Mid-Morning Look

Monday, November 02, 2020

A strong start for global stocks on Monday, trying to recover after last week’s broad-based selling in the U.S., Europe, and Asia while oil prices also recover after falling as much as 6% overnight, before turning positive this morning as investors position themselves ahead a busy week. A combination of weaker tech earnings, surging Covid-19 cases in Europe and the U.S. (and the subsequent stricter policies in Europe from France, Germany and the UK this weekend) and of course uncertainty heading into the Presidential election tomorrow weighed on sentiment last week. Markets seeing a rebound today on hopes for an uncontested election (though unlikely) tomorrow night. President Trump trails former Vice President Joe Biden by 10% points among voters nationally in the final days of his re-election campaign, a Wall Street Journal/NBC News poll found, at 42% to Mr. Biden’s 52%, conducted from Oct. 29 to the 31.

Economic Data

·     U.S. IHS Markit October final manufacturing PMI at 53.4 (vs flash 53.3), the highest since January 2019; IHS Markit manufacturing sector final PMI for October at 53.4 vs flash reading 53.3 and final september 53.2; Manufacturing sector final output index for October at 53.3 vs flash reading 53.0 and final september 53.1

·     U.S. manufacturing activity accelerated in October, with new orders jumping to their highest level in nearly 17 years amid a shift in spending toward goods like motor vehicles as the COVID-19 pandemic drags on. The Institute for Supply Management (ISM) said on Monday its index of national factory activity increased to a reading of 59.3 last month vs. est. 55.8 – that was the highest since November 2018 and followed a reading of 55.4 in September.

·     U.S. Sept construction spending +0.3% below est. 1.0% as Sept private construction spending +0.9 pct, public spending -1.7%

Sector Movers Today

·     Auto sector; NIO delivered 5,055 vehicles in October, +100.1% YoY, deliveries consisted of 2,695 ES6s, 1,477 ES8s and 883 EC6s and said YTD deliveries reached 31,430 units, an increase of 111.4% over the prior year; XPEV delivered 3,040 vehicles in October, +229% YoY and delivered 17,117 vehicles YTD, +64% YoY saying deliveries consisted of 2,104 P7s, smart sports sedan and 936 G3s, compact smart SUV; LI said delivered 3,692 Li ONEs in October as compared to 3,504 units in September, +5.4% MoM and YTD deliveries reached 21,852 units; in supplier space, TEN posts strong cash flow performance and margin expansion in Q3

·     Consumer Staples; CLX Q1 EPS $3.22 on sales $1.92B vs. est. $2.32 and revs $1.75B; sees FY21 EPS $7.70-$7.95 vs. est. $7.69 and sees year sales growth between 5%-9%; ADM upgraded to neutral at Credit Suisse saying pullback overdone; EL Q1 results top views even as net sales decline 9%, benefiting from strong Chinese demand and a surge in online orders for its skincare and boosted its dividend (sees Q2 sales down 3%-5% vs. est. down 5%)

·     Leisure and Gaming; WYNN upgraded to OW from EW at Morgan Stanley as we see 1) an upcoming operating inflection with further upside post-COVID, 2) overblown concerns about Macau high-end, & 3) a positive catalyst if Biden wins, all at an attractive valuation. Our new price target of $95 (up from $90) implies 31% upside; in RV sector, CWH rises as Q3 rev of $1.68B rise 21% YoY and EPS $1.44 topping views of $1.5B and $1.02 while announces $100M stock repurchase program and raises 2020 adj EBITDA guidance to $495-$515 mln from prior $460-$490 mln forecast (THO, WGO, LCII, PATK active on report); in cruise space, NCLH announces extension of suspension of voyages

·     Industrial & Machinery; in the waste sector, CVA upgrade to Overweight at Barclay’s on cont’d resilience, valuation, price strength, and material strategic changes setting up medium-term catalysts, while WM reported a Q3 EPS and sales beat this morning and delivered Q3 adjusted operating EBITDA results in line with last year’s record performance (follows CWST beat and raise quarter last week); in industrials, PH, LFUS, TEL positive mention in Barron’s saying they could benefit if the U.S. makes an economic comeback like China’s

