Hammerstone’s Early Look

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Thursday, July 30, 2020

FuturesUp/Down%Last
DJ Industrials-254.000.96%26,186
S&P 50033.501.02%3,219
Nasdaq-117.501.10%10,556

 

 

U.S. stock futures are broadly lower, sliding ahead of key earnings results, 2Q GDP data which is expected to show record contraction due to the coronavirus, and hopes that the two sides in Washington can come up with an agreement on the HEALS Act calling for a trillion dollars-worth of stimulus relief and a supplemental weekly unemployment benefit, which the two sides appear to be far apart on. Republicans call for extra weekly unemployment benefits equal to 70% of a workers’ prior wages with a $500 cap, while the Democrats wants to extend the $600 per week benefit which is set to expire tomorrow. The Republican plan calls for two months where unemployment beneficiaries would receive a flat $200 a week on top of what they would otherwise receive at the state level. In addition to the big earnings results today (68 S&P companies to report, or 13% of the index, including the big tech AAPL, AMZN, FB, GOOGL), markets get to see final Q2 GDP, which is expected to show a record contraction of (-34.5%) after the coronavirus ravaged the U.S. economy. Before the coronavirus pandemic, the largest drop in GDP on record was 10% in 1958. The government’s quarterly GDP figures go back to 1947. The steepest quarterly drop during the 2007-2009 Great Recession was 8.4%. In Asian markets, The Nikkei Index fell -57 points to 22,339, the Shanghai Index dipped -7 points to 3,286 and the Hang Seng Index fell -172 points to 24,710. In Europe, the German DAX is down about -320 points (2.5%) to 12,500, while the FTSE 100 is lower by -100 points to 6,030.

 

The Fed had the markets back again on Wednesday, reassuring investors in its monetary policy meeting yesterday that the central bank would use all tools at its disposal to help the economy, along with keeping interest rates for a long time. Following yesterday’s gains, the S&P 500 is now up about 1% YTD, while the tech-heavy Nasdaq is up 17.5% on the year and the blue-chip Dow remains 7% below where it closed last year. Today promises to be an eventful day for the markets, with quarterly results expected from big tech giants (80% of FAANG) with Apple, Amazon, Alphabet (GOOGL) and Facebook all set to report (FB was pushed out a day as Zuckerberg testified before a congressional committee regarding antitrust concerns yesterday).

Market Closing Prices Yesterday

  • The S&P 500 Index jumped 40.00 points, or 1.24%, to 3,258.44
  • The Dow Jones Industrial Average rose 160.29 points, or 0.61%, to 26,539.57
  • The Nasdaq Composite surged 140.85 points, or 1.35%, to 10,542.94
  • The Russell 2000 Index advanced 30.87 points, or 2.10% to 1,500.63

 

Economic Calendar for Today

  • 8:30 AM EST       Weekly Jobless Claims…est. 1.43M
  • 8:30 AM EST       Continuing Claims…est. 16.25M
  • 8:30 AM EST       Gross Domestic Product (GDP) Annualized, Q2-actual…est. (-34.5%)
  • 8:30 AM EST       Personal Consumption for Q2-A…est. (-34.5%)
  • 8:30 AM EST       GDP Price Index, Q2-A…est. 0.0%
  • 8:30 AM EST       Core PCE QoQ for Q2-A…est. (-0.9%)
  • 10:30 AM EST     Weekly EIA Natural Gas Inventory Data

 

Earnings Calendar:

  • Earnings Before the Open: AGCO, ALXN, AMT, AOS, ARO, BAX, BC, BGCP, CARR, CARS, CI, CLF, CMCSA, CNX, COP, CROX, CRS, DAN, DBD, DNKN, ELAN, EXP, FCN, GPC, GPI, GRA, HBI, ICE, IP, K, KEX, KHC, LLY, MA, MAS, MCO, MD, MMC, MMP, MTD, NEM, NOC, ODFL, OSTK, PCG, PG, PPC, SAH, SIRI, SWK, TAP, TEX, TPX, TW, TXT, UPS, VC, VLO, WEX, WM, WYND, XYL
  • Earnings After the Close: AAPL, ADSW, AIMT, AMZN, ATUS, BAND, BZH, CC, COG, COLM, CUZ, CVA, CXP, DECK, DVA, EA, EXAS, EXPE, F, FLEX, FLS, FND, GILD, GOOGL, HIG, HST, LOCO, MGM, MHK, MTZ, PFPT, QDEL, RDFN, RP, SHAK, SKYW, SWN, SYK, TNDM, TWOU, VRAY, VRTX, WWE, X, XLNX, XPO, ZEN

