Morning Preview: November 03, 2023

Early Look

Friday, November 3, 2023

Futures

Up/Down

%

Last

Dow

3.00

0.00%

33,917

S&P 500

-6.25

0.16%

4,329

Nasdaq

-54.50

0.36%

14,943

 

 

S&P futures pause their 4-day rally, while Nasdaq futures slip after Apple (AAPL) posts a mixed quarter, beating on the top and bottom line but overall sales fell for a 4th straight quarter and all segments outside of services post weaker than expected revs, including a sharp drop in Mac sales, while reporting weaker China segment sales. Apple shares are looking lower by about -3% after a 5-day rally. The other major market catalyst today is the October nonfarm payroll report at 8:30, where +180K jobs are expected to be added (vs. 336K last month), unemployment to hold steady at 0.3% and average hourly earnings to rise +0.3% m/m. Meanwhile heading into Friday, major averages are on track for their best weekly performance in nearly a year, as the S&P 500 is up 4.87% week-to-date, Nasdaq +5.15% WTD, the Dow +4.38% and the Russell 2000 +4.72%. @jasongoepfert tweeted “this is the 24th time the Russell 2000 closed at a 52-week low, then surged to its best 4-day rally in at least 3 months. A year later, the small-cap index was higher 100% of the time with a median return of +25.6%.” In Asian markets, The Nikkei Index rose 348 points to 31,949, the Shanghai Index gained 21 points to 3,030, and the Hang Seng Index advanced 433 points or 2.5% to 17,664. In Europe, the German DAX is up about 30 points to 15,177, while the FTSE 100 is flat at 7,447.

 

On Thursday, stocks surged, and bonds added to gains a day after the Federal Reserve hinted it may be done with interest-rate hikes. The S&P 500 added over 1.5% — its best session since May — while 10-year yields dropped more than 10 bps before paring declines to ~6 bps. A report showed US labor productivity advanced the most in three years, while unit labor costs surprisingly dropped, helping alleviate the inflationary impact of wage growth. Continuing jobless claims rose for a sixth straight week, indicating those losing their jobs are starting to have more trouble finding new ones.

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 79.92 points, or 1.89%, to 4,317.78.

·     The Dow Jones Industrial Average soared 564.47 points, or 1.70%, to 33,839.05.

·     The Nasdaq Composite jumped 232.72 points, or 1.78%, to 13,294.19.

·     The Russell 2000 Index surged 44.51 points, or 2.67% to 1,714.21.

 

Economic Calendar for Today

·     8:30 AM ET                  Nonfarm payrolls for October…est. 180K (prior 336K)

·     8:30 AM ET                  Private payrolls for October…est. 158K (prior 263K)

·     8:30 AM ET                  Manufacturing payrolls for October…est. -10K (prior +17K)

·     8:30 AM ET                  Unemployment Rate for Oct…est. 3.8%

·     8:30 AM ET                  Average Hourly Earnings M/M for October…est. +0.3%

·     9:45 AM ET                  S&P Global Composite, Oct-Final

·     9:45 AM ET                  S&P Global Services PMI, Oct-Final

·     10:00 AM ET                ISM Non-Manufacturing PMI for October…est. 53.0

·     1:00 PM ET                   Baker Hughes Weekly rig count data

 

Earnings Calendar:

·     Earnings Before the Open: ACRE AES AMCX AXL BATRA BLMN CAH CBOE CHD CNK D DOC EAF EOG ES FLGT FLR FUBO GTES HR INTT IT KOP LBRDA LSXMA LTRPA MMI MOG/A OMI PAA PAGP QRTEA SLCA SRE SSEP TDS TILE USM WPC

 

 

Macro

Up/Down

Last

Nymex

0.17

82.63

Brent

-0.16

86.69

Gold

1.10

1,994.60

EUR/USD

0.0021

1.0641

JPY/USD

-0.22

150.22

10-Year Note

-0.005

4.664%

 

 

World News

·     In the crypto world, a jury found FTX founder Sam Bankman-Fried (SBF) guilty on all seven charges in his federal fraud and conspiracy trial. He was accused of using customer deposits on the crypto trading platform FTX to cover losses at his hedge fund, pay off loans and buy lavish real estate, among other personal expenses.

·     The US has increased its sanctions against Russia, targeting companies and individuals in Turkey, China, and the UAE for supplying Russia with goods that can be used for military purposes, the Financial Times reported.

