Closing Recap

Thursday, August 08, 2024

U.S. stocks opened modestly higher, dipped on the open, and then rocketed higher all day without any significant pullbacks as all eleven S&P sectors finished higher, but are still down modestly on the week. Technology (XLE) was the top gainer +3.4% in the S&P, with 2% advances for Discretionary (XLY), Industrials (XLI), Energy (XLE), and Healthcare (XLV). Favorable labor market data helped the mood as weekly Initial jobless claims fell by 17,000, the most in nearly a year, to 233,000 in the latest week alleviating worries that the Federal Reserve’s aggressive interest-rate policies are slowing economic activity. The S&P 500 Index gained 2.4%, while the technology-heavy Nasdaq 100 Index extended its advance 3% (helped by near 7% pop in SOX semiconductors). Small caps joined in on the party, with the Russell 200 Index up 2.4% as investors shrugged off a weak $25 billion sale of 30-year government debt (weak 10-yr auction yesterday hurt sentiment). Major averages have been trying to claw back from a global selloff on Monday that was sparked by worries about a potential recession, where the VIX index surged to 65 (but down back around 25 today). Investors also fear the Fed has been too slow to cut interest rates in time to prevent an economic downturn. Stocks had bounced similarly at the start of the Wednesday session but ended lower; today, markets managed to hold gains and push higher all afternoon. The odds of a US recession by the end of the year are now about 35%, according to JPMorgan—up from about a 25% chance at the start of July. The bank cited a sharper-than-expected weakening in labor demand. Recap of top earnings movers down below.

• June wholesale sales -0.6% (consensus +0.3%) vs May +0.3% (prev +0.4%) as June stock/sales ratio 1.37 months’ worth vs May 1.35 months; U.S. June wholesale inventories unrevised at +0.2% (consensus +0.2%).

• Brent Crude futures settle at $79.16/bbl, up 83 cents, 1.06%.
• December gold rises $30.90 of 1.25% to settle at $2,463.30 an ounce.
• Bitcoin zero pullback today, ending near best levels of day up over 8% just below $60,000.
• Treasuries prices fell for a 3^rd day, as Treasury yields rebounded after hitting yearly lows on aggressive rate cut expectation by the Fed.
• The U.S. Treasury sold $25B in 30-year bonds at high yield 4.314%, above 4.283% when issued yield prior to auction (largest tail, 3.1bps, since November), with weak bid-to-cover ratio 2.31, as Primary dealers take 19.18% of U.S. 30-year bond sale, direct 15.5% and indirect 65.32%.
• The auction was weak, following up on softer 10-year auction the day prior.
• The U.S. dollar edged higher as the last two-week commentary about the dollar/yen carry trade is beginning to ease after JP Morgan said today that 75% of the global carry trade has now been completed, per Bloomberg headlines.

• In Warehouse/Discount/Specialty retail: COST upgraded to Buy on traffic outperformance at Gordon Haskett with $925 tgt; WRBY posts solid 2Q beat and FY guidance raise as 2Q EBITDA of $20M vs Consensus $17M on revenues about 1% better. Gross margins beat by 100 bps and EBITDA margins by 120 bps. YETI with broad-based Q2 beat and guidance raise as EPS beat ($0.70 vs. $0.64 cons) on better revs ($463MM vs. $452MM cons) and FY guidance increase for EPS and revenues growth (now +8-10% vs. 7-9% prior and +9.5% cons). SN 2Q EPS of $0.71 beat consensus $0.60 and EBITDA 13% above on sales well above consensus while raises FY EBITDA now $935M (mid) vs prior $855M.
• In Apparel Retail: HBI mixed Q2 results as EPS beat but revs $995M miss the $1.3B estimate while also guides FY24 results below consensus – notes on track to complete sale of Champion in 2H; UA posts a surprise Q1 profit and smaller-than-expected drop in revenue helping lift shares (revs $1.18B tops $1.15B est.) as reduces the pace of promotions and improve profitability by a cutting inventory
• In Consumer Products: ODD reported a solid top- and bottom-line beat marked by 27% revenue growth and 32% adjusted EBITDA margins and raised its full-year revenue guidance by ~1% and its full-year adjusted EBITDA guidance by ~2%. In tobacco (PM, MO, BTI), UBS said their 5th Evidence Lab US Tobacco and Alternative Nicotine Survey confirms view that the US combustibles market (c35% of industry profits) has become more challenged; volume declines have accelerated (2024E – 9%) due to cigarettes becoming ‘more expensive’ and vapor substitution.
• In Food& Beverages: BYND posts smaller-than-expected drop in Q2 revenue, raises lower end of FY24 revenue forecast to $320M-$340M from prior view $315M-$345M. MNST Q2 sales $1.9B missed the $2.0B estimate Net sales for the Company’s Monster Energy Drinks segment rose 3.3% to $1.74B; Net sales for the Alcohol Brands segment decreased 31.9% to $41.6M. CELH downgraded from Neutral to Underperform at Bank America and cut tgt to $32 from $60 saying the energy drink category had been steadily growing volume at a pace suggesting sustainable +4-5% growth over the next few years. This pace began to erode earlier this year. USFD in-line EPS and better Q2 sales.
• In Restaurants: BROS reported solid 2Q results, but disappointing guidance as did not reaffirm its long-term mid-teens growth rate or unit potential while the comp store outlook implies flattish results through the balance of the year; QSR posted far weaker-than-expected Q2 earnings with EPS $0.86 adj vs. est. $1.18 as revs rose to $2.08B from $1.775B y/y but well below the $2.88B est. as consolidated same-restaurant sales rose +1.9% vs. est. +2.8% gain. DNUT mixed earnings with revs a touch ahead of consensus and guidance somewhat soft; DIN downgraded to Hold from Buy at Benchmark with no price target after the company reported Q2 results that reflected below plan revenue and same-store sales results and mgmt reduced prior FY24 same-store sales growth guidance by a wide margin.

