Daily Markets: Investors Digesting Recent Highs, Await Next Batch of Earnings

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Today’s Big Picture

Following new record highs for both the Dow Jones Industrial Average and the Nasdaq Composite Index and only modest declines for the S&P 500 and the Nasdaq 100 that left both near record highs yesterday, global equity market appear to be digesting recent gains, waiting next steps in US-China trade talks and the next rash of corporate earnings. Following news the US is considering certain concessions to inch a “phase one” trade deal with China into the end zone, reports suggest China wants the US to make "firmer commitments on lifting tariffs"  if it wants Chinese President Xi Jinping to visit the US to sign a “phase one” agreement. It seems the gamesmanship associated with these trade talks is set to persist and odds are it will push market sentiment back and forth like a ping pong ball in the near-term. 

Equity indices in the Asia-Pacific region ended trading today on a mixed note following reports China is in favor of taking more aggressive steps to crack down on ongoing protests in Hong Kong. Most European markets are modestly higher on the day, and US equity futures point to a slightly higher market open. 

Data Download

Earlier today a fresh batch of European economic data for September and October was published. The October Euro Area Markit Service PMI registers 52.2, stronger than the expected 51.8 and above September’s 51.6. Despite the beat relative to expectations, the October reading was the second weakest print since January. Combined with the October Manufacturing PMI for the area, the October Composite PMI for the Euro Area rose to 50.6, up from  50.1 in September. Before we break out the champagne, that October figure was among the weakest in the last six and half years. Looking at the data on a country basis, October Services PMI readings in Italy and Germany came in better than expected while France met expectations. 

We also received September retail sales for the Euro Area, which rose a slower 0.1% month over month compared to the 0.6% August increase. Year over year, September retail sales increased 3.1%, up from the 2.7% year over year increase registered in August.  

Aside from the weekly EIA Crude Oil Inventory and MBA Mortgage Applications data, US economic data to be had today includes September quarter Productivity and Unit Labor Costs

Stocks to Watch

Wendy’s (WEN) beat September quarter expectations on both its top and bottom line and boosted its full-year sales growth to +3.5-4.0% from the prior +3.0-4.0%. The company also boosted its EPS guidance calling for growth of-1.5% to +1.5% vs. the prior forecast of -6.5% to -3.5%.  For the September quarter, the company's North American comp sales rose 4.4%, besting the expected 3.8% increase. 

CVS Health (CVS) reported September quarter EPS of $1.84, $0.07 better than expected. The company boosted its 2019 EPS guidance to $6.97-7.05 up from the prior $6.89-7.00 and the $6.98 consensus. 

Formerly known as Michael Kors Holdings,  Capri Holdings (CPRI) missed September quarter EPS expectations by $0.09 despite reporting in-line revenue for the quarter. Year over year, Versace revenue was $228 million and comparable store sales were flat on a constant currency basis. Jimmy Choo revenue of $125 million rose 7.8% year over year and was up 9.5% on a constant currency basis. Michael Kors revenue of $1.089 billion for the quarter fell 4.2% compared to the prior year. Capri sees December quarter EPS in the range of $1.55-$1.60, bookending the $1.57 consensus, and reiterated its 2020 EPS guidance of $4.95 compared to the $4.89 consensus. 

The New York Times (NYT) delivered better than expected September quarter EPS of $0.12, $0.03 ahead of expectations. Revenue for the quarter rose 2.7% year over year, in-line with expectations. The company commented the September 2018 quarter was "our best ever third quarter for new digital news subscriptions, the fourth-best quarter in the history of our pay model…" Exiting the quarter, the company had 4.9 million total subscriptions with more than 4 million total digital subscriptions. For the current quarter, the company sees total subscription revenues rising in the low- to mid-single digits year over year with digital-only subscription revenue increasing in the mid-teens. Total advertising revenue is expected to decline in the mid-teens with digital advertising revenue also expected to decrease in the mid-teens.

Lumber Liquidators (LLmissed September quarter EPS expectations by $0.15, missed on quarterly revenue and reduced its 2019 sales outlook. The company now sees flat to slightly positive revenue growth in 2019 with same-store comparisons down 2% to flat year over year. 

After announcing it is restructuring its relationship with Fujifilm, reports suggest Xerox Holding Corp (XRXis planning to make a cash-and-stock offer for HP Inc (HPQ), despite having a market cap of less than a third of HP’s. We live in interesting times.

89BIO, Inc (ETNB), a clinical-stage biopharmaceutical company focused on the development and commercialization of therapies for the treatment of liver and cardio-metabolic diseases, is expected to price its downsized IPO of 4.4 million shares today between $15-$17 and begin trading on the Nasdaq.

Nokia (NOKand Microsoft (MSFT) are teaming to help accelerate digital transformation for enterprises and communications service providers. Joint solutions will leverage Microsoft's cloud, AI and machine learning expertise with Nokia's position in networking and communications. Hopefully, this effort will fare better than when Microsoft bought Nokia's handset business in 2013.

