Mid-Morning Look: October 22, 2024

Mid-Morning Look

Tuesday, October 22, 2024

Index

Up/Down

%

Last

DJ Industrials

-197.54

0.46%

42,733

S&P 500

-20.91

0.35%

5,833

Nasdaq

6.44

0.02%

18,542

Russell 2000

-13.05

0.58%

2,226

 

 

U.S. stock futures were weaker overnight and remain so, though have bounced notably off earlier lows as broad based selling extends into a second day. Earnings season kicked into gear this morning with big movers to the upside including GM in autos after results, SAP in software, and DGX in healthcare, but a handful of companies reported better results, but guidance or commentary about their outlook weighed on shares including MMM, GE, LMT, NUE all in materials/industrial space. Large cap tech helping minimize losses today as MSFT, GOOGL, META, AMZN outperform early. Treasury yields try to keep yesterday’s gains, with the 10-yr yield holding around 4.2% driven by recent Fed speak and data supporting a cautious approach to interest rate cuts. The dollar, meanwhile, benefits from the prospect of Fed rates falling more gradually than previously thought (note the 10-year yield up over 56 bps since the Fed cut rates in September). It’s all about earnings so far this week, but the Presidential election is about 3-week away and markets have pushed gold prices to record highs ahead of it along with a bounce in the dollar and yields. Breakdown of some of the biggest earnings movers below.

Economic Data

  • Richmond Fed composite manufacturing index -14 in Oct vs -21 in September; Richmond Fed manufacturing shipments index -8 in Oct vs -18 in September; services revenues index +3 in Oct vs -1 in September.

 

 

Macro

Up/Down

Last

WTI Crude

0.85

71.41

Brent

0.96

75.25

Gold

14.80

2,753.70

EUR/USD

-0.0009

1.0805

JPY/USD

0.14

150.97

10-Year Note

0.012

4.194%

 

Sector Movers Today

  • In Homebuilders: the sector falls a second day, dropping 3% on Monday behind a spike in Treasury yields making mortgage rates rise while today earnings results/margin comments from PHM, NVR disappoint. PHM guided Q4 margins to 27.5-27.8%, below expectations around 28.5-29%, which followed a Q3 beat. NVR reported a mixed Q3 on EPS slight miss and revenue beat, while sale slower avg sales prices and rise in cancellation rates.
  • In E&C Sector: PWR remains Citigroup top pick in sector earnings preview followed by MTZ and ACM and upgraded FLR calling it a good longer-term outlook/nuclear upside. Overall, Despite their E&C stocks on average outperforming the S&P500 YTD (up ~39% vs. S&P +23%), they say they still see further upside to our preferred E&Cs given continued healthy E&C end market demand trends (we model ’25 book/bill =>1 for E&Cs) and ongoing self-help initiatives/optionality supporting EPS growth.
  • In Payroll: Jefferies upgraded PCTY to Buy from Hold in payroll sector preview and raise tgt to $200 from $145 and raise price tgts for ADP to $290 from $260, DAY to $65 from $55, PAYC to $170 from $155, PYCR to $15 from $13 saying their thesis on the SMID payroll group has been that market saturation, full employment, and peak yields would make it challenging to drive growth at historical levels.
  • In Solar: ENPH to report tonight; Citigroup upgraded FSLR to Buy from neutral saying the stock appears to be pricing-in impact of Q3 guidance cut, lower than expected countervailing duties (CVDs), Trump presidency chance, while Citi downgraded CSIQ to Sell from Neutral on uncertainty around PV module business in US, the only profitable market for modules. On U.S. elections, Citi says FSLR should benefit in either outcome: under Trump, FSLR could pull back momentarily but then recover, while under Dems, FSLR could see a sharp recovery

 

Stock GAINERS

  • CAKE +2%; following a WSJ report overnight that activist investor JCP Investment Management has built a stake in the restaurant chain.
  • DGX +6%; Q3 adj EPS topped consensus on better revs of $2.49B saying earnings were boosted by robust demand for its diagnostic tests.
  • GM +7%; beat and raise as Q3 adj EPS $2.96 vs. est. $2.43; Q3 revs $48.8B tops est. $44.6B; self-driving taxi unit, Cruise, recorded an operating loss of $400M in Q3, smaller than the $700M loss y/y; lifts annual pre-tax profit forecast to between $14B-$15B vs $13B-$15B prior projected in July.
  • IRTC +16%; after announced that the U.S. FDA has granted clearance for its 510(k)-submission related to prior design changes made to the Zio AT device via letter to file.
  • PM +7%; Q3 net revs $9.91B topped est. $9.66B and EPS of $1.91 above $1.82 estimate saying within the company’s smoke-free business, net revenue jumped 17% organically and gross profit increased by 20% (raised its Fy24 adj EPS view to $6.45-$6.51 from $6.33-$6.45 prior)
  • SAP +2%; Cloud revs 27% c/c vs 25% last q and cloud ERP growth of 36% c/c vs 33% last q; Margins came in a 26.1% vs street closer to 23.5% due to big license beat (-14% vs street at -30%) and lower R&D; guide for 2025 was raised
  • ZION +4%; Q3 EPS $1.37 tops est. $1.17 on NII $620Mm vs est. $613.31Mm; Q3 Net interest margin rose to 3.03% in Q3, from 2.93% y/y; Q3 provision for credit losses fell to $5 mln from $46 mln a year earlier.

 

Stock LAGGARDS

  • BOOM -22%; after slashing its 3Q24 revenue and EBITDA guidance to $152 million (from $158-168 million) and $5 million (from $15-18 million), respectively, citing weaker-than-anticipated results out of its Arcadia and DynaEnergetics businesses due to macroeconomic challenges.
  • DECK -3%; was downgraded to Neutral from Buy at BTIG saying sees the stock’s risk/reward as balanced after its channel checks picked up a slower start to the holiday for Ugg and likelihood that any upside stems more from wholesale than direct-to-consumer
  • GPC 18%; shares fell after mixed Q3 as EPS a wide miss ($1.88 vs. est. $2.42) but sales of $5.97B were better but sharply lowered its adj EPS outlook for the year to $8.00-$8.20 from $9.30-$9.50 (est. $9.36) and narrows its FY24 revenue view to up 1%-2% from up 1%-3%.
  • KMB -3%; as adj Q3 EPS $1.83 beat ests $1.70 but revs fell -3.5% y/y to $4.95B missing the $5.05B estimate as personal care sales fell 2% to $2.6B and consumer tissue sales were down 2% to $1.5B.
  • MEDP -7%; shares dropped on mixed Q3 (EPS beat, revs missed) and guides FY revs $2.09-2.13B vs est. $2.138B and EBITDA $450-470Mm vs est. $444.25Mm, sees FY EPS $11.71-12.09 vs est. $11.56.
  • PII -4%; Q3 adj EPS $0.73 missed the consensus est. $0.88; Q3 revs $1.72B misses consensus $1.768B; lowers FY24 adjusted EPS view to down 65% from down 52%-62% and cuts FY24 revenue view to down 20% from down 17%-20%.
  • SHW -4%; Q3 profit estimates miss (EPS $3.37 vs. $3.54 est.) due to lower sales at two of its segments and said expects Q4 consolidated net sales to be flat to up a low-single digit percentage y/y

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.