• In Housing/Furniture: ARHS shares tumbled on weaker forward guidance as EPS and Q2 comps better than estimates but Q3 guide weak as 3Q comps forecasted at down 4-9% vs Consensus +2% and EBITDA of $30M vs Consensus $55M. Lowering FY comps to down 8-11% vs prior down 2-4% and EBITDA down to $135M vs prior $185-$200M (shares of RH, WSM among movers in sympathy).
• In Building Products: AZEK better than expected F3Q24 performance was due in large part to a ~$35M shift in sales, taking some air out of F4Q24 expectations, but collectively, the slight raise to the midpoint of full-year guidance reflects modestly better demand than previously contemplated in guidance (as per Davidson).

• In Theme Parks: PRKS downgraded to Neutral from Buy at Goldman Sachs and cut tgt to $53 from $63, cautious on the 2H outlook and believe achieving the guidance for record EBITDA in 2024 will prove to be a challenge. Reminder the group was pressured on Wednesday after softer DIS park revenue/commentary.
• In Autos: China retail sales of passenger vehicles -2.8% y/y to 1.72 million units in July, or -2.6% m/m. NEV retail sales 0.878 mln, +36.9% y/y, +2.8% m/m. TSLA China exported 27,890 vehicles (-15%y/y, +137% m/m), and BYD 26,995 (+65.2% y/y). In EV Charging, BLNK cut its FY24 revenue to between $145M-$155M, down from its prior forecast of between $165M-$175M (est. $169M) and delayed timeline to achieve positive adj. EBITDA to 2025 from 12/24. ACVA reported revenue/adj. EBITDA of $161M/$7.1M vs. consensus of $156M/ $7.1M. Total GMV was $2.43B vs. consensus of $2.52B, with the take rate coming in at 6.6% vs. 5.0% in 2Q23.

• In Utility/Power: CEG initiated with an Overweight rating and $211 price target at Barclay’s saying they see upside to consensus EPS estimates with a bullish catalyst path ahead: 1) TLN-ISA protest; 2) Dec ’24 PJM BRA; & 3) Co-location deal potential; bull / bear debate, investment considerations & Co-loco sensitivity include. NRG posts a near 148% jump in Q2 profit helped by lower costs and strong demand as core profit $935M tops $892M estimate and said it signed an agreement to sell its Airton HVAC business for $500 million, deal to close by the end of the year.
• In Energy: OXY Q2 PS $1.03 tops est. $0.78 on mostly in-line revs $6.88B as production came in at 1258 Mboe/d vs. Consensus 1257.3 mboe/d; beat Midstream guidance by +$180mn due to lower losses on equity investments, timing of LCV spends, and natural gas transportation optimization; MUR Q2 EPS beat by 8c on better Ebitda while guides Q3 production lower at 181.5-189.5 Mboe/d vs. Consensus 192.3 Mboe/d (impacted by 9.4 MBOEPD of total downtime) and reaffirms FY production guide of 180-188 Mboe; EONGY upgraded to Outperform at Bernstein on the back of valuation, improving regulatory framework and strong networks growth; SM 2Q earnings print came in well ahead of us and consensus, as well as news of a "reloaded’ $500M repurchase program with high-quality beat on oil production, oil realizations, and cash unit expense. TALO posted earnings beat and an unchanged outlook for 2024.

• In Financial Services: LZ reported 2Q24 results, whereby revenue came in 2% above consensus and EBITDA was $1.9M above the high end of guidance while left full-year guidance unchanged and CEO said it reviewing LegalZoom’s product portfolio, with a focus on increasing subscription services and revenue.
• In REITs: VNO upgraded to Outperform and raise tgt to $40 from $29 at BMO Capital saying it has recently been a show-me story…and it is now showing: High leasing volume with attractive rents, dispositions at trophy valuations enhancing NAVs, and execution on its major redevelopments in Penn Plaza. Meanwhile BMO downgraded HPP to MP from Outperform as see shares pressured as long as Hollywood production remains muted, office vacancies mount, and HPP’s earnings disappoint. EQIX Q2 results came in better than expected for revenue, adj. EBITDA, and AFFO, but despite the outperformance, total revenue guide was lowered due to FX.

