Mid-Morning Look

Wednesday, June 08, 2022

U.S. stocks bounce on the open, but still trading lower as Financials, Industrials, REITs, Utilities, Materials and Healthcare are all lagging, while Consumer Discretionary and Comm Services leading in the S&P 500. A handful of earnings in the tech and retail sector moving a few names, but markets still await central bank news tomorrow (ECB policy meeting) and inflation data later this week (CPI on Friday), which remain key market catalysts. The S&P 500 has been trading in a roughly 100-point range over the last week or so, with lows around 4,080 and highs above 4,170-4,180. Oil prices touch fresh 14-week highs before paring gains while Treasury yields edge higher and the buck mixed. No Fed speakers this week ahead of its upcoming policy meeting and economic data quiet today as well. The U.S. dollar moving to highest level since 2002 vs. Japanese yen, up 1.3% or 1.73 to 134.31. The national average for gasoline sets a record for the 10th straight day at $4.97/gallon.

Sector Movers Today

·     Consumer Staples; CPB Q3 EPS of $0.70 beats $0.61 estimate on sales $2.13B vs. est. $2.04B while saying saw continued share pressure from private label following their distribution recovery, market’s higher overall prices; BF Q4 EPS $0.31 vs. est. $0.27 and revs rose 23% y/y to $996M vs. est. $831.8M and said anticipates FY 2023 organic net sales growth in mid-single digit range; STZ positive mention at Wells Fargo as reiterate OW and raise PT to $280 saying a strong start will give options, and STZ’s value proposition vs large cap peers may stand out more – see a “beat and maintain” setup into Q1 results June 30^th; CASY Q4 EPS $1.60 vs. est. $1.59 and revs $3.46B (in-line) as Q4Inside same-store sales up 5.2% with an inside margin of 39.4%; Fuel same-store gallons sold up 1.5% with a fuel margin of 36.2c per gallon; raises dividend

·     Pharma movers: ALDX said lead drug candidate, reproxalap, met two of its main goals of increasing tear production in patients and plans to submit marketing approval application to FDA pending a meeting with the drug regulator; DBVT said its phase 3 trial assessing its Viaskin Peanut for the treatment of peanut allergies in toddlers aged 1 to 3 years met its main goal; MNOV announces positive top-line results from phase 2 trial of MN-166 (Ibudilast) in hospitalized #COVID19 patients at risk for ARDS; VRTX wins key FDA and EU designations for kidney disease drug; RIGL tumbles after the company’s Phase III trial of fostamatinib in patients with warm autoimmune hemolytic anemia failed

·     Semiconductors: INTC shares weak after analysts said mgmt sounded incrementally more cautious at investor conference on its n-t outlook, citing that the three major headwinds flagged on its most recent earnings call (matched set issues, customers reducing inventory levels, and China closures) will likely have a larger impact in the current quarter than originally anticipated, and that 2H22 has become more uncertain (as per Citi, which cut ests and Deutsche Bank). Citi lowers INTC’s FY22 sales est. to $71.9 bln from $74.4 bln and EPS est. to $2.33 from $2.63; TSM maintained its strong revenue growth forecast for the current year saying demand remains solid for its chips; expects its revenue to increase by about 30% this year from last year’s 24.9%; WDC announced that it will explore potential strategic alternatives for the company, including potentially separating its NAND and HDD segments

·     Software movers; GWRE reported better-than-expected Q3 results, with total revenue of $197.4M, up 20% y/y (consensus $188.4M), non-GAAP EPS of ($0.26) (consensus ($0.28)), subscription revenue of $66.4M (JMPe $65.4M), up 49% y/y, a deceleration from 64% growth last quarter, and ARR of $637M (consensus $635.5M), up 18% y/y, down from 19% q/q; KC posts Q1 revenue of 2.17 billion yuan, up ~20% from a year earlier and says gross billings from core cloud services, including computing, storage, and enterprise, jumped 61.2%; DOCU last night said it expands partnership with MSFT SMAR reported customer metrics and net retention that were better and FY23 operating loss/FCF guidance less bad, while billings beat was lower than previous quarters

Stock GAINERS

·     DBVT +19%; said its phase 3 trial assessing its Viaskin Peanut for the treatment of peanut allergies in toddlers aged 1 to 3 years met its main goal

·     DKNG +8%; after UBS revenue estimates move higher, with ‘22E revenue now at $2.11B, up from $1.95B previously, and ‘23E at $2.77B, up from $2.57B mainly adjusting for DKNG’s acquisition of GNOG and entrance into the Ontario market

·     KC +15%; posts Q1 revenue of 2.17 billion yuan, up ~20% from a year earlier and says gross billings from core cloud services, including computing, storage, and enterprise, jumped 61.2%

·     MRNA +4%; said its COVID-19 vaccine booster that targets both the original coronavirus strain as well as Omicron produced better immune response against the variant than its original vaccine

·     NVAX +2%; after the FDA’s Vaccines and Related Biological Products Advisory Committee recommended that the FDA grant Emergency Use Authorization for the Novavax COVID-19 vaccine for individuals aged 18 years and older

·     OI +3%; said it now expected its Q2 adjusted earnings to exceed its previous guidance range; now anticipates Q2 adj. EPS to exceed $0.65, compared to its previous expected range of $0.55–$0.60 (est. $0.58)

·     OLLI +4%; despite Q1 EPS miss of $0.20 vs. est. $0.34 and sales fell -10% y/y to $406.7M vs. est. $434M on weaker margins of 34.8% vs. 40.4% y/y, Q2 guidance slightly better, but lowers year net sales view to $1.87B-$1.9B from prior $1.91B-$1.93B

·     ROKU +7%; rises following a Business Insider report saying that talk is heating up about an acquisition by NFLX https://bit.ly/3MwNPWw

Stock LAGGARDS

·     AFRM ; initiated at Underperform and $15 tgt at Wedbush, which represents ~40% downside citing concern about Affirm’s path to GAAP profitability, increasing competition in the buy now, pay later space, industry forecasts calling for slowing e-commerce sales

·     INTC -3%; after analysts said mgmt sounded incrementally more cautious at investor conference on its n-t outlook, citing that the three major headwinds flagged on its most recent earnings call

·     LOVE -20%; falls despite better quarterly EPS and sales as implied guide down for balance of the year

·     RIGL -47%; tumbles after the company’s Phase III trial of fostamatinib in patients with warm autoimmune hemolytic anemia failed

·     SMG -8%; lowers FY22 adj. EPS view to $4.50-$5.00 below prior view of $8.50-$8.90 and consensus $7.01, said sales are expected to decline 4%-6% and Hawthorne sales are now expected to decline 40%-45% for the year ending September 30, 2022

·     VRA -8%; lowers year revs view to $490M-$505M from prior $555M-$575M view and est. $565M and lowers year EPS view to $0.35-$0.50 from $0.57-$0.67 after posting Q1 EPS loss and miss on revs and margins