Hammerstone’s Early Look

By admin | 03/13/2020

Friday, March 13, 2020

Stock markets in the U.S. are trying to recover after major averages posted their biggest one day rout since the 1987 Black Monday, as the Dow Jones Industrial Average dropped 10%, and posted around 9.5% declines for the S&P 500 and Nasdaq while the SmallCap Russell 2000 index tumbled over 11% as all major averages slide into a bear market (more than 20% from peak levels) in response to the global coronavirus crisis. On the NYSE, there were 2,376 new lows and 2 new highs. Growing alarm about the severity of the COVID-19 pathogen and its economic toll has sent global stock markets into a tailspin. Circuit breakers were triggered in many exchanges across Asia overnight following the worst day for Wall Street since 1987, but averages ended well off their lows as the Nikkei closed 6% lower (after falling 10%), the KOSPI was off 3.4% (after hitting a low of 8.4%) and Australia’s ASX 200 reversed course to gain 4.4% (after sinking more than 8%). European stocks jumped 4% at the open Friday amid temporary short-selling bans and pledges from France to support state-backed firms, though the gains were modest in comparison to the record-setting declines in the previous session. In Europe, the German DAX is higher by 330 points to around the 9,500 level while the FTSE 100 rose 235 points to 5,475. Reports indicate lawmakers and the Trump administration are nearing a final agreement on legislation aimed at aiding Americans affected by the spread of the coronavirus, House Speaker Nancy Pelosi said. She expects lawmakers to take up more bills related to the economic and health impact of the pandemic in the future. Oil prices rose, with Brent crude climbing 5.5% to trade at $35.04 a barrel. The yield on the benchmark 10-year U.S. Treasury edged up to 0.877%, from 0.842% Thursday

Market Closing Prices Yesterday

• The S&P 500 Index plunged -260.74 points, or 9.51%, to 2,480.64
• The Dow Jones Industrial Average fell -2,352.60 points, or 9.99%, to 21,200.62
• The Nasdaq Composite tumbled -750.25 points, or 9.43%, to 7,201.80
• The Russell 2000 Index collapsed -141.37 points, or 11.18% to 1,122.93

Economic Calendar for Today

• 8:30 AM EST       Import Prices MoM for February
• 8:30 AM EST       Import Prices YoY for February
• 10:00 AM EST     University of Michigan Sentiment, Mar-P
• 1:00 PM EST        Baker Hughes Weekly Rig Count

Earnings Calendar:

• Earnings Before the Open: BKE, STRN, GOGO, KIRK

World News

• The London Stock Exchange on Friday announced a ban on short selling — or a bet of shares falling — of Italian and Spanish stocks listed on that exchange, while Borsa Italiana and Spain’s CNMV enacted a similar ban on stocks in those countries.
• The Bank of Japan (BoJ) offers to buy 500B yen in unscheduled REPO operation
• The People’s Bank of China offered discounts to banks’ reserve ratios by a half or 1 percentage point from their original level, Bloomberg News reported, citing PBOC’s website. The cuts will release 550 billion yuan ($79 billion) of liquidity, the statement said
• Norway’s central bank cut its main interest rate by a half point, and the Bank of Japan said it will provide ample liquidity using market operations with long maturities
• ECB Chief Economist Philip Lane said it retains the option of future cuts in the policy rate, if warranted by a tightening in financial conditions or a threat to its medium-term inflation aim. Lane said an interest-rate cut would not have been as effective in the current situation
• NCAA President Mark Emmert and the Board of Governors canceled the Division I men’s and women’s 2020 basketball tournaments, as well as all remaining winter and spring NCAA championships

Sector News Breakdown

Consumer

• Ulta Beauty (ULTA) Q4 EPS $3.89/$2.31B vs. est. $3.73/$2.32B; 4Q comparable sales +4% vs. est. 3.4% (but down from 9.4% YoY); sees FY comparable sales +3% to +4% and guides FY EPS $12.55-$12.75 vs. est. $13.03; said Q4 customer transactions +1.8% vs. +7.10% YoY
• Caleres (CAL) Q4 adj EPS 34c on sales $698.9M vs. est. 41c and $725.8M; sees coronavirus impact 15c-20c; sees year net sales $2.95B vs. est. $2.97B
• Gap (GPS) Q4 adjusted EPS 58c vs. est. 41c and reports Q4 revenue $4.7B vs. est. $4.55B; Q4 comparable sales were down 1% compared with negative 1% last year and better than the (-3.9%) est.; comparable sales by brand Q4: Old Navy Global: flat versus flat last year; Gap Global -5% vs. -5% last year; Banana Republic Global flat vs. -1% last year and Athleta +2% vs. +7% last year; sees year EPS $1.80-$1.92 vs. est. $1.69
• Tilly’s (TLYS) Q4 net sales $172.5M vs. est. $172.5M; Q4 comparable sales -2% vs. +6.40% YoY; says unable to provide earnings guidance on coronavirus
• Zumiez (ZUMZ) 4Q EPS $1.48 vs. est. $1.36 on comps +6.4% vs. est. +6%; guides 1Q EPS $0.01-0.07 vs. est. $0.06, sees 1Q comps +2-4%, sees 1Q revs $219-223Mm vs. est. $222.5Mm

