Mid-Morning Look

Tuesday, July 30, 2024

U.S. stocks looking higher in choppy action again, while Smallcap Russell 2000 opened stronger, but has since faded giving back some gains. Still no big bets being taken by investors to start the week (after choppy action on Monday as well) with central bank events beginning tomorrow, as the FOMC, Bank of Japan and Bank of Canada (then Bank of England Thursday) on deck, while concerns over economic growth in China and in Europe (specifically Germany) weigh on sentiment. It’s not all about the central banks of course amid several important U.S. labor/jobs data this week including JOLTs today, ADP payrolls tomorrow and the nonfarm payrolls on Friday. The main movers could be earnings related from some of the biggest tech names in the world due this week including MSFT tonight along with AMD in the chip sector, then AAPL, AMZN later in the week. The Dow Jones Industrial Average rises +100 points to 40,700, despite more than 6% drops for components PG and MRK after earnings as nearly all other components in the “green” led by financials as (GS, JPM, AXP, TRV). Lots of big movers post earnings this morning/overnight (see below). Economic data mixed this morning with JOLTs, confidence and housing data higher. Oil prices extend losses to more than 2-month lows on demand fears and bounce in dollar ahead of OPEC+.

• July Consumer Confidence index 100.3 (consensus 99.7) vs June revised 97.8 (previous 100.4)
• US May 20-metro area home prices +6.8% (consensus +6.7%) from year ago vs revised +7.3% in April– S&P CoreLogic Case-Shiller reports. U.S. May home prices in 20 metro areas +0.3% seasonally adj (consensus +0.3%) vs +0.4% in April and May 20-metro area home prices non-adjusted +1.0% vs +1.4% in April.
• U.S. home prices 0.0% in May from April as index 424.6 in May; U.S. home prices +5.7% in 12 months through May – U.S. regulator.

• In Banks: BAC shares active after a filing showed Warren Buffett’s Berkshire Hathaway Inc. disclosed more sales of BAC, selling its massive, profitable bet on the lender by a total of more than $3B; Berkshire sold 18.4M shares between 7/25-7/29 at $41.65 in sale valued at $766,996,751. FBMS to be acquired by RNST in a proposed deal for all-stock transaction valued at approximately $1.2B; under deal, shareholders of first will receive 1.00 share of Renasant common stock for each share of first common stock. MBIN downgraded to Outperform from Strong Buy at Raymond James, but up target to $58 noting PTPPI/EPS results fell short despite strong fees and loan growth as NII/NIM missed.
• In Airlines: JBLU posted a surprise Q2 profit and delayed plans to buy Airbus planes worth about $3 billion, aiming for profitability through cost-cuts; HA shares rose as ALK and Hawaiian Holdings agreed with the Department of Justice to extend the review period for their planned merger until 12:01 a.m. Eastern Time on August 15. On May 7, Alaska Air (ALK) and Hawaiian Airlines (HA) certified substantial compliance with a request for additional information and documentary material received from the Antitrust Division of the Department of Justice on February 7 in connection with the DOJ’s merger review of the merger, which triggered the start of a review period. ULCC was downgraded to Underweight at JP Morgan, growing increasingly uncomfortable with Frontier’s dependence on sale leasebacks.
• In Aerospace & Defense: HWM shares hit record highs after $2B share buyback, raised both its FY EPS and rev outlook (to $7.4B-$7.8B from $7.22B-$7.37B), driven by strong demand for its engine products and fastening systems from planemakers dealing with a surge in air travel. LDOS Q2 EPS $2.63 vs. consensus $2.27; Q2 revenue $4.13B above consensus $4.06B; reports Q2 net bookings of $4B with a book-to-bill ratio of one for the quarter and 1.1 for trailing twelve months; raises FY24 adjusted EPS view to $8.60-$9.00 from $8.40-$8.80 and narrows its year sales view. WWD shares slid as Q3 EPS beat, but midpoint of year profit, sales and FCF below consensus.
• In Semiconductors: AMD expected to report earnings after the bell tonight. AMKR shares tumbled on results; reported Q2 results exceeding consensus and guiding slightly below the Street, and relative to 90 days ago, AMKR sees auto/industrial and traditional server recovery being weaker than expected. ASML upgraded to Overweight from Equal Weight at Barclay’s with a price target of EUR 1,150, up from EUR 930 saying the recent news flow and concerns have created an attractive entry point. LSCC shares tumbled on results; was downgraded from Neutral to Underperform at Bank America and cut tgt to $47after results, citing slowing growth prospects and muted visibility; Q2 sales were below midpoint of guide and Q3 also below consensus, as Q2 auto/industrial suffered from broad end market weakness and inventory normalization. RMBS reported Q2 earnings that fell short of Wall Street estimates and forecast product revenue for the third quarter below analyst estimates; sees Q3 licensed billings $60M-$66M.

