Mid-Morning Look

Monday, November 04, 2024

U.S. stocks are edging slightly higher early after falling last week, though no big bets being taken heading into the crucial Presidential election tomorrow and FOMC rate decision later this week on Thursday as investors at this point waiting to get more information before making any additional big bets. There has been some market positioning in recent weeks as bonds have sold off, lifting Treasury yields to 3-month highs and the dollar has been firmer heading into the week – but those trades unwinding this morning as yields and the dollar dump. Gold prices also little changed around $2,750 an ounce after pulling back from record highs above $2,800 last week. Seeing early strength in Energy, Materials, and REITs (all up over 1%) while Utilities and Financials top laggards. Some top movers include YUMC, CC, IART to the upside on earnings; weakness in nuclear stocks CEG, VST, SMR following a FERC decision Friday; NVDA, SHW rise on news being added to the Dow, replacing INTC, DOW; shares of ATSG, ROIC rising on M&A stories; lodging stocks dropping after MAR results and lowered guidance. All eyes on the election results tomorrow as polls changing by the minute in what is expected to be a close race at this point. Oil prices stay strong after OPEC+ has agreed to delay a planned December oil output increase by one month, the group said on Sunday, which were due to raise output in December as part of a plan to gradually unwind the group’s most recent layer of output curbs – a cut of 2.2 million barrels per day (bpd).

• In Media: FOXA reported Q1 revs $3.56B vs. est. $3.37B, helped from higher political advertising ahead of the U.S. presidential election; said Q1 ad revs were $1.33B vs. est. $1.29B and cable revs $1.95B, ahead of estimates of $1.92B; revenue at Fox’s Cable Network Programming came in at $1.60B vs. est. $1.4B. NYT reported in-line Q3 revs of $640M while adding 260K digital-only subscribers, compared with 300K additions in the previous quarter (vs. est. 280K); forecast subscription revenues to grow by 7% to 9% in the fourth quarter, slightly below ests for 8.2% growth.
• In Energy: Oil stocks got a bump on higher oil prices after OPEC+ agreed on Sunday to delay a planned December oil output increase by one month. The eight members of OPEC+, plus Russia and other allies, were due to raise output in December as part of a plan to gradually unwind the group’s most recent layer of output curbs – a cut of 2.2 million barrels per day (bpd). No reason was given for the move. In Oil Equipment, WHD was downgraded to Equal Weight at Barclay’s saying premium story appears fully priced in.
• In Chemicals: SHW is replacing DOW in the Dow Jones Industrial Average prior to the start of trading on Nov. 8, S&P Dow Jones Indices said in a statement; CC reported Q3 results topped expectations for profit (EPS $0.40 vs. est. $0.28) on better sales ($1.5B vs. est. $1.44B) and Ebitda ($208M vs. $187.7M) but guided Q4 net sales to decrease in the mid- to high-single digits sequentially. ECL was downgraded to Neutral at UBS as it sees less potential for outsized stock gains and sees risk/reward as more balanced at current levels.

• ATSG +26%; shares climbed after confirming Reuters report saying it was being acquired by investment firm Stonepeak in a deal valued at $3.1 billion, including debt, with holders getting $22.50 per share.
• CHTR +2%; was upgraded to Buy at Bank America and raised tgt to $450 from $385 as ACP headwinds are largely behind the company and broadband sub trends should continue to improve.
• FRPT 11%; Q3 volumes rose over 26% along with 26% gains in revs y/y to $253.4M vs. est. $248.2M and guided 2024 net sales to be $975M above prior forecast of $965M citing strong demand for its dog and cat foods.
• MOS +7%; along with NTR shares after Belarus President Alexander Lukashenko asks the new CEO of the country’s biggest potash fertilizer firm to speak to Russian companies about a coordinated output cut. Per Bloomberg.
• PTON +5%; was upgraded to Buy at Bank America and raised its tgt to $9 from $3.75 on higher estimates, saying Q1 surprised with much higher-than-expected EBITDA and FY25 guide was raised to $240- 290M
• ROIC +7%; Reuters reported BX is in advanced talks to acquire ROIC, which owns U.S. shopping centers and has a market value of $3.4B including debt, according to people familiar with the matter. If the talks are successful, a deal could be finalized in the coming weeks, the sources said
• SHW +5%; is replacing DOW in the Dow Jones Industrial Average prior to the start of trading on Nov. 8, S&P Dow Jones Indices said in a statement.
• YUMC +8%; reported a top and bottom line beat as Q3 EPS $0.77 vs. est. $0.62 on revs $3.07B vs. est. $3.05B; said total store count reached 15,861 as of September-end; company opened 438 net new stores during the quarter; Q3 Comparable sales -3% vs. est. -2% as KFC comp. sales -2% and Pizza Hut comparable sales -6%.

• INTC -3%; being replaced by NVDA in the Dow jones Industrial Average.
• MAR -2% in lodging sector after reported Q3 EPS and revs light of consensus and guided lower as sees Q4 adjusted EPS $2.31-$2.39 below consensus $2.43 and cuts FY24 adjusted EPS view to $9.19-$9.27 from $9.23-$9.40.
• RILY -11%; after warned of additional impairments from Franchise Group investment; after the bank disclosed it would need to record additional impairments from its investment in Freedom VCM Holdings – the parent company of bankrupt retailer Franchise Group – Reuters
• TSLA -2%; comes into the day down 5-straight days and down 10 of last 12 trading days
• VKTX -7%; erased early gains despite strong data; presented data on the higher doses of its experimental oral obesity drug VK2735 at a conference, Obesity Week. Patients who received the higher dose 100 milligram version of the oral drug, VK2735, showed an 8.2% reduction in body weight on average after 28 days, compared to 1.4% for placebo
• ZTS -2%; despite reporting better Q3 results and raised guidance.