Mid-Morning Look

Tuesday, February 25, 2025

U.S. stocks are under pressure for a 4^th straight session, pulling back amid increasing economic growth concerns and inflation fears as investors are exhibiting notable caution for the first time in 2025 (VIX back above 21). The Nasdaq is down over -1.8% after sinking -1.2% yesterday, extending its losing streak to three straight sessions while the S&P posted its first 3-day losing streak since the end of December. Investors have flocked to safe haven assets with gold hitting new record highs this week (though down slightly today), while Treasury prices have risen 5 straight weeks and up again to start this week as yields fall to 2025 lows (10-yr 4.30%). Momentum sectors have been hit the hardest to start the year with AI capex plays, China ADRs, EVs, homebuilders, machinery, rails and trucking some of the biggest laggards while defensive healthcare, insurance and travel/leisure are among the best. Housing stocks are getting a bounce today as Treasury yields fall with both the 7- and 10-year yields down 10 basis points on day. Bitcoin falls as much as 7.5% to levels not seen since mid-November (below $87K) amid a broader selloff in crypto assets. Data this morning showed the February Consumer Confidence index was weaker at 98.3 reading vs. consensus 102.5. Markets remain on edge as President Trump has said tariffs on Canada, Mexico ‘will go forward’ after being delayed. With today’s downside momentum, the S&P, Nasdaq and Russell 200 have all dipped below key technical supports. Biggest winners are defensive sectors with Consumer Staples, REITs and Healthcare all higher.

• Richmond Fed composite manufacturing index +6 in Feb vs -4 in January; Richmond Fed manufacturing shipments index +12 in Feb vs -9 in January.
• U.S. home prices +0.4% in December from November according to U.S. regulator, while U.S. home prices index 436.1 in December and U.S. home prices +4.7% in 12 months through December.
• December 20-metro area home prices +4.5% (consensus +4.4%) from year ago vs +4.3% in November (previous +4.3%) as per S&P CoreLogic Case-Shiller data; December home prices in 20 metro areas +0.5% seasonally adj (consensus +0.3%) vs +0.4% in November (previous +0.4%).

• In Energy: CIVI was downgraded to Sector Weight at Keybanc after earnings last night and removes $84 PT following disappointing 2025 guidance forecasting a 4% y/y decline in oil, announces 10% workforce reduction, terminated employment of COO T. Hodge Walker. CTRA posted Q4 EPS beat vs. Street expectations driven by a 3% beat on oil and a ~6% beat on total volumes and maintained its F2025 initial outlook from November but is changing the mix of spending modestly by lowering Permian spending by $70mm and increasing Marcellus by $50mm. FANG delivered a ~12% beat of FCF vs. Street, driven by a combination of stronger volumes (oil +0.5%, total +4% vs. expectations) and better operating costs; lowered Midland basin well costs by ~$45/ft compared to post-Endeavor synergy targets; total Capital spending was ~6% below the prior outlook. SLB said it now expects its buyout of CHX to close by the end of the first quarter or early in the second quarter of 2025.
• In Engineering & Construction (E&C): PWR was upgraded to Outperform at BMO Capital saying the recent pullback on power and related infrastructure offers attractive opportunity to lean into PWR noting at current levels sees PWR trading at 13.0x its 2026E EBITDA which is in line with the broader market despite the company’s robust and diversified backlog that spans across what it sees as a decade-long investment cycle in the electric. PRIM shares jumped on earnings results as reported Q4 adj EPS $1.13/$1.74B in revs above ests $0.75/$1.59B on better adj EBITDA $116.6Mm and guides FY25 adj EPS $4.20-4.40 vs est. $4.00. KBR Q4 adj EPS $0.91 vs est. $0.82, adj EBITDA $228Mm vs est. $218.6Mm on revs $2.12B vs. est. $1.999B; guides FY revs $8.7-9.1B vs est. $8.913B.

• EVER +27%; after Q4 results came in solidly above expectations, with revenue, VMM, and adj. EBITDA all noticeably above estimates while Q1 guidance calls for 73% y/y revenue growth at the midpoint with continued healthy margins.
• HD +3%; reported a top and bottom line beat for Q4 along with comp sales beat (Q4 margins missed) but said it expects adjusted EPS for FY25 to decline about 2%, compared to expectations of 4.6% growth, while annual comparable sales are forecast to rise 1%, lower than analysts’ average estimate of a 1.7%.
• LLY +2%; said it has begun selling higher doses of its popular weight-loss drug Zepbound in vials in the U.S. at a $150 discount to the cost of the injector pen versions. LLY said patients could purchase 7.5 milligram and 10mg vials of Zepbound for $499 a month on the LillyDirect website.
• PRIM +2%; shares jumped on earnings results as reported Q4 adj EPS $1.13/$1.74B in revs above ests $0.75/$1.59B on better adj EBITDA $116.6Mm and guides FY25 adj EPS $4.20-4.40 vs est. $4.00.
• YY +4%; after BIDU said it has acquired social media firm JOYY’s (YY) live-streaming business in mainland China for about $2.1B, as the search engine giant looks to diversify its revenue stream.

• CLF -9%; reported Q4 EPS loss (-$0.92), worse than the estimate loss (-$0.68) as Q4 revs fell -15% y/y to $4.33B vs. est. $4.43B and posted Q4 adj Ebitda loss $81M vs. profit $279M y/y saying results in 2024 were a consequence of the worst steel demand environment since 2010, impacted by auto production decline.
• DNUT -24%; after guiding FY25 revs $1.55B-$1.65B and 5% to 7% top-line growth on an organic basis which was below ests of $1.76B in revs and guided adjusted EPS of $0.04-$0.08 below ests of $0.30, which followed Q4 results that missed (revs $404M vs. est. $414M).
• HIMS -20%; reported top and bottom-line beats for Q4 but posted disappointing gross margins (77% vs. est. 78.4%), while issued guidance above views (recall shares tumbled last week after the FDA announced that the Semaglutide shortage is over).
• MRVI -16%; postponed its Q4 earnings results and intends to delay the filing of its 2024 Form 10-K, citing reasons including assessing the effectiveness of controls over financial reporting.
• MSTR -11%; as Bitcoin falls as much as 7% to levels not seen since mid-November (below $87K) amid a broader selloff in crypto assets, weighing on crypto sector BTDR, CLSK, COIN, CORZ, HOOD, HUT, IREN, MARA, RIOT
• NVTS -15%; guided for March quarter revenue to come below the firm’s forecast (sees Q1 revenue $13M-$15M below consensus est. $15.8M) with further industry headwinds impacting the business in the June quarter, followed by a sharp ramp in the second half.
• SRE -23%; as Q4 EPS and revs fell well short of consensus while cutting its FY25 EPS outlook to $4.30-$4.70 from $4.90-$5.25 (and below consensus $5.15) while increases its FY26 long-term EPS growth view to 7%-9%.
• TEM -14%; reported 4Q revenue rose 36% y/y to $200.7M (but below ests $203.1M) and EBITDA of -$7.8M. Formal FY25 guidance now incorporates the closing of the Ambry Genetics business – with revenue of $1.24B (vs. prior messaging of $1.23B pro forma) and adj EBITDA of $5M.
• UCTT -21%; mixed Q4 results (EPS beat/rev miss) and issued a soft Q1 2025 revenue guide (revs $505-555Mm vs est. $561.39Mm) due to China weakness and headwinds in Services from a struggling IDM customer.
• ZM -8%; delivered Q4 results above consensus, but guided FY26/Q1 below consensus, partly due to FX headwinds and prudent guidance by the new CFO.