Early Look

Wednesday, May 3, 2023

Futures	Up/Down	%	Last
Dow	48.00	0.14%	33,820
S&P 500	9.25	0.24%	4,146
Nasdaq	29.50	0.22%	13,213

 

 

U.S. futures with a modest bounce early ahead of the FOMC rate meeting later today while commodity prices fall as WTI crude oil prices drop about -3%, extending losses after a 5.2% decline on Tuesday and dropping below $70 per barrel for the first time since March. Stocks fell sharply Tuesday, led lower by declines in bank shares, as traders braced for the latest Federal Reserve policy announcement (banks are down again this morning). At 2:00 PM ET today, the FOMC is widely expected to raise interest rates by another 25-bps to the 5%-5.25% range, which happens to be the final rate during the 2004/2006 tightening cycle too, and then is also widely expected to hold rates steady at the June meeting. Any commentary deviating from that expected plan could potentially move major averages out of their recent trading ranges. If the message from the Fed leads to a re-pricing of bond markets, taking out rate cuts for year end, then we could se a negative reaction for stock markets. Of course, this line is hardly new from the Fed, but investors still price in 2023 cuts. Of course, if they raise rates, and suggest further hikes in the future, stock, bond, and currency markets are certainly not positioned for that. Banks rolled Tuesday on contagion fears and looking lower early this morning: The risk of contagion in banking—also referred to as systemic risk—is here defined as the risk that financial difficulties at one or more bank(s) spill over to many other banks or the financial system as a whole. @charliebilello noted yesterday “the combined assets of the 3 bank failures this year is $548 billion. That’s a new high for a calendar year, surpassing the prior record of $373 billion set back in 2008”. In drug news, LLY shares rise after its Alzheimer’s treatment donanemab slowed disease progression in clinical trial. In Asian markets, The Nikkei Index rose 34 points to 29,157, the Shanghai Index remained closed for holiday this week, and the Hang Seng Index fell -234 points to 19,699. In Europe, the German DAX is up 110 points to 15,837, while the FTSE 100 rises 16 points to 7,789. Another big round of earnings today, but the FOMC at 2:00 is the main market catalyst.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -48.29 points, or 1.16%, to 4,119.58.

·     The Dow Jones Industrial Average fell -367.17 points, or 1.08%, to 33,684.53.

·     The Nasdaq Composite slumped -132.09 points, or 1.08%, to 12,080.51.

·     The Russell 2000 Index declined -37.10 points, or 2.10% to 1,732.11.

 

Economic Calendar for Today

·     7:00 AM ET             MBA Mortgage Applications Data

·     8:15 AM ET             ADP Employment Data for April…est. 148K (prior 145K)

·     9:45 AM ET             S&P Global Composite PMI, Apr-F

·     9:45 AM ET             S&P Global Services PMI, Apr-F

·     10:00 AM ET           ISM Non-Manufacturing PMI for April…est. 51.8

·     10:30 AM ET           Weekly DOE Inventory Data

·     2:00 PM ET              FOMC Interest Rates Policy Meeting – 25-bps hike expected to 5%-5.25%.

 

Earnings Calendar:

·     Earnings Before the Open: ADNT ALE ASTE AVNT BCRX BDC BG BGCP BLDR BLKB BRY CDW CERE CHEF CNDT COCO CVS DBD DBRG DCPH DFIN DIN DRVN EAT EEFT EL EMR EXC FDP GFF GNRC GOGO HBI HSC HZNP INGR IONS KHC KRP LIND LPX LXP MBUU MUR NBIX NI PCRX PSX PUMP RGS ROCK SBGI SITE SMG SPR SPWR SR TKR UTHR VRSK WING WVE WWE XRAY YUM

·     Earnings After the Close: ACLS ACR ADPT AEIS ALB ALL ALLO AMED AMWL ANSS APA ARC ASPN ATUS AVT BHE BKH BNL CCRN CDAY CENT CFLT CODI CSGS CTSH CTVA CW CXW DEN EQH ERII ETSY EVH EQIX ES FARO FLT FNF FORM FSLY GKOS GL GMRE GNK GNW GOOD HCC HST HUBS INFA INFN IPI IR IVAC KTOS KW LESL LMND MET MKSI MMS MOS MRO MTG NARI NE NGVT NUS O OLED OM OPAD OUT PAHC PARR ODCE PGRE PSA QCOM QDEL QRVO RDN RELY RGLD RGR RM RUN SBRA SUM SYNA TNDM TRIP TXG UDMY ULCC UPWK VAC VMEO WERN WMB YELL ZG

