Early Look

Tuesday, November 3, 2020

Futures	Up/Down	%	Last
DJ Industrials	414.00	1.55%	27,210
S&P 500	38.50	1.17%	3,339
Nasdaq	51.50	0.47%	11,115

 

 

Markets exhibiting no fear, as U.S. futures are jumping ahead of the Presidential election today with investors hoping to avoid a contested outcome in today’s races, which would yield more clarity on additional stimulus packages and new legislation like healthcare and taxes. All three major U.S. stock indexes ended higher on Monday, rebounding from last week’s sharp losses, a day ahead of the U.S. presidential election. Small caps led the gains with the Russell 2000 up around 2%, led by cyclical sectors such as energy, materials and industrials though gains were broad based. Focus remains on today’s U.S. presidential election between President Donald Trump and Democrat Joe Biden, with worries over a possible contested election having rattled the market in recent weeks. However, there still remains several market moving catalysts this week in addition to today’s outcome, including the 2-day FOMC meeting ending tomorrow (though no rate changes or policy moves expected), another onslaught of corporate earnings results and the monthly jobs report release on Friday. U.S. Treasury yields are at their highest levels in about 4-months with the 10-year yield topping 0.88% (note Morgan Stanley said yesterday “We think 10-year yields are about to rise significantly and a 100-bps move cannot be ruled out. In fact, we think it should be expected.” That would lead to a epic tech crash) – as reported by ZeroHedge. In Asian markets, The Nikkei Index gained318 points to 23,295, the Shanghai Index rose 45 points to 3,271 and the Hang Seng Index advanced 479 points to 24,939. In Europe, the German DAX is up around 200 points to trade just under the 12,000 level, while the FTSE 100 rises 90 points to 5,750. Oil prices also extending yesterday’s bounce, with Brent moving back above $40 per barrel.

Market Closing Prices Yesterday

·     The S&P 500 Index advanced 40.28 points, or 1.23%, to 3,310.24

·     The Dow Jones Industrial Average rose 423.45 points, or 1.60%, to 26,925.05

·     The Nasdaq Composite gained 46.02 points, or 0.42%, to 10,957.61

·     The Russell 2000 Index surged 30.11 points, or 1.96% to 1,568.59

 

Economic Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     10:00 AM EST    Durable Goods Orders for September

·     10:00 AM EST    Durables Ex Defense for Sept

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AGCO, ARCB, AVNT, BBGI, BHC, BLD, BMCH, CTLT, EMR, ETN, EXC, EXPD, FOXA, GCI, GTES, HSC, HUM, IT, JCI, JELD, KOPN, LGIH, LPX, MCK, MCS, NSIT, RCM, SPR, SYY, TTI, VPG, VSH, W, WBT, WEC, WLK, WLKP, Y, ZBRA

·     Earnings After the Close: ACOR, AKR, ANDE, BRY, CC, CLW, ES, GAIN, HRZN, HTA, INN, KAR, KE, MCY, MRCY, NBR, NEX, NP, NR, ORA, PAGP, PRU, RNWL, SUPN, TRHC, VNO, WTTR

 

Other Key Events:

·     U.S. Presidential Election

·     Gabelli Annual Auto Aftermarket Symposium, 11/2-11/3 (virtual)

·     Stephens NYC Virtual Bank field trip 11/3-11/4

 

 

Macro	Up/Down	Last
WTI Crude	1.20	38.01
Brent	1.20	40.17
Gold	3.30	1,898.80
EUR/USD	0.0062	1.1703
JPY/USD	0.05	104.77
10-Year Note	+0.031	0.88%

 

 

World News

·     The Treasury Department has lowered its estimates for government borrowing through the year end as negotiations over another large fiscal stimulus bill remain stalled the WSJ reported. An amount of $617B is expected to be borrowed from October through December, down from its $1.216T estimate in early August. Senior Treasury officers continue to imagine that Congress finally will pass another economic relief package with about $1T in new spending. However, that is likely to be pushed back to early 2021

·     Britain will launch a COVID-19 mass testing pilot scheme in the northwest city of Liverpool this week, offering everyone tests whether or not they have symptoms, in an attempt to find a new way to use testing to limit the spread of the coronavirus.

