Early Look

Tuesday, July 26, 2022

U.S. futures are edging lower, with the S&P 500 looking down -0.45% to 3,950 ahead of the Fed’s anticipated rate hike and after Walmart cut its profit outlook again last night in a surprise warning weeks ahead of its earnings report. Inflation continues to take its toll as Wal-Mart (WMT) lowered its profit outlook for Q2 and FY23, as sees adjusted EPS to decline 10%-12% after guiding Q2 EPS and sales growth below views. Also getting some attention, the NY Times reporting that U.S. officials are concerned about China’s statements on Taiwan. They fear that Beijing might try to move against the island. Another big day for earnings coming up along with several pieces of housing data (New Home Sales, CaseShiller, Monthly index) and Consumer Confidence. In Asian markets, The Nikkei Index fell -44 points to 27,655, the Shanghai Index rose 27 points to 3,277, and the Hang Seng Index rose 342 points to 20,905. In Europe, the German DAX is down over -100 points to 13,100, while the FTSE 100 rises 0.45% to 7,340. Huge earnings movers this morning with earnings from UPS, GE, MMM, KO and others while tonight get big tech with GOOGL, MSFT, TXN and others. Bitcoin prices tumble back to $21K

Market Closing Prices Yesterday

• The S&P 500 Index gained 5.21 points, or 0.13%, to 3,966.84
• The Dow Jones Industrial Average rose 90.75 points, or 0.28%, to 31,990.04
• The Nasdaq Composite dropped -51.45 points, or 0.43%, to 11,782.67
• The Russell 2000 Index advanced 10.89 points, or 0.60% to 1,817.77

Economic Calendar for Today

·      7:45 AM ET                  ICSC Weekly Retail Sales

·      8:55 AM ET                  Johnson/Redbook Weekly Sales

·      9:00 AM ET                  Monthly Home Price Index M/M for May

·      9:00 AM ET                  CaseShiller 20-City index for May

·      10:00 AM ET                Consumer Confidence for July

·      10:00 AM ET                New Home Sales M/m for June

·      10:00 AM ET                Richmond Fed Manufacturing for July

·      1:00 PM ET                   U.S. to sell $46B in 5-year notes

·      4:30 PM ET                   API Weekly Inventory Data

Earnings Calendar:

·      Earnings Before the Open: AAN ACI ADM ARC AVNT AWI CAC CNC CTS CVLT ECL FELE FISV GE GLW GM GPK HUBB IRDM KMB KO MCD MCO MMM MSCI NVR ONB PCAR PEBO PGTI PHM PII PROV RTX SSTK ST TRU UPS WSO XRX

·      Earnings After the Close: AAT AXTA BUSE BXP BYD CHX CMG CSGP EGP ENPH EQR ESS FCF FCPT FE FFIC GOOGL HA HAFC HIW HPP IEX JNPR MANH MDLZ MSFT MTDR NAVI NEX NXGN PEB PGRE QCRH RNST ROIC RUSHA SILK SKX SYK TENB TER TESS TNET TRMK TXN USNA V WH WSBC ZION ZWS

World News

• Russia already cutting back gas deliveries again. Nordstream 1 may be back up and running, but flows were restricted to 40% last week and Russia announced yesterday that they would be capped further to just 20% from Wednesday
• Libya Oil Minister Mohammed Oun from Tripoli-Based Unity Govt says oil production is at 1.1mln bpd – Reuters

