Early Look

Tuesday, October 27, 2020

Futures	Up/Down	%	Last
DJ Industrials	104.00	0.38%	27,685
S&P 500	15.50	0.46%	3,409
Nasdaq	60.50	0.52%	11,552

 

 

U.S. stocks are looking modestly higher to start the day, extending the recovery of session lows yesterday (S&P futures back above the 3,400 level) as the busy week of earnings kicks into full gear this morning. Some of today’s earnings lineup includes industrial giants (and Dow components) 3M and Caterpillar, as well as healthcare giants PFE, LLY, and MRK and tech giants MSFT and AMD after the bell. Stock futures got a bump in the last few minutes as AMD agreed to acquire XLNX in a $35B deal in the semiconductor sector. Stocks dropped on Monday as concerns over elevated new case counts in the U.S. and abroad contributed heavily to traders’ jitters. Domestically, cases hit a record high of more than 80,000 on Friday and held above that threshold again on Saturday. Overseas, the Czech Republic on Monday joined France, Spain and Italy in imposing an evening curfew to try and curb the spread of the coronavirus, with cases again surging across Europe. As for the stimulus aid talks, negotiations took place again between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin Monday afternoon, although the time to pass a bill before Nov. 3 continues to narrow. While net earnings are surprising to the upside, with the exception of a few big misses, the market seems very focused on the election, COVID-19 and any news related to stimulus talks. In Asian markets, The Nikkei Index dipped -8 points to 23,485, the Shanghai Index inched higher 3 points to 3,254 and the Hang Seng Index declined -131 points to 24,787. In Europe, the German DAX is down about 50 points to 12,125, while the FTSE 100 is flat just under the 5,800 level.

Economic Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:30 AM EST      Durable Goods Orders for September…est. 0.5%

·     8:30 AM EST      Durable Goods Ex: Transportation for September…est. 0.4%

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     9:00 AM EST      CaseShiller 20 City House Index for August…est. 0.5%

·     10:00 AM EST    Consumer Confidence for October…est. 102.0

·     10:00 AM EST    Richmond Fed Manufacturing for October…prior 21

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ABG, BEN, CAT, CMI, CNC, COWN, CROX, CVLT, DTE, ECL, FELE, GLW, HOG, HUBB, IVZ, JBLU, LECO, LH, LLY, MKTX, MMM, MRK, MSCI, MSM, NEO, NXRT, ODFL, OMC, OMCL, PFE, PII, PJT, ROP, RTX, SALT, SHOO, SHW, SPGI, ST, SWK, TRU, UIS, WAT, WDR, XRX

·     Earnings After the Close: ACCO, AFL, AKAM, AMD, AWI, BGFV, BXP, CHRW, CSGP, CYH, DCOM, DXCM, EGP, EIX, ENPH, EQR, FEYE, FISV, FSLR, FTV, GLPI, HA, HIW, JBT, JNPR, LBRT, LSCC, MASI, MKL, MSFT, MXIM, NCR, OKE, QCRH, RARE, RRD, RRR, SKY, SUM, TENB, TEX, TWOU, UNM, VAR, VECO

 

Market Closing Prices Yesterday

·     The S&P 500 Index plunged -64.42 points, or 1.86%, to 3.400.97

·     The Dow Jones Industrial Average fell -650.19 points, or 2.29%, to 27,685.38

·     The Nasdaq Composite dropped -189.34 points, or 1.64%, to 11,358.94

·     The Russell 2000 Index declined -35.29 points, or 2.15% to 1,605.21

 

 

Macro	Up/Down	Last
WTI Crude	0.47	39.03
Brent	0.52	40.98
Gold	-1.85	1,900.25
EUR/USD	-0.0005	1.1805
JPY/USD	-0.17	104.67
10-Year Note	-0.004	0.799%

 

 

World News

·     The Senate voted Monday evening to confirm Judge Amy Coney Barrett to the Supreme Court, overcoming fierce partisan opposition to the vote and marking the third justice President Donald Trump has appointed to the nation’s highest court in just four years. The vote was 52-48, along partisan lines, with Republican Sen. Susan Collins of Maine the only Republican to cross lines.

 

Sector News Breakdown

Consumer

·     Boyd Gaming (BYD) Q3 adj EPS 38c on revs $652.2M vs. est. 10c and $568.13M; Q3 Adjusted EBITDAR grew more than 23% to $78.9 million and operating margins increased more than 1,600 basis points to 46.1%. Midwest & South revenues fell 15% to $463.6 million while Adjusted EBITDAR increased nearly 17% to $182.5 million

·     Chegg (CHGG) Q3 EPS 17c on revs $154.0M vs. est. 10c and $143.68M; said trends they are seeing in the industry and the momentum experiencing globally give them the confidence to raise our guidance again for 2020 and provide our initial outlook for 2021; sees Q4 adj. EBITDA $82M-$84M and sees Q4 revenue $188M-$190M vs. est. $183.21M