 

Other Key Events:

·     China Caixin Manufacturing PMI for April

 

 

Macro	Up/Down	Last
Nymex	-2.22	69.44
Brent	-2.05	73.27
Gold	-2.40	2,025.7
EUR/USD	0.0036	1.1034
JPY/USD	-0.95	135.59
10-Year Note	-0.034	3.405%

 

 

World News

·     Debt ceiling: Senate floor, Schumer gave no timetable for a possible Senate vote on a debt limit bill with no spending cuts attached. On Monday, Treasury Secretary Janet Yellen, in a letter to Congress, said the federal government could be unable by June 1 to meet all its payment obligations without legislation to raise Washington’s borrowing limit. Democrats have warned that would trigger a historic government default with significant consequences for the U.S. economy and global markets. In response, Democratic President Joe Biden on Monday called the top four Republican and Democratic leaders in Congress to a White House meeting set for May 9. So far neither Democrats nor Republicans, who demand steep spending cuts as part of any debt limit increase, have moved off their positions.

 

Sector News Breakdown

Consumer

·     Caesars Entertainment (CZR) 1Q same store adj EBITDA $958Mm vs. $296M y/y, on revs $2.8B vs est. $2.76B.

·     Camping World (CWH) Q1 EPS $0.05 vs. est. loss (-$0.06); Q1 revs $1.486B vs. est. $1.48B; Q1 same store used vehicle unit sales increased 7.0%, and same store new vehicle unit sales decreased 30.6%

·     Clorox Inc. (CLX) Q3 adj EPS $1.51 vs. est. $1.22; Q3 revs $1.91B vs. est. $1.82B; Q3 gross margin up 590 bps to 41.8% from 35.9% y/y; raises FY23 adj EPS view to $4.35-$4.50 from $4.05-$4.30 (est. $4.30) and boosts FY23 revs to a 1% and 2% increase, vs. prior 2% decrease and 1% increase; also boosted year organic revenue view.

·     Ford Motor (F) Q1 adj EPS $0.63 vs. est. $0.42; Q1 revs $41.5B vs. est. $36.08B; maintaining the full-year 2023 expectations for adjusted EBIT of $9 billion to $11 billion and adjusted free cash flow of about $6 billion; reaffirmed 2023 segment-level Ebit expectations.

·     Starbucks (SBUX) Q2 adjusted EPS $0.74 vs. est. $0.65; Q2 revs $8.72B vs. est. $8.4B; Q2 global comparable store sales increased 11%, primarily driven by a 6% increase in comp transactions and 4% increase in average ticket. North America comparable store sales increased 12% vs. est. 8.9%, driven by a 6% increase in comp transactions and a 5% increase in average ticket; U.S. comparable store sales increased 12%; U.S. Rewards membership up 15% to 30.8M members.

·     Yum China (YUMC) Q1 adj EPS $0.69 vs. est. $0.46; Q1 revs rose 9% y/y to $2.92B vs. est. $2.77B; Q1 same-store sales increased 8% year over year, qtrly total system sales increased 17% year over year, with increases of 17% at both KFC and Pizza Hut; FY23 forecast unchanged.

·     KAR Auction (KAR) 1Q EPS $0.01 vs est. $0.09 on revs $420.6Mm vs est. $393.1Mm, adj EBITDA $58.9Mm vs est. $61.1Mm; guides adj EBITDA $250-270Mm, unchanged vs prior, est. $261Mm and adj EPS $0.37-0.47, unchanged vs prior, est. $0.43.

 

Energy

·     Chesapeake (CHK) Q1 EPS $1.87 vs. est. $1.72; net production in Q1 was about 4.1 billion cubic feet equivalent per day and consisted of about 90% natural gas and 10% total liquids.

·     Comstock Resources (CRK) Q1 adj EPS $0.33 vs. est. $0.35; Q1 revs $390.4M vs. est. $448.43M; Q1 production cost per Mmcfe averaged 83c per Mmcfe; drilled 18 operated horizontal Haynesville/Bossier shale wells in Q1 which had an average lateral length of 12,075 feet.

