Mid-Morning Look

Thursday, November 07, 2024

Another day, another push higher for major U.S. averages as the S&P 500 and Nasdaq Composite each setting new all-time highs after yesterday’s massive move higher post Presidential election results as markets now brace for the FOMC rate decision and commentary on the outlook of rates. Market expectations are for a 25bps cut today with fed fund futures still baking in another 25bps cut in December. On Wednesday, after Donald Trump won the White House, the Dow Jones Industrial Average soared 1,508.05 points, or 3.57%, to a reach a new record close of 43,729.93. It was the first time the 30-stock index has risen more than 1,000 points in one day since November 2022. The S&P 500 reached a new-time high, jumping 2.53%, while the Nasdaq Composite surged 2.95% to also hit a record. The small cap-focused Russell 2000 rose more than 5%. In other central bank news, the Bank of England (BoE) cut key interest rate by 25bps to 4.75% as expected, after inflation fell to a three-year low in September. The stock market exuberance is boiling over at this point, as the VIX index tumbled, stocks add to gains on hopes of less taxes, more pro-business and less regulation under a Trump administration while at the same time the Fed is expected to cut rates today and call for more cuts next year…despite stocks surging, economic data showing improvement and earning season strong yet again! Bitcoin below $75K taking little breather after surging over 9% to record highs Wednesday. Overnight, China exports surged 12.7% y/y last month, easily topping a forecast 5.2% increase and above the 2.4% rise in September. The data comes a day after Donald Trump was elected 47th President and has threatened tariffs in China. Imports fell 2.3%, compared with expectations for a drop of 1.5%, turning negative for the first time in four months. Note Trump has suggested enacting tariffs of 10% to 20% on all imports, including tariffs as high as 60% to 100% for goods from China and more than 200% for imported vehicles from Mexico. Today also marked another very busy day of earnings. No slowing in stock market strength this morning, again no fear heading into the FOMC at 2:00!

• U.S. Q3 non-farm productivity +2.2% (consensus +2.3%), vs Q2 +2.1% (prev +2.5%); U.S. Q3 non-farm unit labor costs +1.9% (consensus +1.0%), vs Q2 +2.4% (prev +0.4%).
• U.S. Sept wholesale inventories revised to -0.2% (consensus -0.1%) from -0.1%; U.S. Sept wholesale sales +0.3% (consensus +0.2%); U.S. Sept wholesale sales +0.3% (consensus +0.2%) vs Aug +0.2% (prev -0.1%); U.S. Sept stock/sales ratio 1.34 months’ worth vs Aug 1.35 months.

• In Beauty: COTY was downgraded to Underweight from Equal Weight at Barclay’s, concerned Coty’s negative sales revision this quarter may not be its last and that the company is pushing too hard to achieve its bottom-line targets. ELF reported Q2 sales up +39.7% vs Street estimate of +34.3% and EPS easily beat at $0.77 vs. est. $0.43 and said continued to gain share in the color cosmetics category in the tracked channel with +195 bps of share in Q2: announced Spring 2025 expansion in TGT and WBA in addition to testing the expansion into DG this month. ODD reported another top- and bottom-line beat with raised full-year guidance, outshining its competitors in D2C beauty & wellness markets (who are seeing a consumer slowdown).
• In Apparel: GOOS posted a surprise quarterly profit and topped Wall Street estimates for revenue noting revs rose 2.5% in Greater China in the second quarter while Selling, general and administrative expenses fell about 8%; lowered Fy25 rev view to low-single-digit decline to a low-single-digit increase, vs. prior forecast of low-single-digit growth. RL boosted its yearly revenue outlook and forecasts Q3 rev. ex-FX about +3% to +4%, vs. est. +1.81%; Revenue increased 6% year over year to $1.7 billion, also coming in slightly ahead of forecasts for $1.68 billion; Sales growth in North America turned positive this quarter, at 3%. TPR boosted FY25 annual revenue and earnings forecasts, helped by full-price sale of its handbags and accessories as now sees revenue up 1% to 2% growth vs prior year and raises EPS by $0.05 on top/bottom line after Q1 beat.
• In Autos: Ford (F) downgraded to Market Perform from Outperform at Bernstein saying Q3 earnings were a mixed bag, and the company will face significant pricing and free cash flow headwinds in the first half of 2025. The firm believes potential upside into the second half of 2025 and 2026 depends on decisive management action. LYFT shares jumped as reported a strong quarter in Q3, with gross bookings, revenue, and adj. EBITDA all solidly above ests, while Active riders were in line. Both total rides and gross bookings increased in the mid-teen’s y/y, as the company saw strong engagement from both riders and drivers. Guidance for $4.28B-4.35B in Q4 bookings was above Street at $4.23B prior, and EBITDA guidance for $100M-$105M was above Street forecasts. NSANY announced a $2.6B cost saving plan, including 9,000 job cuts and a 20% reduction in global production capacity after cutting its operating profit outlook by 70% and its global production capacity to be cut by a fifth

