Hammerstone’s Early Look

By admin | 10/23/2019

Wednesday, October 23, 2019

Stock futures were mostly flat overnight, heading into a busy morning of quarterly earnings, but turned negative after Dow component and machinery giant Caterpillar (CAT) posted quarterly earnings that fell short of consensus and lowered its year profit outlook. In Asian markets, The Nikkei Index rose 76 points to 22,625, the Shanghai Index fell -12 points to 2,941 and the Hang Seng Index fell -219 points to 26,566. In Europe, the German DAX is up about 30 points to 12,785, while the FTSE 100 rose 40 points to 7,250. More earnings all morning likely to be the main market catalysts. Stocks finished mixed on Tuesday as the SmallCap Russell 2000 eked out a small gain while the tech heavy Nasdaq Comp declined led by losses in software and Internet names while broader markets fell on Brexit news as U.K. lawmakers endorsed Prime Minister Johnson’s deal but voted against a speedy timetable to approve Brexit legislation in the next three days. Energy was Tuesday’s top gainer given a bounce in oil. Dow components dominated yesterday’s earnings action with MCD, TRV sliding on results and UTX, PG rising on theirs. FB shares dropped nearly 4% on news that it is now being probed by 47 attorney generals for possible antitrust violations, and Biogen surged 26% on news it now plans to pursue regulatory approval for an experimental Alzheimer’s treatment after earlier appearing to give up on the drug. Today we get earnings results from BA, TSLA, PYPL and Ford among others.

Market Closing Prices Yesterday

• The S&P 500 Index dropped -10.73 points, or 0.36%, to 2,995.99
• The Dow Jones Industrial Average fell -39.54 points, or 0.15%, to 26,788.10
• The Nasdaq Composite slumped -58.69 points, or 0.72%, to 8,104.30
• The Russell 2000 Index advanced 0.73 points, or 0.05% to 1,550.87

Events Calendar for Today

• 7:00 AM EST       MBA Mortgage Applications Data
• 9:00 AM EST       FHFA House Price Index MoM for Aug
• 10:30 AM EST     Weekly DOE Inventory Data

Earnings Calendar:

• Earnings Before the Open: ALXN, ANTM, APH, AVY, BA, BANC, BCO, BKU, BOKF, BSX, BX, CAT, CLF, CMC, EEFT, EVR, FCFS, FCX, GD, GWW, HLT, HRI, IVZ, KNX, LAD, MKTX, NDAQ, NSC, NTRS, OC, ROL, SALT, SLAB, SLGN, TMO, TZOO, UNF, WGO, WM
• Earnings After the Close: ALGN, ASGN, BANR, BMRN, CLGX, CUBI, CUZ, EBAY, ECHO, EFX, EGP, ESS, EW, F, FBHS, FFIV, FNMA, GGG, GTY, HNI, ISBC, KALU, KNL, LRCX, LSTR, LVS, MKSI, MSFT, NOW, NTGR, ORLY, PKG, PLXS, PTC, PUB, PYPL, QCRH, RCKY, RHI, RJF, RUSHA, SAVE, SEIC, SLM, TSLA, VAR, XLNX

World News

• China is preparing plans to replace embattled Hong Kong administrator Carrie Lam, the Financial Times reported Tuesday. Lam’s government has faced months of protests and massive demonstrations calling for democratic reforms and her resignation. The FT said Lam’s replacement could be installed by March and serve out the rest of her five-year term, until 2022.
• Japanese exports fell for a tenth straight month in September, dropping at a sharper pace than forecast as shipments to China and South Korea slipped

