Mid-Morning Look

Thursday, April 22, 2021

U.S. stocks wavering between gains and losses early following mixed economic data and another round of mostly better earnings results. It was a busy morning of airline earnings results (LUV, AAL, ALK, SAVE) after what to this point has been dismal results from others (UAL, DAL); metals earnings plentiful (FCX, NUE, CLF, RS); markets prepare for earnings in tech with INTC and SNAP tonight. Gold prices pullback from 2-month highs, dragging down gold miners. After this morning results, over 100 S&P components have reported with earnings beat rate thus far above 80% on what is considered easy comps. Morning headlines dominated completely by earnings with no Fed speakers and no macro headline shocks other than rising Covid-19 infection rates in parts of Asia, India.

Economic Data

·     U.S. weekly jobless claims fell to 547,000 in the latest week, below the 617 estimate and from 586,000 prior week (previous 576,000); the 4-week moving average fell to 651,000 from 678,750 prior week; continued claims fell to 3.674M in latest week vs. est. 3.667M; and the U.S. insured unemployment rate fell to 2.6% from 2.7% last week

·     Existing home sales for March fell -3.7%, reported at 6.01 mln unit rate (below consensus 6.19 mln) and down from February reading of 6.24 mln; March inventory of homes for sale 1.07 mln units, 2.1 months’ worth; national median home price for existing homes $329,100, +17.2% yoy

·     March Leading Economic Indicators (LEI) rises +1.3% vs. est. 1%

Sector Movers Today

·     Auto sector; Ford (F) mentioned favorably by two analysts as Wolfe upgraded to outperform with $15 tgt as see a very clear path for further improvement in 2022 and beyond, while Deutsche Bank added it to their short-term Catalyst Call Buy List citing favorable vehicle mix/pricing, combined with a robust product cycle, improved warranty performance; in auto preview, Wells Fargo bullish on GM, cautious on VC and most bullish on DAN; in electric vehicle space, which saw strength yesterday as the U.S. and China moved on cutting emissions, saw weakness in FSR today as Goldman downgraded to Sell with $10 tgt and cut RIDE to neutral with $10 tgt as well

·     Biotech movers; sector remains pressured, down about 10% from its early February record highs (XBI with shares of SRPT, FOLD, FREQ among those losing more than half their value this year alone – some causes include efforts in Washington to reduce drug prices, as well as recent reports the FTC has indicated it is preparing to take a harder line on drug-company mergers; BIIB Q1 beat ($5.34/$2.69B vs. rest. $5.04/$2.65B) while raised year EPS view but maintained rev outlook, as Tecfidera, Spinraza, and Tysabri sales have fallen ~56.4%, ~7.9%, and ~3.7% to $479.3, 520.5, and 503.3M, respectively; BNGO announces publication of new approach to study DNA replication using optical genome mapping with Saphyr, potentially supporting development of cancer drugs targeting replication pathways

·     Retailers; TSCO raises FY comp sales +5% to +8%, saw -2% to +1% after Q1 results easily topped consensus (comp sales jumped 36.8%) and boosts FY21 revenue to $11.4B-$11.7B from prior view for $10.7B to $11.0B (est. $10.88B consensus); NKE tgt cut to $175 from $183 at UBS saying the reaction in China to Nike’s statement on Xinjiang is bigger than they expected as checks suggest Nike’s sales growth rate turned negative in China almost immediately after the controversy began and the company’s growth rate has not yet started improving; POOL 1Q EPS $2.32 vs. est. $1.15 on sales $1.06B vs. est. $823.9Mm and guides FY EPS $11.85-12.60 vs. est. $9.46 (also pos for LESL); SNBR Q1 EPS beat on tax but comps missed (+20% vs. est. 30%) on sourcing delays and said $50m of sales will shift into Q2 and noted demand comps was 30%; WHR Q1 beat across the board and raised guidance and added to buyback

