Mid-Morning Look

Wednesday, August 25, 2021

Stocks open modestly higher, holding in a tight trading range as all eyes remain fixed on this Friday’s Jackson Hole Fed Symposium, with Chairman Powell set to speak at 10:00 AM. New all-time highs for the tech heavy Nasdaq early before fading while the Smallcap Russell 2000 extends gains after its recent 6-day losing streak was snapped this week. News in Washington last night helping sentiment (industrials and materials) after the Democratic-controlled U.S. House of Representatives voted on Tuesday to advance key parts of President Joe Biden’s agenda after reaching a tentative compromise between moderates and progressives over which elements should take priority. Back to Friday’s Fed speaking event, markets await clues to asset tapering timeline, comments about inflation and the growth of the economy due to the impact of the Corona Delta variant. Markets ignoring the increased China rhetoric in recent days after they threatened retaliation against those questioning whether the coronavirus leaked from its labs. Earnings moving the needle for a few names today in retail (JWN plunges, DKS soars) and tech. The move in stock markets in recent days all coming on low volume as investors await the Fed, and end of summer doldrums. Bitcoin slides a 3^rd day, gold falls and yields inch higher.

Economic Data

·     July Durable Goods slipped -0.1% vs. the -0.2% expected and +0.8% prior reading; transportation equipment drove the decrease, falling 2.2%, its first decline after two consecutive months of increases. Excluding transportation, Durable new orders rose +0.7% vs. +0.5% expected and % prior (revised from +0.3%). U.S. July durables ex-defense orders -1.2% vs June +0.9%. July durables shipments +2.2% vs June +1.6%

Sector Movers Today

·     Consumer Staples; CPB downgraded to Neutral from Overweight at Piper saying broad exposure to rising commodity prices, especially steel, is becoming a significant risk to Campbell’s F22 outlook; LMNR shares tumbled after guided Q3 revs $49M, below consensus est. $58.1M and pre-announced 3Q21 EBITDA of $7.2M-$8.4M vs. Stifel $14.9M; SAM downgraded to an Underperform rating at Cowen and a $400 PT as see 30% downside to 2022 consensus EPS estimates saying seltzer’s summer slump continued through mid-August; BYND downgraded to Hold at Argus saying Q3 revenue guidance of $120- $140M is below consensus, driven by labor shortages, a July 4 shift, and decelerating foodservice revenue growth

·     Semiconductors; sector outperforms led by NVDA, TSM, AMD; U.S. officials have approved license applications worth hundreds of millions of dollars for China’s blacklisted telecom company Huawei to buy chips for its growing auto component business, Reuters reported (note the move is a change to trade restrictions imposed by the Trump administration on the sale of chips and other components); PLAB posted a top and bottom line beat along with upside guidance; TSM active after Digitimes said the company reportedly plans to raise its manufacturing prices by 10% to 20% starting with orders expected to be fulfilled in December; MCHP 2-for-1 stock split

·     Pharma movers; JNJ says it has given a booster dose in a small trial 6 months after a single shot of its vaccine and is seeing it produces what it calls a “rapid and robust” in spike binding antibodies; MRK said a Phase 3 study of its Vaxneuvance 15-valent pneumococcal vaccine in infants met its key immunogenicity and safety endpoints; LLY said it signed a multi-year research collaboration and licensing agreement with Lycia Therapeutics; FGEN positive topline results from phase 2 clinical trial of roxadustat for the treatment of chemotherapy induced anemia; ANIX said its Covid-19 compounds are expected to be effective against the delta variant.

Stock GAINERS

·     DKS +16%; Q2 EPS comes in well ahead of consensus at $5.08 vs. est. $2.72, while announces increase in its share buyback to a minimum of $400 mln and a special dividend of $5.50 per share; Q2 sales $3.27B vs. est. $2.82B while Q2 comps rose 19.2% vs. est. 5.5% and raises year guidance (helps sporting goods stores ASO, BGFV, SPWH, HIBB)

·     INTU +1%; Forecasts FY 2022 revenue and profit above estimates after beating expectations for Q4 results – said sees FY22 adj EPS between $11.05-$11.25 vs estimates of $10.86; sees FY revenue in the range of $11.05B-$11.20B vs estimates of $10.96B

·     JNJ ; said it has given a booster dose in a small trial 6 months after a single shot of its vaccine and is seeing it produces what it calls a “rapid and robust” in spike binding

·     MRNA +3%; completes submission of biologics license app to the FDA for its #COVID19 vaccine; efficacy remains durable thru 6 months after 2nd dose; final blinded analysis of Phase 3 cove study shows 93% efficacy

·     PENN +3%; upward momentum in online betting and casino names, with the group rising for a 4^th straight day, boosted by positive vaccine news this week (CZR, DKNG, WYNN rise)

·     SCSC +17%; after its earnings results last night

·     TOL +3%; Q3 EPS $1.87 vs. est. $1.54; Q3 revs $2.26B vs. est. $2.24B; Net signed contract value was $2.98 billion, up 35% compared to FY 2020’s third quarter; contracted homes were 3,154, up 11% – Home deliveries rose 28% to 2,597.

Stock LAGGARDS

·     AAL ; fell initially after the co’s chief revenue officer says recent uptick in Covid cases has created some softness in post end bookings with a rise in closing cancellations (weighed on other airlines) – shares have since rebounded as stocks make another move higher

·     BYND -1%; downgraded to Hold at Argus saying Q3 revenue guidance of $120- $140M is below consensus, driven by labor shortages, a July 4 shift, and decelerating foodservice revenue growth

·     EH -5%; reported Q2 adj operating loss (RMB 49.4M) vs. (RMB 11.1M) last year as revs of $1.9M, down 65.9% from last year

·     JWN -15%; Q2 top and bottom-line results topped estimates, but Q2 sales lag recovery in rival department store operators Macy’s and KSS; also downgraded to Underweight at JPMorgan

·     LMNR -2%; shares tumbled after guided Q3 revs $49M, below consensus est. $58.1M and pre-announced 3Q21 EBITDA of $7.2M-$8.4M vs. Stifel $14.9M

·     SAVA -30%; plunges after late Wednesday it was revealed that a Citizen Petition was filed with U.S. FDA on 8/18 requesting that the agency halt two ongoing trials of Cassava’s lead drug candidate simufilam used in treatment of Alzheimer’s disease, pending a thorough audit by FDA – SAVA issued a statement calling claims made regarding scientific integrity “false and misleading”

·     URBN -9%; 2Q EPS of $1.28 beat consensus of $0.79 on sales and gross margin (GM) as sales increased 20.3% vs F20 (C19), while mgmt expects lower markdown to offset supply chain headwinds