Hammerstone’s Early Look

By admin | 07/23/2020

Thursday, July 23, 2020

Stock futures are higher as surprisingly better than expected quarterly earnings thus far (including a blow-out from Tesla overnight) as well as additional stimulus hopes after reports that Senate Republicans have “reached a fundamental agreement” with White House negotiators Steven Mnuchin and Mark Meadows on how to move forward with the next coronavirus relief bill, are again boosting stocks, on track for a 5^th straight day of gains. Precious metals are also looking to rise for a 5^th straight session, with gold prices currently up another $15 to $1,881 an ounce, nearing its all-time high $1,891.90 an ounce in August of 2011. In Asian markets, The Nikkei Index was closed, the Shanghai Index dipped -8 points to 3,325 and the Hang Seng Index rose 205 points to 25,263. In Europe, the German DAX is up around 100 points to trade above 13,200, while the FTSE 100 is up about 40 points to 6,250. Today marks another busy day of earnings as we begin to get into the crux of the quarter, with airlines LUV and AAL expected to report this morning along with AT&T as well as Dow component Dow Chemical and Intel (INTC) after the close. On the economic front, weekly jobless claims are expected to show another 1.3M file for first time unemployment and over 17M continuing to receive benefits as the additional $600 credit to out of work employees are expected to lapse next week.

Market Closing Prices Yesterday

• The S&P 500 Index jumped 18.72 points, or 0.57%, to 3,276.302
• The Dow Jones Industrial Average rose 165.44 points, or 0.62%, to 27,005.84
• The Nasdaq Composite gained 25.76 points, or 0.24%, to 10,706.13
• The Russell 2000 Index advanced 2.63 points, or 0.18% to 1,490.14

Economic Calendar for Today

• 8:30 AM EST       Weekly Jobless Claims…est. 1.3M
• 8:30 AM EST       Continuing Claims…est. 17.067M
• 10:00 AM EST     Leading Index for June…est. 2.1%
• 10:30 AM EST     Weekly EIA Natural Gas Inventory Data
• 11:00 AM EST     Kansas City Fed Manufacturing Activity for July…

Earnings Calendar:

• Earnings Before the Open: AAL, AB, ADS, ALK, AN, APD, BANC, BX, CMS, CTAS, CTXS, CYBE, DGX, DOW, ENTG, FCX, FITB, GNCA, GWW, HBAN, HRI, HSY, KMB, LUV, MTB, NUE, PHM, POOL, PTEN, RS, SAFE, T, TRV, TSCO, TWTR, UFPI, UNP, VLY, WBS, WHR, WSO, WST
• Earnings After the Close: ASB, BJRI, BOOM, BY, COLB, CSTR, EHTH, ETFC, EW, FE, GBCI, GHL, INTC, MANH, MAT, MSBI, MXL, OZK, PBCT, SAM, SBCF, SGMS, SIVB, SKX, SWKS, TACO, VRSN, WSFS, WTER

