Morning Preview: July 20, 2023

Early Look

Thursday, July 20, 2023

Futures

Up/Down

%

Last

Dow

52.00

0.15%

35,305

S&P 500

-6.25

0.13%

4,591

Nasdaq

-106.50

0.67%

15,852

 

 

U.S. futures are looking mixed to start, with the Nasdaq led lower by softer guidance from TSM in semiconductors, NFLX dips on weaker revs (though subs easily beat), TSLA drops -3% as EPS and sales topped views, though operating profit missed and IBM slips on revs miss as well. Dow Transports look to extend its gains as airline UAL raised guidance after strong quarterly results. The Dow Jones Industrial Average looks to extend its consecutive win streak to 9 days (longest streak in 4-years), while the S&P looks slightly lower. Stocks rose Wednesday, with the S&P and Nasdaq registering fresh 52-week highs as the corporate earnings season continued to come in strong, led by banks. Market breadth was strong Wednesday, as financials continued to rally, and telecoms rebounded for a second straight day. In Asian markets overnight, The Nikkei Index tumbled -405 points to 32,490, the Shanghai Index fell -29 points to 3,169, and the Hang Seng Index slipped -24 points to 18,928. In Europe, the German DAX is up 50 points to 16,160, while the FTSE 100 rises 57 points to 7,645.

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 10.74 points, or 0.24%, to 4,565.72.

·     The Dow Jones Industrial Average rose 109.28 points, or 0.31%, to 35,061.21.

·     The Nasdaq Composite edged higher 4.38 points, or 0.03%, to 14,358.02.

·     The Russell 2000 Index advanced 8.82 points, or 0.45% to 1,984.89.

 

Economic Calendar for Today

·     8:30 AM ET            Weekly Jobless Claims…est. 242K

·     8:30 AM ET            Continuing Claims…est. 1.729M

·     8:30 AM ET            Philly Fed Business Index for July…est. (-10.0)

·     10:00 AM ET          Existing Home Sales M/M for June…est. 4.2M

·     10:00 AM ET          Leading index M/M for June…est. (-0.6%)

·     10:30 AM ET          Weekly EIA Natural Gas Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AAL ABT BHLB BMI BSVN BX DHI EWBC FCX FITB FOR GPC HFWA HOMB IIIN JNJ KEY MAN MKTX MMC NEM PM POOL SNA SNV STBA TCBI TFC TRV WBS

·     Earnings After the Close: AMTB ASB COF CSTR CSX FFBC INDB ISRG KNX MCB OCFC OZK PPG SFBS SRCE TFIN WRB

 

 

Macro

Up/Down

Last

Nymex

0.11

75.46

Brent

0.18

79.64

Gold

4.40

1,985.20

EUR/USD

0.0013

1.1211

JPY/USD

-0.32

139.34

10-Year Note

+0.043

3.786%

 

 

World News

·     The Peoples Bank of China (PBoC) sets USDCNY reference rate at 7.1466 vs estimates of 7.2233; prev close 7.2240, while injected 26b yuan via 7day RR, net 21b injection and left the 1 and 5Y LPRs unchanged as expected; 1Y rate 3.55%, 5Y rate 4.2%.

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was 29.9 vs 15.1 last week. Bulls rise to 51.4% from 41%, Neutrals fall to 27.1% from 33.1%, Bears fall to 21.5% from 25.9%.

 

Sector News Breakdown

Consumer

·     Tesla Inc. (TSLA) 2Q adj EPS $0.91 vs est. $0.82 on revs $24.927B vs est. $24.478B, adj EBITDA $4.653B vs est. $4.091B, GAAP gr mgn 18.2% vs 25% year ago; says focusing on cost reduction, new product development, says Cybertruck remains on track to begin initial production later this year at gigafactory Texas, says have ample liquidity to fund product roadmap, long-term capacity expansion and other expenses; planning to grow production as quickly as possible in alignment with 50% CAGR target began guiding in 2021.

