Mid-Morning Look

Wednesday, July 28, 2021

U.S. stock markets choppy ahead of the FOMC policy meeting later this afternoon, as better earnings results from Google-parent Alphabet props up the Nasdaq after its biggest drop in over two months, while AMD, AAPL and MSFT also post better quarterly results (AAPL slips on conservative rev growth views). The FOMC meeting results today at 2:00 PM and Fed Chairman Powell at 2:30 – while no action is expected from the FOMC today, there may be a possible mention of tapering the central bank’s bond program. The Fed is currently purchasing $120B in securities a month, including $80B in Treasury bonds and $40B in mortgage-backed securities. Chinese tech-related exchange traded funds are rebounding, with the KraneShares CSI China Internet ETF (KWEB) rising +7% after the ETF faced was crushed over the past four days and reaching a 14-month low after tighter restrictions in Beijing broadens out from tech across various industries. Bloomberg noted that China’s securities regulator convened a virtual meeting with execs of major investment banks on Wed night, attempting to ease market fears. Earnings overload this week with more than 1/3 of S&P 500 companies expected to report – and beat rate remains around 90% thus far. No fear into the Fed with a sharp rebound off lows to start the day.

Economic Data

·     Advance Goods Trade Balance for June at $-91.2B vs. the deficit est. of $-88.0B as Retail Inventories (M/M) for June up 0.3% vs. est. -0.5%

Sector Movers Today

·     Restaurants; MCD global comparable sales +10.5% vs. a consensus of +38.7% and U.S. comparable sales were +25.9% vs. consensus of +23.1% – follows $0.25 EPS beat on better revs at $5.89B; SBUX posted record profit and sales for the quarter with an overall increase in comparable-store sales of 73% relative to the Q3 last year as U.S. comp sales rose 84% and raised its 2021 EPS view from $2.90-$3.00 to $3.20-$3.25; CAKE posted a wider EPS miss of $0.37, missing ests by $0.41 and said expected cost of sales inflation of 3% for the back-half of the year; WING shares slide 2Q EPS $0.38 vs est. $0.33, domestic comps +2.1%, revs $74Mm vs est. $73.4Mm; reit guide for +mid-single domestic comps – total domestic stores comp sales growth +2.1% vs. +31.9% y/y, estimate +1.95%

·     Transports; NSC Q2 profit that more than doubled to beat expectations, as revenue growth was more than triple the increase in costs, reported Q2 EPS $3.28 vs est. $2.94 on revs $2.8B vs est. $2.74B, railway operating ratio was a record 58.3%; Ryder (R) posted Q2 EPS $2.40 vs est. $1.38 on revs $2.38B vs est. $2.23B, sees Q3 EPS $1.95-2.05 (est. $1.69) and raised FY21 EPS view to $7.20-7.50 (est. $5.83) from $5.50-5.90; CHRW Q2 EPS $1.44 vs est. $1.33 on revs $5.5B vs est. $4.9B; ODFL reported Q2 EPS $2.31 vs est. $216 on revs $1.3B vs est. $1.25B, authorized a new buyback plan of up to $2B; HA Q2 adj EPS ($1.44) loss vs est. ($1.85) loss on revs $410.8M vs est. $399M, sees Q3 capacity 20-23% lower vs 2019 and revs 28-33% lower than 2019

·     Pharma movers; BMY Q2 adj EPS of $1.93 and revs $11.7B slightly above estimates as backs full-year EPS outlook of $7.35-$7.55 and expects worldwide revenues to grow in the high-single digits; PFE Q2 results beat the top and bottom line consensus and raises FY21 adjusted EPS view to $3.95-$4.05 from $3.55-$3.65 (est. $3.70) and raises FY21 revenue view to $78B-$80B from $70.5B-$72.5B (est. $72.78B); GSK reported better than expected quarterly results, helped by the performance of its pharmaceuticals and vaccines businesses but only reiterated its guidance range for 2021 for a decline of mid to high-single digit percent Adjusted EPS at CER; in specialty pharma, TEVA Q2 adj EPS of $0.59 in-line with estimates while revs of $3.91B missed the $4.02B estimate as Copaxone North America revenue fell -36% YoY to $152M while Europe Copaxone revenue rose 19% YoY to $100M