·     Edison International (EIX) Q1 EPS $1.09 vs. est. $0.95; Q1 revs $3.97B vs. est. $4.25B; backs FY23 EPS view of $4.55-$4.85 vs. est. $4.73 and l-t EPS growth rate target of 5%-7% for 2021-2025.

·     Murphy USA (MUSA) 1Q EPS $4.80 vs est. $4.02 on revs $5.08B vs est. $4.95B, adj EBITDA $220.2Mm vs est. $204.3Mm; announces $1.5B repurchase program.

·     ONEOK Inc. (OKE) Q1 EPS $2.34 vs. est. $2.09; Adjusted EBITDA of $1.72 billion (includes impact of insurance settlement); 32% increase in natural gas gathering and processing segment adjusted EBITDA; 11% increase in natural gas volumes processed; 27% increase in Mid-Continent region natural gas volumes processed.

 

Financials

·     Jack Henry & Associates (JKHY) 3Q EPS $1.12 vs est. $1.10 on revs $508.5Mm vs est. $529.2Mm; guides FY adj revs $2.02-2.03B vs est. $2.05B and EPS $4.85-4.87 vs est. $4.81.

·     Lincoln National (LNC) announces $28B reinsurance pact with Fortitude Re; guides Q1 adjusted EPS $1.47-$1.56 vs. est. $1.81.

·     Paycom (PAYC) 1Q adj EPS $2.46 vs est. $2.35 on revs $451.6Mm vs est. $444.2Mm, adj EBITDA $221Mm vs est. $211.4Mm; guides 2Q revs $397-399Mm vs est. $393.1Mm, adj EBITDA $152-154Mm vs est. $150.4Mm, sees FY revs $1.713-1.715B vs est. $1.7B.

·     Prudential (PRU) Q1 adj EPS $2.66 vs. est. $2.93; Q1 Book value per Common share of $85.33 versus $76.77 per share y/y; adjusted book value per Common share of $97.29 versus $102.09 per share y/y; Assets under management of $1.417 trillion versus $1.620 trillion y/y.

·     RenaissanceRe (RNR) Q1 operating EPS $8.16 vs. est. $7.34; Q1 revs $2.21B vs. est. $1.9B; Property catastrophe net premiums written grew by $214.7 million or 35.7%; Fee income of $44.8 million; Net investment income of $254.4M in Q1 2023, 203.9% growth compared y/y.

·     Simon Property Group (SPG) 1Q FFO/shr $2.74 vs est. $2.81; guides FY FFO/shr $11.80-11.95 vs prior $11.70-11.95 and est. $11.93; raises dividend 8.8%.

·     Voya Financial (VOYA) Q1 adj EPS $1.44 vs. est. $1.71; Excess capital of approximately $0.5 billion as of March 31, 2023, reflecting capital generation of over 90% of adjusted operating earnings for the trailing twelve months ended March 31.

·     Unum (UNM) Q1 EPS $1.87 vs. est. $1.66; Q1 revs $3.04B vs. est. $3.05B; raises FY23 after-tax adjusted operating income outlook; Previous outlook of an increase in after-tax adj operating income per share of 8%-12% increased to 20%-25%; 1Q book value per common shr $46.85.

·     Western Union (WU) Q1 adj EPS $0.43 vs. est. $0.34; Q1 revs $1.04B vs. est. $998.5M; sees FY23 adjusted EPS $1.55-$1.65 vs. est. $1.58; sees FY23 GAAP revenue (9%)-(7%) vs. est. $4.09B.

 

Healthcare

·     Eli Lilly (LLY) shares rise 8% as its Alzheimer’s treatment donanemab slowed disease progression in clinical trial. Patients who received donanemab demonstrated a 35% slower decline in memory, thinking and their ability to perform daily activities, according to clinical trial data.

·     CVS Health (CVS) Q1 EPS $2.20 vs. est. $2.09; Q1 revs $85.30B vs. est. $80.85B; Q1 adj Operating Income $4.37B vs. est. $4.19B); Q1 comp sales +11.6% vs. est. +6.3%; sees FY Adj EPS $8.50-$8.70, down from $8.70-$8.90 prior and still sees FY cash flow from ops $12.5B-$13.5B.

