Mid-Morning Look

Tuesday, July 23, 2024

U.S. stocks edging higher early, adding to prior day gains as software stocks pace gains in technology sector, and financials outperform early, while transports decline behind a miss and lower guide from package delivery giant UPS (shares -10%). SAP shares jump on results boosting software stocks and SPOT a bright spot in media on its results and sub numbers. CMCSA weighs on cable and theme parks (Universal) after Q2 results come up mixed. Leisure/RV sector declines behind PII missed results and sharply lower guidance. GE giving industrial sector a boost to record highs on results. Semiconductors mixed as analog/auto related names (TXN, ON) drop after NXPI results/guidance fall short. GM posted solid results, but shares reversed lower following a run to 52-week highs (and ahead of TSLA results tonight). Consumer products mixed with KMB shares slid following its mixed results. Economic data was softer (pushing Treasury yields lower), with existing home sales for June falling -5.4% M/M below consensus and Richmond Fed also a larger negative reading for July. Investors still await GDP data on Thursday and PCE inflation data on Friday, ahead of the FOMC meeting next week. Overall, a solid start to the week after the S&P and Nasdaq posted losses last week. After pullback late last week, the Smallcap Russell 2000 big strong start to the week, up over 2.5% so far. Bitcoin prices -2% after big week last week to $66,700.

• June Existing Home Sales fell -5.4% m/m to 3.89M unit rate (vs. consensus 4.00M) and vs May 4.11M; June inventory of homes for sale 1.32M units, 4.1 months’ worth; June national median home price for existing homes $426,900, +4.1% from June 2023.

• In Autos: GM shares fell despite posting strong Q2 beat and raised guidance; Q2 adj EPS $3.06 vs. est. $2.71; Q2 net sales and revs rose 7.2% y/y to $47.97B vs. est. $45.62B; raises FY adj EPS to $9.50-$10.50 from $9-$10 (est. $9.53); boosts FY adj free cash flow to $9.5B-$11.5B from $8.5B-$10.5B and boosts FY adj Ebit to $13B-$15B from $12.5B-$14.5B. TSLA expected to report earnings after the close tonight. Porsche (POAHY) cut their outlook saying FY sales revenue was now expected to come in between 39B-40B euros ($42.4 billion), down from a previously expected 40B-42B euros. In Auto retailers/parts: GPC lowered its profit forecast for 2024 as macroeconomic pressures weigh saying they now see 2024 adjusted EPS to be between $9.30 and $9.50, compared with the earlier range of $9.80 to $9.95.
• In Industrials: GE better results and guidance as Q2 adj EPS $1.20 vs. est. $0.98; Q2 revs $8.22 vs. est. $8.46B; Q2 total orders $11.2B, up 18%; sees FY24 adjusted EPS $3.95-$4.20 above prior view $3.80-$4.05 and vs. consensus $4.08; sees FY adj revenue growth in the high single digits vs. previous view low single digits. AOS shares dropped amid in-line EPS of $1.06, but North America segment margins fell to 25.1% from 27.6% and earnings dropped slightly; also narrowed its FY EPS view to $3.95 to $4.10, from $3.90 to $4.15. In heavy duty trucks, PCAR shares slid on mixed results as EPS $2.13 missed the $2.14 estimate on better revs $8.77B.
• In Banks: BANC drops after Q2 EPS $0.12 missed est. $0.19; CATY reported a mixed quarter as loan growth was lower than expected, but EPS beat our estimate driven by a better-than-expected loan loss provision. Guidance updates were net negative with the outlook for both loan growth and deposit growth reduced. ZION Q2 EPS beat estimates ($1.21 vs $1.12 consensus) due primarily to a lower provision as Operating PPNR was ~1.5% above consensus. CADE Q2 adj EPS $0.69 vs. est. $0.61; Q2 Total deposits were $37.9M as of June 30, 2024, a decline of $261.6M from the prior quarter.

• DHR +7%; posted Q2 beat as EPS $1.72/$5,.74B sales topped views $1.57/$5.59B while guides Q3 revenue down low-single digits and backs FY24 revenue down low-single digits.
• GE +1%; better results and guidance as Q2 adj EPS $1.20 vs. est. $0.98; Q2 revs $8.22 vs. est. $8.46B; Q2 total orders $11.2B, up 18%; sees FY24 adjusted EPS $3.95-$4.20 above prior view $3.80-$4.05 and vs. consensus $4.08; sees FY adj revenue growth in the high single digits vs. previous view low single digits.
• IPAR +9%; after prelim Q2 revs $342Mm vs est. $337.71Mm; reaffirms FY guide of net sales $1.45B vs est. $1.454B and EPS $5.15 vs est. $5.15.
• SAP +6%; reported Q2 results with non-IFRS EPS of EU1.10 consensus EU1.08) and operating profit of EU1.94B (consensus EU1.81B) on total revenue of 8.29B (consensus EU8.24B), up 10% y/y in constant currency, an acceleration from 9% last quarter; cloud growth of 25% in cc, flat with last quarter.
• SHW +4%; Q2 adj EPS of $3.70 topped consensus $3.48 but sales of $6.27B missed consensus $6.33B and guided Q3 sales up low-single digits, while raising FY adj EPS view to $11.10-$11.40 from $10.85-$11.35 (est. $11.37).
• SPOT +13%; shares a bright spot after Q2 results of 1.11B euros, up ~45% from a year earlier and EPS of 1.33 euros handily topping estimates of 1.06 euros, citing lower marketing spend and higher music and podcast profitability; Q2 margins grew to 29.2% in Q2, up 510 bps y/y.

• CMCSA -4%; Q2 adj EPS $1.21, topped est. $1.12 while revs fell -2.7% y/y to $29.69B vs. est. $30B; said Peacock streaming service posted a 27.5% rise in revenue to $1.05B, driven by a 38% surge in paid subscribers to a total of 33M; Q2 theme park business posted a -10.6% fall in revenue and studio business revs fell -27%.
• MEDP -15%; shares fell as posted Q2 beat and raised on EBITDA and EPS but came in well below the Street expectations on bookings; Guggenheim noted the company delivered a shocking 1.04x B2B (lowest B2B we observe in our model going back to 2018).
• NXPI -7%; results missed, recorded its worst quarterly revenue decline in four years in Q2 and guided Q3 adj EPS $3.21-3.63 vs est. $3.61, sees revs $3.15-$3.35B vs est. $3.355B; weighing on shares of analog semi names ADI, ON, TXN
• PII -6%; after Q2 adj EPS $1.38 missed est. of $2.23 and revs fell -12% y/y to $1.96B below consensus of $2.18B saying Q2 proved challenging; also cuts full-year sales to fall 17% to 20% vs. prior guidance of down 5% to 7%; lowers FY adj EPS to be down 56% to 62%, compared with prior guidance of down 10% to 15%.
• UPS -10%; shares tumbled after Q2 adj EPS $1.79 missed est. $1.99 and Q2 revenue fell -1.9% y/y to $21.8B below consensus $22.18B; In the U.S. domestic package segment, revenue declined 1.9% to $14.12B, (vs. est. 414.54b), as average daily volume fell 2.6%. International revenue fell 1% to $4.37B amid a 2.9% decrease in average daily volume; now expects 2024 revenue of approximately $93B below prior view of $92B-$94.5B.