Closing Recap

Tuesday, November 05, 2024

U.S. stocks put in a tremendous performance on Tuesday, with the Nasdaq rising over 1.4% just above 18,400 for it best day since 10/8 when rose 1.45% and less than 2% away from recent all-time highs (18,785.50 on 10/30), as Technology, Consumer Discretionary, Industrials and Utilities were all up over 1% heading into election day results tonight for President! The large cap mega cap/Mag 7 names did most of the heavy lifting early with big gains in TSLA, AAPL, AMZN, META, MSFT, but it was the Smallcap Russell 2000 that enjoyed a stellar afternoon, leading large caps. Overall, all eleven S&P sectors finished in positive territory with NYSE breadth roughly 3:1 advancers leading. No fear heading into the biggest election day the U.S. has seen, maybe ever, with U.S. stocks pushing higher all day. The dollar slipped along with Treasury yields late day while oil prices edged higher. Economic data was broadly positive with a big jump in ISM Non-Manufacturing (services data) ahead of the FOMC policy decision on Thursday where a 25-bps cut is expected.

Plenty of election uncertainty in regard the timing of outcome! As much as we all want a final answer on the Presidential election outcome by tomorrow, @carlquintanilla noted, citing JPM desk the time it took in 2020 to get the results for key battleground states noting: Arizona [which has 11 electoral votes), In 2020, the state was called early Weds morning. Georgia [16] – In 2020, the state was called on Nov 19 vs. Nov 3 Election Day. Michigan [15] – In 2020, the state was called Weds night. Nevada [6] In 2020, the state was called on Saturday. North Carolina [16] – In 2020, the state was called more than a week later, on Friday (Nov 13). Pennsylvania [19] – In 2020, the state was called on Saturday (Nov 7). Wisconsin [10] – In 2020, the state was called Weds afternoon.

Interesting stat as the top mega cap companies make up a bigger and bigger piece of the pie! @KobeissiLetter noted: Another day, another record: “The top 10 companies in the S&P 500 now account for a record 37% of the index. This percentage officially exceeds peak levels seen during the 2000 Dot-Com bubble by 10 percentage points. Over the last decade, the market concentration has more than DOUBLED. Furthermore, the top 10 stocks alone now have a market cap of ~$18.7 TRILLION. This means that the top 10 stocks in the US now have a combined market cap that is $1 trillion higher than the entire European stock market.”

• Sept exports -1.2% vs Aug +1.8%, imports +3.0% vs Aug -1.0%; Sept exports $267.95B vs Aug $271.19B, imports $352.31B vs Aug $341.98B; U.S. Sept capital goods imports $86.23B vs Aug imports $83.42B; The U.S.-China Sept trade deficit $31.81B vs Aug deficit $27.88B.
• S&P Global October final composite PMI at 54.1 (vs flash 54.3); U.S. S&P Global October final services PMI at 55.0 (vs flash 55.3).

• Front-month gas futures for December delivery on the New York Mercantile Exchange fell 11.1 cents, or 4.0%, to settle at $2.670 per million British thermal units (mmBtu).
• Gold prices rise $3.50 to settle at $2,749.70 an ounce. The number of first-time buyers of precious metals, including gold, around the world rose sharply last month ahead of the U.S. election, but new buyers of the metals in the U.S. declined on a monthly basis, according to BullionVault.
• The US dollar added to recent pullback after surging to a 3month high in late October as the DXY fell -0.4% to 103.45. Mexico’s peso currency extended losses to trade down 1% against the U.S. dollar around 20.317 pesos, to reach its weakest level since September 2022 (prices reversed to finish little changed).
• Bond prices jumped in the final hours of the day as Treasury yields came tumbling from 7-r to 30-yr yields; the benchmark 10-yr yield hit lows below 4.29% late day after hitting highs above 4.36% earlier on economic data.

• In Food space: ADM shares fell after saying it will amend previous financial statements after finding additional accounting issues, prompting them to cancel its quarterly earnings call with analysts 14 hours before its start. LWAY said its board rejected the unsolicited proposal made on September 23, 2024 by Danone North America PBC to acquire all the shares of Lifeway that it does not already own for $25.00 per share.

• QSR reported Q3 revs $2.29B, below ests $2.31B on weak demand across Tim Hortons, Burger King and international markets including China and the Middle East and EPS of $0.93 vs. est. $0.95; consolidated comparable sales were 0.3% and net restaurants grew 3.8% versus the prior year.
• YUM Q3 revenue and profit miss on weak demand and stiff competition, especially for KFC in the U.S., along with choppy international sales; reports surprise drop in Q3 worldwide sales of -2%, vs. market expectations of a 0.23% rise while KFC’s same-store sales in the U.S. tumbled 5%, marking their third straight quarter of declines this year while Q3 Pizza Hut comparable sales -4%, vs. est. loss -1.73%

