Mid-Morning Look

Wednesday, August 18, 2021

Stocks trade sideways in choppy action the first hour of the day, as major averages look to rebound from their worst daily performance in about 4-weeks on Tuesday. Several factors remain in the forefront of investors’ minds, monitoring the Taliban’s seizure of Kabul, today’s FOMC meeting minutes at 2:00 PM (looking for inflation, taper related timeframe of assets), more headlines/lockdowns overseas amid rising Delta variant and impact of Chinese government regulatory moves. Earnings remain in focus (just not as overwhelming) with LOW posting better monthly comps this morning after rival HD shares tumbled yesterday following its results; TGT a beat in retail; and mixed news in chip sector (ADI, CREE) ahead of NVDA earnings results tonight. More cautious sentiment surrounding equities over last couple of days partly chalked up to growth concerns (weak retail sales data yesterday and mixed housing today today). According to reports, the White House widely expected to announce that most Americans who have received the coronavirus vaccine will need booster shots to address waning immunity and highly transmissible Delta variant that is driving a surge in Covid-19 cases.

Economic Data

·     Housing Starts MoM for July fell (-7.0%) to 1.534M units (weakest since April) vs. est. up 1.60M (vs. June +3.55); Building Permits MoM for July rose 2.6% to 1.635M units vs. est. 1.61M (vs. June -5.3%); July single-family starts -4.5% to 1.111 mln unit rate; multifamily -13.1% to 423,000 rate

Sector Movers Today

·     Retailers; TGT Q2 EPS $3.64 vs. est. $3.49; Q2 revs $25.16B vs. est. $25.08B; Q2 comp store sales rise +8.9% vs. est. +8.2%; board approved a new, $15B share repurchase program; for 2H2 2021, expects high single digit growth in comp sales, near high end of previous guidance range; TJX 2Q EPS $0.64 vs est. $0.57 on net sales at $12.1B vs. est. $11.0B, qtrly open-only comps +20% vs. est. 14.5% (Marmaxx +18%); says all US, Canada and Europe stores are currently open, and 3Q sales off to very strong start with overall open-only comps +mid-teens; PLCE topped Q2 estimates on Q2 earnings but revs missed and declined to provide EPS guidance due to continued COVID-related uncertainty (posted margin beat of 9.7% vs Street at 2%); LZB 1Q adj EPS $0.55 vs est. $0.56 on sales $534.8M vs est. $485.9M, qtrly written comps in co-owned retail segment +22%

·     MedTech Equipment; Agilent (A) posted a healthy Q3 beat with core growth of +21% beating guidance of +15-17%, led by +37% core growth in DGG with EPS of $1.10 also coming in above the $0.99 estimate and also raised the full-year revenue guidance from $6.15B-$6.21B to $6.29B-$6.32B; ALC Q2 EPS $0.56 tops est. $0.45 and raises FY21 EPS view to $2.00-$2.10 from $1.85-$1.95 (est. $1.93) and raises FY21 rev view to $8B-$8.2B from $7.8B-$8B (est. $7.92B); BWAY received 510(k) clearance from the FDA allowing the company to market its Deep Transcranial Magnetic Stimulation System for decreasing anxiety symptoms in patients with depression

·     Hardware, Components & Services; HPQ estimates lowered for Q3 and FY21 at Bernstein due to weakness in PCs stemming from (1) a collapse in the Chromebook market in June and July and (2) very poor availability in FY Q3 of traditional PCs that caused HPQ to lose market share; in optical space, LITE 4Q adj EPS $1.15 (prior method), $1.06 (new method) vs est. $1.05 on revs $392.1Mm vs est. $382.3Mm; guides 1Q adj EPS $1.47-1.61 vs est. $1.45, sees 1Q revs $430-445Mm vs est. $437.3Mm; BB was upgraded to Hold from Sell at Canaccord while maintain $10 tgt after hosted a fireside chat with company, highlighting the various levers for future growth within BlackBerry’s cybersecurity business; CSCO earnings tonight in networking

·     Semiconductors; NVDA earnings tonight in chip space; CREE mostly in-line quarterly results, but shares dropped initially following weaker guidance on higher expenses and supply issues – said that it would be focusing further expansion of SiC production outside of Durham and took a $73.9M write-down during the quarter on the facility; ADI posts Q3 EPS and rev beat with slightly better Q4 forecasts on both top and bottom line as well

Stock GAINERS

·     A +1%; posted a solid 3QFY21 with a top- and bottom-line beat driven by strength across the portfolio, with notable performance in Pharma (+27%), Diagnostics (+28%), and the economically sensitive C&E market – which was up +23% yoy in the quarter and raised guidance

·     ALC +11%; Q2 EPS $0.56 tops est. $0.45 and raises FY21 EPS view to $2.00-$2.10 from $1.85-$1.95 (est. $1.93) and raises FY21 rev view to $8B-$8.2B from $7.8B-$8B

·     ANAB +2%; said it received accelerated approval for its GSK partnered JEMPERLI for the treatment of adult patients with dMMR, as approval triggers a $20M milestone payment, with an additional $15M and $165M in other potential payment

·     BWAY +26%; received 510(k) clearance from the FDA allowing the company to market its Deep Transcranial Magnetic Stimulation System for decreasing anxiety symptoms in patients with depression

·     LOW +10%; little better results than rival HD yesterday (better comps) as Q2 EPS $4.25 vs. est. $4.00; Q2 revs $27.6B vs. est. $26.79B; Q2 consolidated comparable sales decreased (-1.6%) vs. est. decline (-2.2%) and U.S. comparable sales decreased (-2.2%) vs. est. (-2.6%)

·     REGN +1%; said it delivered 135,023 drug doses to U.S. healthcare providers last week, a nine-fold increase from a month earlier – Regeneron estimates that as recently as June, fewer than 5% of high-risk patients were receiving treatment, before increasing recently to as much as 30%

·     TLRY +2%; acquired majority of outstanding convertible notes of MedMen Enterprises (MMNFF) – is paying about $118Mn for a ~21% contingent stake in MedMen as per Cantor, which would imply $561Mn for 100% of the MedMen equity

·     VIAC +4%; upgraded to Overweight from Equal Weight at Wells Fargo with a price target of $60, up from $45 saying the company’s streaming efforts are bearing fruit and have impressed us, so is moving from historical bears to constructive bulls

·     VRPX +83%; after the firm said it received a pre-investigational new drug response from the U.S. FDA for an antiviral barrier product

Stock LAGGARDS

·     CDK -8%; falls on guidance as sees FY22 EBITDA of $655M-$685M, vs. Street’s $691M ests, as topline strength is offset by investment spend, particularly at Roadster

·     CREE -12%; mostly in-line quarterly results, but shares dropped initially following weaker guidance on higher expenses and supply issues (sees 1Q revs $144-154Mm vs. est. $153.4Mm)

·     DIDI -6%; after officials in China said the Ministry of Transportation is drafting measures to ensure the rights of ride-hailing and trucking platform drivers – Bloomberg

·     PLCE -5%; after the company topped expectations on Q2 earnings but missed on revenue and declined to provide EPS guidance due to continued COVID-related uncertainty.

·     TWTR -0.6%; on track for a 9th straight day of declines