• FFIV +10%; shares jumped after Q3 results were solid vs consensus with top-line and bottom-line metrics coming above expectations and FY/24 guidance moving higher across the board.
• HLIT +23%; shares jumped as Q2 beat (adj EPS $0.08 vs. est. $0.04; Q2 revs $138.7M vs. consensus $133.67M) and sees Q3 revenue $175M-$190M vs. est. $177.83M.
• JBLU +15%; posted a surprise Q2 profit and delayed plans to buy Airbus planes worth about $3 billion, aiming for profitability through cost-cuts.
• PYPL +7%; Q2 adj EPS $1.19 topped consensus $0.99 and revs rose 8.2% y/y to $7.89B, also above consensus $7.82B as logged total payment volume of $416.81 billion, up 11% y/y and mainly driven by growth of 28% in unbranded card-processing volumes and a 9% increase across Venmo; raised guidance.
• SWK +7%; posted EPS beat of $1.09 vs. est. $0.84 on in-line revs while boosted its low end of earnings view and raised free cash flow outlook by $50M.
• VSTO +4%; said it was reviewing alternatives, including a sale, for its outdoor sporting gear business Revelyst and said Czechoslovak Group is considering a Revelyst acquisition, while it is also engaging with MNC Capital on its bid for the whole company.

• AGCO -6%; after posted a sharp Q2 loss as revs fell -15% y/y to $3.25B (vs. est. 3.48B) while targeted FY sales of about $12.5B, below consensus of $13.13B and well below the $14.4B in 2023; said tractor sales fell 8% in North America in the first six months of the year, while combine sales fell 11% in the same region; guided year adj EPS $8.00, well below consensus $10.95 (DE, CNHI, DE shares fell early in sympathy).
• CRWD -7%; after CNBC reported that DAL is hiring attorney David Boies to seek potential damages from the cyber security company and MSFT following the widespread outage earlier this month.
• MRK -7%; as Q2 EPS $2.28 vs. est. $2.17; Q2 revs $16.1B vs. est. $15.84B; said it expects FY EPS in the range of $7.94 to $8.04 on sales of $63.4 billion to $64.4 billion. Below consensus for EPS of $8.16 and sales of $64.29 billion.
• NVAX 22%; after being downgraded to Underweight from Neutral at JP Morgan saying shares are up 267% since the announced strategic partnership with Sanofi (SNY) for Novavax’s COVID-19 vaccine program.
• PG -6%; posted core EPS $1.40 above consensus $1.37 but sales of $20.5B, below consensus $20.74B and down from $20.6B y/y while organic sales rose 2%; guided FY EPS $6.91-$7.05, vs. est. $6.97 and sees FY25 sales growth of 2%-4%, with organic sales up 3%-5%.
• SYM -21%; shares dropped after posted mixed results and offered softer guidance (revenue beat guidance in FQ3’24 but adj. EBITDA fell well short, on weaker System gross margins).
• WWD -15%; shares slid as Q3 EPS beat, but midpoint of year profit, sales and FCF below consensus.