near parity, but the yen slumped past the key psychological level of 140 per dollar for the first time in almost 25-years. There were a handful of earnings releases in the tech sector overnight, but all eyes fixated on the jobs data and its impact on markets this final trading day of the summer heading into the long-3-day Labor Day holiday weekend. In Asian markets, The Nikkei Index dipped -10 points to 27,650, the Shanghai Index was up 1 point to 3,186, and the Hang Seng Index declined -145 points to 19,452. In Europe, the German DAX is up 1.2% to 12,780, while the FTSE 100 rises +0.5% to 7,185.

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 11.85 points, or 0.30%, to 3,966.85

·     The Dow Jones Industrial Average rose 145.99 points, or 0.46%, to 31,656.42

·     The Nasdaq Composite slipped -31.08 points, or 0.26%, to 11,785.13

·     The Russell 2000 Index declined -21.30 points, or 1.15% to 1,822.82

Economic Calendar for Today

·     8:30 AM ET           Nonfarm Payrolls for August…est. +300K

·     8:30 AM ET           Private Payrolls for August…est. +300K

·     8:30 AM ET           Manufacturing Payrolls for Aug…est. +20K

·     8:30 AM ET           Unemployment Rate for August…est. 3.5%

·     8:30 AM ET           Average Hourly Earnings for Aug…est. +0.4%

·     10:00 AM ET         Factory Orders M/M for July…est. +0.2%

·     10:00 AM ET         Durable Goods M/M for July

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

World News

·     Fed’s Bostic said late yesterday inflation is too high, must bring it down to our target; We have got to figure out how fast we are going to move our policy to try to arrest that inflation and to wrestle it back down to 2%, MBS weight on balance sheet will grow; Fed may have to consider selling MBS in future

·     The G7 countries are preparing to announce an agreement to implement a price cap on purchases of Russian oil, in a bid to limit the Kremlin’s earnings on exports and reduce financial support for its war against Ukraine – Financial Times

Sector News Breakdown

Consumer

·     Lulu Lemon (LULU) Q2 adj EPS $2.27 vs. est. $1.87; Q2 revs rose 29% y/y to $1.87B vs. est. $1.77B; qtrly comparable sales increased 23%, or 25% on a constant dollar basis; guides Q3 revs $1.78B-$1.81B vs. est. $1.74B and raises year revs to $7.87B-$7.94B from prior $7.61B-$7.71B (est. $7.69B); inventories at end of Q2 +85% to $1.5B compared to $0.8B y/y

·     Calavo Growers (CVGO) Q3 adj EPS $0.16 vs. est. $0.35; Q3 revs rose 20% to $342M vs. est. $332.5M; said saw volatility that negatively affected results in q3 subside in aug, and expect more normal conditions to persist over balance of qtr

·     JOANN Inc. (JOAN) 2Q adj EPS ($0.75) vs est. ($0.65) on sales $463.3Mm vs est. $451.6Mm; anticipates significant debt reduction by fiscal 2023 year-end

·     Oxford Industries (OXM) 2Q adj EPS $3.61 vs est. $3.48 on sales $363Mm vs est. $364Mm, raises FY sales and EPS guide; sees 3Q sales $270-280Mm vs est. $266.6Mm and adj EPS $0.90-1.05 vs est. $1.09; sees FY sales $1.3-1.325B vs est. $1.305B and adj EPS $9.85-10.10 vs est. $9.88

·     Sportsman Warehouse (SPWH) 2Q EPS $0.35 vs est. $0.25 on sales $351Mm vs est. $337.7Mm, comps -9.4%; guides 3Q sales $345-365Mm vs est. $399Mm, comps -17 to -12% and adj EPS $0.24-0.32 vs est. $0.48

·     Starbucks (SBUX) announced that Laxman Narasimhan will become the company’s next chief executive officer and a member of the Starbucks board of directors. Narasimhan will join Starbucks as incoming CEO on October 1, 2022, after relocating from London to the Seattle area and will work closely with Howard Schultz

·     Tilly’s (TLYS) Q2 EPS $0.13 vs. est. $0.16; Q2 sales fell -16.7% to $168.3M vs. est. $173.77M; sees Q3 sales $165M-$170M vs. est. $173.77M; said Q2 comp store sales fell (-16.4%) and 1H comp store sales fell (-14.9%)

