Mid-Morning Look

Tuesday, November 03, 2020

U.S. stocks rise as election day is finally here, with investors buying on hopes of an uncontested election result this evening and that the pathway to additional fiscal stimulus out of Washington will follow to help the economy. After hitting its highest levels since June above the 40 level, the CBOE Volatility index (VIX) has slipped the last few days into the election. Treasury yields rise back to best levels in 4-months, with the 10-year yield above 0.88%, while commodity prices rise. A very busy week of earnings continued this morning, but given the macro factors such as the election, the FOMC 2-day meeting tomorrow, the monthly jobs report, and dealing with the rising Covid-19 cases in the U.S. and Europe, investors certainly have a lot on their plates to digest. Several sectors seen center stage ahead of the Presidential election as solar, cannabis, healthcare, casinos and infrastructure seen benefitting under a Biden presidency while energy, MLPs’, private prisons, defense seen rising under a Trump win with mixed takes on financials, technology and consumer. The battle for the Senate also hotly contested as currently Republicans are the incumbents in 13 out of the 15 competitive races. The GOP currently has 53 seats in the Senate, so Democrats need a net gain of four seats to take control of the chamber.

Sector Movers Today

·     Pharma movers; BMY said its experimental plaque psoriasis oral drug (deucravacitinib) proved more effective in clearing moderate to severe cases of the skin condition than placebo or AMGN’s Otezla in a late-stage study – drug also met a secondary goal; BHC posted quarterly profit vs year-ago loss, tops Q3 revenue estimates ($2.14B vs. $2.03B) and reaffirms outlook; KPTI SEAL study met its primary endpoint of a statistically significant increase in progression-free survival evaluating single agent, oral XPOVIO versus matching placebo in patients with advanced unresectable dedifferentiated liposarcoma; JAZZ Xyrem revenues grew ~5% YoY in the quarter, driven by 4% volume growth, with 15,075 active Xyrem patients during the quarter, up 2% YoY; HALO reported 3Q20 revenues of $65.3M, above FactSet consensus ($59.9M), ended 3Q20 with cash of ~$347M, and, increased 2020 revenue guidance to $250M-$260M from $230M-$245M; AUPH said its drug candidate for the treatment of dry eye syndrome, did not meet the main goal in mid-to-late stage study and that it is suspending the development program

·     Industrial & Machinery; IR reported better than expected results last night, with revenue and EPS coming in ahead of consensus as orders in the quarter were down 8% y/y, though trends are improving, up 13% from 2Q; EMR Q4 adj EPS $1.10 beat the highest estimate on revs$4.56B (est. $4.48B), and the company guides FY21 Adj EPS to $3.40-3.50, above $3.30 est., and is planning on resuming stock buyback and increasing its dividend 2% in 2021; ETN Q3 Adj EPS $1.18 and revs $4.5B both beat estimates, and they affirm midpoint FY cash flow to $2.5B but narrow the range to $2.4B-$2.6B, though Q4 outlook remains uncertain amid the pandemic; JCI posts Q4 EPS 76c on $5.95B, both topping consensus, and Q1 Adj EPS guidance of 39-41c also tops estimates (39c); AGCO posted Q3 EPS $2.09 on revs $2.5B, both beating ests and rising from Q3 2019 (10c, $2.11B), and the company sees FY20 Adj EPS $5 vs. est. $3.92 and FY Sales $8.9B vs est. $8.42B

·     Media & Telecom movers; in towers, SBAC beat 3Q consensus, raised its 2020 guidance and continues to provide upbeat new leasing commentary into 2021; BBGI surges as co says it expects to reduce operating expenses through year-end by more than $32M vs. 2020 operating budget after EPS and revenue beat; FOXA posted Q1 EPS and revs beat ($1.18 and $2.72B above the 76c and $2.58B est.); GCI Q3 revenue of $814.5M top ests $779M helped in part by a 31% jump in digital subscriptions