Sector News Breakdown

Consumer

• Tesla Inc. (TSLA) shares rose 6%; Q2 EPS 50c on revs $6.04B ($6.35B a year ago) vs. est. 3c/$5.37B; Q2 free cash flow $418M vs. est. loss $617M; $535M increase in our cash and cash equivalents in Q2 to $8.6B; says experienced costs associated with factory shutdowns, which were offset by actions taken during the quarter to reduce expenses; delivering half million vehicles in 2020 remains target; Q2 gross margin 25.4% vs. 18.9% YoY
• Chipotle Mexican Grill (CMG) Q2 EPS 40c on revs $1.36B vs. est. 28c and $1.33B; 2Q comparable sales -9.8% vs. +10% YoY and est. -10.8%; said 2Q restaurant level operating margin 12.2% vs. 20.9% YoY; not providing FY20 guidance and sees acceleration in number of units opened in 2021
• Las Vegas Sands (LVS) Q2 adjusted EPS loss ($1.05) on revs $98M (down -97% YoY) vs. est. 72c; 2Q Sands China revenue $40 million, -98% YoY and 2Q Sands China loss $549 million vs. profit $511 million YoY (shares or WYNN, MGM down in reaction initially)
• Meritage Homes (MTH) 2Q EPS $2.38 vs. est. $1.43, orders 3,597, homes closed 2,770, closing revs $1.03B vs. est. $888.6Mm; guides 3Q EPS $2.15-2.35 vs. est. $1.26, sees FY EPS $8.75-9.25 vs. est. $6.14; says ended qtr. with almost $500Mm cash
• Whirlpool (WHR) Q2 adjusted EPS $2.15 on revs $4.04B vs. est. 87c/$3.51B; revises FY20 sales decline to 10%-15% from 13%-18% and sees FY20 organic net sales decline of 7%-12% vs. 10%-15% previously; COVID-19 response plan on track to deliver over $500M in cost takeout
• Ascena Retail (ASNA) files for voluntary Chapter 11 petitions
• Southwest Air (LUV) Q2 operating revenue $1.01B vs. est. $904M; 2Q adjusted loss per share ($2.67) vs. est. loss ($2.77); average cash burn about $18m per day in July
• Tractor Supply (TSCO) Q2 EPS $2.90 on revs $3.18B vs. est. $2.52/$2.96B; Q2 Comparable Store Sales up 30.5%; raises FY20 CapEx view to $300M-$325M from $225M-$275M and now expects to open 75-80 new Tractor Supply stores

Energy

• ConocoPhillips (COP) said it agreed to acquire additional Montney acreage in Canada from Kelt Exploration for cash consideration of approximately $375 million
• Cenovus Energy (CVE) Q2 operating EPS loss (34c) on revs vs. est. loss (2c); operating loss was $414M and net loss of $235M vs. operating earnings of $267M and net earnings of almost $1.8B in the same period in 2019
• Kinder Morgan (KMI) Q2 adjusted EPS 17c (in-line) on revs $2.56B vs. est. $2.89B; sees FY20 adjusted EBITDA below plan slightly more than 8%; records $1 bln non-cash goodwill impairment associated with natural gas non-FERC regulated midstream business; expect budgeted $2.4 bln expansion projects & contributions to joint ventures for 2020to be lower by about $660Mm
• Repsol (REPYF) said it expects to further reduce both operating expenditure and capital expenditure after posting Q2 adjusted loss of €258M driven by weak upstream prices and reduced sales; plans to cut operating costs by €450M in 2020, €100M more than its previous estimate in March, resulting in cost cuts of €250M in the quarter. It also expects to reduce capital expenditure by the end of 2020 by a further €100M, for total cut of €1.1B

Financials

• Banner (BANR) Q2 EPS 67c on revs $147.3M vs. est. 34c and $118.3M; 2Q total assets rose 22% YoY to $14.41 billion; 2Q cash and cash equivalents $420.0 million, +70% YoY and 2Q common equity Tier 1 ratio 10.7%
• Cohen & Steers (CNS) Q2 adj EPS 54c on revs $94.1M vs. est. 53c and $94.3M
• Discover Financial (DFS) Q2 EPS loss ($1.20) on revs $2.66B vs. est. loss (28c)/$2.66B; quarterly total net charge-off rate 3.44% vs 3.22%; total loans, end of Q2 $88.9B, decline 1%; credit card loans end of q2 $70.2 billion, down 3% YoY; Q2 provision for credit losses of $2.0 billion increased $1.3 billion from the prior year; payment services volume ended quarter $64.5 billion, up 4% YoY
• HNI Corporation (HNI) Q2 adjusted EPS 20c on revs $417.5M vs. est. loss (31c)/$379.94M; seeing seasonal uptick in sales, expect Q3 sales and profit to track ahead of Q2 2020 levels
• SLM Corp. (SLM) Q2 EPS loss (23c) vs. est. 8c; private education loan portfolio totals $19.8B at June 30, 2020 and $497M in private education loans originated during quarter; Q2 provision for credit losses $351.9M vs. $93.4M YoY; Q2 NIM 4.55% and NII -12% YoY to $348.8M

