Mid-Morning Look

Tuesday, April 27, 2021

U.S. stocks open lower following a busy morning of corporate earnings, with small profit taking early in the S&P 500 and Nasdaq after closing at record highs the day prior. Thru this morning, out of 153 S&P components that have reported, 88% have beaten estimates with average earnings beat of 17.2% (and Q2 estimates raised 60%) as per CNBC. Dow Transports outperform, up 1.7% to new all-time highs of 15,350 (taking out prior high 15,275), led behind gains in UPS after earnings beat (trades record high), as shares rise over 10%. Economic data again coming in strong, with Consumer Confidence jumping from prior month and well above consensus views. Huge night of earnings in tech space coming up with MSFT, GOOGL results, along with AMGN, MDLZ, Visa, PINS, among others. Markets also position ahead of the 2-day FOMC policy meeting as Goldman Sachs says amidst low core inflation, unemployment rate at 6%, and still higher broader slack, they do not expect incremental color on tapering. Treasuries slip, with yields rising across the curve. The dollar strengthened. Commodities surged to the highest levels in almost three years, buoyed by copper. Oil rose and gold fluctuated. Bitcoin pushed above $55,000.

Economic Data

·     Consumer confidence index for April 121.7 (well above consensus 113.0) while March revised to 109.0 (previous 109.7); the expectations index 109.8 in April vs. March revised 108.3 (previous 109.6) and present situation index 139.6 in April vs. March revised 110.1; the jobs hard-to-get index 13.2 in April vs. March 18.5

·     S&P Case-Shiller Feb 10-City Home Price Index up 11.7% Year Over Year; S&P Case-Shiller Feb 20-City Home Price Index up 11.9% Year Over Year; S&P Case-Shiller Feb U.S. National Home Price Index up 12.0% Year Over Year

Sector Movers Today

·     Auto sector; TSLA Q1 adj EPS 93c vs. est. 80c; Q1 revs $10.38B vs. est. $10.29B – largely in line with expectations as auto GMs were marginally better than expectations, but higher EV credits (+$518M vs. $337M) and a gain from a sale of bitcoin ($101M) were largely offset by higher opex ($370M) resulting in inline EPS; LYFT shared details of its agreement to sell its Level 5 Self Driving division to Woven Planet, a subsidiary of Toyota, for $550MM; ABG posted Q1 EPS and revenue beat as Same store – Total revenue +18.3% and gross profit +21%, New vehicle revenue +21.6% and gross profit +60%, Used vehicle retail revenue +20.7%; in online auto, Wells Fargo said with eAuto Q1 prints around the corner, checks are coming up roses, yet share performance has been volatile in the last month (CVNA +14%/+29%/-6% vs. SPX +5%) on the back of rising rates, value over growth positioning and lingering concerns around inventory supply; RBC Capital raises ORLY estimates and price target (to $595) ahead of Q1 results

·     Semiconductors; NXPI reported MarQ at $2.57B, in line with $2.56B consensus and guided the JunQ flat q/q and in line with consensus at $2.54B, as margins were guided to 55.5% (cons. 53.7%) and said MarQ Auto sales were up 3% q/q (24% y/y); SYNA upgraded to Outperform at Cowen and up tgt from $130 to $176 saying recent checks in Taiwan indicate significant price hikes for display drivers and touch controllers, supporting margin leverage; ENTG shares slip as misses Q1 EPS by 2c on light revs, though guided Q2 above estimates (Q2 revenue between $530M-$545M (est. $523.35M) and EPS 77c-82c vs. est. 73c

·     Media & Telecom movers; VZ downgraded to neutral from Buy at Moffett as still believe Verizon will post stronger ARPU growth in 2021…but says that alone isn’t enough; SBAC improved its outlook for the year +$48M/ +$11M/ +$0.155 for revenues/ adj. EBITDA/ AFFOS at the midpoints, due to better tower activity; RBC Capital said they reiterate DISCA as preferred pick ahead of Q1 earnings given its relative positioning across Pay TV and a streaming opportunity that continues to be underappreciated; Goldman Sachs said DIS, VIAC remain top picks in media into earnings citing growth in streaming subscribers and pace of ad revs recovery