·     Nearly 99M early votes have been cast in person or by mail as of Monday night, about 72.3% of the entire turnout in 2016 and representing about 40% of all Americans who can participate in the U.S. election

·     Swing states like Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin are expected to be key pieces for either side to get to the 270 Electoral College votes needed to win the presidency. Democrats are also pushing to recapture a Senate majority and are expected to retain their control of the House of Representatives.

 

Sector News Breakdown

Consumer

·     Mondelez (MDLZ) Q3 adjusted eps 63c (in-line) on sales $6.7B vs. est. $6.5B; 3q organic revenue +4.4% vs. +4.20% YoY and Q3 adjusted operating margin 17.5% vs. 16.8% YoY; for 2020, company expects organic net revenue growth of 3.5+ %, expects year free cash flow of approximately $3 bln and for 2020 expects adjusted eps growth of 5+ percent on a constant-currency basis

·     JAKKS Pacific (JAKK) rises 25% as Q3 adj EPS $4.76 on revs $242.3M vs. est. $3.09 and $230.1M; says cost controls and improved inventory management resulted in higher gross margins and operating income in the qtr

·     Kforce (KFRC) 3Q EPS from continuing ops $0.89 vs. est. $0.81 on revs $365.4Mm vs. est. $360.6Mm; guides 4Q revs $337-347Mm vs. est. $341.2Mm, sees 4Q EPS $0.70-0.78 vs. est. $0.60

·     Royal Caribbean Group (RCL) says will be extending the suspension of sailings to include those departing on or before December 31, 2020

 

Energy

·     Diamondback Energy (FANG) Q3 EPS 62c on revs $720M vs. est. 37c and $714.4M; sees FY 2020 total net production 290.0-305.0 mboe/d; sees 2020 net production 290 mboe/d to 305 mboe/d; sees fy 2020 oil production 178.0 mbo/d to182.0 mbo/d and sees fy2020 capital spend $1.80 bln – $1.90 bln

·     Plains All American (PAA) Q3 ad EPS 46c on revs $5.83B vs. est. 33c and $5.42B; announced a $500M common equity repurchase program; sees FY20 adjusted EBITDA roughly $2.585B

·     SolarEdge (SEDG) shares fall -16%; 3Q adj EPS $1.21 vs. est. $0.82 on revs $338.1Mm vs. est. $337.5Mm; guides 4Q revs $345-365Mm below est. $389.6Mm

·     Transocean (RIG) Q3 adj. EPS loss (11c) on revs $773M vs. est. loss (8c) and $769.05M; said Q3 contract backlog was $8.2B as of the October fleet status report; recorded $449 mln, $0.65 per share, gain on restructuring and retirement of debt in q3

·     Viper Energy (VNOM) 3Q EPS loss (1c) vs. est. loss (4c); narrowing full year 2020 average production guidance to 15,750 to 16,000 bo/d; initiating average daily production guidance for q4 2020 and q1 2021 of 15,250 to 16,250 bo/d; Board has elected to increase our distribution for the third quarter to 50% of our total cash available for distribution, up from 25% previously.

·     Williams (WMB) Q3 adjusted EPS 27c on revs $1.93B vs. est. 27c and $1.75B; continues to expect 2020 Adjusted EBITDA in the lower half of its guidance range of between $4.95B and $5.25B; continues to expect 2020 growth capex of $1B to $1.2B, down from the original guidance range of $1.1B to $1.3B

 

Financials

·     Cardlytics (CDLX) 3Q adj EPS ($0.16) vs. est. ($0.28) on revs $46.1Mm vs. est. $38.9Mm

·     Cincinnati Financial (CINF) Q3 adjusted EPS 39c on revs $2.23B vs. est. 74c and $1.65B

·     EverQuote (EVER) EPS misses by $0.05, beats on revenue of $89.98M (+34.1% Y/Y) beats by $4.81M; consumer traffic initiatives led to an 18% Y/Y increase in revenue per quote request and a 14% Y/Y increase in quote requests; variable Marketing Margin of $29.4M, an increase of 41%; guides Q4 rev $90.4-$92.4M; Variable Marketing Margin of $29.3-$30.3M; Adjusted EBITDA in the range of $4-$5M.

