Mid-Morning Look

Wednesday, February 12, 2025

U.S. stock index futures drop sharply this morning following a “hotter-than-expected” consumer inflation report, which fueled fears that the Federal Reserve will not cut interest rates anytime soon. January consumer price index (CPI) rose 3% on an annual basis in January, versus the +2.9% increase forecast and on a monthly basis, the index rose +0.5% (highest since Aug 2023), compared to an estimated +0.3% rise. The core CPI, which excludes volatile food and energy components, rose +0.4% on a monthly basis against an expectation of a 0.3% advance. Annually, it came in at 3.3%, versus an estimated 3.1% increase. Following the data, S&P futures fell over 1%, the Russell 2000 nearly 2% as implied probabilities for no change from Fed at May meeting move from 76% to 87% and for the June meeting from 51% to 65% on hotter CPI. Treasury yields also spiked with the 10-yr to highs of 4.65% from 4.53% prior and the dollar spiked. Still, while stocks sunk initially, major averages staged a strong bounce off the lows on the open, cutting losses heading into day 2 of testimony by Fed Chairman Powell on Capital Hill today on monetary policy and the economy. Homebuilders sunk following the spike in yields/mortgage rates, though all eleven S&P sectors are in the “red” early led by more than 1% declines for Materials, Industrials, Technology and REITs. Gold prices slipped as the CPI data boosted the likelihood of the Fed holding rates but pared much of the earlier losses as trade war concerns kept investors on the edge.

• In Medical Equipment: STAA shares tumbled after Q4 sales of $48.95M were well below consensus of $77.2M and said plans to implement cost cuts this year in light of a lower revenue forecast, does not expect to meet its previously set sales target for 2026. WAT shares slipped after guiding Q1 EPS between $2.17-$2.25 per share, below analysts’ estimate of $2.42 as sees an around 7% hit to profit from a stronger dollar in the first quarter and about 4% for the year; guidance for year brackets consensus. EW delivered Q4’24 sales/EPS results above consensus, beating them by 2% and 7%, respectively as Q4 TAVR sales beat expectations by 2%.
• In Oil E&P, Equipment, and Services: BOOM rejects the non-binding $10.18 per share acquisition proposal from Steel Connect noting the offer undervalues company and expects Q4 sales and adjusted EBITDA to exceed guidance. EOG was upgraded to Outperform from Sector Perform at RBC Capital driven by the company’s continued strong operational performance, exposure to improving natural gas prices, premium commodity price realizations, and potential for significant stock buybacks. TotalEnergies and Aker BP are seeking an independent review of their stakes in EQNR Johan Sverdrup oilfield with a goal of boosting their holdings.
• In Utilities: EXC said it plans to invest $38 billion in capital expenditures over the next four years, 10% higher than its previous plan after reporting Q4 EPS $0.64 above the $0.59 estimate and raised 2025 EPS to $2.64-$2.74 above consensus of $2.63 as expects to benefit from higher rates for electricity and natural gas. Dominion (D) Q4 EPS of $0.58 beats the $0.56 estimate while reaffirms l-t operating EPS growth rate guidance and narrows 2025 operating EPS range to $3.28-$3.52 per share. ZWS announced 7.75M shares sold by Ice Mountain at $35, 5.1% discount to last sale; the Co agreed to repurchase ~1.6M shares, approx $55M worth, from the underwriters.