·     Consumer Staples; in food sector, MDLZ Significant top-line beat and EPS in line with Street expectations and SYY reported Q1 profit and sales that fell from last year as the COVID-19 pandemic weighed on its foodservice business, but still beat expectations; STZ upgraded to OW with attractive valuation post significant stock underperformance, and ahead of an expected beer topline acceleration in fiscal 2H21 at Morgan Stanley; MNST also upgraded to OW at Morgan Stanley as forecast a reacceleration in US topline trends, which coupled with strong international growth, should drive revenue/EPS upside vs. consensus

·     Healthcare services and providers; HUM raised the lower end of its full-year adjusted profit view after beating Q3 profit estimates, helped by a slow recovery in demand for optional medical services delayed due to the COVID-19 pandemic – its consolidated benefit ratio, the percentage of premiums spent on claims, improved to 82.6% in the quarter from 85% a year earlier; MCK reported Q3 revenue of $60.8B and EPS of $4.80 both above views with the international and med-surg businesses ahead of street consensus and raises its F2021 guidance; OMI reported 3Q results where EPS of $0.81 beat estimates of $0.67, primarily driven by better performance in both of the company’s segments as OMI continues to benefit from higher demand for PPE

Stock GAINERS

·     ALSK +59%; to be acquired by an affiliate of Macquarie and GCM in an all-cash transaction valued at ~$300M, including debt, with holders receiving $3.00 per share https://bit.ly/3mFJLqG

·     ANET +18%; posted adjusted Q3 profit of $2.42 beating the $2.21 estimate and revs $605.4M beat the $581M views as company said it saw continued improvement in underlying business trends during the quarter

·     BMY +3%; as its experimental plaque psoriasis oral drug (deucravacitinib) proved more effective in clearing moderate to severe cases of the skin condition than placebo or AMGN’s Otezla in a late-stage study – drug also met a secondary goal

·     CRUS +9%; strong beat and raise, with CRUS benefiting not only from potential share gains by key customers vs Huawei, but also robust WFH/EFH tablet and portables/wearables dem

·     INSP +18%; reported 3Q revenues/GAAP EPS of $35.8M/($0.39), blowing past consensus/our/company guidance of $22.7M/$22.1M/$20-$24M, respectively

·     IT +14%; after Q3 results easily topping consensus and raised guidance for full year as demand is tracking above our prior expectations

·     JAKK +15%; as Q3 adj EPS $4.76 on revs $242.3M vs. est. $3.09 and $230.1M

·     KPTI +5%; as its SEAL study met its primary endpoint of a statistically significant increase in progression-free survival evaluating single agent, oral XPOVIO versus matching placebo in patients with advanced unresectable dedifferentiated liposarcoma

·     PLUG +10%; after activist shareholder D.E. Shaw & Co reports 5% passive stake in SEC filing – Shaw, holding 5.34% of company’s stock, is the second-biggest PLUG shareholder

·     SYY +6%; reported Q1 profit and sales that fell from last year as the COVID-19 pandemic weighed on its foodservice business, but still beat expectations

Stock LAGGARDS

·     AUPH -10%; after saying its voclosporin ophthalmic solution, its drug candidate for the treatment of dry eye syndrome, did not meet the main goal in mid-to-late stage study and that it is suspending the development program

·     BABA -3%; shares slide after Shanghai suspends Ant Group’s blockbuster IPO

·     BRKR -4%; as Q3 beat but said expects pandemic & related economic slowdown will continue to have negative year-over-year impact on Q4 2020 financial results

·     EDIT -7%; initiated underperform and $14 tgt at Baird saying they see sees limited market opportunity for the company’s lead indication Leber’s congenital amaurosis type 10 and is skeptical about LCA10-IVS26

·     ESPR -9%; posts Q3 sales of $3.8 mln, and says it has a cash balance of $215.7 mln, which several analysts say would only be sufficient for less than a year

·     PYPL -6%; posted upbeat Q3 rev and profit as digital payments surged, driven by coronavirus-led lockdowns while disappoint Q4 profit outlook fueled by incremental investments and headwinds from payment processing agreement with EBAY (sees 17%-18% growth vs. est. 20%)

·     SEDG -19%; downgraded by a few analysts as Q4 rev guidance $345-365M misses $389.6M estimate even as Q3 Adj EPS $1.21 beats consensus and revs $338.1M were in-line