·     Unemployment in the eurozone rose slightly from record lows in September, reported at 6.5% in September, seasonally adjusted data, in line with the expectations.

·     House Republicans, led by newly installed Speaker Mike Johnson, passed a $14.3 billion Israel aid package tied to cuts in IRS funding, triggering a clash with Democrats over tax law enforcement that risks delaying US financial help.

 

Sector News Breakdown

Consumer

·     Bloomin’ Brands (BLMN) cuts FY23 adjusted EPS view to $2.80-$2.90 from $2.91-$3.00 (est. $2.93) and cuts FY23 U.S. comparable restaurant sales growth view to 1.5%-2% from 2%-4%.

·     Booking Holdings (BKNG) Q3 EPS $72.32 vs. est. $67.84; Q3 revs $7.34B vs. est. $7.26B; Q3 gross travel bookings of $39.8B, up 24% y/y or about 21% c/c; Q3 room nights booked increased 15% y/y

·     Carvana (CVNA) Q3 revs $2.77B vs. est. $2.78B; Q3 adj Ebitda $148M vs. est. $60M; sold 80,987 retail units for total revenue of $2.773B; sees 4q sequential decline in retail units sold; sees Q4 positive adjusted ebitda for the third consecutive quarter.

·     DraftKings (DKNG) Q3 adj EPS loss (-$0.35) vs. est. loss (-$0.67); Q3 revs rose 57% y/y to $790M vs. est. $703M; raises 2023 revenue guidance midpoint to $3.695B and improves 2023 adjusted ebitda guidance midpoint to ($105M); introduces FY24 revs of $4.5B-$4.8B and FY adj Ebitda guide of $350M-$450M.

·     Expedia Inc. (EXPE) Q3 adj EPS $5.41 vs. est. $4.99; Q3 revs $3.93B vs. est. $3.86B; announces $5B share repurchase authorization; Lodging gross bookings at $18.5 billion grew 8% compared to 2022 and were at record levels for any third quarter.

·     Floor & Décor (FND) Q3 EPS $0.61 vs est. $0.56 on sales $1.018B vs est. $1.121B, adj EBITDA $140.9Mm vs est. $137.65Mm; guides FY comps (8.5)%-(7.8)%, net sales $4.345-4.385B vs est. $4.473B, adj EBITDA $535-550Mm vs est. $562.7Mm, EPS $2.14-2.24 vs est. $2.37.

·     Monster Inc. (MNST) Q3 EPS $0.43 vs est. $0.40 on sales $1.86B vs est. $1.866B.

·     Nio Inc. (NIO) is planning to cut 10% of its workforce this month. The move aims to improve efficiency and cut costs in the face of growing competition, Reuters reported.

·     Sweetgreen (SG) Q3 EPS loss (-$0.22) vs. est. loss (-$0.17); Q3 revs $153.4M vs. est. $154.03M; sees FY23 revenue $575M-$585M vs. est. $583.94M and for FY23, sees 35 net new restaurant openings; same-store sales change between 3% and 5%.

·     WW International (WW) posted a deeper-than-expected drop in revenue in Q3, driven by lower subscribers as revs fell -14% y/y to $214.9M vs. est. $221.6M; ended the quarter with a subscriber base of 4Mmm, down from 4.1Mm subscribers as of July 1. Clinical subscribers grew by 23% to 45,000 from the prior quarter.

 

Energy, Industrials and Materials

·     A.P. Moeller-Maersk (AMKBY) announced plans to cut 9% of its entire workforce by the end of next year, by slashing its headcount by 10K at the start of 2023 to less than 100,000 in 2024 following a collapse in its third-quarter revenues.

·     DMC Global (BOOM) Q3 EPS $0.50 vs. est. $0.54; Q3 revs $172.1M vs. est. $183.9M; energy products business, reported sales of $73.0M, up 4% y/y and down 14% sequentially; demand in Dyna’s core N.A market was impacted by a 10% sequential decline in U.S. well completions.

·     Schneider National (SNDR) Q3 adj EPS $0.20 vs. est. $0.37; Q3 revs $1.35B vs. est. $1.38B; cuts FY23 adjusted EPS view to $1.40-$1.45 from $1.75-$1.90 (est. $1.78).

·     Southwestern Energy (SWN) Q3 adj EPS $0.10 vs est. $0.07, adj EBITDA $513Mm vs est. $468.04, adj FCF $23Mm; sees Q4 total production 400-420 BCFE.