Healthcare

• Align Technology (ALGN) shares fell -6%; Q2 adj EPS loss ($0.35) vs. est. ($0.05) on revs $352.3Mm vs. est. $332.88Mm; says cannot reasonably estimate future impact on operations and financial results at this time
• Aurinia Pharmaceuticals (AUPH)333M share Secondary priced at $15.00
• BioNTech (BNTX)5M share Secondary priced at $93.00
• G1 Therapeutics (GTHX) announces an exclusive license agreement with EQRx, for the development and commercialization of G1’s lerociclib in the U.S., Europe, Japan and all other global markets
• Danaher (DHR) Q2 EPS $1.44 on revs $5.3B vs. est. $1.09/$4.95B; sees 3q core revenue growth including Cytiva in mid- to high-single digits
• West Pharmaceutical (WST) raises FY20 adj. EPS view to $4.15-$4.25 from $3.52-$3.62 and also boosts its FY20 revenue guidance to $2.04B-$2.06B from $1.95B-$1.97B

Industrials & Materials

• CSX Corp. (CSX) Q2 EPS 65c on revs $2.26B vs. est. 64c/$2.3B; Q2 operating income $828M vs. est. $832M; Q2 operating ratio 63.3% vs. est. 64%; sees FY cap-ex low end of $1.6B-$1.7B; active locomotives down 25% in 2q, 1,000 in storage
• Dow Inc. (DOW) Q2 operating EPS loss (26c) on revs $8.4B vs. est. loss (30c) and $8.01B; Packaging and specialty plastics sales declined 23% to $4 billion from a year ago. Industrial intermediaries and infrastructure sales were $2.4 billion, lower by 28% compared with last year’s second quarter. Performance materials and coatings sales came in at $1.9 billion, a 21% decline.
• Echo Global (ECHO) Q2 adjusted EPS 19c/$514.7M vs. est. 11c/$470.16M; sees Q3 revs $565M-$615M vs. est. $520.5M
• Graco (GGG) Q2 adj EPS $0.37 vs. est. $0.26 on net sales $366.9Mm vs. est. $325Mm
• Kaiser Aluminum (KALU) 2Q adj EPS $0.36 vs. est. $0.22 on sales $276Mm vs. est. $266Mm; sees revenue from commercial aerospace/defense lower in 2H
• Landstar (LSTR) Q2 EPS 63c on revs $823.5M vs. est. 72c and $783.8M; sees 3Q revenue $885M-$935M vs. est. $852.5M; expect 2020 Q3 truck revenue per load to be lower than 2019 q3 in a mid-single-digit percentage range
• UFP Industries (UFPI) Q2 EPS $1.08 vs. est. $0.58 on revs $1.24B vs. est. $1.08B

Technology, Media & Telecom

• Microsoft (MSFT) Q4 EPS $1.46 on revs $38.0B (up 13% YoY) vs. est. $1.37/$36.5B; 4Q Productivity and Business Processes revenue $11.75 billion, +6.4% YoY, Intelligent Cloud revenue $13.37 billion, +17% YoY, More Personal Computing revenue $12.91 billion, +14% YoY
• Netgear (NTGR) 2Q adj EPS $0.54 vs. est. $0.22 on revs $280.1Mm vs. est. $235.3Mm, expects strong demand to continue in 2H20; says prudent to continue to suspend giving guidance for 3Q and FY20
• Plexus (PLXS) shares rise 10%; 3Q EPS $1.20 vs. est. $0.75 on revs $857Mm vs. est. $802Mm; guides 4Q EPS $1.05-1.20 vs. est. $0.90, sees 4Q revs $850-890Mm vs. est. $821Mm

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