Mid-Morning Look

Thursday, October 21, 2021

After a flurry of earnings results overnight (some good, some bad), major U.S. averages rebound off overnight lows to trade up slightly/flat. Positive economic data also boosting sentiment as existing home sales data tops consensus, while weekly jobless claims were below last week’s levels and consensus. The Philly Fed Index was solid but came in below last month figures and economist estimates. Treasury yields continue to inch higher (10-yr above 1.67% and 5-year yield touches 1.20%, highest since February 2020), but no concern in stock markets about rising inflation fears still. In earnings, TSLA shares outperform in tech after big margin outperformance, while other upside earnings standouts include AN, TSCO, CSX and GPC. On the downside, IBM and LRCX weigh on tech as well as EFX and KMI in financials and energy. U.S. investors remain hopeful for a spending bill resolution in Washington D.C. with more talks ongoing. Energy prices take a breather as oil prices slip. Consumer discretionary/retail a notable standout to the upside to start the day (UAA, PVH, RL, BBWI). Another strong start to earnings season, building stock market gains as the Dow and S&P 500 came close to closing above record highs yesterday, falling just short and slipping early. Bitcoin takes a rare breather after topping $67K yesterday to set new intraday all-time highs (down around $64,300 today).

Economic Data

·     Weekly Jobless claims fell to 290K in latest week vs. 300K est. and below last week upwardly revised 296k figure (from 293kk); the 4-week moving average fell to 319,750 from 335,000 prior week (previous 334,250); continued claims fell to 2.481M from 2.603M prior (est. 2.55M); the U.S. insured unemployment rate fell to 1.8% from 1.9% prior

·     Philly Fed Survey for October reported at 23.8 vs. 30.7 in September and below the 25.0 estimate

·     U.S. September leading economic indicators (LEI) +0.2% vs. est. +0.4%

·     Existing home sales for September rose 7% to 6.29M unit rate (above consensus 6.09M) and vs. Aug 5.88M; U.S. Sept inventory of homes for sale 1.27 mln units, 2.4 months’ worth; the Sept national median home price for existing homes $352,800, +13.3 pct from sept 2020

Sector Movers Today

·     Vaccine news: the COVID-19 vaccine developed by PFE is “highly effective” at preventing infection and symptomatic disease from the Delta variant among people aged between 12 and 18, Reuters reported, citing research conducted in Israel. In the trial, estimated effectiveness of the vaccine against COVID-19 infection in the study age group was 90%, and 93% against symptomatic disease, on days seven to 21 after the second dose; U.S. regulators signed off on extending COVID-19 boosters to Americans who got JNJ or MRNA vaccine and said anyone eligible for an extra dose can get a brand different from the one they received initially

·     Metals & Mining: KALU Q3 adj EPS $0.57 vs. est. $1.33 on sales $751M that missed est. $773.2M; FCX Q3 adj EPS 89c vs est. 82c on revenue $6.08B vs est. $6.17B, copper production 687M lbs. vs est. 1.01B, says the outlook for copper market is extraordinarily positive and sees Q4 copper sales volume 1.03B lbs., and cut its FY view of copper sales volume to 3.8B lbs. from 3.85B, now sees capex $2.3B from $2.2B; NUE Q3 EPS $7.28 was below consensus $7.43 on net sales $10.31B vs est. $10.27B; SCHN posted Q4 adj EPS $1.82 vs est. $1.81 on revenue $846M above est. $782M; IIIN Q4 EPS $1.28 vs est. $0.96 on revs $171.26M vs est. $170.26M; RBC double-downgraded VALE to Underperform as China’s economic rebalancing away from property and fixed asset investments hits iron ore, which is the driver of the company’s profitability

·     Media & Telecom movers; AT) Q3 adj EPS $0.87 vs. est. $0.78; Q3 revs $39.92B vs. est. $39.14B; added 928,000 net new phone subscribers who pay a monthly bill, above quarterly expectations of 560,000, (VZ added 429,000 subscribers in its latest quarter); AT&T added 12.5 million subscribers globally for its premium TV channel HBO and streaming service HBO Max; sees FY21 adjusted EPS at high end of low- to mid-single digit growth; a day after OMC earnings results disappointed Wall Street, IPG posted a beat on the top/bottom line and boosted its 2021 organic growth view to 11% from 9%-10%; in towers, CCI results were ahead of expectations, but 2022 guidance for new tower leasing activity, as Tower Organic growth of 5.5% vs. consensus of 6.0% and KeyBanc’s 6.7% with the shortfall coming from lower new tower leasing due to lower prepaid rent amortization and higher T-Mobile churn; in research, Barclay’s downgraded