• BROS +42%; reported 3Q results that came in better than consensus on both SSS and EBITDA and led to a FY guidance raise; highlights include positive traffic as indicative of continued momentum in key SSS driver
• HUBS +6%; reported better than expected 3Q results last night on both the top and bottom lines. Revenue came in at $670M vs. cons. of $647M and reversed the downward trend in beats seen in 1H. Margins were strong with OM of 18.7% coming in well above consensus’ expectation for 16.8%.
• LYFT +22%; reported a strong quarter in Q3, with gross bookings, revenue, and adj. EBITDA all solidly above ests, while Active riders were in line. Both total rides and gross bookings increased in the mid-teen’s y/y, as the company saw strong engagement from both riders and drivers, better guidance.
• QCOM +5%; posted strong F4Q results and higher F1Q guidance, which solidly beat with upside driven by Auto and IoT, while guidance reflects the ramp of Snapdragon 8 Gen 4, with China Android expected to grow 40% q/q
• UA +25%; on track for best day ever after boosted FY25 adjusted profit forecast to $0.24-$0.27 from prior $0.19-$0.21 view, helped by lower input expenses and cost-cut initiatives and guides FY gross margin to increase by 125 to 150 basis points vs prior target of a 75 to 100 basis point rise
• WBD +14%; gained more subscribers for its Max streaming service than expected in the third quarter, boosted by its international expansion and suggesting its online business is picking up, but EPS and revs missed estimates
• Z +13%; Q3 revs rose 17% y/y to $581M above ests $555.3M on narrower loss, posting better-than-feared Q3 results against a weak housing market, largely driven by upside in ZG’s Residential Revenue, which outperformed the residential RE industry by ~1000bps.

• APA -5%; amid earnings results and general weakness in the energy complex today.
• ARM -3%; reported a headline beat-and-raise but kept the full-year outlook unchanged for a second consecutive quarter; revised down this year’s royalty revenue growth projection from 20%+ to high teens YoY, citing prolonged weakness in industrial and IoT; guides Q4 revenues: $920M-$970M vs Street at 950M.
• CTVA -7%; reported Q324 EBITDA of ($100M), compared to consensus of $12M; beat in Crop Protection (CP) while missing in Seed; low-end of management’s EBITDA guidance for 2024 remains intact
• HAL -4%; posted a Q3 EPS and rev miss citing a slowdown in drilling activity in North America that weighed on demand for its oilfield services and equipment (EPS $0.73/$5.7B vs. est. $0.75/$5.83B)
• MTCH -16%; shares fell on results and now forecasts FY total rev growth about 4%; forecast about 5%.
• WOLF -25%; on weak results/guidance; Q1 EPS ($2.23) vs est. ($1.00) on revs $195Mm vs est. $200.39Mm, adj gr mgn 3%; guides Q2 revs $160-200Mm vs est. $214.58Mm
• XRAY -22%; after lowered year EPS view to $1.82-$1.86, down from its prior forecast range of $1.96 to $2.02 due to voluntary suspension of sales, marketing, and shipments of its Byte Aligners and Impression Kits.