Mid-Morning Look

Friday, April 26, 2024

U.S. stocks extending yesterday’s bounce off lows (stocks closed lower Thursday but ended near the highs in afternoon rally), as strong technology earnings results boost optimism heading into another big week of results. A monster recovery for semiconductors, as the Philly semi-index (SOX) rises a 5^th straight day, up over 8% this week and pares monthly losses to -4%, rising above 4,700 (off April lows of 4,288 just last Friday) with monster moves in space from NVDA, AMD, SMCI among others; notable strength in semi equipment earnings this week (LRCX, KLAC, TER). Next week chip makers begin heavy earnings results AMD, SWKS, others. INTC lags in space after another rough quarter/guidance last night. Fear in stocks has quickly dissipated in just 5-days, as major averages rise for a 4^th time in 5-days following the 6-day losing streak conclusion through last Friday, as the CBOE Volatility index (VIX) down about -1% at 15.22 near lows (off last Friday highs 21.36). Despite stubbornly high PCE inflation readings yesterday/today, and mixed views on the economy, a handful of earnings reports helped turn things around, especially in the growth driving AI sector, with GOOGL and MSFT earnings/guidance erasing META weakness the day prior to boost stocks which are on track for weekly gains. Nasdaq extends gains to +2% or over 300 points now above 15,900 – up over 4% this week alone. Recap of some of the big earnings results below.

• PCE Inflation readings were mostly in-line: March overall PCE price index M/M +0.3%, in-line with consensus and prior Feb reading and March core PCE price index M/M also rises +0.3%, and in-line with consensus and prior Feb reading as well. On a Y/Y basis, the headline PCE rose +2.7% (vs. Feb +2.5%) and slightly above expectations of +2.6%, while the core PCE rose +2.8% vs. est. +2.7% and in line with February.
• University of Michigan surveys of consumers 1-year inflation outlook final April 3.2% vs prelim 3.1% and final March 2.9% and 5-year inflation outlook final April 3.0% vs prelim 3.0% and final March 2.8%. University of Michigan surveys of consumers sentiment final April 77.2 (consensus 77.9) vs preliminary April 77.9 and final March 79.4 as conditions index final April 79.0 vs prelim April 79.3 and final March 82.5 and expectations index final April 76.0 vs prelim April 77.0.

• In Major Oil: CVX Q1 adj EPS $2.93 vs. est. $2.68; Q1 revs $48.72B vs. est. $47.33B; Q1 worldwide production was 12% higher than a year ago; Q1 Net income fell to $5.5 billion, or $2.97 a share, from $6.57 billion, or $3.46 a share, due primarily to lower margins on refined product sales and lower natural-gas realizations. XOM Q1 adj EPS $2.06, below consensus $2.19 and Q1 revs $83.08B vs. est. $73.2B; Q1 cash flow from operations $14.7B; free cash flow $10.1B; misses Q1 profit estimates, hit by weaker refining margins and lower natural gas prices.
• In Transports: SAIA shares tumbled after the LTL services co reported Q1 operating income of $117.9M, below consensus of $121.5M while revs rose 14% y/y to $754.8M but below ests $770.7M; the results pressured shares as well as comp LTL stocks (XPO, ODFL, ARCB). KNX was downgraded to Hold from Buy and cut tgt to $47 from $53 at Stifel after Knight reported Q124 adjusted EPS of $0.12—consistent with the pre-release guide-down, mainly driven by the unexpected duration of softness in the freight market.

• GOOGL +9%; Q1 revenue of $80.5B was 2.5% above consensus as Search and YouTube revenue growth both accelerated for the fifth quarter in a row, while Cloud revenue growth accelerated for the second quarter in a row, and operating income came in 15% above consensus; also authorized repurchase up to $70B company’s Class A and C shares; says intends to pay qtrly cash dividend in future.
• MSFT +2%; Total Azure growth accelerated to 31%, well ahead of consensus estimates, while within this AI-related Azure, revenue contributed 7% to growth, implying a $4B annual run-rate, which was up from 6% last quarter while core Azure grew 24%, an acceleration from 22% a quarter ago.
• RMD +17%; reported Q3 revenue growth was ahead of expectations, driven by upside in Devices; Q3 adj EPS $2.13 vs est. $1.91 on revs $1.2B vs est. $1.167B, adj gr mgn 58.5%.
• SAM +5%; as Q1 revs rose 3.9% y/y to $426.1M above est. $413.2M; Q1 gross margins 43.7% up 570 basis points year over year; said 1Q depletions were flat and shipments increased 0.9%; has not changed its full year guidance.
• SKX +15%; Q1 beat EPS $1.33 vs. est. $1.10 driven by Wholesale (reason for weakness last qtr), Inventory -10% q/q, GMs strong while Q2 guide is light but FY was raised by more than the beat; raised its FY24 sales guidance ~1% to $8.725-$8.875B and EPS guidance ~7% to $3.95- 4.10.
• SLCA +19%; entered into a definitive agreement to be acquired by funds managed by affiliates of APO in an all-cash transaction that values the Company at an enterprise value of about $1.85B. https://tinyurl.com/4yv4y492
• SNAP +22%; reported strong Q124 results whereby revenue came in ~7% ahead of consensus and EBITDA came in ~$100M above the high end of guidance as Snap’s ad models are driving better returns for advertisers; Q1 DAUs for Snapchat grew to 422M above ests. 419.6M.

• CHTR -2%; lost -72K internet customers in Q1, more than the -57K loss estimate (after adding 76K y/y); Q1 revs $13.68B in-line with ests. and EPS $7.55 missed the $7.92 estimate; also posted lower FCF of $358M vs. ests. $519M.
• DXCM -5%; declined as Q1 revs beat ($921M vs. $910M) and rev guidance raise at the low-end ($4.2B to $4.35B vs. $4.15B to $4.35B prior), but shares fell amid high expectations (Raymond James said was hoping for a bit more upside, but DexCom added a record number of new users in Q1).
• INTC -12%; reported 1Q results in line and guided 2Q lower. In-line results were driven by growth in INTC Products (DCAI, CCG, NEX) and offset by declines in MBLY, ALTR, and 5G; Q2 rec guidance was lower than expected with outlook of $13B, at the midpoint, below the consensus of $13.6B & gross margin expected to decline.
• ROKU -9%; reversed overnight gains, sliding this morning after warning that streaming rivals’ push towards ad-supported offerings could weigh on its growth this year (the outlook overshadowed better Q1 results and Q2 revenue forecast as Q1 revs $881.47M topped ests $848.62M and sees Q2 revs $935M vs. est. $932.4M).
• SAIA -19%; reported Q1 operating income of $117.9M, below consensus of $121.5M while revs rose 14% y/y to $754.8M but below ests $770.7M; the results pressured shares as well as comp LTL stocks (XPO. ODFL, ARCB).
• TEAM -10%; as Q3 results were overshadowed by their co-Founder and co-CEO, Scott Farquhar stepping down effective end of August; delivered a strong +8.3% beat vs. consensus on top-line revenue driven by a final burst of Server migrations to Datacenter driving 64% YoY growth, while Cloud results and F4Q guidance were only in line.