Mid-Morning Look

Wednesday, April 24, 2024

U.S. stock markets are mixed as NYSE breadth weak, with Technology (XLK) and Consumer Discretionary (XLY) doing all the heavy lifting as most other S&P sectors are lower to start the day. Shares of TSLA lifting the XLY sector, rising over 14% following earnings results that missed/came in well below last year numbers, but positive comments on Robotaxis and launching a more affordable model that can be produced on the same manufacturing lines helped sentiment. Tech is higher behind a spike in semiconductors (SOX +2.3%) after TXN results beat, helping analog/auto chip names. Tech also awaits META; IBM earnings results this afternoon. No big sector losers on the day, with modest losses for Materials (for a 2^nd day), Energy, Staples, and Healthcare. Lone piece of U.S. economic data was in-line with consensus (Durable Goods), ahead of GDP data tomorrow and the PCE inflation report on Friday. Treasury yields near morning highs 4.66% for the 10-yr (where it was prior to yesterday’s decline on PMI data), while the dollar bounces and gold fall a 3^rd day after recent record highs. No Fed speakers still until next week FOMC meeting results. Dow Transports are down over 2.5%, led by weakness in ODFL, NSC, HA after earnings/commentary/guidance for each disappointed. Other big earnings tonight expected from CMG, LRCX, NOW, VKTX.

• In Toy Retail: MAT reported a smaller-than-expected loss for Q1 (-$0.05 vs. -$0.12 est.) while Q1 sales of $809.5M missed the consensus of $831.8M but reaffirmed its full-year sales and profit forecasts. HAS shares also rallied behind results after posting a smaller-than-expected drop in Q1 sales and tops profit estimates on leaner inventories and steady digital gaming revenue ($0.61/$757.3M topped ests $0.27/$738M).
• In Oil Services: BKR reported a 2% EBITDA beat and FCF was nicely above Street ests. IET was above the top end of the guide while OFSE was a touch below the midpoint. 1Q IET orders should give confidence in the annual order outlook of $11.5B – $13.5B. New energy orders were an impressive $239MM. WFRD posted a beat and a guide-up, and WFRD posted the highest EBITDA margin in 15 years. ’24 EBITDA margins are now expected to be 25% vs these occurring in ’25. The 2Q guidance is above Street, and 2Q EBITDA margins should be ~25%.
• In Consumer Lending: ENVA reported Q1 adjusted EPS upside of $1.91 (above ests) driven primarily by stronger-than-projected originations and ending loan balances, particularly for SMB; SYF Q1 adj EPS $1.18 missed the $1.34 estimate; Q1 net interest income (NII) rose 8.7% to $4.41 billion from $4.05 billion but below ests $4.45B; said interest and fees on loans increased 15% to $5.3 billion.

• BIIB +6%; on EPS beat while Skyclarys sales of $78 million beat expectations and should assuage concerns about a slow commercial launch. Leqembi sales of $19 million were also better than the lowered expectations.
• BSX +6%; boosted its 2024 adj EPS outlook to $2.29-$2.34 from prior forecast of $2.23-$2.27 after Q1 EPS/revs topped consensus ($0.56/$3.86B vs. est. $0.51/$3.69B); Organic sales +13.1% y/y, Cardiovascular sales +16.3% y/y, Cardiology sales +17.9% y/y, MedSurg sales +7.8% y/y.
• RILY +41%; shares jumped after filing its annual report with U.S. SEC after missing initial deadline of Feb. 29 as well as 15-day grace period; the firm said an independent investigation reached same conclusion as prior internal review that RILY was not involved/knowledge of any alleged misconduct by former Franchise Group CEO Brian Kahn/affiliates.
• TSLA +13%; reported a sharp drop in Q1 revenue, deliveries, margins, and EPS from a year ago, but shares pushed higher overnight after the company said that it would introduce new models in late 2024/2025 to be built on its existing production lines.
• TXN +6%; reported in line at $3.66B, with JunQ guided up ~4% q/q, in line but better than feared; for MarQ 1) Autos/Industrial both down q/q, seeing JunQ stabilizing Industrial trends, 2) 2024E Analog Pricing potentially down LSD% y/y, as it noted vs up 5%/15%/15% in 2023/22/21.
• VRT +11%; shares surge to record high after raises FY24 adj. EPS forecast to the range of $2.29-$2.35 from prior $2.20-$2.26 and sees FY sales $7.54B-$7.69B vs. prior $7.52B-$7.66B; comes after beating Q1 top/bottom line saying strength in orders and acceleration of AI-driven demand boosted results.

• ENPH -1%; Q1 earnings disappointed due to lower demand in Q1 and Q2 on lower-than-expected revenues and an increasingly cautious outlook from lower underlying demand; but mgmt said see signs of a near-term trough;
• GD -5%; Q1 EPS $2.88 missed the $2.93 estimate after failing to deliver any G700 jets while facing sustained supply chain challenges and higher input costs; Q1 revs topped expectations.
• HUM -4%; quarterly profit beat but withdrew its 2025 profit forecast, which it had slashed to $22 and $26 per share from $37 in January, citing more uncertainties.
• MAS -5%; Q1 sales missed while EPS beat; said Q1 North American sales in fell -2% while international sales fell -5%, hurt by soft demand in key markets of Europe and China.
• ODFL -9%; selling accelerated following conference call comments about revs after in-line Q1 results.
• TAP -1%; was downgraded to sell from neutral at Citigroup saying repeating a record 2023 may be tough.
• UBER -3%; along with early weakness in LYFT after Elon Musk talked up the TSLA robotaxi concept on the company conference call last night.