Mid-Morning Look

Wednesday, May 07, 2025

U.S. stock markets are higher ahead of today’s FOMC meeting, reacting positively to news that Trump Administration officials will meet with Chinese counterparts in Switzerland this weekend in the hope that the talks will be a first step in deescalating the trade war. The FOMC decision is at 2:00 pm, followed by Powell at 2:30 where they are expected to hold rates (FedWatch shows roughly 96% chance of rates on hold). Note some analysts have said they see markets being too optimistic on Fed rate cuts. In other central bank news, the Peoples Bank of China overnight announces interest rate cut, RRR reduction; Chinese President Xi set to begin four-day visit to Russia. Also, the Bank of England is expected to cut rates Thursday. In earnings, shares of Dow component and media giant Disney (DIS) rise after earnings results and comments this morning, while chip stocks fall on mixed results (AMD rises on results, ENTG, CRUS, SMCI slide on results). Early broad-based strength with 10 of 11 S&P sectors higher (XLB Materials lagging), but no standout sector to the upside. No economic data ahead of the Fed, gold prices pare recent gains, the dollar edges higher, while Bitcoin jumps +2.4% to around $97,000.

Treasury Secretary Scott Bessent and U.S. Trade Rep. Jamieson Greer will meet with high-level Chinese officials later this week, as Bessent will meet with Vice Premier He Lifeng and Greer will speak his counterpart. Those would be the first U.S.-China trade talks. Trump tariffs on China have skyrocketed to 145% vs. most Chinese goods. China has retaliated with 125% duties on American goods. In other trade news, EU trade chief notes European commission will announce on Thursday preparatory steps on next countermeasures to U.S. tariffs.

• In Food & Grocers: ACI was upgraded to Outperform with a $25 target price at BMO Capital saying believes ACI may see valuation expansion from low levels as investors seek cheap, defensive stocks in 2H25. GO traffic led the Q1 comp beat while gross margin and EPS beat consensus and guide while mgmt maintained most of its FY’25 guidance ranges except for comp sales. BG beat Q1 profit estimate, helped by higher tariff uncertainty-fueled demand for its products (EPS $1.81 vs. est. $1.30); HAIN shares tumbled after announcing a strategic review of portfolio and announced that Wendy Davidson departs as CEO and board member and cut its guidance; STZ was upgraded to buy at Truist based on its belief that investor cynicism on alcohol consumption is too high, and investor sentiment on STZ has bottomed.
• In Chemicals: CC shares fell as posted mixed Q1 results (EPS missed/revs beat) Q1 adj net income $19M vs. est. $28.1M and announced it is cutting its dividend by 65%. TROX was downgraded from Outperform to Market Perform at BMO Capital saying while Q1 was modestly better than expected the implications for Q2 are worse given expectations for high-cost inventories tied to Botlek and the Mining business; AXTA Q1 EPS and EBITDA beat on slightly lower sales, guided Q2 adj EBITDA below consensus and lowers FY revenue guidance; MOS Q1 EPS beat on light revenue while reaffirms FY volumes and capex guidance.
• In Industrials: EMR posted a top and bottom line Q2 beat while lowered FY EPS view to $4.05-$4.20, from $4.42-$4.62 with weaker Q3 outlook; HON upgraded to Buy from neutral at Bank America as believes earnings have now stabilized, and says the company can start to close some of the valuation gap vs peers; ITW downgraded from Neutral to Underperform at Bank America (tgt to $220 from $245) as believes that the company will face headwinds to growth and margin expansion; JCI Q2 EPS beat on in line sales, while Q3 EPS guidance a touch light vs consensus but raises FY EPS guidance; KMT rises on results as Q1 EPS beat on in-line sales, raises year EPS but narrows sales view; ROK reported Q2 EPS/sales topped consensus and raised annual EPS to be between $9.20-$10.20, up from its prior expectation range of $8.60-$9.80.