·     Casinos, Gaming, Lodging & Leisure sector; theme parks and movie theatres get a bump after SIX and IMAX reported better-than-expected quarterly results; SIX Q2 EPS handily topped estimates (profit vs. expected loss) saying revs down 17% compared to the level of 2019, while attendance was 8.5M guests vs. 10.5M in 2019; in casinos, BYD Q2 adj EPS easily topped views with $1.54 topping the est. $0.90 on better revs $893.6M vs. est. $790.35M, aided by stimulus/vaccine; MGM upgraded to Neutral from Sell with $43 tgt at Goldman Sachs saying since Sept ’20 downgrade, a robust leisure-led recovery has taken hold, with Strip GGR +11% (hold-adjusted) vs. 2019 in May even as visitation remained -22% vs. 2019

Stock GAINERS

·     AMD +1%; Q2 revs almost doubled to $3.85B, beating the $3.62B estimate while guides Q3 revs about $4.1B, plus/minus $100M vs. est. $3.82B

·     BA +4%; shares rise after a strong earnings report with a surprise quarterly profit as Q2 adj EPS 40c blew out est. (81c) loss on revs $17B (+12% vs Q1, +44% YoY) vs est. $16.54B, and said it plans to almost double its current monthly production of 737Max planes

·     CHEF +16%; Q2 adj EPS $0.04 vs. est. loss (-$0.32); Q2 revs $423M vs. est. $355M; said not issuing guidance at this time

·     GOOGL +3%; crushed it for the quarter as both revenue and profit surged to record highs powered by a rise in advertising spending – said ad revs rose nearly 70% to $50.44B and Ad revenue for its streaming video platform YouTube soar 83.7% to $7B

·     ISBC +7%; as CFG said it will buy the New Jersey-based bank holding company in a cash-and-stock deal valued at $3.5 billion

·     MAT +1%; reported a big 2Q21 upside surprise, with sales +40% and +19% vs. 2Q19, reflecting double-digit POS growth and more retail inventory re-stocking and raised 2021 sales guidance to +12%-14% from +6%-8%, with EBITDA +9% to $875M-$900M

·     SIX +1%; Q2 EPS handily topped estimates (profit vs. expected loss) saying revs down 17% compared to the level of 2019, while attendance was 8.5M guests vs. 10.5M in 2019

Stock LAGGARDS

·     AAPL 1%; reported significant beat in quarter, driven by iPhone upside as iPhone revenue of $40.0B (+50% Y/Y), driven by strength in both units (+20% Y/Y) and ASPs (+25% Y/Y) – but indication for sub 36% revenue growth in FQ4 to September weighed on shares

·     CAKE -11%; posted a wider EPS miss of $0.37, missing ests by $0.41 and said expected cost of sales inflation of 3% for the back-half of the year

·     HMLP -60%; after the co slashed its quarterly cash distribution to 1c per common unit from 44c

·     SBUX -3%; as slowing growth in China overshadowing a jump in U.S. same-store sales in its quarterly result, but analysts remain positive post record setting Q2 results

·     SPOT -8%; as reported a 20% jump in paid subscribers for its premium service, but quarterly MAUs of 365 million missed analysts’ expectations of 371.5 million along with mixed guidance

·     TDOC -4%; Q2 revenue, adjusted EBITDA, total visits, and adjusted gross profit all exceeded consensus estimate, (though post Q2 miss and wider loss for year) while commentary around 2022 membership growth sounded more cautious

·     WING -5%; on mixed results with headline EPS and revs topping views but posted a YoY income decline (to $11.3M from $11.5M) as domestic comp sales rose 2.1%, below the 2.9% estimate

Syndicate:

·     Duolingo (DUOL) 3.7M share IPO priced at $102.00

·     Independence Realty Trust (IRT) 14M share Secondary priced at $17.75

·     MeridianLink (MLNK) 13.2M share IPO priced at $26.00

·     PowerSchool (PWSC) 39.5M share IPO priced at $18.00

·     Snap One (SNPO) 13.85M share IPO priced at $18.00