Daily Market Report

Friday, August 3, 2018

U.S. futures are quiet, with the dollar little changed and oil markets down slightly as investors prepare for the monthly nonfarm payrolls report later this morning. The economy is expected to have added over 190K jobs for the month of July, as the unemployment rate is expected to move back under 4% and wages are expected to have increased 0.3%. The jobs report may temporarily take the attention off the ongoing trade/tariff dispute between the U.S. and China, as well as the Nafta issues with Canada and Mexico. Technology stocks pushed the S&P 500 and Nasdaq higher on Thursday, driven by Apple shares as the iPhone maker became the first publicly traded U.S. company worth a trillion dollars. Apple's milestone comes on the heels of strong quarterly earnings and an upbeat outlook issued earlier in the week. Shares of Tesla jumped over 16% after quarterly results convinced investors of future profitability and Chief Executive Elon Musk apologized for his behavior on the previous earnings call. It has been a busy week of corporate earnings (now more than 400 S&P companies have reported results now) and central bank meetings, highlighted by the Fed leaving interest rates unchanged on Wednesday while painting an upbeat portrait of both the labor market and economy, while the Bank of England raised its key interest rate at yesterday’s meeting.

 

In Asian markets, The Nikkei Index rose 12 points to settle at 22,525, the Shanghai Index dropped -27 points to settle at 2,740 and the Hang Seng Index slipped -38 points to close at 27,676. In Europe, the German DAX is higher by around 60 points above 12,600, while the FTSE 100 is up around 50 points at 7,625. In the UK, governor Mark Carney of the BoE warned that there is an "uncomfortably high" chance of the U.K. crashing out of the European Union without a transition agreement, which could rattle the economy. "I think the possibility of a 'no deal' is uncomfortably high at this point."

Market Closing Prices Yesterday

· The S&P 500 Index gained 13.86 points, or 0.49%, to 2,827.22

· The Dow Jones Industrial Average slid -7.66 points, or 0.03%, to 25,326.16

· The Nasdaq Composite spiked 95.40 points, or 1.24%, to 7,802.69

· The Russell 2000 Index advanced 12.84 points, or 0.77% to 1,682.10

 

Events Calendar for Today

· 8:30 AM EST Change in Nonfarm Payrolls for July…est. 192K

· 8:30 AM EST Change in Private payrolls for July…est. 190K

· 8:30 AM EST Unemployment Rate for July…est. 3.9%

· 8:30 AM EST Average Hourly Earnings for July…est. 0.3%

· 9:45 AM EST Markit US Services PMI, July-F…est. 56.2

· 9:45 AM EST Markit US Composite PMI, July-F

· 10:00 AM EST ISM Non-Manufacturing Composite for July…est. 58.6

· 1:00 PM EST Baker Hughes Weekly Rig Count

 

World News

· China has lost its position as the world’s second largest equity market to Japan as trade war tension with the US has weighed heavily on Chinese equities

· Japan July services PMI slows slightly in sign of subdued activity- The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to 51.3 on a seasonally adjusted basis from 51.4 in June

· China July services new business growth weakest since December 2015: Caixin PMI- For July, the Caixin/Markit services purchasing managers’ index (PMI) fell to 52.8, the lowest since March, from June’s 53.9.

· The sell-off in the Turkish lira continued on Friday with the currency hitting a fresh record low against the dollar following US sanctions on two senior government ministers

· Activity in Britain’s service sector slipped to a three-month low in July as the purchasing managers' index for the biggest part of the UK economy came in below market expectations

· Senior U.S. and Mexican officials on Thursday sought to hammer out new rules for the auto trade at the center of negotiations to overhaul the North American Free Trade Agreement, while Canadian officials sat out the latest talks

 

Sector News Breakdown

Consumer

· Heineken said on Friday it had entered into a non-binding agreement with Chinese brewer China Resources Beer in a $3bn tie-up to tap the China’s premium beer market https://reut.rs/2n4IL2C

