Mid-Morning Look

Thursday, May 02, 2024

U.S. stock markets opened higher, quickly reversed/turn negative and attempting to bounce again as the early attempt to recover most of the late day tumble late Wednesday remains choppy. Stocks popped mid-afternoon Wednesday post the FOMC meeting results/commentary from Fed Chairman Powell and company before giving way to late day profit taking. Investors have certainly had a ton to digest this week, leading to much confusion and volatility, with still some big catalysts ahead. In the last few days, we have seen a barrage of mixed corporate earnings results lifting/weighing on certain sectors, as well as a mixed economic picture with mixed jobs (ADP strong/JOLTS weaker), softer manufacturing prints (ISM) and higher inflation readings (ECI, ISM Prices Paid), making the Fed’s job a bit tougher. Yesterday’s FOMC meeting showed rate hikes are not being forecast (stocks liked that) but remain data dependent on future rate cuts. Still coming tomorrow is the nonfarm payroll report, but tonight results from tech giant AAPL could dominate tech overall. Dow Transports outperform early, rising 1.7% or 250 points to 15,100 as CAR and CHRW shares jump following earnings results. Some massive movers on earnings overnight/this morning with QCOM, MPWR helping the recently weaker semi space (though WOLF, QRVO fall on results), while CVNA surges on results in auto retail and Wayfair (W) in consumer. To the downside, DASH, ETSY softer on commentary; casinos mixed with MGM rising on results/BALY falls.

• March exports -2.0% vs Feb +2.2%, imports -1.6% vs Feb +2.3%; U.S. March exports $257.62B vs Feb $262.93B, imports $326.99B vs Feb $332.39B; U.S. March capital goods imports $75.73B vs Feb imports $75.67B; U.S.-China March trade deficit $17.17B vs Feb deficit $19.88B.
• March factory orders +1.6% in-line with consensus +1.6% and vs Feb +1.2%; factory orders ex-transportation +0.5% vs Feb +1.1% (prev +1.1%); factory orders ex-defense +1.4% vs Feb +1.6%; March Durables orders unrevised at +2.6% and March nondurables orders +0.6% vs Feb +1.7%; nondefense cap orders ex-aircraft revised to +0.1% from +0.2%.

• In Chemicals: CTVA reported 1Q24 EBITDA of $1,034B vs. est. $1.01B as beat in Seeds was driven by earlier planting vs. expectations, but also healthy pricing. The more challenged Crop Protection business performed ahead of forecasts with volume falling a less severe 18% vs. our -26% forecast and a 3% price decline vs. our 6% (Keybanc ests).  In Ag Chemicals: CF reported 1Q24 adjusted EBITDA of $459M, significantly below Street $603M, as miss was largely driven by higher costs as a result of planned and unplanned turnarounds and Ammonia production was also low enough to limit volumes of upgraded products; MOS Q1 top/bottom line miss saying selling price for potash fell to $241 per tonne in the quarter from $421 per tonne a year earlier, while phosphate prices fell 9.4% to $598 per tonne and lowers volumes for year.
• In Casinos: BALY posted a larger Q1 EPS loss (-$3.61) vs. est. loss (-$1.11) on weak revs $618.5M vs. est. $626.8M saying casinos and resorts revenue was up 4.1% in Q1, while international interactive revenue was down 4.4%; MGM Q1 adj EPS and revs ($0.74/$4.38B vs. est. $0.62/$4.24B) topped consensus as Las Vegas Strip Resorts net revenue rose 3.6% y/y to $2.26B and Q1 MGM China net revenue +71% y/y to $1.06B. PENN posted a Q1 loss while revs slipped -4% to $1.61B just below the $1.63B estimate – said “ESPN BET continued to attract new users while maintaining a disciplined approach to promotions and marketing expenses; however, our financial results were impacted by lower-than-expected hold and spend per user”
• In Insurance: AIG reported operating EPS of $1.77, which was 6% ahead of consensus driven by better-than-expected P&C results, on lower catastrophes and better expense ratio and co said to buy back up to $10B shares and boosts quarterly dividend to 40c/share; Q1 general insurance underwriting income up 19% to $596M. AFL Q1 adj EPS $1.66 vs. est. $1.58; Q1 revs rose 13% y/y to $5.4B vs. est. $4.3B; Q1 U.S. net premium income $1.5B, +7.1% y/y, above est. $1.45B; ALL Q1 adj EPS $5.13 vs. est. $3.94; Q1 revs $15.26B vs. est. $12.88B; Q1 Property-Liability earned premiums of $12.9 billion increased 10.9% y/y; Underwriting income of $898 million in the quarter increased by $1.9 billion y/y; Q1 Premiums written of $13.2 billion increased 11.9% compared to the prior year quarter. MET Q1 adj EPS $1.83 vs est. $1.82; Q1 revs $16.06B vs $15.39B last year; board approves new $3B share repurchase authorization; Q1 net investment income $5.4B and Q1 premiums, fees, other rev $12B; overall, KBW said posted Q1 headline Beat but group results are weaker.