• In Casinos/Gaming: WYNN shares declined after Macau and Las Vegas both come in below estimates, and the forward look was somewhat more tempered across the board. CNTY was upgraded to OP from MP at JMP Securities as the completion of the land-based facility in Caruthersville, MO marked the end of an M&A and refurbishment cycle across its U.S. portfolio, resulting in lease-adjusted leverage increasing to 6.6x at 3Q24, from ~1x in 2018

• In Industrials: EMR reported earnings and made a proposal to acquire the stake it does not already own in AZPN for $240 per share in cash, doubling down on its industrial automation push, which values co at $15.1 billion on an enterprise basis (Emerson already owns about 55% of shares in AspenTech, which it acquired in 2022). In building products, JELD tumbled over 20% after Q3 revs missed estimate by wide margin and lowered 2024 rev guidance to $3.7-$3.75 bln from prior forecast of $3.9-$4.1B and reduced Ebitda outlook. PRIM shares jumped following its quarterly beat and raised guidance for the year in infrastructure space.
• In Machinery: AGCO lowered FY sales to $12B from $12.5B prior (ests $12.4B) after reporting a sharp drop in earnings following a downturn in the market for tractors and other farm equipment; also said quarterly revs fell -25% from a year ago to $2.6B, missing the $2.9B expected and N.A. revenue was down 22% y/y. CMI posted a top and bottom line beat ($5.86/$8.45B vs. est. $4.80/$8.3B) citing robust demand for its power generation products from data centers.
• In Aerospace & Defense: BA said U.S. West Coast factory workers accepted a new contract offer on Monday, ending a bitter seven-week strike that halted most jet production. PLTR shares jumped after results and upbeat guidance as see FY revs $2.805-2.809B vs est. $2.759B and adj op Inc $1.054-1.058B vs est. $971.04Mm.
• In Metals: CLF realized 3Q24 EBITDA of $124M vs. our $134M, with steel volumes modestly below our model, likely due to automotive production/inventory adjustments. CLF specifically said the quarter was negatively impacted by "two of our top four automotive clients who continue to underperform their own expectations”.
• In Materials: LPX trades all-time highs after Q3 EPS and revs topped consensus as Siding segment set new records for net sales and Adjusted EBITDA, and the OSB (Oriented Strand Board) segment delivered a solid quarter
• In Chemicals: CE shares tumbled after Q3 net earnings fell about 87% to $120M as adjusted EPS $2.44 missed consensus $2.93 on light revs ($2.6B vs. $2.7B) and said it expects to draw on term loan in Q1’25 for use towards $1.3B maturing debt while intending to reduce dividend by 95% in Q1; 4Q guidance implies 2024 EPS of $8.15, compared to the prior guidance of $10.50; DD rises as top/bottom line results top expectations while raises both EPS and adj Ebitda outlooks but lowered its revenue outlook; HUN 3Q is slightly above expectations, but weaker 4Q guidance as 2H24 EBITDA of ~$206M compared to consensus of $235M citing demand in the auto market materially softened in 3Q, and much of the same is expected into year-end.

• In Insurance: EVER reported a Q3 beat and guided Q4 above consensus; Revenue/adjusted EBITDA of $144.5M/$18.8M exceeded consensus of $140.3M/$15.4M and guided to 4Q24 revenue/adjusted EBITDA of $133.5M/$15M above consensus of $126.2M/$12.5M. AIG shares drop on earnings. CRBG operating earnings come in ahead of estimates on strong performance from Life Insurance and solid results in all other segments. SLF company’s operating earnings were above Street’s expectations on better-than-expected results in Canada and U.S.

• AVB reported a 3Q24 Core FFO beat, and management modestly increased 2024 Core FFO guidance, which appears to be due to 3Q24 performance but appears partially timing-related given the beat was not fully carried through to the full-year outlook. Same-store revenue growth guidance was reaffirmed at the midpoint and lower opex growth.
• DEI reported 3Q24 FFO of $0.43, which beat both consensus and our estimate of $0.41/sh. Relative to our estimates, the earnings beat was driven by higher rental revenue and lower G&A expense, partially offset by higher opex. Importantly, management raised the FY24 FFO guidance midpoint by $0.04 (2.4%) to a range of $1.69-$1.73 ($1.65-$1.69 prior) primarily driven by the 3Q24 beat, a reduction in G&A expense guidance by $2M at the midpoint ($0.01), and a 100 bps increase in the SSNOI growth forecast (-3.0% to -1.5% from -4.0% to -2.5%).
• INN 3Q24 adjusted EBITDA and adjusted FFO beat expectations and were slightly better and in line with our assumptions, respectively. RevPAR growth was essentially flat in 3Q24, as moderating RevPAR growth into September and disruption from Hurricane Helene negatively impacted results.
• O reported 3Q24 AFFO of $1.05, which beat both consensus and KBCM of $1.04. Importantly, management raised the low end of FY24 AFFO guidance to a range of $4.17-$4.21 (from $4.15-$4.21) and increased investment volume guidance to ~$3.5B (vs. $3.0B prior, which implies ~$1.3B of investments in 4Q24). The revised guidance implies 4Q24 AFFO of $1.05, which is in line with consensus.