· B&G Foods (BGS) Q2 EPS 38c/$388.4M vs. est. 44c/$387.54M; Q2 adjusted EBITDA decreased 4.7% to $74.4 million; sees FY adjusted EPS $2.05-$2.15 on revs $1.73B-$1.75B vs. est. $2.08/$1.72 billion

· Eldorado Resorts (ERI) Q2 EPS 47c/$456.8M vs. est. 50c/$461.54M

· GoPro (GPRO) Q2 non-GAAP EPS loss (15c)/$283M vs. est. loss (22c)/$270.23M; 2Q inventory decreased by $47m q/q, lowest level since 2Q14; 2Q adj. gross margins 31%, up from 24% q/q

· Medifast (MED) Q2 EPS $1.16/$117.3M vs. est. $1.00/$103.78M; sees Q3 EPS $1.05-$1.10 on revs $120M-$125M vs. est. 96c/$104.38M

· Nu Skin (NUS) increases stock repurchase authorization to $500M; Q2 EPS with items 90c/$704.2M vs. est. 92c/$644.3M; quarterly earnings were negatively impacted by a foreign currency translation loss of 13c and a 5c purchase accounting charge; sees FY18 EPS with items $3.50-$3.65 vs. est. $3.71 while raises FY18 revenue view to $2.63B-$2.67B from prior outlook of $2.51B-$2.56B (est. $2.55B)

 

Restaurant earnings:

· Bojangles (BOJA) Q2 EPS 13c/$140.5M vs. est. 18c/$139.45M; System-wide comparable restaurant sales decreased 0.2%, while company-operated comparable restaurant sales decreased 0.8% and franchised comparable restaurant sales increased 0.1%; raises FY18 EPS view to 66c-73c from 64c-72c and lowers FY18 revenue view to $542M-$547M from $550M-$560M

· Shake Shack (SHAK) Q2 EPS 29c/$116.3M vs. est. 18c/$110.99M; delivered YoY revenue growth of 27%, including a 1.1% increase in same-Shack sales, and grew adjusted EBITDA by 13%; backs FY18 revenue view $446M-$450M and backs Same-Shack sales view of up 0%-1%

· Wingstop (WING) Q2 EPS 23c/$37.0M vs. est. 20c/$36.81M; reports system-wide domestic same store sales increase of 4.3%; confirms long-term SSS growth view of low single digits; sees FY18 adjusted EPS 80c vs. consensus 84c

 

Energy

· EOG Resources (EOG) Q2 EPS $1.37/$4.24B vs. est. $1.23/$3.92B; grew total crude oil production 15% YoY to 384,600 barrels of oil per day. Total company production increased 16% in Q2 vs. same period last year; maintained its target for 18% crude oil growth for full year 2018; raises common stock dividend 19% to 22c per share

· Noble Corp. (NE) Q2 EPS loss (49c)/$258.4M vs. est. loss (47c)/$255.6M;

· SolarEdge (SEDG) Q2 EPS 82c/$227.1M vs. est. 84c/$222.05M; sees Q3 revenue $230M-$240M, vs. consensus $227.88M and sees Q3 gross margin 36%-38%.

· Southwestern Energy (SWN) Q2 EPS 18c/$816M vs. est. 16c/$813.86M; backs FY18 capital investment view $1.15B-$1.25B/raises FY18 net production view to 955-970 Bcfe from 930-965

· TC Pipelines (TCLP) Q2 EPS $1.00 vs. est. 81c; 2Q distributable cash flow $101M

 

Financials

· AIG Inc. (AIG) shares fell after Q2 EPS of $1.05 missed the $1.21 est. as 2Q net income $937M vs. $1.13B YoY; Q2 net investment income $3.12B vs. $3.53B y/y, driven by lower investment returns on alternative investments, primarily from less robust private equity and hedge fund performance

· Athene Holding (ATH) Q2 adjusted EPS $1.48 vs. est. $1.27; reports Q2 total revenue $1.8B; book value per share increased 2% YoY to $43.10; adjusted book value per share increased 18% to $42.60