• AVDX +18%; as confirmed it is being taken private by TPG and CPAY at $10.00/share (~22% premium).
• CRL +16%; announced an agreement with Elliott Investment Management L.P., Charles River’s largest investor, under which Elliott has agreed to customary standstill, voting, confidentiality, and other provisions and raises 2025 adj profit forecast to $9.30-$9.80 per share, from $9.10-$9.60 per share prior.
• DIS +10%; Q2 EPS $1.45 vs. est. $1.20 and revs rose 7% y/y to $23.6B vs. est. $23.14B; forecast FY25 adj EPS of $5.75, an increase of 16% y/y (and vs. est. $5.44); reiterated guidance for 6% to 8% operating income growth in the parks-led Experiences division; said it picked up 1.4M customers for Disney+ during Q2.
• HWM +1%; rising for the 12th consecutive day to new all-time highs.
• ROK +12%; reported Q2 EPS/sales topped consensus and raised annual EPS to be between $9.20-$10.20, up from its prior expectation range of $8.60-$9.80.
• ZK +10%; after Chinese EV maker Geely Automobile said it plans to take Zeekrprivate for $25.66 per ADS – a premium of 13.6% as the offer-values Zeekr at $6.52B; Geely Auto already owns 65.7% of total outstanding share capital of Zeekr.

• CC -9%; shares fell as posted mixed Q1 results (EPS missed/revs beat) Q1 adj net income $19M vs. est. $28.1M and announced it is cutting its dividend by 65%.
• ENTG -13%; guided Q2 EPS $0.60-$0.67, below consensus of $0.71 and revs $735M-$755M below consensus $823.5M after reporting both a top/bottom line miss for Q1.
• EPC -13%; cut its year forecasts after Q2 results fell short of expectations; FY25 adjusted EPS view to $2.85-$3.05 from $3.15-$3.35, cuts FY25 adjusted EBITDA view to $329M-$341M from $356M-$368M and lowers FY25 organic net sales view to flat to +1% from up 1%-3%.
• HAIN -51%; announces CEO transition and strategic review of portfolio as Wendy Davidson departs as CEO and board member; cuts annual organic net sales growth to be down about -5% to -6%, compared to previous forecast of down -2% to -4%, on slower-than-anticipated volume recovery.
• MRVL -10%; postpones a previously scheduled investor day conference, citing a “dynamic macroeconomic environment,” and narrowed its Q1 rev forecast range to be approximately $1.875B, within a range of plus or minus 2%, compared to the prior range of plus or minus 5%, but maintained the midpoint of its outlook.
• MYGN -33%; cut FY25 revenue view to $807M-$823M from $840M-$860M, (est. $846.39M); cuts FY25 adjusted EBITDA view to $19M-$27M from $25M-$35M noting a reallocation of resources away from Genesight will have more significant negative volume impacts than previously expected.
• SMCI -4%; reported revenue at the high-end of its downwardly revised guidance ($4.6B vs. est. $5B) as mgmt attributed the shipment delays to customers evaluating the next generation Nvidia Blackwell GPU platforms; guided; guided Q2 lower and cuts FY25 rev view to $21.8B-$22.6B from the $23.5B-$25B prior.
• SRPT -16%; cut its full-year outlook after results saying it expects total net product revenue of $2.3B-$2.6B, down from its prior forecast of $2.9B-$3.1B; shares fell Tuesday after the announcement of Vinay Prasad as the new head of the FDA’s CBER weighed on the whole Biotech sector.
• UBER -4%; Q1 gross bookings $42.82B, miss the est. $43.14B and guides Q2 gross bookings $45.75B to $47.25B, est. $45.85B after reporting Q1 revs of $11.53B missing the $11.61B estimate.
• UPST -12%; as Q1 volumes and credit data remain strong, but a softer Q2 outlook coupled with a lack of full-year revenue flow through on higher interest income are the key source of weakness; Q1 results came in ahead of consensus both across revenues and margins, and performance was driven by net interest income.