• ALDX said its experimental therapy to treat dry eye disease met the main goal of a late-stage study as the therapy reproxalap was statistically superior in reducing the symptom of ocular discomfort in patients.
• APLS announce positive topline results from Phase 3 VALIANT study of Pegcetacoplan in C3G and Primary IC-MPGN saying it met the primary endpoint, achieving statistically significant 68% (p<0.0001) reduction in proteinuria compared to placebo in a broad study population.
• CDT enters into an exclusive license agreement with AZN for multiple assets to advance potential first-in-class treatments; as part of the license agreement, AstraZeneca will take stake by receiving Conduit shares.
• CPRX reported 2Q total revenue of $122.7M, topping the Street’s $111.8ME as sales growth was driven by robust performance across the company’s marketed products, and CPRX now expects to achieve the upper end of its $455-475M full-year revenue guidance as previously issued.
• MRK halted a Phase 3 clinical trial of its anti-TIGIT drug vibostolimab in small cell lung cancer after independent monitors determined the drug combined with Keytruda would not prolong patient survival compared to standard treatment.
• NVAX shares tumble as Q2 EPS $0.99 well below consensus estimate $1.64 on light revs $415.5M vs. estimate $458.6M, said on track with global restructuring and cost reduction plan, but cuts FY product sales to $275M-$375M from prior $400M-$600M and cuts total revs to $700-$800M from prior $970M-$1.17B.
• SRPT reported Q2 total/Elevidys revenue of $363/$134M, missing consensus of $395/$149M, and provided a largely inline 2025 total revenue guidance of 2.9-3.1B; mgmt provided detailed guidance on Elevidys near-term and long-term expectations, noting q/q growth of ~30% for Q324 and ~100% for Q424, while peak revenue of 4B was "years away".

• In Healthcare Services: GDRX Q2 net income of $6.7M, compared with a net income of $58.8M a year ago as Q2 subscription revenue decreased 8% to $22M from $23.9M a year ago and guided FY 2024 revenue to be at the lower end of its previous forecast of $800M-$810M.
• In Healthcare Drug Distributors: MCK shares stumble as Q1 results were mixed, with the adj EPS beat of $7.88 vs consensus of $7.21 being driven by non-operational items, and with adj EPS guidance being raised ($31.75-$32.55 vs prior $31.25-$32.05) by less than the FQ1 beat.
• In Cannabis: sector got a late day pop (MSOS) after Trump said in news conference that he’s starting to be more in favor of legalizing marijuana as more states head in that direction.

• In Materials/Wood Products: LPX downgraded to Market Perform from Outperform at BMO Capital on valuation after they reported another beat/raise quarter in Siding, which is encouraging against a softer housing demand backdrop (stock within 5% of price tgt).
• In Ag Chemicals: NTR mixed Q2 as EPS $2.34 beat consensus $2.19 but revs $10.16B miss while retail adjusted EBITDA guidance was lowered to $1.5B-$1.7B from $1.65B-$1.85B due primarily to ongoing market instability in Brazil as well as the impact of delayed planting in North America in the second quarter. CF beat on top/bottom line while 1H’24 average selling prices were lower than in 1H’23; ammonia production was 2.6 million tons in the reported quarter, compared to 2.4 million tons in the year-ago quarter.
• In Industrials: PH shares jump as Q4 profit topped estimates amid strong demand for its aircraft systems and components with EPS of $6.77 above $6.22 estimate and revs $5.19B vs. est. $5.08B.

• In social media: dating app BMBL shares tumble over -30% after reported a mixed 2Q (weaker topline, better adjusted EBITDA) and slashed its FY24 revenue view to 1%-2% from 8%-11% and lowers FY24 adjusted EBITDA margin growth view to at least 200 basis points from 300 basis points (weighed on shares of comp MTCH). PINS rallied this afternoon following a report in The Information that AMZN enlists TikTok, Pinterest in quest to sell everywhere.
• In Online learning: DUOL Q2 DAU, MAU, and subscription bookings growth reaccelerated with results coming in ahead of guidance and consensus – though guidance calls for a slowdown in DAU, bookings, revenue, and EBITDA growth as 2H23 comps are tougher.

• In IT Services & Consulting: FSLY shares tumble after posting an in-line 2Q report and substantial guide down for 3Q and 2024 that implies flat growth in 4Q vs. 17% in CY23, 8% in 2Q24, and prior discussions of LT DD% top-line growth targets in the 20% range by Fastly.

• LSCC upgraded to Outperform from Market Perform at Raymond James with a $50 price target as believes the cyclical correction is largely behind the company and expects upward earnings revisions to start in the next two quarters.
• CEVA reported revenue and EPS well ahead of consensus, reflecting royalty recovery and licensing traction with newer connectivity and edge AI IP portfolio offerings (upgraded to Buy at RothMKM).
• Tokyo Electron UPS profit forecast, saying it sees strong AI demand – Tokyo Electron now expects its net profit to surge 31% to 478B yen ($3.2B) in the year ending next March, up from a May projection of a 22% increase.