· FleetCor (FLT) Q2 EPS $2.57/$608.3M vs. est. $2.53/$596.3M; sees FY18 EPS $10.32-$10.52 on revs $2.47B-$2.52B vs. est. $10.43/$2.43B

· Western Union (WU) Q2 EPS 46c/$1.41B vs. est. 47c/$1.43B; sees adjusted FY18 EPS $1.80-$1.90 vs. est. $1.87; sees FY18 low single-digit GAAP revenue increase, previously low to mid-single digit increase, and low to mid-single digit increase in constant currency revenue

 

Healthcare

· Eli Lilly and Company (LLY) announced that its subsidiary, Elanco Animal Health, has filed a registration statement with the SEC for an initial public offering, or IPO, of common stock

· Allscripts (MDRX) Q2 EPS 18c/$525.5M vs. est. 18c/$533.16M; Q2 bookings were $278M in Q2; announces new $250M stock repurchase program; affirms 2018 EPS outlook 72c-82c (est. 77c) and affirms 2018 revenue outlook $2.15B-$2.25B

· BioMarin (BMRN) Q2 EPS loss (9c)/$372.8M vs. est. loss (17c)/$361.05M; backs FY18 revenue view $1.47B-$1.53B vs. est. $1.5B; still sees FY18 non-GAAP income $100M-$140M

· Bright Horizons (BFAM) Q2 EPS 87c/$490M vs. est. 85c/$486.59M; sees FY18 adjusted EPS $3.13-$3.16 vs. est. $3.14 and backs FY18 revenue growth view of 8%-10%, consensus $1.9B

· Cerner (CERN) Q2 EPS 62c/$1.37B vs. est. 60c/$1.33B; Q2 bookings were $1.775B, an increase of 9% compared to $1.636B in Q2 of 2017; sees Q3 EPS 62c-64c on revs $1.34B-$1.39B vs. est. 65c/$1.35B; backs both year EPS and rev outlook

· Glaukos (GKOS) Q2 EPS (15c)/$43.2M vs. est. loss (12c)/$40.49M; raises FY18 sales view to $162M-$166M from $160M-$165M

· Insulet (PODD) Q2 EPS loss (3c)/$124.3M vs. est. loss (13c)/$132.86M; Q2 gross margin of 66%, up 710 basis points; sees Q3 revenue $144.5M-$151.5M vs. est. $154.2M; lowers FY18 revenue view to $547M-$562M from $565M-$580M

· Tesaro (TSRO) Q2 EPS loss ($3.04)/$56.5M vs. est. loss ($2.65)/$63.34M

· Tivity Health (TVTY) Q2 adjusted EPS 53c/$151.9M vs. est. 53c/$152.98M; backs FY18 EPS view $2.12-$2.20 (est. $2.16) and backs FY18 revenue $607M-$625M (est. $613.69M)

 

Industrials & Materials

· Chemours (CC) Q2 EPS $1.71/$1.8B vs. est. $1.59/$1.82B; announces new $750M share repurchase program; raises quarterly dividend to 25c per share; says believe that earnings will be in the top end of our previously announced range

· Fluor (FLR) Q2 EPS 81c/$4.88B vs. est. 71c/$4.54B; Q2 new awards for the quarter were $5.4B; said this quarter we saw an increase in backlog for the first time since 2016, and we expect continued improvement in backlog as we move through the remainder of 2018; reaffirms year

· Stericycle (SRCL) Q2 EPS $1.17/$883.3M vs. est. $1.14/$897.7M; said delivered Adjusted EBITDA and Adjusted EPS within guidance by effectively controlling our expenses, offsetting weaker CRS results

· Wesco Aircraft (WAIR) Q3 EPS 20c/$410.4M vs. est. 19c/$384.8M; remain on track with 2020 goals

 

Media & Telecom

· Altice USA (ATUS) Q2 EPS loss (13c)/$2.36B vs. est. loss (6c)/$2.37B; adjusted EBITDA grew 1.5% to $1.01B. Total unique residential customer relationships rose 0.1% with quarterly net losses of 4,000 in Q2; reaffirms 2018 revenue growth outlook 2.5%-3.0%