·     Media movers; DIS signed a movie licensing deal with SONY that will bring Spider-Man and other Marvel titles to the Disney Plus streaming service starting next year; Vivid seats, a leading concert, sports and theater ticket marketplace, to become a publicly-listed company via merger with HZACSling TV launches new exclusive DKNG sports betting information channel; in advertising, IPG downgraded to market perform at BMO as expect co to continue leading in organic growth, but this is increasingly reflected in the premium valuation; MTCH is forking over an increasing chunk of its sales to Apple and Google as users of its dating platforms like Tinder spend more money within mobile apps

·     Metals; busy morning of earnings in metals (steel/copper) space as FCX reported in-line Q1 EPS and sales; RS with a Q1 EPS and revenue beat and better Q2 guidance ($4.2–$4.40 vs. est. $3.27); CLF Q21 sales of $4.05B missed the $4.22B estimate while posts Q1 profit and raises FY21 adj Ebitda guidance to $4B; NUE said strong demand and higher average selling prices brought the company to its most profitable quarter on record (but sales fell short of ests at $7.02B vs. est. $7.19B on mostly in-line earnings) – average sales price per ton rose 25% over the year-ago period and steel mills total shipments rose about 1% to 6.54 million tons

Stock GAINERS

·     CMG ; price tgt raised by several analysts, with Cowen taking it to $1,725 from $1,600 following another stellar quarter that was capped off with high-teens same-store sales and the highest restaurant-level margin in over five years (Q1 adj EPS $5.36 vs. est. $4.89)

·     EFX +16%; posted strong Q2 guidance, boosted its 2021 guidance after a Q1 beat (guides Q2 adj EPS of $1.60-$1.70 vs. consensus estimate of $1.51 on better revs)

·     IQV +4%; reported 1Q results with revenue of $3.41B topping 3.18B est. and better EPS of $2.18 (vs. est. $1.86 cons), with broad strength in its three segments w/ solid bookings/backlog and raised its guidance

·     POOL +8%; 1Q EPS $2.32 vs. est. $1.15 on sales $1.06B vs. est. $823.9Mm and guides FY EPS $11.85-12.60 vs. est. $9.46 (also pos for LESL)

·     SKLZ +4%; after ARK Investment discloses 5.07M shares of Skillz bought

·     TDC +29%; positively preannounced Q1 results as recent momentum in the cloud-first strategy, solid execution and flexible pricing to drive new customer acquisition continued to start the year

·     TSCO +6%; raises FY comp sales +5% to +8%, saw -2% to +1% after Q1 results easily topped consensus (comp sales jumped 36.8%) and boosts FY21 revenue to $11.4B-$11.7B from prior view for $10.7B to $11.0B (est. $10.88B consensus)

·     XM +17%; tops Q1 estimates with $238.6M in revenue, up 36% on the year and about $11M ahead of estimates, and EPS of $0.01, four cents better than expected (shares of XM were upgraded at both Piper and BMO post earnings)

Stock LAGGARDS

·     CIEN -1%; comm equipment names slip (CIEN, JNPR, COMM) after AT&T (T) reduced 2021 cap-ex to $17B from $18B

·     CS -4%; the WSJ reported that CS established over $20B of exposure to investments related to Archegos Capital, but the bank struggled to monitor its exposure before the fund was forced to liquidate many of its major positions

·     FSR -8%; downgraded to Sell with $10 tgt at Goldman Sachs as incrementally concerned about what we believe is the company’s late time to market (the company is planning to enter the industry starting in 4Q22 with its Ocean SUV) as competition increases

·     NUE -4%; said strong demand and higher average selling prices brought the company to its most profitable quarter on record (but sales fell short of ests at $7.02B vs. est. $7.19B on mostly in-line earnings)

·     SNBR -13%; Q1 EPS beat on tax but comps missed (+20% vs. est. 30%) on sourcing delays and said $50m of sales will shift into Q2 and noted demand comps was 30%

·     UNP -2%; the last of major rails to report with EPS of $2.00, missing the $2.05 estimate on mostly in-line revs of $5.00 vs. est. $5.02B

Syndicate:

·     Evolus (EOLS) 9M share Spot Secondary priced at $9.50

·     KnowBe4 (KNBE) 9.5M share IPO priced at $16.00

·     NeuroPace (NPCE) 6M share IPO priced at $17.00

·     Zymergen (ZY) 16.13M share IPO priced at $31.00