Crickets and Cicadas. The Dow Jones Industrial Average is barely budging on Thursday morning, but markets are at least nudging higher following yesterday's mixed close. The balance between trade worries and upbeat earnings continues, and Tesla (TSLA) is slipping a bit after talk of going private has spawned plenty of questions. In today's Morning Movers, we...
•...watch markets inch toward the open ; •...talk about (what else?) tariffs and earnings; •...and review Viacom's (VIAB) earnings.
Slouching Towards Labor Day
Stocks are creeping toward the open on Thursday, another day with little news.
Dow Jones Industrial Average and S&P 500 futures are up 0.1% while the Nasdaq Composite is roughly flat.
Markets didn't move around a lot yesterday, but the Dow and S&P 500 did end lower, as new tariffs sapped enthusiasm even as new highs remain tantalizingly close.
Perhaps today's tepid gains are due to the fact that notching new records seem a bridge too far without some good news? Negotiating tactic or not, it's easy to see why markets may be growing tired of the threat of a trade war, as more and more tariffs come into play. After all, earnings, which have buoyed the market for so long, aren't immune. UBS's Keith Parker notes that his firm sees fourth-quarter gross domestic product growth taking a 140 basis point cut on 10% tariffs on $200 billion of Chinese imports, and that alone would lower his S&P 500 2018 earnings per share estimate by 40 basis points. From there, Parker notes that every 25 basis point reduction in 2019 growth lowers their 2019 S&P EPS estimate by 80 basis points.
If earnings are peaking, then, we're entering a "muddle-along zone," for markets, writes U.S. Bank Wealth Management's Terry Sandven. At least robust second-quarter season has helped stocks notch more gains thus far, and the outlook for the third-quarter looks "equally compelling" he writes.
Sounds great right? Well, a better-than-expected third quarter and a resolution of trade tensions would likely push the S&P 500 above Sandven's 2,900 year-end target. But earnings and markets can't defy gravity forever. "Near term, of concern and warranting caution is the projected slowing in the rate of earnings growth in 2019," he writes, as analysts expect year-over-year earnings growth of 10% next year, half of this year's 20% projected growth. "A slower rate of earnings growth typically implies multiple compression, resulting in more subdued returns."
Subdued is a word we don't get to use often in the news cycle these days. But if nothing else, we might get a little quieter as we head into the back end of August. Pass the sunscreen.
Earnings & News
Costco (COST) is down 1.4% to $221.48 after reporting July comparable sales grew 8.4%, compared with 6.2% in the year-ago period, and 9.7% last month.
Diamondback Energy (FANG) is down 3.6% to $129 after reporting second-quarter earnings. The exploration and production company earned $1.59 a share on revenue of $526.3 million. Analysts were looking for earnings of $1.64 on revenue of $479.57 million.
e.l.f. Beauty (ELF) is down 19.5% to $12 after reporting second-quarter earnings. The cosmetics firm earned 13 cents a share on revenue of $59.06 million. Analysts were looking for earnings of six cents on revenue of $59.2 million. for the full year, it sees EPS of 56 cents to 61 cents, compared with the 60 cent consensus estimate.
Flowers Foods (FLO) is down 3.4% to $19.39 after reporting second-quarter earnings. The food company earned 25 cents a share on revenue of $941.3 million. Analysts were looking for earnings of 27 cents on revenue of $936.16 million. For the full year, it expects EPS of $1 to $1.07, compared with the $1.07 consensus estimate.
MercadoLibre (MELI) is up 1.5% to$349.57 after reporting second-quarter earnings. The Latin American e-commerce firm earned 25 cents a share on revenue of $335.4 million. Analysts were looking for earnings of 21 cents on revenue of $333.98 million.
Norwegian Cruise Line Holdings (NCLH) is up 4.4% to $51.30 after reporting second-quarter earnings. The cruise operator earned $1.21 per share on revenue of $1.52 billion. Analysts were looking for earnings of $1.03 on revenue of $1.5 billion.
Roku (ROKU) is up 11.8% to $52.80 after reporting second-quarter earnings. The digital entertainment company broke even for the quarter, on revenue of $156.8 million. Analysts were looking for a 15 cent loss on revenue of $141.59 million. For the full year, it sees revenues of $710 million to $730 million, compared with the $698.28 million consensus estimate.
Viacom (VIAB) is down 1.1% to $28.30 after reporting third-quarter earnings. The media firm earned $1.18 per share on revenue of $3.24 billion. Analysts were looking for earnings of $1.07 on revenue of $3.27 billion.
Yelp (YELP) is up 15.5% to $44.07 after reporting second-quarter earnings. The online review company earned 12 cents a share on revenue of $234.9 million. Analysts were looking for earnings of 27 cents on revenue of $232.26 million. for the full year, it sees revenues of $952 million to $967 million. Analysts are looking for earnings of $959.78 million.
Upgrades & Downgrades
Applied Materials (AMAT) is down 2.5% to$48.95 after Morgan Stanley downgraded it to Equal Weight.
On Semiconductor (ON) is down 4.1% to $21.51 after Morgan Stanley downgraded it to Underweight.
Seagate Technology (STX) is down 4.6% to $52.50 after Goldman Sachs downgraded it to Sell.
Southern Co. (SO) is down 1.3% to $46.25 after it was downgraded to Neutral by Guggenheim and Barclays.
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