• EBS +68%; shares surged after saying it would cut about 300 jobs across all areas of the company and shut down several manufacturing facilities as part of a restructuring plan; raises FY24 revenue view to $1B-$1.1B from $900M-$1.1B and boosts FY24 adjusted EBITDA view to $125M-$175M from $50M-$100M.
• ENVX +25%; announced formal development agreement announced with a top-5 smartphone OEM, revealed that 2 “leading smartphone OEMs” would be first to market with Enovix batteries in 2025 and mgmt also unveiled that it expects its future lines to produce ~11.5M smartphone cells per year, more than previous expectations of 9.5M/year/line.
• HWM +15%; boosted its 2024 revenue, profit forecast after Q1 and Q2 results/guide beat; FY revenue and adjusted EPS forecasts higher than previous outlook and higher than analysts estimate saying sees demand for air travel continuing to be robust, and exceeding pre-pandemic levels.
• IAC +7%; to replace AEL in the S&P Smallcap 600 prior to the opening on Mon 5/6.
• MPWR +5%; reported strong 1Q results and 2Q guidance, which exceeded expectations, as mgt noted that it saw improving booking trends throughout 1Q but remains cautiously optimistic regarding the outlook for the 2H.
• SRPT +6%; following its announcement that it will be provided with a draft label imminently regarding Elevidys’ potential expansion across ages/ambulatory status and conversion to full approval.
• QCOM +9%; after solid beat and above-consensus guide as bright spots came from Auto and IoT, both guided up Q/Q.
• W +13%; forecasts Q2 sales flat to slightly positive, est. down 2%; Active customers increased 2.8% on year to 22.3 million as at March 31 and customer growth accelerated from the prior quarter; Q1 revs $2.73B beat $2.64B though revs in U.S. decreased 1%, while international revenue fell 5.8%.

• DASH -13%; declines after guiding Q2 profit below expectations (EBITDA $325M-$425M vs. est. $393.8M) saying higher costs were offsetting some of its gains from rising groceries and food orders.
• ETSY -15%; shares tumbled as misses Q1 gross merchandise sales (GMS) and profit estimates citing lower demand for its big-ticket discretionary items; Q1 GMS of $3M missed the $3.12B estimate.
• FSLY –34%; missed revs slightly for the second straight qtr. & significantly cut CY24 guidance as growth outlook was lowered from +15-17% Y/Y to just +10-12% Y/Y as towards the end of Q1, sending shares lower.
• QRVO -11%; shares tumbled after softer Q1 revs of $850M plus/minus $25M vs. est. $917.7M; and on the sequentially declining sales and contracting gross margin, the company guided to June quarter EPS of $0.60-$0.80, with a $0.70 mid-point that fell $0.57 consensus.
• WOLF -18%; on lower guidance as sees Q4 EPS loss (86c) to (72c), vs. consensus loss (-$0.61) and revenue $185M-$215M vs. est. $225.8M as auto chip makers deal with high inventory levels amid slower-than-expected EV sales growth.
• ZG -6%; shares fell after strong Q124 results but a soft Q2 revenue and EBITDA guide as sees Q2 revenue $525M-$540M vs. est. $558.85M.