Sector News Breakdown

Consumer

• Chipotle (CMG) Q3 adjusted EPS $3.82/$1.4B vs. est. $3.21/$1.38B; Q3 comp sales rose 11.0% topping the 9.3% estimate and included nearly 7.5% of comparable restaurant transactions growth; said Q3 digital sales grew 87.9% and accounted for 18.3% of sales for the quarter. Restaurant level operating margin was 20.8%, an increase of 210 basis points; sees 2019 comparable restaurant sales growth at top end of range
• iRobot (IRBT) shares fell -15%; Q3 EPS $1.24/$289.4M vs. est. 52c/$259.38M; narrowed our full-year 2019 expectations as now expect 2019 revenue between $1.2-$1.21B vs. est. $1.21B on 10% to 11% growth, with an operating income between $75M-$80M and EPS in $2.60-$2.80
• Hilton (HLT) Q3 adjusted EPS $1.05/$2.40B vs. est. $1.02/$2.39B; Q3 system-wide comparable RevPAR grew 0.4% driven by increased occupancy; raises FY19 adjusted EPS view to $3.81-$3.86 from $3.78-$3.85 (est. $3.87); sees FY19 adjusted EBITDA $2.28B-$2.31B.
• Owens Corning (OC) Q3 adjusted EPS $1.63/$1.9B vs. est. $1.50/$1.85B; now expects general corporate expenses of $110 million to $115 million, compared with the previous range of $125 million to $135 million
• NIKE Inc. (NKE) said John Donahoe will be appointed as the company’s new president and CEO, effective Jan. 13, 2020 as Mark Parker, CEO since 2006 and chairman, president & CEO since 2016, will become executive chairman
• Six Flags (SIX) Q3 EPS $2.11/$621.2M vs. est. $2.30/$643.9M; 3Q adjusted Ebitda $307.3M bellows ests around $324M; for Q3, attendance growth of 3% or 440,000, to 14.0 million guests in the third quarter of 2019, which was partially offset by a 1% decrease in guest spending
• Skechers (SKX) Q3 EPS 67c/$1.354B vs. est. 70c/$1.34B; Q3 comp sales rose 7.7% vs. est. 6.5%, including increases of 6.8% domestically and 9.9% internationally; sees Q4 EPS 35c-40c on revs $1.225B-$1.25B vs. est. 39c/$1.22B
• Meritage Homes (MTH) Q3 EPS $1.79/$940.9M vs. est. $1.50/$928M; 3Q home closing revenue $939.2M up 7% YoY; projects “8,900-9,100 total home closings for the year, generating approximately $3.5B of total home closing revenue; raises FY19 EPS view to $5.50-$5.70 from $5.20-$5.50
• Whirlpool (WHR) Q3 adjusted EPS $3.97/$5.09B vs. est. $3.89/$5.13B; still sees FY ongoing EPS $14.75-$15.50 vs. est. $15.24 and still sees FY free cash flow about $800M; Q3 ongoing EBIT $364M up 9.6% YoY

Energy

• The American Petroleum Institute (API) reported that U.S. crude supplies rose by 4.45M barrels for the week ended Oct. 18, showed stockpile declines of -702,000 barrels for gasoline and -3.5M barrels for distillates

Financials

• Discover Financial (DFS) Q3 EPS $2.36/$2.90B vs. est. $2.28/$2.88B; Q3 provision for loan losses $799M up 7.7% YoY while net interest income $2.40B up 8.1% YoY and Q3 loans $92.49B up 2.5% from last quarter
• Equity Residential (EQR) Q3 normalized FFO 91c/$685.145M vs. est. 88c/$679.02M; sees FY19 normalized FFO $3.46-$3.48 vs. prior view $3.43-$3.49 (est. $3.45)
• Euronet (EEFT) Q3 adjusted EPS $2.84/$787M vs. est. $2.80/$817.8M; Q3 adjusted Ebitda $227.3Ml guides Q4 EPS $1.61 in-line with estimates
• WR Berkley (WRB) Q3 EPS 85c/$1.97B vs. est. 67c/$1.97B; Q3 net premiums written $1.75B, +7.7% YoY
• Fulton Financial (FULT) Q3 EPS 37c vs. est. 35c; 3Q net interest margin 3.31% vs. 3.42% YoY and net interest income $161.3M up less than 1% YoY

Healthcare

• Alexion (ALXN) Q3 adjusted EPS $2.79/$1.26B vs. est. $2.47/$1.24B; raises FY19 adj. EPS view to $10.25-$10.40 from $9.65-$9.85 (est. $9.94) and also raises FY19 revenue view to $4.86B-$4.89B from $4.75B-$4.8B (est. $4.85B)
• Anthem (ANTM) Q3 adjusted EPS $4.87/$26.4B vs. est. $4.82/$25.88B; raises FY19 adjusted EPS view to greater than $19.40 per share (vs. prior view above $19.30); raises FY19 operating cash flow view to greater than $5.5B from $5.2B; raises FY19 operating revenue view to approximately $103B from $102B
• Eli Lilly (LLY) Q3 EPS $1.48/$5.48B vs. est. $1.40/$5.5B; raises FY19 EPS view to $5.75-$5.85 from $5.67-$5.77 (est. $5.72) and backs FY19 revenue view $22B-$22.5B (vs. est. $22.23B)
• Usana (USNA) Q3 EPS $1.09/$260.6M vs. est. 86c/$261.24M; guides FY net sales $1.03-1.05B, was $1.02-1.06B; sees FY EPS $3.90-4.05 vs prior $3.70-$4.10
• Moderna, Inc. (MRNA) announced that the U.S. FDA has granted Fast Track designation for mRNA-3927, its investigational mRNA therapeutic for propionic academia (PA)
• Opko Health (OPK) files to sell $100M in common stock
• Healthcare Services Group (HCSG) Q3 EPS 25c/$455.6M vs. est. 28c/$450.7M; boosts dividend

