Mid-Morning Look

Wednesday, April 28, 2021

Stocks are trading mixed as the S&P 500 index touched another all-time high and the Dow Transports remain on track for a 13^th straight week of gains (longest in its history), while the tech heavy Nasdaq rebounds off morning declines in another all-out buying blitz into the FOMC meeting results later this afternoon. The Dow Jones Industrial Average underperforms early, falling after mixed results from several components as AMGN the biggest drag on its earnings miss, while BA posts larger than expected quarterly loss and MSFT declines despite strong results (profit taking). Visa a bright spot in earnings in card services with improving economic hopes (COF also better EPS results). For the FOMC meeting, Powell is not expected to give any additional color on tapering timing and reiterate the Fed’s high bar for liftoff. Expectations are for a status check of the economic recovery relative to the forecast upgrades they unveiled at their March meeting. The other focus other than the Fed (and obvious earnings blitz), is Biden with fiscal stimulus the main area of focus ahead of his speech to Congress tonight. As expected, reports noted Biden will outline an American Families Plan worth $1.8T that will be largely paid for by raising taxes on the wealthy. Plan will largely be paid for by raising taxes on the wealthy. It proposes raising top income-tax rate to 39.6% from 37%. For households making more than $1M, top rate on capital gains and dividends would rise to 39.6% from 20% (and go to 43.4% when including the 3.8% existing payroll and investment taxes). Also eliminates the carried interest provision and the step-up basis but does not change the inheritance tax. Goldman Sachs with bullish call on energy complex today helping boost stocks as firm expects the biggest jump in oil demand ever – a 5.2 mb/d rise over the next 6m, 50% larger than the next largest increase over that time frame since 2000, coinciding with commodities rallying another 13.5% over the next six months, with oil hitting $80 per barrel. U.S. advance march retail inventories excluding autos +0.6%; advance march goods trade balance -90.59 billion dollars and advance march wholesale inventories +1.4%.

Sector Movers Today

·     Semiconductors; several chip makers with earnings overnight as AMD said it now expected 2021 revenue to rise 50% from a year earlier, implying $14.64B, above its previous forecast of a 39% jump, which followed better-than-expected results for Q1; TXN posted strong results and guidance solidly above expectations, with strength across auto, industrials, and personal electronics, which in aggregate grew ~40% y/y, though 2Q guidance was 500 bps below seasonal; MXIM reported their MarQ with Revs/GM/EPS were 4%/11bps/10% above consensus with all end markets growing QQ; TER posted a beat for Q1 and much higher guide for Q2 saying a recovery for industrial automation is in full swing

·     Transports; CHRW reported a strong 31% beat to 1Q consensus estimates on the strength of Global Forwarding results; UPS upgraded to market perform at BMO Capital with $195 tgt after earnings beat, saying the co has benefited from both constrained transportation markets and revenue quality/ productivity initiatives; NSC Q1 EPS $2.66 above $2.54 est.; Q1 revs $2.6B vs. est. $2.62B; qtrly railway operating revenues of $2.6 bln increased 1%, or $14 mln, compared with first-quarter 2020; qtrly railway operating expenses were $1.6 bln; shipping names active (SBLK, SHIP, EGLE) as the Baltic Dry Index rises to over 10-year highs, up 68 points, or 2.4%, to 2,957, a peak since mid-September 2010 (extended its winning streak to an 11th straight session) – the Capesize index rose 164 points, or 3.6%, at 4,680, its highest in more than one year

·     REITs; BXP reported 1Q21 FFO/sh of $1.56 (high end of guidance at $1.53-$1.57), above consensus at $1.55, driven by +4c from better portfolio performance +1c of higher fee income, partially offset by -4c non-cash write-off from preferred stock redemption; HIW reported 1Q21 FFO/sh of $0.91, above consensus at $0.87; UDR Q1 adj FFO/shr was in-line at 47c on revs $301.4M vs est. $300.7, and now see FY21 FFO $1.76-1.85 vs previous range of $1.87-1.89; WRI Q1 core FFO/shr $0.48 vs est $0.41, cash collection of rent and billable expenses were 95% of total billed in 1Q; ESS Q1 FFO $3.07 vs. est. $3.06, guided Q2 FFO to $2.84-3 (est. $3.04), and reaffirmed FY21 FFO guidance range $11.86-12.46 (est. $12.30); EQR Q1 FFO in-line 68c on revs $597.6M vs est. $592.6M, and sees Q2 FFO 67-71c (est. 69c) and FY FFO $2.70-2.80 from $2.60-2.80; QTS Q1 FFO 76c on revs $148.7M

·     Insurance; CB Q1 core EPS $2.52 vs. est. $2.49, net premiums written $8.66B (+8.6% YoY) vs est. $8.38B, net premiums earned $8.22B vs est. $8.25B (increased share buyback authorization to $2.5 billion from $1.5 billion); PFG Q1 EPS $1.53 vs. est. $1.34 on revs $3.11B vs est. $3.87B, a record AUM of $820.3B, raised its dividend by 5% to 61c/shr; Piper upgraded MMC to OW with a $145 pt after the company’s strong Q1 earnings report yesterday with lockdowns not impacting organic growth as much as expected, expectations that commercial insurance rate increase continue at a high pace throughout the year, and valuation