·     Investors Real Estate Trust (IRET) Q3 FFO of $0.90 beats by $0.04 and revs $44.14M (-7.0% Y/Y); total collections were 98.8% of expected residential revenue for Q3, vs. 99.6% in year ago period

·     PayPal (PYPL) Q3 adj EPS $1.07 on revs $5.46B vs. est. 94c and $5.43B; Q3 total payment volume of $247B, up 36% Y/Y, vs. analyst estimate of $232.3B; merchant services volume grew 40% on a spot basis; Venmo processed ~$44B in TPV, up 61%; expects FY 2020 TPV growth to be approximately 30%; 4.0 billion payment transactions in qtr, up 30%

·     Vornado Realty (VNO) Q3 revs $364.0M vs. est. $351.6M (but still down 22% YoY); 3q FFO adj FFO 59c and 3q net income $53.2 million, -84% YoY

 

Healthcare

·     Esperion (ESPR) 3Q ($3.07) vs. est. ($3.44) on revs $3.8Mm vs. est. $5.2Mm

·     Halozyme (HALO) 3Q EPS $0.25 vs. est. $0.19 on revs $65.3Mm vs. est. $60.9Mm; guides FY revs $250-260Mm vs. est. $235.9Mm, sees FY EPS $0.80-0.85 vs. est. $0.69

·     Humana (HUM) Q3 Non-GAAP EPS of $3.08 beats by $0.28; GAAP EPS of $10.05 beats by $1.81 and revenue of $18.82B (+15.9% Y/Y) beats by $230M; benefits expense ratio of 85.3% vs. consensus of 85.9%.

·     Inspire Medical (INSP) 3Q ($0.39) vs. est. ($0.72) on revs $35.8Mm vs. est. $22.75Mm; guides FY revs $110-112Mm vs. est. $90.2Mm

·     Jazz Pharma (JAZZ) 3Q adj EPS $4.31 vs. est. $4.08 on revs $600.9Mm vs. est. $577.6Mm; guides FY adj EPS $12.20-13.00 vs. est. $12.46, sees FY revs $2.32-2.38B vs. est. $2.28B

·     Karyopharm Therapeutics (KPTI) rises 8%; announced positive top-line results from the Phase 3 portion of the randomized, double blind, placebo controlled, cross-over, SEAL study evaluating single agent, oral XPOVIO versus matching placebo in patients with advanced unresectable dedifferentiated liposarcoma. The SEAL study met its primary endpoint of a statistically significant increase in progression-free survival

·     Owens & Minor (OMI) Q3 adjusted 81c on revs $2.19B vs. est. 71c and $2.08B; says positioned to deliver double-digit earnings growth in 2021; sees year EPS $1.90-$2.00 vs. est. $1.80

 

Industrials & Materials

·     The Federal Aviation Administration’s proposed new training module and emergency checklists for the Boeing (BA) 737 MAX are “clunky at best” and should be streamlined, the union representing pilots at Southwest Airlines (LUV) says in urging the FAA to simplify the procedure recommended to address an emergency that can force down the plane’s nose, an issue in the two fatal crashes that ultimately grounded the plane.

·     Eaton (ETN) Q3 Non-GAAP EPS of $1.18 beats by $0.14; GAAP EPS of $1.11 beats by $0.08, while revenue of $4.53B (-14.7% Y/Y) beats by $320M.