·     In Heavy Duty machinery (CMI, PCAR), according to prelim ACT Research, October Class 8 net order figures of 31,900 units. Orders in October decreased 25% y/y and 14% seq., but we would note orders remain at relatively elevated levels, especially for the trough of a freight cycle.

 

Financials

·     Block Inc. (SQ) Q3 adj EPS $0.55 vs. est. $0.45; Q3 revs rose 24% y/y to $5.62B vs. est. $5.47B; Q3 adj Ebitda rises 46% y/y to $477.5M vs. est. $373.8M; Gross payment volume $60.08B, +10% y/y.

·     Coinbase (COIN) Q3 EPS loss (-$0.01) vs. est. loss (-$0.55); was the seventh-straight quarter of losses for Coinbase; Q3 revs $623M vs. est. $651M (but above prior year $576M); Q3 adjusted EBITDA $181M vs ($116M) last year; expect 4Q subscription and services revenue to be approximately flat compared to 3Q; said it had $76B in total trading volume, compared to $92B in Q2 and $159B y/y.

·     Redfin (RDFN) Q3 EPS loss (-$0.17) vs. est. loss (-$0.20); Q3 revs $269M vs. est. $271M; said earned Ebitda profit, a $59M improvement y/y; sees Q4 revenue $211M-$226M vs. est. $242M.

·     Ventas (VTR) Q3 FFO/shr $0.75 vs est. $0.74; sees normalized FFO/shr $2.96-2.99 vs est. $2.98 and NAREIT FFO/shr $3.20-3.23.

 

Healthcare

·     Insulet Corp. (PODD) Q3 adj EPS $0.71 vs est. $0.40 on revs $432.7Mm vs est. $414.38Mm, adj gr mgn 67.3%, adj EBITDA $82.8Mm vs est. $60.29Mm; sees Q4 revs +22-25% vs est. +23.38%; guides FY revs $+26-27% vs prior +22-25% and est. +24.4%

·     Stryker (SYK) Q3 adj EPS $2.46 vs est. $2.43 on revs $4.9B vs est. $4.862B, adj gr mgn 64.7%, adj op mgn 23.4%; guides FY organic net sales +10.0-10.5% vs est. +9.8%; adj EPS $10.35-10.45 vs est. $10.36.

 

Technology, Media & Telecom

·     Apple Inc. (AAPL) Q4 EPS $1.46 vs. est. $1.39; Q4 revs fell -1% y/y to $89.50B vs. est. $89.35B; Q4 greater China revs fell -2.5% y/y to $15.08B vs. est. $17.01B; Q3 iPhone sales were $43.81B, in-line with ests; Q3 wearables segment revs (Watch and AirPods), fell -3% to $9.32B vs. est. $9.43B; Q3 Mac sales slumped by a third to $7.61B (est. $8.6B), iPad sales -10% to $6.44B (est. $6.07B); services strong rising 16% to $22.3B vs. est. $21.35B; sees Q1 revenue ‘similar’ to last year.

·     Atlassian (TEAM) Q1 adj EPS $0.65 vs est. $0.54 on revs $977.775Mm vs est. $966.11Mm sees Q2 revs $1.01-1.03B vs est. $1.022B, adj gr mgn approx 83.5%, adj op mgn approx 21%.

·     Bill Holdings (BILL) Q1 adj EPS $0.14 vs est. $0.50 on revs $305Mm vs est. $298Mm; sees Q2 revs $293-303Mm vs est. $319.07Mm and adj EPS $0.35-0.44 vs est. $0.47; sees FY revs $1.205-1.245B vs est. $1.3B, adj EPS $1.64-1.97 vs est. $1.94.

·     Cirrus Logic (CRUS) Q2 adj EPS $1.80 vs est. $1.54 on revs $481.1Mm vs est. $457.49Mm; guides Q3 revs $510-570Mm vs est. $539.19Mm, gr mgn 49-51%, adj op exp $120-126Mm.

·     Cloudflare (NET) Q3 adj EPS $0.16 vs est. $0.10 on revs $335.603Mm vs est. $330.53Mm, adj op Inc $42.5Mm vs est. $20.65Mm; guides Q4 revs $352-353Mm vs est. $356.27Mm, adj op Inc $28-29Mm vs est. $22.86Mm and adj EPS $0.12 vs est. $0.10.