• CFLT +16%; as reported strong Q4 earnings, with a subscription revenue beat of 2.1% vs. midpoint guidance and Cloud revenue specifically +5.2% above consensus.
• CVS +14%; after solid Q4 profit beat, with EPS of $1.19 topping the $0.93 consensus as the pace of its insurance unit’s medical cost increases slowed; its medical loss ratio, or percentage of premiums spent on patient care, rises to 94.8% from 88.5% in the same period a year earlier.
• DASH +3%; as 4Q orders growth accelerated 1 point to +19% Y/Y, GOV came in $279M (1%) above the high end of guidance, and EBITDA came in just over consensus and near the high end of guidance; MAU grew at a double-digit rate in the U.S. while global MAU reached 42M (+13.5% Y/Y).
• GILD +8%; delivered a Q4 beat and gave 2025 EPS guidance that was ahead of consensus; total revenue of $7.6B (+6% YoY; vs. consensus of $7.2B and non-GAAP EPS of $1.90 beats $1.74 est.; higher HIV and oncology sales were offset by lower Veklury revenue and higher OpEx. Initial FY25 total product sales guidance brackets estimates.
• MCY +17%; was upgraded to Strong Buy from Outperform at Raymond James and raised to $80 from $70 after Q4 results; notes Q424 results reflect some of the strongest underlying results in over the last 10 years, which should continue as long as auto frequency/severity loss trends remain relatively stable.
• SMCI +7%; adjusted earnings and revenue outlook for the period came in below analysts’ expectations, but said it expects $40 billion in revenue for fiscal 2026, significantly above the consensus of $29.2 billion.
• UPST +30%; as Q4 results solidly beat previous guidance and Street as origination volume and Adj. EBITDA margins snap-backed to the highest levels since ’22; raises FY25 revenue guide by ~20% vs consensus, vowing to reach GAAP net income breakeven for the FY.

• BIIB -6%; Q4 EPS and revenue above expectations, though mgmt expects full year 2025 total revenue to decline by a mid-single digit vs ’24. Skyclarys revenue below expectations $102M vs $112M est.; Q4 MS revenue $1.07B vs $1.02B est. Sees FY adjusted EPS $15.25 to $16.25 below estimate $16.16.
• BL -16%; after reporting mixed Q424 results, with non-GAAP EPS of $0.47 (consensus $0.50) and operating margins of 18.1% (consensus 18.5%), and guidance disappointed due in part to negative FX impacts and deferred customer starting dates
• DENN -21%; reported Q4 adj EPS and sales that came in just short of consensus views as EPS of $0.14/$114.7M vs. est. $0.15/$116M.
• KHC -4%; forecasts 2025 adj EPS $2.63-$2.74 below consensus est. $3.05 while reported quarterly sales fell 4.1% from a year ago to $6.6B and comp sales fell (-3.1%) as its prices crept higher; said expects organic sales to be flat to down 2.5% versus the year prior.
• LYFT -9%; reported 4Q bookings 1% below prior Street forecast but EBITDA came in 8% better; the company guided 1Q25E rides growth to mid-teens y/y (in-line with Street) and bookings growth of 10-14% y/y (3-pts below Street at midpoint), reflecting the deterioration in industry pricing trends since late 4Q.
• SPIR -49%; after saying it is seeking a court order to have Kpler Holding consummate the acquisition of its maritime business. Spire Global filed a complaint in the Delaware Court of Chancery against the Belgian company seeking a grant of specific performance ordering Kpler to satisfy its obligation to go through with the closing.
• STAA -30%; after Q4 sales of $48.95M were well below consensus of $77.2M and said plans to implement cost cuts this year in light of a lower revenue forecast, does not expect to meet its previously set sales target for 2026.
• TDC -18%; on mixed Q4 results as EPS beat by $0.10 but revs of $409Mm below est. $414.94Mm, and issues Q1 and FY EPS above views; sees Q1 adj EPS $0.55-0.59 vs est. $0.63 and EPS $2.15-2.25 vs est. $2.46.
• VRT -6%; as the maker of cooling and power equipment for data centers-maintained guidance provided in November for adjusted earnings of $3.50-$3.60 a share in 2025 and guided sales outlook to about $9.1B-$9.28B (vs. est. $9.25B) and also issued mixed Q1 guidance; shares of DELL and ETN were also weaker.
• ZWS -2%; announced 7.75M shares sold by Ice Mountain at $35, 5.1% discount to last sale; the Co agreed to repurchase ~1.6M shares, approx $55M worth, from the underwriters.