Mid-Morning Look

Friday, July 19, 2024

U.S. stocks opening lower on this option expiration Friday, adding to weekly losses for the S&P 500 and Nasdaq, while the Dow falls further from record highs reached yesterday as markets are dealing with a massive cyber security incident that is impacting various business around the globe. Shares of cyber security vendor Crowdstrike (CRWD) shares fell -10% (paring losses) after a program update by the company led to major IT outages worldwide. The outage disrupted business operations for airlines, banks, telecommunications providers, healthcare systems, and more while key services for Microsoft and Amazon were also down. CrowdStrike said the outage was caused by a defect in a single content update for Windows hosts and that they identified the issue and deployed an isolated fix to resolve the problem. Time will tell how long this issue will impact users. Outside of that news, market focus was on Republican Presidential candidate Donald Trump’s speech at the RNC last night and the White House as pressure mounts from Democratic leaders for President Joe Biden to back out of the upcoming election. Earnings got going this week, but the heavy hitters coming up next few weeks; while for today, shares of CMA tumbles on net interest income outlook (HBAN, FITB rise on results); oil service names mixed (HAL/SLB) after earnings results; auto suppliers drop on ALV warning and media giant NFLX shares volatile after quarterly results beat last night, but offered a softer outlook. After a red-hot start to July, rising over 10% in a span of 5 days, the Russell 2000 index has given a chunk of those gains.

• Regional Bank earnings: CMA Q2 EPS $1.49 vs. est. $1.19; Q2 CET1 capital ratio 11.55%; 2Q Net Interest Income fell -$15M to $533M driven by a decline in deposits held at the Federal Reserve, lower loan volume and the net impact of higher short-term rates; 2Q Net Interest Margin 2.86% and 2Q Loans Decreased $301M to $51.1B. FITB Q2 EPS $0.81 vs. est. $0.85; Q2 Net interest income fell 5% to $1.39 billion, slightly below analyst forecasts; Non-interest income slid 4% to $695M; sees FY24 revenue down ~2% y/y; sees FY24 net interest income down 2%-4%; noninterest income stable to down 1%; Average loans & leases down ~3%. HBAN Q2 EPS $0.30 vs. est. $0.28; Q2 revs $1.82B vs. est. $1.81B; Q2 net interest income decreased 3% from the year-ago quarter to $1.31B, net interest margin lower as 2.99% from 3.20%; Q2 provisions for credit losses increased to $100M from $92M. RF Q2 profit fell -14% y/y as EPS of $0.52 tops ests $0.48 while revs $1.7B missed the $1.76B estimate; Q2 net interest margin 3.51% vs. 4.04% last year while Q2 net interest income (NII) fell 14% to $1.2B in the quarter and sees Q3 NII flat to +2% q/q.
• In Gambling/Casinos: JMP noted RSI, MGM, and CZR take iGaming share in Q224; DKNG and FLUT’s FanDuel down marginally. The firm said same-store iGaming revenue was up 25% in June, compared to +27% in May and 23% in April. State-reported data from CT, MI, NJ, and DE highlighted that DraftKings remained the number-one iGaming operator in the U.S. at 26%, despite market share declining 49 bps QoQ. FanDuel lost the most market share in the industry MoM but only declined 34 bps from Q124. iGaming revenue for the two largest companies declined 2% QoQ.

• ISRG +7%; reported Q2’24 results, delivering upside surprise of 2% on sales driven by better-than-expected procedure volume growth (+17% vs. +15.5%) and system placements (341 vs. 318); and 15% on EPS.
• LLY +2%; rebounds from recent losses after competing Roche data hit shares of obesity drugs; company said its weight-loss drug tirzepatide has received approval from Chinese regulators. Tirzepatide is the active ingredient in the U.S. drugmaker’s diabetes drug Mounjaro, also approved in China, and weight-loss drug Zepbound.
• NFLX ; posted better Q2 results as $4.88 EPS tops consensus $4.74 on better revs $9.56B vs. est. $9.53B as Q2 Streaming paid memberships 277.65M, +16% y/y, vs. est. 273.78M; said posted Q2 operating margin of 27% vs. 22% y/y; Q2 global streaming paid net additions of 8.05M, rising 47% y/y; Q3 guidance was light of expectations.
• S +4%; as shares if cyber security stocks CYBR, PANW, others benefit from CRWD software update glitch leading the shutdown of several industries (airlines, media, banking).
• WWW +6%; was upgraded to Buy at UBS saying it has increasing conviction WWW’s sales growth rate should accelerate, sees upside to Street FY24/FY25 forecasts and sees a compelling EPS growth algorithm.

• AXP -4%; reported Q2 adj EPS $3.49 above estimates $3.24 while revs of $16.33B were below the consensus estimate $16.59B; card issuer issued better guidance as sees FY EPS $13.30-$13.80, above prior forecast $12.65-$13.15 and guides FY revenue growth 9% to 11%.
• CMA -13%; Q2 EPS $1.49 vs. est. $1.19; 2Q Net Interest Income fell -$15M to $533M driven by a decline in deposits held at the Fed, lower loan volume and the net impact of higher short-term rates; 2Q NIM 2.86% and 2Q Loans decreased $301M to $51.1B; said it expects its full-year net interest income (NII) down -14% y/y.
• CRWD -10%; responsible for major outages affecting businesses around the world after an update by the cybersecurity firm led to a major IT outage on Friday, impacting airlines, banking, media businesses around the world. “The issue has been identified, isolated and a fix has been deployed,” CEO George Kurtz said in a statement on X.
• MSFT 1%; after reporting problems with its cloud services. IT outages across the globe are weighing on several sectors on Friday, including airlines, insurers and stock exchange operators – CRWD shares sank after a widely used cybersecurity program crashed.
• PLUG -15%; as 78.74M share Spot Secondary priced at $2.54.
• PPG -3%; reported essentially in-line Q2 EPS of $2.50 as overall volume was flat Y/Y while issued lower Q3 guidance of EPS $2.10-$2.20 vs. consensus $2.28 and guides Q3 organic sales growth flat to up low single digits; cuts FY24 adj EPS view to $8.15-$8.30 from $8.34-$8.59 and lowers FY24 organic sales growth view.
• SPWR -41%; after saying late yesterday it will pause some operations, including deactivating lease and power purchase agreements from its own sales platform and halting new product shipments.
• WIT -10%; A day after INFY shares rallied on earnings results in Indian IT sector, today WIT missed quarterly revenue estimates due to weak demand in Europe and Asia-Pacific, saying revs fell -3.8% to 219.64B rupees ($2.63B) for the quarter ended June, below analysts’ estimates of 225.9B rupees