Industrials & Materials

• Caterpillar (CAT) shares fall 6%; Q3 adjusted EPS $2.66/$12.76B vs. est. $2.87/$13.41B; lowers year EPS outlook to $10.90-$11.40 from low end of $12.06-$13.06 as view which assumes modestly lower sales; says for Q4, now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty
• Canadian National (CNI) Q3 EPS C$1.66/C$ 3.83B vs. est. C$1.62/$3.86B; said in light of the deterioration in North American rail demand, as the economy continues to weaken, CN is now targeting to deliver 2019 adjusted diluted EPS growth in the high single-digit range this year versus last year’s adjusted diluted EPS of C$5.50, compared with its July 23, 2019 financial outlook which called for low double-digit growth in adjusted diluted EPS
• Resideo (REZI) shares fell -34%; cuts FY19 revenue growth view to 2%-4% from 2%-5%, and said it is actively investing in its value engineering team and expects meaningful improvement to gross margins over the next 18 months. As a result, updating its FY19 adjusted EBITDA guidance to be in the range of $330M-$350M, down from previously expected $410M-$430M
• Carlisle (CSL) Q3 EPS $2.42/$1.28B vs. est. $2.29/$1.29B

Technology, Media & Telecom

• Texas Instruments (TXN) shares fell -9%; Q3 EPS $1.49/$3.77B vs. est. $1.42/$3.82B; sees Q4 EPS 91c-$1.09 on revs $3.07B-$3.33B, well below the consensus $1.28/$3.59B; says most markets weakened further with Analog revenue down 8% YoY to $2.67B and Embedded Processing down 19% to $724M
• Teradyne (TER) shares rose 4%; Q3 adjusted EPS 77c/$582M vs. est. 70c/$565.72M; sees Q4 EPS 73c-84c on revenue $590M-$630M vs. est. 61c/$536.27M; Q3 rev breakdown: Semiconductor Test, $398M; System Test, $73M; Industrial Automation, $69M; Wireless Test, $42M
• Snap (SNAP) Q3 EPS loss (4c)/$446.2M vs. est. loss (5c)/$437.9M; reported daily active users for Q3 210M above the 206M est.; sees 4Q daily active users 214M-215M vs. est. 208M; sees 4Q revenue $540M-$560M vs. est. $557.2M; sees 4Q adjusted EBITDA breakeven to $20M (est. $12.5M); Q3 net income improved by $98M to -$227M. EBITDA improved by $96M to -$42M
• ServiceNow (NOW) shares fell on CEO change; announced that Bill McDermott will join ServiceNow by year-end 2019 as President and CEO and a member of the Board of Directors. McDermott will succeed John Donahoe, who is stepping down from ServiceNow to become President and CEO of Nike in January 2020; NOW sees Q3 revs $885.8M vs. est. $885M
• Monolithic Power (MPWR) Q3 EPS $1.08/$168.8M vs. est. $1.06/$165M; sees Q4 revenue $160M-$166M vs. est. $161.55M and sees Q4 non-GAAP gross margin between 55.2%-55.8%, which excludes an estimated impact of stock-based compensation expenses of 0.4%; sees Q4 revenue $160M-$166M vs. est. $161.55M
• Manhattan Associates (MANH) Q3 EPS 51c/$162.3M vs. est. 36c/$151.64M; said posted strong organic growth in the quarter, resulting in an all-time record revenue quarter; guides FY19 EPS $1.63-$1.65 on revs $610M-$614M above ests. $1.48/$600.92M
• Alphabet’s Google (GOOGL) said it’s made a breakthrough in quantum computing, known as quantum supremacy. In a blog post, Google said it’s developed a new 54-qubit processor that performed a target computation in 200 seconds, which would take the world’s fastest supercomputer 10,000 years to produce a similar output

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