·     Las Vegas Sands (LVS) Q2 adj EPS $0.46 vs. est. $0.42; Q2 adj property Ebitda $973M vs. est. $916.5M and compared to $209M in the prior year quarter; Marina Bay Sands Adjusted Property EBITDA Reached $432M and Macao Adjusted Property EBITDA Reached $541M.

·     Armstrong World Industries (AWI) boosts buyback program by $500m.

 

Energy

·     Kinder Morgan (KMI) Q2 adj EPS $0.24, in-line with consensus; Q2 revs $3.5B, below consensus $4.55B; project backlog at end of q2 was $3.7 bln, flat to Q1; said while they are on budget year-to-date, now expect to finish 2023 slightly below our plan on a full-year basis; backs FY23 view.

·     Liberty Energy (LBRT) Q2 EPS $0.87 vs. est. $0.90; Q2 revs $1.2B vs. est. $1.27B; Adjusted EBITDA of $311 million, increased 59% from $196 million in the second quarter of 2022 and decreased 6% from $330 million in the first quarter of 2023.

 

Financials

·     Discover Financial (DFS) Q2 EPS $3.54 vs. est. $3.67; Q2 net income $901M vs. est. $929.8M; Q2 loans rose 4.6% q/q to $117.9B; said seeing positive early results from relaunch of our cash back debit product; Q2 provision for credit losses of $1.3B increased $756M from prior year; Q2 net charge-offs $924M and Q2 total deposits $98.99B; sees FY loan growth flat, saw low to mid-teen; said decided to pause share repurchases amid investigation into this issue by external law firm ongoing; said misclassified some credit card accounts from ~mid-2007.

·     Equifax (EFX) 2Q adj EPS $1.71 vs est. $1.67 on revs $1.32B vs est. $1.325B; guides 3Q revs $1.32-1.34B vs est. $1.352B; sees FY revs $5.27-5.33B vs prior $5.28-5.38B and est. $5.321B; says later in qtr saw US mortgage activity at levels below expectations and slowing US hiring activity, says expect FY mortgage originations to decline about 37%.

·     KeyCorp (KEY) Q2 EPS $0.27 vs. est. $0.31; Q2 revs $1.6B vs. est. $1.63B; Q2 CET1 capital ratio 9.2%; qtrly provision for credit losses was $167M, compared to $45M y/y and $139M in Q1 Q2 average deposits totaled $142.9 bln, a decrease of $4.6 bln compared to year-ago quarter.

·     SL Green Realty (SLG) 2Q FFO/shr $1.43 vs est. $1.34 on revs $221.1Mm (adj revs $165.7Mm) vs est. $205.97Mm.

·     Truist Financial (TFC) Q2 EPS $0.92 vs. est. $1.01; Q2 revs $5.97B vs. est. $5.99B; Q2 adj. pre provision net rev (PPNR) declined to $2.41 bln vs $2.45 bln a year earlier; qtrly provision for credit losses was $538 million compared to $502 million for the first quarter of 2023.

·     Zions Bancorp, (ZION) 2Q EPS $1.11 vs est. $1.11; says second qtr results reflect $2B, or 3.2%, rebound in customer deposits over the past three months.

·     Banner Corp. (BANR) Q2 adj EPS $1.32 vs. est. $1.55; Q2 revs $150.94M vs. est. $151.51M; Q2 CET1 capital ratio 10.2%; Q2 tangible book value per share $33.83; Q2 credit loss provision $6.76M; Q2 NII $142.51M.

·     Cohen & Steers (CNS) 2Q adj EPS $0.70 vs est. $0.72 on revs $120.63Mm, adj op mgn 36.4%.

·     National Bank (NBHC) 2Q EPS $0.85 vs est. $0.92 on NII $91.2Mm vs est. $93.26Mm, provision expense for credit losses $1.7Mm, avg total deposits +$8.0B.