·     Pharma movers; HZNP Q3 revs $636.4M (vs. $531M cons), with Tepezza revenue of $286.9M (vs. $226M cons). EBITDA was $329.8M (vs. $225M cons) and EPS was $1.74 (Vs. $0.97 cons) – raises its guidance to Tepezza; DBVT rises following the validation of its marketing authorization application for Viaskin Peanut by the European Medicines Agency; FUSN co-partners with b to develop cancer therapies; ANPC rises after China-based Jiangsu AnPac Health Management Co, in which ANPC has a 15% stake, has received regulatory nod to conduct COVID-19 nucleic acid tests

·     Insurance; insurance brokers AJG upgraded to overweight from neutral at Piper and downgraded AON, MMC, and WLTW to neutral from overweight saying AJG’s organic growth is “solidly positive”, while that of larger brokers mostly flat. Says with little change to strategy and management over the past decade, AJG seen as a relatively stable place to work for producers; LMND initiated overweight and $63 tgt at Piper calling it a disruptive insurance provider competing against legacy players with a digital and technology-forward competitive advantage; CLGX estimates that Hurricane Zeta caused $2.5B-$4.0B in insured wind and storm surge losses.

·     Media & Telecom movers; AMC files to offer up to 20m shares; NLSN rises after saying it will sell its consumer goods data unit for $2.7 bln to private equity firm Advent International, while also posted Q3 revs of $1.56B, topping ests; OMC upgraded to In Line from Underperform at Evercore ISI; AMCX mixed Q3 report that included upside revenue of $654.02M (-9% Y/Y, $45.35M above consensus) and an EPS miss with $1.32 ($0.02 below consensus) as ad revs fell 15.5% YoY; LAMR upgraded to overweight at Morgan Stanley saying they are well positioned to benefit from an improving U.S. macro environment and is the only traditional media business with audience growth, both during and beyond the COVID-19 pandemic

Stock GAINERS

·     CVAC +2%; says interim phase I covid-19 trial results show volunteers developed antibodies on a par with those who have recovered from serious cases

·     CWH +14%; Q3 rev of $1.68B rise 21% YoY and EPS $1.44 topping views of $1.5B and $1.02 while announces $100M stock repurchase program and raises 2020 adj EBITDA guidance to $495-$515 mln from prior $460-$490 mln forecast

·     DBVT +79%; following the validation of its marketing authorization application for Viaskin Peanut by the European Medicines Agency

·     DNKN +6%; Inspire Brands Inc. will pay $106.50 per share for DNKN in a $8.8B deal, the companies said, and valued at $11.3B including debt https://on.wsj.com/3mI3OVy

·     EIGI +61%; to be acquired by affiliates of Clearlake Capital Group in an all cash transaction valued at ~$3B including outstanding indebtedness, with holders getting $9.50/share https://bit.ly/2TIyhGm

·     NIO +10%; as electric vehicle names rally on October updates from NIO, XPEV and LI

·     NLSN +8%; after saying it will sell its consumer goods data unit for $2.7 bln to private equity firm Advent International, while also posted Q3 revs of $1.56B, topping ests

Stock LAGGARDS

·     HSIC -3%; after mixed earnings results

·     JNCE -27%; as discontinues patient enrollment in mid-stage study of its drug candidate, vopratelimab, in combination with another drug for the treatment of non-small cell lung cancer

·     LUV -3%; as airlines falter on UK increasing lockdown measures over the weekend

·     NCLH -6%; announces extension of suspension of voyages

·     RGS -12%; Q1 rev slumps 55% to $111.4 mln, net loss more than doubles to $35.3 mln, due to COVID-19 impact

·     TWTR -1%; extends last week losses after posted weaker guidance