· CBS Corp. (CBS) Q2 EPS $1.12/$3.47B vs. est. $1.11/$3.46B; 2Q Entertainment revenue $2.37B, Q2 Cable Networks revenue $591M, Q2 publishing revenue $207M and Q2 local media revenue $420.0M

· Sierra Wireless (SWIR) Q2 EPS 27c/$201.9M vs. est. 21c/$199.17M

 

Technology

· Activision Blizzard (ATVI) Q2 adjusted EPS 62c/$1.38B vs. est. 35c/$1.38B; sees Q3 adjusted EPS 37c vs. est. 66c and sees Q3 net bookings $1.61B vs. est. $1.87B; sees FY18 adjusted EPS $2.46, consensus $2.60 and backs FY18 net bookings view $7.48B vs. est. $7.52B

· Acacia Communications (ACIA) Q2 EPS loss (8c)/$65M vs. est. loss (8c)/$63.34M; sees Q3 EPS 10c-22c on revs $86M-$94M vs. est. 7c/$72.77M

· Appian (APPN) Q2 EPS loss (14c)/$59.88M vs. est. loss (17c)/$50.27M; sees Q3 EPS loss (19c)-(17c) on revs $49.6M-$49.8M vs. est. loss (17c)/$49.55M

· Arista Networks (ANET) Q2 EPS $1.93/$519.8M vs. est. $1.70/$509.27M; non-GAAP gross margin of 64.5%, compared to non-GAAP gross margin of 64.4% in the first quarter of 2018 and 64.4% in the second quarter of 2017; sees Q3 revenue $540M-$552M vs. est. $542.75M

· Arlo Technologies (ARLO) 10.215M share IPO priced at $16.00

· Cohu (COHU) slides after forecasting 3Q revenue of ~$92M, below the $102.7M est. due to slower-than-expected demand for its equipment for smartphone application processor test; 2Q sales of $99.8M on EPS 64c vs. est. 47c

· GoDaddy (GDDY) Q2 EPS 11c/$651.6M vs. est. 8c/$643.55M; reports total bookings of $754.2M, up 13.0% year over year and average revenue per user of $142, up 10.2% YoY; raises 2018 revenue outlook to $2.645B-$2.655B vs. est. $2.63B

· Motorola Solutions (MSI) Q2 EPS $1.46/$1.76B vs. est. $1.38/$1.72B; reports backlog of $9.4B, up $919M or 11% from a year ago; raises 2018 EPS outlook to $6.79-$6.89 from $6.70-$6.85 and now expects revenue growth of approximately 14.5%, up from the prior outlook of 14%

· Open Text (OTEX) Q4 EPS 72c/$754.3M vs. est. 68c/$732.0M; 4Q license rev. $139.9M, 4Q cloud rev. $217.9M, 4Q adjusted gross margin +74%

· RealPage (RP) announced its agreement to acquire substantially all of the assets of LeaseLabs, a provider of digital marketing services and software to approximately 800,000 units in the multifamily housing industry; sees FY18 adjusted EPS $1.44-$1.48 on revs $866.4M-$872.5M vs. est. $1.47/$864.8M after in-line Q2

· SS&C (SSNC) Q2 EPS 62c/$908.5M vs. est. 55c/$904.08M; sees FY18 adjusted revenue $3.356B-$3.396B vs. est. $3.38B; sees Q3 adjusted revenue $992M-$1.012B vs. est. $1B

· Symantec (SYMC) Q1 EPS 34c/$1.16B vs. est. 33c/$1.15B; says internal investigation on financial results is ongoing; sees Q2 EPS 31c-35c on revs $1.13B-$1.16B vs. est. 38c/$1.19B

· Take-Two (TTWO) Q1 EPS 62c/$388.0M; Q1 net bookings were $288.3M; sees Q2 GAAP EPS 43c-53c on revs $480M-$530M vs. est. 89c/$583.8M

· Tableau (DATA) Q2 EPS 0c/$282.3M vs. est. loss (10c)/$236.4M; 2Q license rev. $137.8M