Mid-Morning Look

Friday, April 30, 2021

Stocks open lower in a bout of early profit taking following a good week of earnings, economic data, dovish Fed comments and another government stimulus proposal (Biden’s American Families Plan worth $1.8T that will be largely paid for by raising taxes on the wealthy). But stocks have recovered nicely off the morning lows with a steady climb higher (Nasdaq nearly turned positive) following stronger Chicago PMI and UoM confidence data. Treasury yields volatile early, impacting moves in gold and the dollar. U.S. consumer spending rebounded in March amid a surge in income as households received additional COVID-19 pandemic relief money from the government. Despite the small dip in stocks early, major averages remain not far off record highs as the S&P 500 index and Dow remain on track for a third straight month of gains and the Nasdaq is also positioned for six consecutive months of gains. Crypto currency markets seeing strength this morning (Bitcoin, Litecoin), boosting names leveraged in that space, while semiconductors fall on mixed earnings results (SWKS, CRUS shares slide) and energy takes a breather with energy stocks following oil prices lower. Following the busiest week of earnings for the S&P (over 30% of components reported this week), the busiest week of pure volume is upon us, with many Small and MidCap names out next week.

Economic Data

·     Personal income for March jumped +21.1%, above the +20.3% estimate after Feb declined -7.0%; Personal spending rose +4.2% in March, topping the 4.1% estimate; inflation readings show: March overall PCE price index +0.5%, core PCE price index +0.4% (est. +0.3%); the Q1 employment cost index (ECI) rose +0.9% vs. est. +0.7% and vs. Q4 +0.7%

·     Chicago PMI actual 72.1, handily topping the forecast 65.3 and prior reading of 66.3

·     University of Michigan surveys of consumers sentiment final April 88.3, topping the 87.4 estimate and vs. preliminary April 86.5 and final March 84.9; the consumers expectations index final April 82.7 vs prelim April 79.7 and final March 79.7 and the current conditions index final April 97.2 vs prelim April 97.2 and final march 93.0

Sector Movers Today

·     Semiconductors; WDC reported a good MarQ rev/EPS at $4.1B/$1.02 and 27.7% GMs, with NAND GMs up 290bps q/q and also guided to a SOLID JunQ at $4.5B/$1.45 (well above cons. $4.3B/$1.01) with strong NAND pricing and GM improvement; CRUS posts Q4 earnings and revenue well below expectations and forecasts Q1 revenue between $240M-$280M, below the midpoint of range below analysts’ est. of $277.35M saying supply constraints impacted Q4 revenue and Q1 outlook; KLAC produced F3Q results at the high end of guidance and provided F4Q guidance well above consensus as demand has improved over the past quarter; INTC is seeking 8 billion euros ($9.7 billion) in public subsidies towards building a semiconductor manufacturing site in Europe, its CEO said Friday; SWKS reported MarQ Rev/EPS/GM at $1.17B/$2.37/50.8% versus consensus ~$1.15B/ $2.35/50.9%, and guided to JunQ at $1.10B/$2.13, ~3% above $1.07B consensus and Mobile was up ~47% y/y

·     Consumer Staples; CLX falls on mixed Q3 as EPS beat but sales of $1.78B missed the $1.87B estimate and said it now sees fy21 gross margin down due to higher commodity, manufacturing, logistics costs; CL posts better-than-expected Q1 results with organic sales growth of 5%, saying they delivered positive pricing in every division, helping drive growth in operating profit, net income and earnings per share (also warns of future cost pressures); NSRGY agreed to buy vitamin maker Bountiful Co. for $5.75 billion, becoming a world leader in the field of minerals and supplements; CHD downgraded to Sell from Hold by CFRA and cuts tgt by $5 to $80

·     Energy stock movers; major oils report with Dow components out: CVX Q1 EPS was in-line 90c on revs $32.03B vs est. $30.37B, and its production fell 4% YoY in the quarter to 3.12 Mboe/d as international operations struggled with the effects of asset sales, maintenance and entitlements, though its U.S. production increased by 1% due to an additional 210k bpd from the Noble Energy acquisition that offset a decrease related to its Appalachian asset sale and Winter Storm Uri; XOM reported Q1 adj EPS 65c vs est. 60c on revs $59.15B vs est. $56.38B, production 3.8 Mboe/d (+3% YoY), cash flow from ops $9.26B vs est. $6.27B