·     Auto sector; TSLA Q3 EPS and revs beat ($1.86/$13.76B vs. $1.58/$13.62B est.) and said reached an operating margin of 14.6%, exceeding our medium-term guidance of ‘operating margin in low-teens and automotive gross margin rose to 28.8%, from 25.8% the previous quarter; AN unveiled an additional $1 billion share buyback program while reported a quarterly profit that nearly doubled, benefiting from higher car prices due to surging demand and tight inventories; DIDI rises after a media report that Chinese regulators are nudging the company towards a Hong Kong listing; GPC raises year EPS and free cash flow guidance for 2021 after Q3 EPS/revs beat

Stock GAINERS

·     CROX +10%; beat Q3 estimates and boosted the low end of its full-year revenue forecast

·     DIDI +5%; after China’s internet watchdog suggested it explore a listing in Hong Kong, according to a Dow Jones report

·     HPQ +5%; among top gainers in the S&P 500 after analysts noted mgmt outlined a bullish FY22 EPS outlook 8% ahead of Street est.

·     TSC +29%; as RJF to acquire the co. in a cash-and-stock deal valued at $1.1 billion, with TSC holders to receive $6 in cash and 0.25 shares of RJF stock in a deal valued at $31.09 per share

·     TSCO +4%; Q3 EPS $1.95 and revenue $3.02B both beat consensus and they raised their full-year outlook for net sales to $12.6B from $12.1-12.3B, comp sales to +16% from +11-13%, and operating margin to 10.2-10.3% from 9.7-9.9%

·     TSLA +3%; Q3 EPS of $1.86 beat consensus of $1.66 which was largely driven by auto gross margins (+$0.21); Auto gross margin ex EV credits of 28.8% was better than consensus of 26.6% (note shares had a massive run into the earnings results this past week)

·     WE +5%; open at $11.28 in first day of NYSE trading after Spac merger with Bowx Acquisition

·     XM +7%; Q3 results topped expectations, highlighted by 67% growth in RPO (with cRPO up 58%), while the co raised its financial goals organically

Stock LAGGARDS

·     EFX -6%; falls on mixed Q4 results and guidance, as EPS falls short of views and guides FY22 profit outlook below consensus, with revs above views

·     FTI -3%; as Q3 rev of $1.58B missed the $1.7B est. along with a surprise Q3 adj loss and EBITDA of $140.6M missing views as results were impacted by lower activity in the North Sea and Asia

·     IBM -5%; after revenue miss, in-line earnings as Q3 operating EPS comes in as expected at $2.52, while 3Q Revenue $17.62B missed the $17.79B estimate

·     KALU -10%; Q3 adj EPS $0.57 vs. est. $1.33 on sales $751M that missed est. $773.2M

·     KMI -4%; CSFB said expect a negative reaction to the miss as we believe investors were positioning for a beat. That said, the reiteration of full year EBITDA guidance and ’22 guidance on the horizon may slightly mute reaction

·     LRCX -4%; as co price tgt lowered by several analysts after its Q1 earnings beat and a slight miss on Q2 guidance which was held back by supply chain issues

·     LVS -2%; Q3 total reported EBITDA $17M loss vs Street +$160M, Macau $32m vs. Bofa $45m (weak in Sep no surprise) and Singapore $15m below Bofa $100m highlighted by weak VIP revs in the region which just went away (-67% y/y)

Syndicate:

·     Crinetics (CRNX) 7.576M share Spot Secondary priced at $19.80

·     dLocal (DLO) 17M share Secondary priced at $52.25

·     Enfusion (ENFN) 18.75M share IPO priced at $17.00

·     HighPeak Energy (HPK) 2.2M share Secondary priced at $10.00

·     Portillo’s (PTLO) 20.27M share IPO priced at $20.00

·     Runway Growth Finance (RWAY) 6.85M share IPO priced at $14.60

·     TaskUs (TASK) 12.078M share Secondary priced at $63.50

·     Ventyx Biosciences (VTYX) 9.47M share IPO priced at $16.00

·     Vita Coco (COCO) 11.5M share IPO priced at $15.00

·     WhiteHorse Finance (WHF) 1.9M share Spot Secondary priced at $15.81