·     FMC Corporation (FMC) Q3 adjusted EPS $1.22 on revs $1.08B vs. est. $1.11 and $1.07B; sees Q4 adjusted EPS $1.70-$1.82 vs. est. $1.82 and revs $1.23B-$1.29B vs. est. $1.26B

·     Ingersoll-Rand (IR) Q3 EPS 40c on revs $1.34B above est. 31c and $1.27B; reports Q3 adjusted EBITDA of $284 million with a margin of 21.3%; not providing FY20 guidance

·     Matson Inc. (MATX) Q3 EPS $1.63 on revs $645.2M vs. est. $1.39 and $644.39M

·     Mosaic (MOS) 3Q adj EPS $0.23 vs. est. $0.17 on net sales $2.38B vs. est. $2.38B; says strengthening fundamental trends thru 3Q expected to continue into 2021

·     YRC Worldwide (YRCW) Q3 EPS loss (4c) vs. est. loss (28c) and in-line revs of $1.18B; said ended the quarter with just over $450 million in liquidity with a reaffirmed focus on managing our operations; said its CFO resigned

 

Technology, Media & Telecom

·     Cirrus Logic (CRUS) 2Q adj EPS $1.26 vs. est. $0.90 on revs $347.3Mm vs. est. $310.6Mm; guides 3Q revs $440-480Mm vs. est. $354.4Mm; GAAP and non-GAAP gross margin was 51.9% vs. the 51-53% guidance and 53.6% in last year’s quarter; GAAP combined R&D and SG&A expenses totaled $116M vs. the $114-120M guidance.

·     Skyworks Solutions (SWKS) 4Q adj EPS $1.85 vs. est. $1.52 on revs $956.8Mm vs. est. $842.4Mm; guides 1Q adj EPS $2.06 vs. est. $1.81, sees 1Q revs $1.04-1.07B vs. est. $932Mm

·     AMC Entertainment (AMC) Q3 revenues were slightly ahead of sharply lowered expectations, falling nearly 91% to $119.5M, with U.S. theater operations suspended for nearly two-thirds of the quarter; attendance worldwide was down 92.5% to 6.5M; U.S. markets attendance fell 96.8% to 1.96M. Average screens were down 62.3%, to 4,022

·     Arista Networks (ANET) Q3 EPS $2.42 on revs $605.4M vs. est. $2.21 and $581.33M; Arista Networks reports Q3 EPS $2.42 on revs $605.4M above est. $2.21 and $581.33M; says saw continued improvement in business trends

·     Alaska Communications Systems (ALSK) has entered into a definitive agreement to be acquired by an affiliate of Macquarie and GCM in an all-cash transaction valued at ~$300M, including debt, with holders receiving $3.00 per share https://bit.ly/3mFJLqG

·     Coupa Software (COUP) files to sell 2.15M shares of common stock for holders

·     Fabrinet (FN) Q1 EPS $1.05 on revs $436.6M vs. est. 98c and $421.65M; sees Q2 EPS $1.00-$1.07 vs. est. $1.01 and sees Q2 revenue $420M-$440M, vs. consensus $425.76M

·     j2 Global (JCOM) Q3 adjusted EPS $2.02 on revs $357.0M vs. est. $1.77 and $338.82M; raises FY20 adjusted EPS view to $7.85-$8.00 from $7.17-$7.41 and ups year revs to $1.447B-$1.462B from $1.38B-$1.40B

·     Mimecast (MIME) 2Q adj EPS $0.32 vs. est. $0.20 on revs $122.7Mm vs. est. $116.2Mm; guides 3Q revs $126-127Mm vs. est. $124.8Mm; sees FY revs $490.5-493.5Mm vs. est. $490.9Mm; sees FY adj EBITDA $109-110.5Mm

·     NeoPhotonics (NPTN) 3Q adj EPS $0.11 on revs $102.4Mm vs. est. $101.7Mm; guides 4Q revs $64-70Mm vs. est. $68.3Mm, sees 4Q adj EPS ($0.13) to ($0.23) vs. est. ($0.13)

·     OneSpan (OSPN) 3Q adj EPS $0.03 vs. est. $0.05 on revs $51.4Mm vs. est. $58.6Mm; guides FY revs $203-207Mm vs. est. $233.7Mm

·     Rambus (RMBS) announces new 20M share repurchase program; Q3 GAAP EPS loss (11c) on revs $56.9M

·     SBA Communications (SBAC) Q3 AFFO $2.38 on revs $522.9M vs. est. $2.32 and $516.06M; raises FY20 AFFO view to $9.27-$9.50 from $8.94-$9.33 (est. $9.30) and up year revenue view to $2.065B-$2.085B from $2.047B-$2.087B (est. $2.07B)