·     Restaurants; SBUX posted a mixed Q2 as EPS beat but revs just fell short of consensus while global com store sales increased 15% vs. the 17.3%; WING 1Q EPS $0.44 tops est. $0.31 on revs $70.7Mm vs. est. $68.8Mm, domestic comps +20.7%, digital sales mix 63.6% vs 43.3% year ago and guides +MSD comps growth and 11%+ unit growth for FY; EAT Q3 results missed expectations with adj EPS 78c missing est. 82c and revs $828.4M missing est. $848.4M; YUM Q1 adj EPS $1.07 topped consensus $0.86 on revs $1.49B vs est. $1.45B; YUMC Q1 adj EPS 54c vs. est. 46c on revs $2.56B vs. est. $2.14B, system sales +34% (KFC +24%, Pizza Hut +57% ex FX), comps +10% (KFC +5% vs est. +7.1%, Pizza Hut +38% vs est. +29.3% ex FX), and said the recovery of same-store sales to 2019 levels will be uneven

Stock GAINERS

·     ADMA +36%; after the FDA has granted approval for its expanded manufacturing process, enabling fractionation and purification of a 4,400-liter plasma pool for the manufacture of Intravenous Immune Globulin

·     AMD +4%; said it now expected 2021 revenue to rise 50% from a year earlier, implying $14.64B, above its previous forecast of a 39% jump, which followed better-than-expected results for Q1

·     COF +5%; swung to a Q1 profit, beating analyst expectations, despite slightly lower revenue in the period – said net income was $3.24 billion, compared with a loss of $1.42 billion a year ago

·     DB +10%; swings to better-than-expected net profit for Q1 as strength at the investment bank helped offset the headwinds of an ongoing restructuring program and said it sees 2021 revenues to be “essentially flat”, compared with a previous estimate of “marginally lower”

·     FANG +3%; as energy complex outperforms early, with E&P and service names jumping

·     G +9%; will replace GNW in the S&P MidCap 400

·     GOOGL +5%; new all-time highs, with its price tgt raised by several analysts after crushing earnings while revenue growth reaccelerating across most of Alphabet’s core businesses as Search and YouTube’s gross revenue growth accelerated +30% & +49% Y/Y, respectively—and 1Q21 revenue and operating income coming in 8% and 39% above consensus

·     GSX +11%; after Goldman Sachs upgraded to Buy as acknowledges ongoing regulatory uncertainties may continue, but believes the current share price provides compelling risk-reward

·     MDLZ +4%; following a Q1 top and bottom-line beat, driven by an increase of 3.8% in organic net revenue, while guides for high single-digit growth

·     SHOP +11%; Q1 rev more than doubles to $988.6M vs. est. $865.5M, as benefited from the past year’s COVID-19 driven boom in online buying and selling, as gross merchandise volume (GMV) soared 114% to $37.3 billion in Q1

Stock LAGGARDS

·     AMGN -8%; reported a choppy quarter missing on both the top ($5.90B revenue vs. consensus $6.24B) and bottom lines (EPS $3.70 vs. $4.04) as Bernstein noted the most important factor here was softer I&I pricing

·     BA -3%; reported a Q1 loss ($1.53) wider than the est. ($1.16) on revs $15.22B vs est. $15.12B as its commercial airplane and global services segments missed estimates but its defense, space, & security revenue beat

·     ENPH 13%; beat consensus by $0.02 driven by higher revenue and GM offset by higher OPEX but Q2 revenue guidance was $300M-$320M below the consensus of $321M

·     DISCA -6%; after missing Q1 estimates on profitability saying it had ended the quarter March 31 with 13M DTC subs, but was below some analyst ests (RBC at 14.2M)

·     FFIV -10%; as mid-point of co’s Q3 adj EPS outlook is $2.45, below analysts’ expectations of $2.50 while Q2 results beat estimates, helped by strength in its product and system revenue growth

·     PINS -11%; warned of a slowing user growth in the U.S. as people are dialing down time spent on social media, while reports a 78.4% rise in Q1 revenue to $485.23M, above the $473.6M estimate

·     PLX -40%; after FDA rejection of experimental therapy for Fabry disease

·     SBUX -3%; posted a mixed Q2 as EPS beat but revs just fell short of consensus while global com store sales increased 15% vs. the 17.3%

·     SHOO -5%; Q1 EPS and revs above ($0.33/$361.0M vs. est. $0.17/$336.0M while margins above consensus and inventories +4.2% y/y, but Q2 EPS guide $0.26-$0.28 below consensus $0.34 and revenue $360M-$365M below consensus $368.7M

·     SPOT -9%; posted Q1 EPS loss of eu0.25 on in-line revs eu2.15B (+16% YoY) with MAUs 356M vs est. 361.8M, and updated its full-year guidance for operating loss of eu150-250M from eu200-300M, revenue to eu9.11-9.51B from eu9.01-9.41B, and MAUs to 402-422M from 407-427M