Sector News Breakdown

Consumer

• Walmart (WMT) lowers its Q2 operating income to decline 13%-14% and adjusted EPS to fall 8%-9% (company had forecast EPS to be “flat to up slightly” for the second quarter and to decrease only 1% when it reported in May), while for the FY22 sees operating income to fall 11%-13%, and EPS to fall 11%-13%; maintains US comp sales growth, ex fuel, guide of about +3% in 2H
• General Motors (GM) Q2 adjusted EPS $1.14 vs. est. $1.30; Q2 revs $35.78B vs. est. $34.59B; reaffirmed that it expects full-year net income of $9.6 billion to $11.2 billion, and adjusted EBIT of $13 billion to $15 billion; said that it had binding agreements securing all the electric vehicle battery raw materials needed to support its plan for annual capacity of 1 million vehicles in North America in 2025
• Aaron Rentals (AAN) shares tumble as 2Q adj EPS ($0.17) vs est. $0.61 on revs $610.4Mm vs est. $607.5Mm; guides FY revs $2.19-2.27B vs est. $2.34B and adj EPS $1.75-2.15 vs est. $2.65; says, "In the Aaron’s Business, customer demand and payment activity progressively worsened through the quarter as high inflation impacted the lower-income consumer
• PetMed Express (PETS) slides after Q2 earnings missed on the top and bottom lines; net income year over year declined 37% to ~$2.8M ($0.14 per share, basic and diluted, compared to $0.22); revenue of ~$70.2M was 11.5% lower than the prior-year period.
• Pulte Homes (PHM) 2Q adj EPS $2.73 vs est $2.63, home sale revs $3.8B vs est $4.1B, net new orders 6,418 w/ value $3.9B, qtrly unit backlog 19,176 homes w/ value $11.6B
• Whirlpool (WHR) 2Q adj EPS $5.97 vs est. $5.24 on net sales $5.1B vs est. $5.2B; guides FY revs approx $20.7B vs est. $21.8B and cuts adj EPS to $22.00-24.00 from $24-$26 and vs est. $23.91; says on track with commitment to return over $1.5B to shareholders this year
• Allegiant Travel (ALGT) guides Q2 EPS 62c below consensus $1.38; said Q2 CASM, excluding fuel and 2022 employee recognition bonus, was up 14% year over three-year, in-line with prior guidance. Our fuel cost per gallon was $4.32, slightly above our previous guidance.

Energy

• Range Resources (RRC) 2Q adj EPS $1.27 vs est. $1.26 on revs $1.23B vs est. $945.9Mm, 2Q CAPEX $127M, about 27% of FY budget; qtrly production avg 2.1 BCFE/day (approx 70% nat gas)
• Liberty Energy (LBRT) reports Q2 tops earnings expectations and issuing strong guidance for Q3; Q2 net income swung to a $105M from a $5M net loss in Q1 and a $51M net loss in the year-ago quarter, while adjusted EBITDA more doubled Q/Q and surged more than 5x Y/Y to $196M; sees Q3 revenues to rise ~10% Q/Q, which should equate to ~$1.04B, well ahead of $942M est.
• Shell Midstream Partners (SHLX) shares rise after hours after Shell USA (SHEL) agreed to acquire all Shell Midstream common units it did not already own for $15.85/unit, for a total value of ~$1.96B. Shell USA already owned a ~68.5% in Shell Midstream (SHLX)

Financials

• AGNC Investment (AGNC) said book value declined in Q2 with weakness in the agency mortgage-backed securities market, resulting in a still negative economic return on tangible common equity; tangible net book value per common share of $11.43 at June 30, 2022 fell from $13.12 at March 31, and return on tangible common equity in the quarter was -10.1% vs. -14.4% in Q1.
• Coinbase (COIN) is facing a probe by the SEC on whether the platform has improperly allowed users to trade digital assets which should have been registered as securities – Bloomberg
• MicroStrategy (MSTR) downgraded to Underperform from Hold at Jefferies with $180 tgt
• Sun Communities (SUI) lowered its full-year outlooks in core FFO as well as same property NOI growth; sees 2022 core funds from operations of $7.17-7.27 per share, compared with $7.20-7.32 in the prior view; said same property net operating income is expected to grow 6.0%-6.8% in 2022 vs. 6.5%-7.3% in the previous guidance.