·     Fortinet (FTNT) Q3 EPS $0.41 vs. est. $0.36 and revs $1.33B vs. est. $1348B; Q3 adj operating margin 22.7%; guides Q4 revs $1.38B-$1.44B below consensus of $1.5B citing weak spending by customers in an uncertain economy.

·     Go Daddy (GDDY) Q3 EPS $0.89 vs. est. $0.71; Q3 revs in-line with est. at $1.07B; Q3 Applications and Commerce revenue and related ARR both up 11%; delivered $131M in net income on 12% margin and $296M in Normalized EBITDA on expanded 28% margin; sees Q4 revs $1.095B-$1.115B and raises its targeted NEBITDA margin to approximately 29%.

·     Knowles (KN) Q3 adj EPS $0.31 vs. est. $0.28; Q3 revs $175.1M vs. est. $179.05M; sees Q4 adj EPS $0.27-$0.31 vs. est. $0.35 and revs $210M-$220M vs. est. $202M.

·     Live Nation (LYV) Q3 EPS $1.78 vs. est. $1.27; Q3 revs $8.2B vs. est. $6.94B; 2023 capital expenditures forecast is $450M with two-thirds on revenue-generating projects; below–line impact to 2023 eps: annual accretion is expected to be approximately 60% higher than 2022; AOI up 35% to $836 million in Q3; and up 33% to $1.7 billion year-to-date.

·     MagnaChip (MX) Q3 adj EPS ($0.04) vs est. ($0.17) on revs $61.2Mm vs est. $61.83Mm, gr mgn 23.6%; guides Q4 revs $50-55Mm vs est. $62.23Mm, gr mgn 22.5-24.5%.

·     Microchip (MCHP) Q2 EPS $1.21 vs est. $1.62 on sales $2.254B vs est. $2.265B; guides Q3 sales $1.803-1.916B vs est. $2.114B, adj gr mgn 64-65%, adj EPS $1.09-1.17 vs est. $1.44.

·     Motorola Solutions (MSI) Q3 adj EPS $3.19 vs est. $3.02 on sales $2.556B vs est. $2.526B, adj EBIT mgn 29%, adj FCF $714Mm; guides Q4 revs +4% vs est. $+3.9% and adj EPS $3.60-3.65 vs est. $3.57; sees FY revs $9.93-9.945B vs prior $9.875-9.9B and est. $9.914B, sees adj EPS $11.65-11.70 vs prior $11.40-11.48 and est. $11.49.

·     Paramount Global (PARA) Q3 adj EPS $0.30 vs est. $0.10 on revs $7.13B vs est. $7.10B, qtrly DTC advertising revs +18%, paramount+ revs +61% on more than 63Mm global subs, paramount+ global ARPU +16%; says remain on path to achieving significant total earnings growth in 2024; sees DTC losses in 2023 lower than 2022 with DTC losses in Q4 similar to year earlier qtr;

·     Qualys Inc. (QLYS) Q3 adj EPS $1.51 vs est. $1.14 on revs $142Mm vs est. $140.97Mm, adj gr mgn 83%, adj EBITDA $68.8Mm vs est. $60.65Mm; sees Q4 revs $144.1-145.1Mm vs est. $145.16Mm and adj EPS $1.18-1.28 vs est. $1.12; sees FY revs $554-555Mm vs est. $554.25Mm and adj EPS $5.04-5.14 vs est. $4.61.

·     SBA Communications (SBAC) Q3 AFFO/shr $3.34 vs est. $3.24, adj EBITDA $482.1Mm vs est. $471.61Mm, adj EBITDA mgn 71.4%; sees FY revs $2.705-2.725B vs est. $2.725B and AFFO/shr $12.91-13.13 vs est. $12.94.

·     Skyworks Solutions (SWKS) Q4 adj EPS $2.20 vs est. $2.10 on revs $1.219B vs est. $1.216B, adj op Inc $397.9Mm vs est. $393.1Mm; sees Q1 revs $1.175-1.225B vs est. $1.293B and adj EPS $1.95 vs est. $2.30.

·     Yelp Inc. (YELP) Q3 EPS $0.79 vs. est. $0.35; Q3 revs rose 12% y/y to $345M vs. est. $340.6M; Adjusted EBITDA increased by 30% year over year to a record $96M; raises full-year outlook to $1.332B-$1.337B of revs and $319M-$324M of adjusted EBITDA.

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.