·     Heidrick & Struggles (HSII) 3Q adj EPS $0.39 vs. est. ($0.38) on revs $143.5Mm vs. est. $127.7Mm; guides 4Q revs $140-150Mm vs. est. $141.3Mm

·     K12 (LRN) Q1 EPS 30c vs. est. loss (31c) and revs $371M vs. est. $362.5M; Q1 adjusted Ebitda $39.2 million; sees FY21 cap-ex in range of $50M-$60M and FY21 $12M-$15M

·     Polaris (PII) Q3 EPS $2.66 on revs $1.95B vs. est. $2.19 and $1.93B; North American retail sales increased 15% for the quarter compared to last year led by strength in ORV, Motorcycles and Snow; raises FY20 adj. EPS view to $7.15-$7.30 from $6.40-$6.60; raises FY20 revenue view to $6.93B-$7B from $6.65B-$6.75B (est. $6.78B)

·     Sheldon Adelson’s Las Vegas Sands (LVS) is looking into the sale of its flagship casinos in Las Vegas, Bloomberg reported. The company is working with an advisor to solicit interest from possible buyers, and may fetch $6B or more for its Las Vegas properties https://bloom.bg/31M4X6b

·     J.M. Smucker (SJM) entered into a definitive agreement to sell its Crisco oils and shortening business to B&G Foods, Inc. (BGS) in a cash transaction valued at approximately $550M

·     Stanley Works (SWK) 3Q adj EPS $2.89 vs. est. $2.73 on revs $3.9B vs. est. $4.03B; no guidance at this time

·     TriNet (TNET) Q3 adjusted EPS 56c on revs $216M vs. est. 16c and $177.91M

 

Energy

·     BP Plc (BP) reported an underlying replacement cost profit of $86 million, beating a consensus estimate of a $120 million loss, as the result narrowed heavily from a year earlier, when the oil-and-gas company posted a $2.25 billion underlying RC profit; Cash flow from operations was $5.20 billion, beating a market consensus of $3.53 billion

·     Energy Transfer (ET) announces $0.1525 quarterly dividend, a-50% decrease from prior dividend of $0.305

·     National Oilwell (NOV) Q3 EPS loss (14c) vs. est. loss (10c) on in-line revs of $1.38B; said execution on cost reduction and working capital initiatives continues to exceed expectations, resulting in $323 million in cash flow from operations and a reduction in net debt to $339 million

 

Financials

·     American International Group Inc. (AIG) is taking steps to split off its life-insurance business into a separate company, leaving it to focus on property-casualty insurance, a separation it will make under the direction of a new chief executive

·     Alexandria Real Estate (ARE) Q3 EPS $1.83 (in-line) as reports $3.9B of liquidity as of September 30 and Q3 collected rents and tenant recoveries of 99.7%

·     Berkshire Hills Bancorp (BHLB): Q3 GAAP EPS of $0.42 beats by $0.50 while revenue of $97.02M (-18.0% Y/Y) misses by $2.58M.

·     Cathay General (CATY) Q3 EPS 71c vs. est. 61c; 3Q return on average assets 1.18% vs. 1.65% y/y, 3Q return on average equity 9.53% vs. 13.0% y/y, estimate 8.36% and Q3 net interest margin 3.02% vs. 3.56% y/y, estimate 3.06%

·     Cincinnati Financial (CINF) Q3 adj EPS 39c on revs $2.23B vs. est. 74c and $1.65B; 3q net premiums written $1.39 billion, +3.1% YoY while Q3 book value per share $60.57 vs. $57.37 YoY

·     Moelis (MC) Q3 adjusted EPS 54c on revs $207.6M vs. est. 3c and $141.08M

·     Principal Financial (PFG) Q3 EPS 85c on sales $1.6B vs. est. $1.39; assets under mgmt. was $731.3B at quarter end

·     QTS Realty Trust (QTS) Q3 operating FFO 70c vs. est. 65c and revs $137.5M vs. est. $136.93M; sees 2020 op FFO $2.75-$2.83 and revs $531M-$537M

·     TCF Financial (TCF) Q3 EPS 63c vs. est. 64c; Q3 NII $377.2M vs. $371.8M last year, Q3 net interest margin 3.31% vs. 4.12% last year and 3.33% in Q2; Q3 provision for credit losses of $69.7M, down 11.5% from Q2 and vs. $27.2M in Q3 of last year

·     TransUnion (TRU) Q3 adjusted EPS 81c on revs $696M vs. est. 75c and $678.53M; sees FY20 adjusted EPS $2.94-$3.01 vs. est. $2.88 and guides FY20 revenue $2.696B-$2.715B vs. est. $2.68B

·     Schwab (SCHW) said it begins cutting 1,000 jobs from TD Ameritrade acquisition or about 3% of the combined total workforce

·     Wells Fargo (WFC) is exploring the sale of its corporate trust unit, a deal that could bring more than $1B, according to Bloomberg, which followed Friday’s report that the bank is also exploring a sale of its asset management unit, which could garner more than $3B.

