Mid-Morning Look

Tuesday, September 15, 2020

Stocks surge to start Tuesday, adding on to Monday’s big gains, once again led by technology shares as AAPL rises ahead of its virtual event today starting at 1:00 PM EST that could involve a variety of product announcements, while TSLA now up over 30% from last Wednesday lows ahead of its battery event next week and more speculation of an inclusion into the S&P 500 index. Financials a drag early after outperformance yesterday. Economic data today broadly higher with beats for import prices and Empire Manufacturing and follows better data out of China last night as China retail sales returned to growth for the first time in 2020, rising 0.5% in August from a year earlier, and China Industrial production rose 5.6%, up from July’s 4.8% increase, the statistics bureau said. Oil rose as data showed China’s economic recovery from the coronavirus crisis is gathering strength, offsetting a bleak assessment of demand by the IEA which cut its 2020 oil demand forecast.

Economic Data

·     Import prices rise +0.9% vs. est. 0.5% and compared to July up 1.2%; and Aug export prices +0.5% vs. est. 0.4% vs. July 0.9%; Aug year-over-year import prices -1.4%, export prices -2.8%

·     Empire Manufacturing rose to 17.0 in September, topping the 6.0 estimate and was above the prior month reading of 3.7

·     Industrial output rises +0.4% vs. est. 1% and vs. July up 3.5%; Capacity utilization rate 71.4%, which was in-line with estimates and above the July 71.1% reading

Sector Movers Today

·     Industrial & Machinery; CAT rolling 3-month retail sales for world total machines fell 20% in Aug; rolling 3-month retail sales for world resource industries fell 27% and rolling 3-month retail sales for world construction industries fell 17% in Aug; MMM forecast Q3 sales above expectations, saying it sees sales between $8.2B-$8.3B above estimates of $8B and said August sales rose 2% to $2.7 billion led by 23% jump in Health Care, 6% in Safety and Industrial, and 3% Consumer; CARR init OW and $38 tgt at KeyBanc saying it is well positioned relative to emerging “stay at home,” “indoor air quality,” and ESG themes, and comes without the excessive premium of peers; GTES said it sees 3q core rev decline of 5%-7% YoY vs previously guidance of 10%-15% decline

·     Healthcare services and providers; BDX said it is investigating reports from nursing homes that federally provided rapid coronavirus testing equipment from the company is producing false-positive results in some cases; DVA announced that ~8m shares of DVA were validly tendered and not validly withdrawn at or below the price of $88; CVS to maintain previously announced FY adj EPS range and FY cash flow from ops guidance range, but midpoint misses estimates

·     Consumer Staples; in beverages, RBC Capital noted for STZ that beer volumes up 9.7% in the latest 4 weeks driven by Modelo +7%, Corona Extra +5% and Premier +14%, for SAM beer volumes +44% in the latest 4 weeks driven by Truly +92% and Twisted Tea +33%, beer volumes +61% in the latest week driven by Truly +115%; KHC unveils its strategic transformation plan, updates 2020 outlook, and provides long-term financial algorithm as sees better-than-expected qtrly sales growth, and says it will step up its marketing budget and overhaul its supply chain, hoping to save $2B by 2024; LSF the maker of plant-based Superfood Creamer coffee creamers and other items set IPO terms with plans to offer 2.2M shares priced at $18 to $20 each

·     Utilities & Solar; NEE increased its 2021 financial expectations ranges by $0.20 and now expects adjusted earnings per share to be in the range of $9.60 to $10.15. For 2022 and 2023, NextEra Energy expects to grow 6% to 8%, ff the expected increased 2021 adjusted earnings per share. The board of directors also approves a 4-for-1 stock split; Wells Fargo upgrades NEE, NEP to OW

Stock GAINERS

·     BNTX +4%; & PFE secures 375 mln euros ($445.95 mln) in government funding to speed up work on its COVID-19 vaccine program and expand its production capacity in Germany; BioNTech and Pfizer are testing their most promising vaccine candidate in late-stage trials

·     CWH +6%; raised upped guidance after company said it expects adj. EBITDA to grow mid-single digits over the next 5 years (expects to make $500M in Ebitda vs. prior view $460M-$490M)

·     EQ +11%; completes pre-Investigational New Drug (IND) meeting with U.S. FDA for itolizumab as a potential treatment for hospitalized COVID-19 patients

·     KHC +1%; unveils its strategic transformation plan, updates 2020 outlook, and provides long-term financial algorithm as sees better-than-expected qtrly sales growth, and says it will step up its marketing budget and overhaul its supply chain, hoping to save $2B by 2024

·     FCAU +8%; after the car maker and French partner PSA revised the terms of their merger deal, with FCA’s shareholders getting a smaller cash payout but a stake in another business

·     MPWR +7%; raises Q3 revenue view to $257M-$259M from $200M-$210M (est. $205.15M) and lowers Q3 non-GAAP gross margin view to 55.4%-55.6% from 55.5%-56.1%

·     MRNS +45%; after its Phase 3 “Marigold” trial of oral ganaxolone in children and young adults with CDKL5 deficiency disorder, a genetic epilepsy with refractory seizures, met its primary endpoint

·     NVAX +2%; announces covid-19 vaccine manufacturing agreement with serum institute of India to manufacture about 1 bln doses of nvx-cov2373 in 2021

Stock LAGGARDS

·     C 3%; banks among top decliners this morning, with weakness in BAC, SCHW, others

·     CCL -7%; after prelim Q3 results, announces $1B proposed stock offering

·     LEN -2%; Q3 earnings and revs topped views as EPS $2.12 on revenue $5.87B topping the $1.58 estimate and $5.53B while Q3 deliveries of 13,842 homes vs. its guidance of 13,200-13,400 and Q3 new orders of 15,564 homes, up 16% (Wells Fargo said Q4 order outlook implies modest 8% growth)

·     NKLA -5%; as the SEC is examining the company to determine the merits of Hindenburg’s allegations of deceit; Hindenburg’s Sept. 10 report referred to Nikola as an “intricate fraud”

·     NNOX -9%; after Citron out negative this morning with a target of zero