Healthcare

• Albany Int’l (AIN) 2Q adj EPS $1.06 vs est. $0.82 on revs $261Mm vs est. $239.3Mm; guides FY revs $970Mm-1.01B vs est. $958.1Mm and adj EPS $3.30-3.60 vs est. $3.27
• Angion Biomedica (ANGN) announced it has commenced a process to explore and evaluate strategic options to enhance and preserve shareholder value
• Astellas Pharma (ALPMY) and Seagen (SGEN) announced topline results from the phase 1b/2 EV-103 clinical trial Cohort K evaluating Padcev in combination with Merck’s (MRK) anti-PD-1 therapy Keytruda as first-line treatment in patients with unresectable locally advanced or metastatic urothelial cancer,
• Quest Diagnostics (DGX) files debt securities shelf
• Universal Health (UHS) Q2 adjusted EPS $2.20 vs. est. $2.35; Q2 revs $3.32B vs. est. $3.28B; said experienced a decline in Q2 COVID acute care patients that was not offset by an increase in non-COVID patients

Industrials & Materials

• UPS (UPS) Q2 adj EPS $3.29 vs. est. $3.16; Q2 revs $24.8B vs. est. $24.62B; reaffirms its full-year financial targets: Consolidated revenue of about $102 billion, consolidated adjusted operating margin of approximately 13.7%
• 3M (MMM) guides FY sales to -0.5% up 2.5% from prior view of up 1%-4% after Q2 EPS $2.48 vs. est. $2.44; said it intends to spin off its Health Care business, resulting in two public companies to pursue their respective growth plans.
• Covenant Logistics (CVLG) 2Q adj EPS $1.63 vs est. $1.31 on revs $317.4Mm vs est. $282.6Mm; says sees 2H moderating freight demand, greater driver availability and continuing cost inflation, says continued focus on cost control, and our ongoing stock repurchase program to generate adjusted earnings per diluted share for the 2H22 in excess of the same period for 2021
• Crane Inc. (CR) 2Q adj EPS $1.90 vs est $1.78 on revs $864Mm vs est $821.1Mm; sees FY adj EPS $7.45-7.85 vs est $7.41
• Graphic Packaging (GPK) 2Q adj EPS $0.60 vs est $0.50 on sales $2.358B vs est $2.24B; adj EBITDA $396Mm vs est $382.4Mm
• Hexcel (HXL) 2Q adj EPS $0.33 vs est $0.30 on revs $393Mm vs est $391.5Mm; reaffirms FY guide
• Kaiser Aluminum (KALU) 2Q adj EPS ($0.03) vs est. $0.67 on revs $954mm vs est. $910.3Mm; says improved pricing largely mitigating inflationary and commodity costs
• Livent (LTHM) and General Motors Co. announced today a significant multi-year sourcing agreement in which Livent will supply GM with battery-grade lithium hydroxide made primarily from lithium extracted at Livent’s brine-based operations in South America.
• Packaging Corp. (PKG) 2Q adj EPS $3.23 vs est $2.85 on sales $2.2B vs est $2.14B; continues to experience significant cost inflation across company as well as supply chain challenges, says will continue to implement previously announced price increases in paper segment; guides 3Q EPS $2.80 vs est $3.13 on continued inflation, continued rail service challenges and higher scheduled outage costs

Technology, Media & Telecom

• Cadence Design Systems (CDNS) 2Q adj EPS $1.08 vs est. $0.96 on revs $858Mm vs est. $837Mm; guides 3Q revs $860-880Mm vs est. $847.8Mm, adj EBIT margin 37-38%, adj EPS $0.94-0.98 vs est. $0.93; sees FY revs $3.47-3.51B vs est. $3.41B, adj EBIT margin 39.25-40.25% and adj EPS $4.06-4.12 vs est. $3.93
• F5 Network (FFIV) 3Q adj EPS $2.57 vs est. $2.23 on revs $674Mm vs est. $667.5Mm; sees 4Q revs $680-700Mm vs est. $689.4Mm and adj EPS $2.45-2.57 vs est. $2.28
• Logitech (LOGI) Q1 EPS 74c vs. est. $1.10; Q1 revs $1.16B vs. est. $1.27B; cuts FY23 revenue growth view to down 8% to down 4% from up 2%-4%, which implies $5.04B-$5.26B vs. est. 5.53B
• Alibaba Group (BABA) announces that its board of directors has authorized the Company’s management to apply for a primary listing on the Main Board of Hong Kong Stock Exchange
• Zendesk (ZEN) downgraded to Market Perform from Outperform at JMP Securities
• Paramount (PARA) downgraded to Sell from Buy at Goldman Sachs and cut tgt to $20 from $37
• Roku (ROKU) downgraded to Underperform from Peer Perform at Wolfe Research