 

Healthcare

·     Eli Lilly (LLY) Q3 EPS $1.54 on sales $5.74B vs. est. $1.71 and $5.88B; backs FY20 adj. EPS view $7.20-$7.40 vs. est. $7.28 and also reaffirms FY20 revenue view $23.7B-$24.2B vs. est. $23.91B.

·     DexCom (DXCM) reports Q3 revenue $500.9M vs. est. $476.75M, representing 26% growth YoY

·     GeneTx Biotherapeutics and Ultragenyx Pharmaceutical (RARE), companies partnered in the development of intrathecally administered GTX-102, an investigational treatment for Angelman syndrome, announced positive interim data from the Phase 1/2 study of GTX-102

·     Medpace Holdings (MEDP) 3Q $1.09 vs. est. $10.7 on revs $230.4Mm vs. est. $223.6Mm; guides FY20 EPS $3.62-3.83 vs. est. $3.74, sees FY revs $880-920Mm vs. est. $903.5Mm; guides FY21 revs $1.05-1.125B vs. est. $1.106B, sees FY21 EBITDA $200-220Mm

·     Mirati Therapeutics (MRTX) files to sell $700M of common stock

·     Turning Point Therapeutics (TPTX) 4.598M share Secondary priced at $87.00

 

Industrials & Materials

·     3M (MMM) Q3 adjusted EPS $2.43 on revs $8.4B vs. est. $2.26 and $8.29B; said it is not able to estimate the full duration, magnitude and pace of recovery across its diverse end markets with reasonable accuracy – so believes it prudent to not provide guidance

·     Caterpillar (CAT) Q3 EPS $1.22 vs. est. $1.18 on revs $9.9B vs. est. $9.8B

·     Crane (CR) 3Q adj EPS $1.05 vs. est. $0.80 on revs $735Mm vs. est. $672.4Mm; guides FY20 adj EPS $3.75-4.00 vs. est. $3.75; sees FY20 sales down 17%-19% versus prior view down 17%-21% and expects a full-year 2020 core sales decline of approximately 17% to 19%, compared to its prior expectation of a decline in the range of 17% to 21%

·     Simpson Manufacturing (SSD) Q3 EPS $1.54 on revs $364.3M both above consensus of 95c and $312.4M; North America gross margin increased to 48.9% from 45.6%, and Europe gross margin decreased to 37.9% from 38.4%; N raises FY20 revenue growth view to 9%-10% from 1.5%-4% and gross margin is estimated to be in the range of 45.0% to 46.0%

·     Packaging Corp. (PKG) Q3 EPS $1.57 on revenue $1.69B vs. est. $1.41 and $1.64B

·     Flexsteel Industries’ (FLXS) board approved a new repurchase program to purchase up to an aggregate of $30M of stock over the next three years.

 

Technology, Media & Telecom

·     AMD (AMD) agrees to buy Xilinx (XLNX) in $35B deal, confirming recent reports; Under the deal, Xilinx shareholders are to receive around 1.7234 AMD shares for each of their Xilinx shares, representing a premium of almost 25% over the company’s current value

·     Amkor Technology (AMKR) Q3 EPS 38c on sales $1.35B vs. ests. 31c; sees 4q net sales $1.25 billion to $1.35 billion and EPS 28c to 47c, vs. $1.225B and estimate 31c

·     F5 Networks (FFIV) Q4 EPS $2.43 on revs $617M vs. est. $2.37 and $607.3M; sees Q1 revs $595M-$615M and EPS $2.26-$2.38 vs. est. $592.6M and $2.28; Net income fell slightly to $150M from a year-ago $157M

·     Harmonic (HLIT) 3Q adj EPS $0.03 vs. est. ($0.05); guides 4Q adj EPS $0.10-0.18 vs. est. $0.18, sees 4Q revs $120-130Mm vs. est. $131Mm

·     NXP Semiconductors (NXPI) Q3 revenue $2.27B vs. est. $2.23B, reports Q3 adjusted gross margin 50.1% and adjusted operating margin was 25.8%; For Q4, NXPI expects $2.375-2.525B in revenue vs. est. $2.27B; gross margin of 50.9-51.6%, and operating margin of 17.9-19.8%

·     Sensata Technologies (ST) sees Q4 Non-GAAP EPS in the range of $0.64 to $0.72 vs. a consensus of $0.67, sees revenue of $810-$850M vs. $793.8M.

·     Twilio (TWLO) adj EPS $0.04 vs. est. ($0.03) on revs $448Mm vs. est. $409.9Mm; guides 4Q adj EPS ($0.11-0.08) vs. est. $0.02, sees 4Q revs $450-455Mm vs. est. $437.4Mm

·     Varonis (VRNS) 3Q EPS ($0.61) vs. est. ($0.13) on revs $76,.8Mm vs. est. $70.2Mm; guides 4Q adj EPS $0.10-0.13 vs. est. ($0.02), sees 4Q revs $82-85Mm vs. est. $79.8Mm; announces agreement to acquire Polyrize (no terms disclosed)