Energy, Industrials & Materials

• Noble Energy (NBL) reduces 2020 expenditure guidance by $550 million, focuses on protecting returns, cash flow, and balance sheet; has also identified more than $50 mln in reductions through operating and other cash costs
• Clean Energy (CLNE) announces $30M share repurchase program
• Schneider National (SNDR) and S. Xpress Enterprises (USX) downgraded to neutral from buy at Bank America
• Oil drillers Noble Corp. (NE) and Diamond Offshore (DO) both downgraded to Underweight from Equal Weight at Wells Fargo and the firm cut Transocean (RIG) to Equal Weight

Financials

• American Campus Communities (ACC) said it has seen no definitive negative impacts to operating performance from the coronavirus and will not revisit its 2020 earnings guidance at this time

Healthcare

• Amyris (AMRS) Q4 revenue of $40.5M increased 148% YoY and FY19 total revenue of $152.6M up 140% YoY, more than doubled recurring revenue year over year with gross margin of 56%
• Inovio (INO) Q4 EPS loss (38c) vs. est. loss (24c); cash and other rose 10% YoY to $89.5M; earnings report included no new details on its Covid-19 drug candidate
• Rockwell Medical (RMTI) Q4 EPS loss (11c) vs. est. loss (12c); 4Q sales $15.5M vs. est. $16.2M
• The FDA has issued an Emergency Use Authorization for Roche’s (RHHBY) fully automated cobas SARS-CoV-2 Test for the qualitative (yes or no answer) detection of the coronavirus causing the current outbreak COVID-19. The test, also available in markets accepting the CE Mark, is performed on nasopharyngeal and oropharyngeal swab samples

Technology, Media & Telecom

• Adobe Systems (ADBE) 1Q adj EPS $2.27 vs. est. $2.23 on revs $3.09B vs. est. $3.04B; guides 2Q adj EPS $2.35 vs. est. $2.33, sees 2Q revs about $3.18B vs. est. $3.22B; forecast adjusted earnings per share for the second quarter factoring in “the expected impact of the global uncertainty caused by the COVID-19 situation based on the latest data and information available
• Broadcom (AVGO) withdraws prior annual guidance on coronavirus impact; 1Q adj EPS $5.25 vs. est. $5.34; guides 2Q revs $5.7B +/- $150Mm, sees 2Q adj EBITDA $3.135B +/- $75Mm
• Oracle (ORCL) Q3 adjusted EPS 97c vs. est. 96c; Q3 revenue $9.8B vs. est. $9.75B; raises share repurchase authorization by $15B; 3Q service revenue $778M, hardware revenue $857M; 3Q adjusted operating margin 44% vs. 44% YoY; sees Q4 adjusted EPS $1.20-$1.28 vs. est. $1.23 and sees Q4 revenue growth (2%)- 2% vs. est. $11.31B
• Slack Technologies (WORK) shares fell -16%; Q4 adj EPS loss (4c) vs. est. loss (6c) on revs $181.9M vs. est. $173.5M; said billings rose 37% QoQ to $254.7M; sees Q1 revs $185M-$188M vs. est. $188.4M and EPS loss (6c-7c) vs. est. loss (8c); for the year sees EPS loss (19c-21c) vs. est. loss (24c) and revs $842M-$862M vs. est. $855.6M
• DocuSign (DOCU) 4Q adj EPS $0.12 vs. est. $0.05 on revs $274.9Mm vs. est. $266.5Mm, billings $366.9Mm; guides 1Q revs $280-284Mm vs. est. $275.6Mm, sees 2021 revs $1.27-1.28B vs. est. $1.22B
• The Walt Disney Company (DIS) said that it would close the Disneyland resort in Anaheim for the first time since the Sept. 11 attacks, and just the fourth time in its 65-year history, because of the coronavirus pandemic. Disney (DIS) is also shuttering its theme parks in Florida, and Paris in response to the coronavirus pandemic, and will suspend all new cruise departures starting Saturday
• Sanmina (SANM) announced as the result of the impact of COVID-19, that it does not expect to meet its Q2 2020 financial outlook provided on January 27, 2020.
• Cognex (CGNX) announces $200M share buyback
• Zuora Inc. (ZUO) shares fall -24%; Q4 EPS loss (21c) vs. est. loss (19c); Q4 revs $70.4M vs. est. $71.9M; 4Q negative free cash flow down -54% YoY to $4.5M and 4Q cash and cash equivalents $54.3M, -20% YoY; sees Q1 EPS loss (10c-11c) vs. est. loss (8c)

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