 

 

MacroUp/DownLast
WTI Crude-0.5940.68
Brent-0.5743.18
Gold-16.001,954.50
EUR/USD-0.0041.1752
JPY/USD0.15105.07
10-Year Note-0.0140.559%

 

 

World News

  • Germany recorded its worst deterioration in the economy in the second quarter since 1970, according to statistics released on Thursday. German gross domestic product fell a seasonally adjusted 10.1% quarter-on-quarter, which was worse than the 9% drop forecast by economists.

 

Sector News Breakdown

Consumer

  • Dunkin’ Brands (DNKN) misses profit expectations but beats on revenue, reinstates dividend; Q2 adj EPS 49c on sales $287.4M vs. est. 50c and $278.3M; Q2 comp store sales dropped 18.7%, as a decline in traffic resulting from the COVID-19 pandemic offset an increase in the average ticket, which was driven by a shift to family-size bulk orders and snacking
  • O’Reilly Automotive (ORLY) 2Q EPS $7.10 vs. estimate $4.30 and 2Q sales $3.09B up 19% YoY and topping the $2.65B estimate
  • Cheesecake Factory (CAKE) comparable sales fell 56.9% in Q2 as the impact of restaurant closings factored in while its restaurant margin was -7.0% of sales vs. +0.8% consensus; ended the quarter with 71% of its restaurants back open for dine-in
  • Yum China (YUMC) Q2 adjusted EPS 35c on revs $1.9B vs. est. 24c/$1.96B; 2Q comparable sales fell -11% vs. +4% YoY; 2Q Pizza Hut Casual Dining comp sales -12% vs. +1% YoY; 2Q restaurant margin 13.7% vs. 14.7% YoY
  • At Home Group (HOME) Q2 revenue about $515M vs. est. $360.87M; Q2 comp sales up 42%
  • JAKKS Pacific (JAKK) Q2 sales $78.8Mm vs. est. $79.5Mm, EPS ($7.70) vs. est. ($5.90)

 

Energy

  • Apache (APA) and Total S.A. (TOT) announced a major oil discovery at the Kwaskwasi-1 well drilled offshore Suriname in Block 58. The well was drilled using the Noble Sam Croft with Apache as operator holding a 50% working interest and Total holding a 50% working interest; Q2 adjusted EPS loss (74c) on revs $752M vs. est. loss ($1.01)/$706.25M
  • Antero Midstream Corp (AM) Q2 revs down -14% YoY to $219.7M (in-line w views); lowers FY capital expenditure to $200M-$215M from prior $215M-$240M and sees FY free cash flow $445M-$475M up from prior $420M-$450M
  • Concho Resources (CXO) said its full-year 2020 production and capital expenditure expectations are unchanged at 197 Mboepd and $1.6 billion, respectively; controllable costs are forecasted to be approximately $250 million in the third and fourth quarters of 2020, and oil and gas production taxes are forecasted to be 8% to 10% of oil and gas revenues.
  • QEP Resources (QEP) reports Q2 loss wider than expected; lowered its 2020 annual guidance, with oil equivalent production of 28.1-29.6 MMboe, compared to earlier guidance of 31.5-33.7 MMboe, with oil & condensate production at 19-19.5 MMbbl; sees total capex between $340-380M, down from $545-$595M
  • Transocean (RIG) reported adjusted Q2 loss of $1M but contract drilling revenue jumped 23% Y/Y to $930M, primarily due to $177M of revenues recognized in Q2 resulting from a settlement agreement with a customer for performance disputes; Q2 adjusted EBITDA climbed to $418M from $235M in Q1; revenue efficiency was 97.2% vs. 94.4% in Q1
  • WPX Energy (WPX) reports Q2 loss of $414M, compared to income of $305M prior, primarily driven by derivative loss of $275M, led by lower overall commodity prices; reports oil volumes of 123,700 bbl/day (+26% Y/Y), despite curtailments of ~20,000 bbl/day; total capital spending of $1,050-$1,150M, down further $50M from earlier outlook