Energy, Industrials and Materials

·     Freyr Battery (FREY) files $500M mixed securities shelf

·     Hollysys Automation Technologies (HOLI) shares looking higher after Reuters reported a consortium led by China’s Hollysys Automation Technologies management plans to take the co private in a deal that would value the firm at $1.8 billion

·     Quanex Building (NX) 3Q adj EPS $0.79 vs est. $0.61 on sales $324Mm vs est. $300.5Mm; reaffirms FY guide

·     The US called Iran’s response to the latest effort to revive the 2015 nuclear accord “not constructive,” raising questions about whether the two sides can reach a deal – Bloomberg

Financials

·     Credit Suisse (CS) is considering cutting around 5,000 jobs, about one position in 10, as part of a cost reduction drive at Switzerland’s second-biggest bank, a source with direct knowledge of the matter told Reuters

Healthcare

·     Intellia Therapeutics (NTLA) receives U.S. FDA orphan drug designation for ntla-2002, an investigational Crispr therapy for the treatment of hereditary angioedema

·     Illumina (ILMN) prevailed over the Federal Trade Commission in its year-long effort to keep the cancer testing company Grail, an $8 billion acquisition that has drawn scrutiny from regulators around the world

Technology, Media & Telecom

·     Broadcom (AVGO) 3Q adj EPS $9.73 vs est. $9.56 on revs $8.464B vs est. $8.373B, adj EBITDA $5.378B vs est. $5.134B; guides 4Q revs approx $8.9B vs est. $8.725B with adj EBITDA margin approx 63%; expects solid demand across end markets to continue in 4Q

·     nCino Inc. (NCNO) Q2 EPS loss (-$0.04) vs. est. loss (-$0.08); Q2 revs rose 50% y/y to $99.6M vs. est. $97.46M; Q2 Subscription Revenues of $84.4M, up 57% y/y and Q2 Organic Subscription Revenues of $69.4M, up 29% y/y; guides FY23 EPS loss (19c)-(17c) vs. est. loss (29c) and sees FY23 revenues $401.5M-$403.5M vs. est. $391.49M

·     NortonLifeLock’s (NLOK) $8.6B acquisition of British rival Avast gets nod from Britain’s Competition and Markets Authority (CMA), confirming its provisional decision to allow the deal last month. NLOK had agreed to buy Avast for up to $8.6 billion in cash and stock in Aug 2021

·     Ooma Inc. (OOMA) 2Q adj EPS $0.12 vs est. $0.10 on revs $52.7Mm vs est. $51.7Mm; sees 3Q revs $56.0-56.5Mm vs est. $53.8Mm and FY revs $215.5-218.5Mm vs est. $212.0Mm; acquires Onsip, expands base of SMB customers, expects to be accretive to adj EBITDA starting 4Q

·     PagerDuty (PD) Q2 adj EPS loss (-$0.04) vs. est. loss (-$0.08); Q2 revs rose 34% y/y to $90.3M vs. est. $88.1M; raises FY23 EPS view to loss of (12c)-(10c) from (21c)-(17c) and boosts FY23 revenue view to $365M-$370M from $364M-$369M (est. $366.13M); Q2 Total paid customers of 15,174 as of July 31, 2022, compared to 14,169 in the year ago period; Q2 customers with ARR over $100,000 was 689 as of July 31, 2022, compared to 501 in the year ago period

·     Smartsheet (SMAR) 2Q adj EPS ($0.10) vs est. ($0.20) on revs $186.7Mm vs est. $180.2Mm; guides 3Q adj EPS ($0.16)-($0.15) vs est. ($0.15) and revs $193-194Mm vs est. $195Mm; sees FY revs $750-755Mm vs est. $756.3Mm and adj EPS ($0.56)-($0.49) vs est. ($0.63)

·     HashiCorp Inc. (HCP) Q2 EPS loss (-$0.40) vs. est. loss (-$0.31); Q2 revs rose 52% to $113.9M vs. est. $102.3M; sees FY EPS loss (95c)-(97c) vs. est. loss (-$1.17) and revs $442M-$448M vs. est. $427.7M; Q2 total GAAP RPO totaled $476.0M, up 50% y/y and Q2 current GAAP RPO totaled $304.3M, representing an increase of 53% y/y