·     ImmunoGen Inc. (IMGN) announced positive top-line data from the Phase 3 confirmatory MIRASOL trial (GOG 3045/ENGOT OV-55) evaluating the safety and efficacy of ELAHERE.

·     Inspire Medical Systems (INSP) 1Q EPS ($0.53) vs est. (0.66) on revs $127.9Mm vs est. $119.3Mm, gr mgn 84.4%; guides FY revs $580-590Mm vs est. $569.9Mm, gr mgn 83-85%.

·     Omnicell (OMCL) 1Q adj EPS $0.39 vs est. $0.07 on revs $290.6Mm vs est. $277.7M, adj EBITDA $27Mm vs est. $11.3M; guides 2Q revs $278-288M vs est. $288.7M, adj EBITDA $22-28M vs est. $30.7M and adj EPS $0.25-0.35 vs est. $0.37; sees FY adj EBITDA $120-135Mm vs est. $127.5M.

·     Pacific Biosciences (PACB) 1Q adj EPS ($0.31) vs est. ($0.33) on revs $38.9Mm vs est. $34.4Mm, adj gross mgn 26%.

·     Penumbra Inc. (PEN) Q EPS $0.22 vs est. $0.11 on revs $241.4Mm vs est. $229.7Mm; guides FY revs $1.04-1.06B vs est. $1.0B.

·     Sarepta (SRPT) 1Q adj EPS ($0.97) vs est. ($1.38) on revs $253.5Mm vs est. $241.96Mm; had about $1.9B cash, equivalents, investments, and long-term restricted cash at qtr end.

 

Industrials & Materials

·     Axalta Consulting (AXTA) 1Q adj EPS $0.35 vs est. $0.31 on revs $1.28B vs est. $1.24B, adj EBIT $149.3Mm vs est. $139.8Mm; guides 2Q net sales +7-10% vs est. +5.7%, adj EBITDA $220-240Mm vs est. $235.5Mm, adj EPS $0.34-0.40 vs est. $0.39.

·     Livent Corp. (LTHM) 1Q adj EPS $0.60 vs est. $0.39 on revs $253.5Mm vs est. $233.5Mm, adj EBITDA $157.4Mm vs est. $112.5Mm; guides FY revs $1.025-1.125B vs prior $1.0-1.1B and est. $1.067B, adj EBITDA $530-600Mm vs prior $510-580Mm and est. $523.6Mm.

·     Manitowoc (MTW) Q1 EPS $0.37 vs. est. $0.15; Q1 revs $508.3M vs. est. $477.3M; Q1 adjusted EBITDA $45.1M.

·     WestRock Company (WRK) announced it will permanently cease operating its paper mill in North Charleston, South Carolina, on August 31, 2023. The North Charleston mill produces containerboard, uncoated kraft paper, and unbleached saturating kraft paper.

 

Technology, Media & Telecom

·     Advanced Micro (AMD) 1Q adj EPS $0.60 vs est. $0.56 on revs $5.353B vs est. $5.3B, adj gr mgn 50%; guides 2Q revs $5.0-5.6B vs est. $5.48B and adj gr mgn approx 50%; says remain confident in growth in 2H as pc and server markets strengthen and new products ramp.

·     Match Inc. (MTCH) 1Q EPS $0.42 vs est. $0.41 on revs $787.1Mm vs est. $793.8Mm, adj op mgn 33%; guides 2Q revs $805-815Mm vs est. $822.3Mm.

·     Super Micro (SMCI) 3Q adj EPS $1.63 vs est. $1.71 on revs $1.28B vs est. $1.39B, adj gr mgn 17.7%; guides 4Q net sales $1.7-1.9B vs est. $1.64B, adj EPS $2.21-2.71 vs est. $2.10.

·     Viavi (VIAV) Q3 adj EPS $0.08 vs. est. $0.09; Q3 revs $247.8M vs. est. $250.32M; guides Q4 EPS and revs below consensus views.

·     Workiva (WK) Q1 adj EPS loss (-$0.12) vs. est. loss (-$0.22); Q1 revs $150.19M vs. est. $149.61M; FY23 adjusted EPS loss (13c)-(9c) vs. est. loss (-$0.26) and revs $626M-$628M vs. est. $625.75M.