 

Financials

  • PayPal (PYPL) 2Q adj EPS $1.07 vs. est. $0.88 on revs $5.26B vs. est. $5.0B, total active accounts 346Mm +21%; reinstates and raises FY guide, sees FY adj EPS growth about +25%; guides 3Q revs about +23%; processed $222 billion in payments over the period, up 30% from a year earlier
  • Ameriprise (AMP) Q2 adjusted EPS $2.64 on revs $2.71B vs. est. $2.46/$2.79B
  • Genworth Financial (GNW) is moving forward with plans to address its near-term liabilities and financial obligations, which include the recently announced settlement agreement with AXA and ~$1.0B of debt maturing in 2021.

 

Healthcare

  • AstraZeneca PLC (AZN) said that Q2 net profit surged and that late-stage trials for the vaccine it is developing with University of Oxford researchers are under way.
  • Johnson & Johnson (JNJ) said that its lead vaccine candidate protected against infection with SARS-CoV-2, the virus that causes COVID-19, in pre-clinical studies. The vaccine provided a robust immune response as demonstrated by “neutralizing antibodies,” successfully preventing subsequent infection and providing complete or near-complete protection in the lungs from the virus in non-human primates, the company said
  • Cigna (CI) Q2 EPS $5.81 on revs $39.21B vs. est. $5.14 and $38.1B; guides year operating EPS $18-$18.60 vs. est. $18.42 and sales $154B-$156B vs. est. $154.78B
  • Eli Lilly (LLY) Q2 EPS $1.89 on revs $5.5B vs. est. $1.56 and $1.76B;
  • Bristol Myers Squibb (BMY) has resubmitted its marketing application to the FDA seeking approval of CAR T cell immunotherapy idecabtagene vicleucel (formerly bb2121) for the treatment of adults with relapsed/refractory multiple myeloma,
  • Cerner (CERN) Q2 adj EPS 63c on revs $1.33B vs. est. 61c and $1.36B; sees FY20 EPS $2.80-$2.88 vs. est. $2.83 and guides FY20 revenue $5.45B-$5.55B vs. est. $5.61B
  • Hologic (HOLX) Q3 adjusted EPS 75c on revenue $822.9M vs. est. 38c/$616.69M; sees Q4 adjusted EPS 95c-$1.15 on revenue $925M-$1.025B above estimate of 69c/$815.47M
  • Teladoc (TDOC) Q2 EPS loss (34c) on revs $241.03M vs. est. loss (23c)/$220.67M; boosted its adjusted Ebitda forecast for the full year; to $85M-$92M from $60M-$70M prior after 2Q adjusted Ebitda $26.3 million vs. $6.3 million YoY

 

Industrials & Materials

  • DuPont (DD) loss widens as revenue falls 12% in Q2, books non-cash charge related to slowdown in car market; Q2 adj EPS 70c on sales $4.8B (down 12%) vs. est. 60c and $4.7B; is moving ahead with the planned spinoff of its nutrition and biosciences business ahead of a planned merger with IFF in the first quarter
  • Agnico Eagle (AEM) Q2 adjusted EPS 18c tops 12c estimate and Q2 revenue $557.18M beats the consensus $536.15M; raises 2020 gold production to 1.68M-1.73M oz. from 1.63M-1.73M
  • Kinross Gold (KGC) Q2 adjusted EPS 15c on revs $1.01B vs. est. 13c/$1.01B; reports production of 571,978 attributable gold equivalent ounces, and sales of 584,477 Au eq. oz
  • Kraton Corp. (KRA) 2Q adj EPS $0.30 vs est. $0.05 on revs $355.7Mm vs est. $354.7Mm; says expects 2H will see weaker demand related to Covid and other factors will have an adverse impact on financial results vs 1Q
  • United Rentals (URI) Q2 adj EPS $3.68 on revs $1.83B vs. est. $1.82 and $1.85B; sees year revs $80.5B-$8.45B and FY free cash flow $2.0B-$2.2B
  • Werner Enterprises (WERN) Q2 adj EPS 62c on revs $569M vs. est. 41c and $562.5M