·     Healthcare Services; MDRX posted better-than-expected Q1 profit, helped by strength in bookings and also reaffirmed its 2021 revenue forecast of $1.5 billion; EHTH posted a strong first quarter beat driven by better-than-expected MA enrollment during OEP as it transitions from third-party broker utilization to a mostly internal sales force; OMCL reported 1Q21 results that were ahead of consensus as total revenue was $251.8 million (+9.6% y/y), which compares to company’s guidance of $243-248 million; ACHC had 1Q beat coupled with the continued pause of sequestration and raised 2021 adjusted EBITDA and EPS guidance by +2% and +4% at the midpoint; TRUP strong quarter, with enrolled pet and revenue growth both accelerating and coming in ahead of expectations; CYH upgraded at Credit Suisse after earnings beat

Stock GAINERS

·     ABBV +1%; posts Q1 revenue ahead of estimates and raises FY profit forecast, helped by demand for its rheumatoid arthritis drug Humira and psoriasis treatment Skyrizi – said Humira sales rose 3.5% to $4.87B, ahead of expectations of $4.78B, and Skyrizi sales up 91% to $574M

·     ALXN +3%; posts better-than-expected Q1 profit and revenue, helped by demand for its rare blood disorder drug, Ultomiris as sales rose 56% to $346.9M

·     CRY +14%; as 1Q revenues of $71.1M handily beat consensus estimates of $63.0M, up 7% y/y, bucking mid-February guide of down 5-8%, based on improved US, new launches

·     EHTH +7%; posted a strong first quarter beat driven by better-than-expected MA enrollment during OEP as it transitions from third-party broker utilization to a mostly internal sales force

·     FIVN +7%; Q1 marked the firm’s best quarter ever in terms of new customer bookings as well as a record Q1 for bookings in the base, while also announced 45% growth (over the last four quarters, Five9’s growth has gone +29%, +34%, +39%, +45%)

·     TEDU +10%; enters into a merger agreement with Kidedu Holdings and its wholly-owned subsidiary in a transaction implying an equity value of ~$230.6M https://bit.ly/2Rh5ESU

Stock LAGGARDS

·     ARDX -11%; after the FDA asked for additional analyses regarding tenapanor for certain kidney disease patients, resulting in the PDUFA date for tenapanor for the control of serum phosphorus in adult patients with chronic kidney disease on dialysis being extended.

·     CLX -3%; falls on mixed Q3 as EPS beat but sales of $1.78B missed the $1.87B estimate and said it now sees fy21 gross margin down due to higher commodity, manufacturing, logistics costs

·     CRUS -16%; posts Q4 earnings and revenue well below expectations and forecasts Q1 revenue between $240M-$280M, below the midpoint of range below analysts’ est. of $277.35M

·     DXCM declines as Canaccord notes there is enough in the results for shorts to pick at, namely plans to lower OUS pricing to drive further market access in the near term

·     FSLR -9%; beat estimates for quarterly profit, but said it is taking a little bit of a headwind around the impact of planned downtime

·     ROKU -1%; after Axios reported that Google’s YouTube TV has been removed from Roku’s channel store, after the companies failed to come to a distribution agreement amid accusations that the tech giant made anti-competitive demands

·     TWTR -13%; reported mixed Q1 results amidst a generally strong digital advertising backdrop as mDAU were slightly below for the US but above for International, with revenue and operating income both beating expectations, while Q2 guidance was slightly below estimates

·     WY -5%; posted a jump in Q1 Sales and earnings helped by record prices for lumber and oriented strand board, but its results fell shy of expectations (48c/$2.06B well below the 91c/$2.52B estimate)

Syndicate:

·     Columbus McKinnon (CMCO) 3.75M share Secondary priced at $48.00

·     Compass Pathways (CMPS) 4M share Secondary priced at $36.00

·     Fiserv (FISV) 20M share Spot Secondary priced at $118.30

·     Mid Penn Bancorp (MPB) 2.6M share Secondary priced at $25.00

·     OneMain Holdings (OMF) 8M share Secondary priced at $53.50

·     Vaccitech (VACC) 6.5M share IPO price $17.00

·     Werewolf (HOWL) 7.5M share IPO priced at $16.00