·     Banking; UBS said it lost $861M from Archegos implosion, a bigger hit than analysts expected, and Nomura (NMRsaid it is now expecting a $2.85B loss from its previous estimate of around $2B. These follow last week’s estimates from CS of a $5.5B cost from the fallout for the bank, MS saying it incurred a $911M loss, and MUFG warning it faces a $300M loss; UBS reported Q1 EPS 49c on NII $1.61B; HSBC posted Q1 EPS 19c vs est. 12c on revs $12.99B vs est. $12.94B, adj profits before tax $6.4B (+79% YoY) vs est. $4.3B; SF Q1 EPS $1.50 on revs $1.135B both topped consensus views of $1.39 on $1.07B and it raised its dividend to 15c from 11c; IVZ Q1 EPS 68c vs est. 62c on revs $1.25B vs est. $1.22B, AUM $1.4T (+4% vs 4Q20), net long-term inflows $24.5B; CATY Q1 EPS 92c vs. est. 77c, reversal of provisions for credit losses of $13.6M

Stock GAINERS

·     AAN +9%; Q1 EPS $1.24 vs. est. 57c; Q1 revenue $481.1M beats $430.6M est. and raises FY revenue to $1.725B-$1.775B vs prior $1.650B-$1.70B on better Ebitda view $190M-$205M vs prior $155M-$170M

·     ALDX +22%; after reports positive top-line results from late-stage trial of its investigational new drug in patients with allergic conjunctivitis as achieved statistical significance for all main and secondary goals, including itching, redness and tearing

·     CROX +14%; Q1 beat (EPS $1.49 vs. est. $0.88 and revenue $460.1M vs. est. $415.8M) and guides FY revenue growth +40%-50% vs prior +20%-25% and consensus +25.2% and OM 22%-24% vs prior 18%-19%

·     GMBL +9%; initiated new Buy and $21 tgt at HC Wainwright saying focus on esports is a differentiator and in our view positions the business for substantial growth while being somewhat insulated from the more competitive traditional online sports wagering

·     GME +6%; after announces completion of previously announced ATM offering

·     PENN +4%; gets a boost after positive analyst coverage in the online wagering sector as Needham initiated DKNG Buy and $71 tgt, PENN Buy and $151 tgt at Needham

·     PHM +4%; strength in the homebuilder after strong quarterly results

·     UPS +10%; gives the transport index a nice boost following earnings, as Q1 adj EPS of $2.77 topped the est. $1.72 and Q1 revenue $22.9B beat the est. $20.49B, though said is not providing FY21 earnings, revenue guidance

Stock LAGGARDS

·     CDNS -8%; posted solid 1Q results, but the magnitude of the 2021 guidance raise was more in line with consensus levels

·     ENTG -2%; as misses Q1 EPS by 2c on light revs, though guided Q2 above estimates (Q2 revenue between $530M-$545M (est. $523.35M) and EPS 77c-82c vs. est. 73c

·     GE -2%; after reported lower revenue and a loss in Q1 as the company’s jet-engine business and divestitures weighed on results – GE’s revenue fell 12% to $17.1 billion, reflecting a 28% decline in its aviation unit and a 9% drop in its healthcare unit

·     HYFM -12%; following 4M share stock offering, using proceeds for $78M acquisition of plant nutrients firm Heavy 16, while also issues Q1 Ebitda and sales guidance

·     LLY -2%; Q1 EPS trails estimates (EPS $1.87 vs. est. $2.13 on revs $6.806B vs. est. $6.988B) and guidance lags consensus (FY revs $26.6-27.6B vs. est. $27.7B)

·     MMM -2%; posted a profit beat on pandemic-fueled demand for safety products, but warned supply chain disruptions from the pandemic and February winter storm are pushing costs higher

·     RNWK -20%; as 8.25M share Spot Secondary priced at $2.70

·     SYF -3%; reported Q1 EPS $1.73 vs. est. $1.38, interest and fees on loans $3.7B (-14% YoY), purchase volume $34.7B (+8%);

·     TSLA -3%; Q1 adj EPS 93c vs. est. 80c; Q1 revs $10.38B vs. est. $10.29B – largely in line as auto GMs were marginally better than expectations, but higher EV credits (+$518M vs. $337M) and a gain from a sale of bitcoin ($101M) were largely offset by higher opex ($370M)