 

Technology, Media & Telecom

  • Cognizant (CTSH) Q2 adjusted EPS 82c/$4B vs. est. 69c/$3.84B; sees FY20 adjusted EPS $3.48-$3.58 vs. est. $3.34 and sees FY20 revenue $16.4B-$16.7B vs. est. $16.16B
  • Inovalon (INOV) Q2 adj EPS $0.15 vs est $0.11 on revs $162.2Mm vs est $159.7Mm; guides 3Q revs +5-11% and adj EPS $0.16-0.18 vs est $0.16; guides 4Q revs +6-13%; raises FY20 EPS view to 57c-61c from 53c-57c
  • Lam Research (LRCX) Q2 EPS $4.78 on revs $2.79M vs. est. $4.05/$2.68B; forecast Q1 revs $2.9-3.3B (vs. est. $2.72B) and $4.75-5.55 EPS (est. $4.12); Q4 Gross margin was 46.1% of revenue and operating margin was nearly 27%
  • Macom (MTSI) Q3 EPS 33c on revs $137.3M vs. est. 21c/$131.26M; Q3 adjusted gross margin was 55.5%, compared to 39.4% in the previous year fiscal third quarter and 54.5% in the prior fiscal quarter; guides Q4 EPS 36c-40c on revs $144M-$148M vs. est. 22c/$132.2M
  • Pluralsight (PS) 2Q revs $94.8Mm vs est $88.2Mm adj EPS ($0.02) vs est ($0.12), sees 3Q revs $95-96Mm vs est $93.5Mm, sees 3Q pro forma adj EPS loss 5-6C vs est loss/shr 10C
  • PTC (PTC) Q3 EPS 30c on revs $351.7M vs. est. 44c/$332.47M; Q3 ARR was $1.21 billion, growth of 9%, or 10% in constant currency; narrows FY20 EPS view to $2.28-$2.35 vs. est. $2.30 and narrows FY20 revenue view to $1.415B-$1.43B (est. $1.42B)
  • Qualcomm (QCOM) 3Q adj EPS $0.86 vs est $0.70, sees 4Q adj EPS $1.05-1.25 vs est $1.13, says Covid rebound has happened faster than thought, sees 4Q MSM chip shipments 145-165Mm vs est 165.7Mm; and says resolved a licensing dispute with Huawei Technologies Co Ltd, which will pay QCOM a catch-up payment of $1.8B in Q4
  • Qorvo (QRVO) 1Q EPS $1.50 vs est $1.13 on revs $787Mm vs est $730Mm; sees 2Q21 adj EPS midpoint $1.90 vs est $1.44, sees 2Q21 revs $925-955Mm vs est $803Mm
  • Sanmina (SANM) Q3 adjusted EPS 86c on revs $1.65B vs. est. 35c/$1.56B; sees Q4 adjusted EPS 73c-83c above est. 43c and sees Q4 revenue $1.73B-$1.83B vs. est. $1.63B
  • ServiceNow (NOW) Q2 adjusted EPS $1.23 on revs $1.07B (up 28% YoY) vs. est. $1.01 and $1.05B; 2Q billings growth +24% vs. +31% YoY and free cash flow $259.3 million, +34% YoY
  • Tyler Technologies (TYL) 2Q adj EPS $1.38 vs est $1.20 on revs $271.1Mm vs est $278.2Mm; guides FY adj EPS $5.30-5.50 vs est $5.26, sees FY revs $1.124-1.144B vs est $1.148B, sees FY CAPEX $34-35Mm
  • Ultra Clean Holdings (UCTT) 2Q EPS $0.52 vs est $0.47 on revs $344.8Mm vs est $309.9Mm; guides 3Q adj EPS $0.56-0.72 vs est $0.39, says will be opening a manufacturing facility in Malaysia

 

 

 

 

 

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