·     Rexford Industrial (REXR) 2Q core FFO /shr $0.54 vs est. $0.54, NOI $149.8Mm; sees FY core FFO/shr $2.13-2.16 vs prior $2.11-2.15 and est. $2.19, sees EPS $1.03-1.06 vs est. $1.40.

 

Healthcare

·     Johnson & Johnson (JNJ) Q2 adj EPS $2.80 vs. est. $2.62; Q2 revs $25.5B vs. est. $24.63B; raises FY23 adjusted EPS to $10.70-$10.80 from $10.60-$10.70 (est. $10.65) and boosts FY23 revenue view to $98.8B-$99.8B from $97.9B-$98.9B (est. $98.96B).

·     Catalent Inc. (CTLT) shares rose 8% after Bloomberg News reported that Elliott Investment Management has built a significant stake in the drugmaker and is pushing for changes to the company’s board https://tinyurl.com/yc382xrp

 

Industrials & Materials

·     Alcoa Inc. (AA) Q2 adj EPS loss (-$0.35) vs. est. loss (-$0.48); Q2 adj Ebitda $137M vs. est. $158M; Q2 sales $2.68B vs. est. $2.69B; expects 2023 total alumina shipments between 12.7 and 12.9 mln metric tons; sees 2023 aluminum shipments between 2.5 and 2.6 mln metric tons; Q3 alumina segment adjusted ebitda, company expects an improvement of $65M.

·     FedEx Corp (FDX) files mixed securities shelf.

·     Steel Dynamics (STLD) 2Q EPS $4.81 vs est. $4.79 on revs $5.081B vs est. $5.57B; says believe North American steel consumption will increase in coming years, remain confident conditions in place for domestic steel consumption to be solid.

·     United Airlines (UAL) Q2 adj EPS $5.03 vs. est. $3.99; Q2 revs rose 17% y/y to $14.18B vs. est. $13.9B; raises FY adj EPS to $11-$12, vs. prior $10-$12 and vs. est. $9.80; Q2 traffic was up 17% and capacity 17.5%.

 

Technology, Media & Telecom

·     Netflix Inc. (NFLX) 2QEPS $3.29 vs est. $2.86 on revs $8.19B vs est. $8.3B, global streaming paid net adds 5.89Mm vs est. +1.888; sees 3Q paid net adds like 2Q vs est. +5.317, sees 3Q revs $8.52B vs est. $8.679B and op mgn 22.2%; plans to deliver substantial positive FCF in 2024.

·     IBM Inc. (IBM) Q2 adjusted EPS $2.18, vs. est. $2.01; Q2 revs $15.5B vs. est. $15.57B; backs FY23 constant currency revenue growth 3%-5% vs. est. $62.27B; continues to expect about $10.5B in free cash flow, up more than $1B year to year; said “particularly excited about the response to the recently launched Watson AI platform.”

·     Crown Castle (CCI) 2Q adj FFO/shr $2.05 vs est. $2.03, adj EBITDA $1.188B vs est. $1.176B, site rental revs $1.728B vs est. $1.857B; guides FY AFFO/shr $7.50-7.58 vs est. $7.64 and site rental revs $6.488-6.533B vs est. $7.184B.

·     Calix Inc. (CALX) Q2 EPS $0.36 vs. est. $0.31; Q2 revs $251M vs. est. $257.1M; sees 2023 non-GAAP gross margin up 200-250 basis points; guides Q3 EPS $0.32-$0.38 vs. est. $0.33 and revs seen $260M-$265M vs. est. $259.2M.

·     Taiwan Semiconductor’s (TSM) cut its annual outlook for revenue and postponed the start of production at its signature Arizona project to 2025; said Q2 revenue fell 14% y/y to $15.68B while Q2 net profit fell 23% from a year earlier to $5.84B; revised down its 2023 revenue forecast to a fall of around 10%, from previous guidance of a low-to-mid single digit decline.

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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.