• AZN shares fall after Reuters reported, citing financial media firm Yicai, that dozens of senior executives at AstraZeneca China are expected to be implicated in the largest insurance fraud case in the nation’s pharmaceutical sector in years
• BEAM shares fall after Stat News reported a patient with sickle cell disease died while participating in a clinical trial of a CRISPR-based treatment from Beam Therapeutics, the company said this morning.
• ILMN 3Q revenues were in-line with consensus at $1.08B, with better performance in consumables balanced by weaker instrument revenues, while the company did see better operating margins driving an EPS beat; tempered their expectations for 2024 revenue growth, though raised guidance for operating margin and EPS.
• MRUS said the FDA decision date for zenocutuzumab, a drug to treat lung and pancreatic cancer caused by a specific genetic mutation, was delayed to Feb. 4 from December. The agency requested extra time to review new manufacturing information.
• VRTX Q3 results came in ahead of consensus and the company raised 2024 revenue guidance by about 1% at the midpoint. The next catalyst for the stock will be the suzetrigine Phase 2 lumbosacral radiculopathy, or LSR data, that are still expected by year-end.

• BRKR 3Q revenues were slightly below consensus, with Nano ahead balanced by CALID and BEST, while EPS was inline. The company lowered its guidance, now expecting revenue of $3.34B to $3.37B (vs. $3.38B to $3.44B prior), assuming organic growth of +3% to 4% (vs. +5% to 7% prior).
• HIMS delivered qtrly beat, driven by nice uptake of GLP-1s and the core business (~40% subscriber growth); average price also moved up with GLP-1s, but GM% fell several points y/y.
• HSIC Q3 revenue $3.17B vs $3.24B est. Q3 Adjusted EBITDA $268M vs $271.2M est. FY Revenue growth +4% to 5% y/y vs prior guidance +4% to 6%. Reaffirms adjusted EBITDA growth +low-double-digit percentages y/y.
• INSP reported strong Q3 results with the top-line coming in comfortably above the Street, while EPS of 60c was well above its model and consensus. Inspire also increased its FY2024 top-line guidance to $793M-$798M, representing a $2.5M increase from the previous range at-the-midpoint.
• TCMD shares fall, downgraded at BTIG and Oppenheimer following Q3 results as reported revs of ~$73.1M below Street ests. of $76.0M as CMS documentation requirements and DME buying patterns impacted results.

• In Video Games: NTDOY cut its operating profit forecast for the year to March 2025 by 10% to 360B Yen ($2.36B) below forecast for 391.4B Yen; Nintendo sold 4.7M Switch consoles in the first half of the financial year, down from 6.8M units in the same period a year earlier; the Co lowered its full-year sales forecast for the console.
• In Hardware/Components: TDC delivered a solid quarter with a larger recurring revenue beat than usual and better profitability result, but it meaningfully lowered its growth outlook for Public Cloud annual recurring revenue for the second consecutive quarter

• ALAB shares jumped with price tgts raised on Wall Street (Needham to $100, Stifel to $100, Hallum $105) after the co posted another strong beat and raise driven by Aries retimers and the ramp of Aries and Taurus SCMs.
• AOSL Reported F1Q25 sales and EPS slightly ahead, but F2Q25’s guide was below with a greater downside EPS variance due to tough competitor pricing nicking GM.
• CRUS reported better results, primarily on stronger Apple as the top line beat expectation, but guidance was significantly worse ($510M vs Street’s $593M) as management called out three dynamics: 1) this September had an extra week of higher seasonal volume production; 2) the December quarter in FY24 was a 14-week quarter; and 3) December last year saw a stronger than normal Android ramp (that will not recur this year).
• GFS Q3 net revenue fell -6.1% y/y to $1.74B above est. $1.73B and adj EBITDA -6% y/y to $627M vs. est. $600.6M; guided Q4 EPS and revs above consensus views.
• LSCC reported in-line 3Q results and guided 4Q lower, as weakness within the Industrials end market continues to persist, partially offset by strength in Comms and Compute, as Telecom has bottomed, while data center is strong.
• MAX revealed in 8K that on Oct 30, got initial settlement demand from FTC staff that they are prepared to recommend FTC approve filing complaint against co to seek injunctive and monetary relief and civil penalties
• NXPI posted in-line 3Q results and guided 4Q lower. 3Q results reflect in-line demand in Auto, while Industrial & IoT was below, and Mobile & Comms were slightly above. 4Q revenue is expected to be down 5% q/q, lower than consensus, which likely reflects continued macro weakness in Europe and the Americas.
• SLAB shares slid as reported in-line 2Q results and guided 3Q flat q/q, meaningfully below consensus expectations for 13% q/q growth, as weakness within Industrial IoT broadened offsetting continue strength and recovery within Home & Life.