Benchmark Electronics (BHE) disclosed some of its systems were affected by a ransomware incident that encrypted information on its systems and disrupted customer and employee access to its systems and services.

In a blog postFacebook (FB) disclosed another privacy breach involving approximately 100 developers, which made the names and profile pictures of users associated with the company’s Groups API accessible.

German sportswear firm Adidas (ADDDF) reported sales and operating profit above expectations along with accelerating sales for the fourth quarter. For 2019, the company continues to expect sales to increase at a rate of between 5% and 8% on a currency-neutral basis with a significant sequential top-line acceleration during the fourth quarter.

Shares of cloud software company Five9 (FIVN) rose 9% in after-hours when the company beat on both its top and bottom line. The company delivered EPS of $0.20 versus expectations for $0.15 and revenue of $83.8 million versus expectations for $78.8 million. The company also delivered strong guidance for the December quarter.

Shares of Match Group (MTCH), the parent company of dating apps such as Tinder and OkCupid, dropped nearly 20% after the company beat on earnings and matched revenue expectations, but delivered weaker than expected guidance for the final quarter of 2019.

Yesterday Peloton (PTON) shares were up around 6% in pre-market trading after reporting revenue than more than doubled from the year-ago quarter, beating estimates by $28.65 million and its net losses narrowed to -$49.8 million from -$54.5 million with EPS of -$1.29 missing by $0.81. Shares then dropped 4% after the opening bell and closed down 7.6% on the day. CEO John Foley said in a CNBC interview that, "The stock going backwards is a bit of a head-scratcher, I've got to be totally honest with you." One of us will be watching for any more wild moves today from our Tread.

The FCC approved the merger between T-Mobile (TMUS) and Sprint (S) subject to certain concessions, including the divestiture of some Sprint prepaid customers.

Shares of drugstore company Walgreens Boots Alliance (WBA) traded higher yesterday on reports the company has been exploring a leveraged buyout with Evercore (EVR).  

Plantronics Inc (PLT) reported second-quarter earnings and revenue miss after the close and provided weaker than expected guidance, which sent shares down nearly 30%.

WW International (WW(formerly Weight Watchers), lost 15% in after-hours when the company beat on EPS but missed on revenue and saw subscribers decline from 4.6 million at the end of the second quarter to 4.4 million. 

After the market’s close today the companies reporting include:

  • Albemarle (ALB) is expected to report EPS of $1.49 on revenue of $883.7 million.
  • (BIDU) is expected to deliver EPS of $1.17 on revenue of $3,889.5 million.
  • CenturyLink (CTL) is expected to report EPS of $0.32 on revenue of $5,534.3 million.
  • AXA Equitable Holdings (EQH) is expected to deliver EPS of $1.06 on revenue of $3,277.4 million.
  • Energy Transfer (ET) is expected to report EPS of $0.36 on revenue of $14,471 million.
  • Expedia Group (EXPE) is expected to deliver EPS of $3.82 on revenue of $13,572 million.
  • Fitbit (FIT) is expected to report EPS of -$0.10 on revenue of $345.3 million.
  • Fossil (FOSL) is expected to deliver EPS of $0.04 on revenue of $553.5 million.
  • GoDaddy (GDDY) is expected to report EPS of $0.70 on revenue of $761 million.
  • Kinross Gold (KGC) is expected to report EPS of $0.09 on revenue of $908.8 million.
  • Lanett (LCI) is expected to deliver EPS of $0.19 on revenue of $120.8 million.
  • Marathon Oil (MPC) is expected to report EPS of $0.06 on revenue of $1,255.1 million.
  • Pan Am Silver (PAAS) is expected to deliver EPS of $0.12 on revenue of $325.5 million.
  • PDC Energy (PDCE) is expected to report EPS of $0.31 on revenue of $325.4 million.
  • Qualcomm (QCOM) is expected to report EPS of $0.71 on revenue of $4.7 billion
  • Roku (ROKU) is expected to report EPS of -$0.25 on revenue of $257.6 million
  • Square (SQ) is expected to report EPS of $0.20 on revenue of $596 million
  • Wynn Resorts (WYNN) is expected to report EPS of $0.90 on revenue of $1.67 billion

On the Horizon

  • Upcoming IPOs:
    • 36KR Holdings (KRKR), a brand and a pioneering platform dedicated to serving New Economy participants in China. The company has expanded its offerings to business services, including online advertising services, enterprise value-added services, and subscription services.
    • Centogene B.V. (CNTG), a commercial-stage company focused on rare diseases that transforms real-world clinical and genetic data into actionable information, is expected to price November 7th between $14 and $16 and begin trading on Nasdaq Global.
    • Silvergate Capital Corp (SI), the holding company for Silvergate bank, is expected to price November 7th between $13 and $15 and begin trading on NYSE.
    • Galera Therapeutics, Inc (GRTX), a clinical-stage biopharmaceutical company focused on developing and commercializing a pipeline of novel, proprietary therapeutics that have the potential to transform radiotherapy in cancer,  is expected to price November 7th between $14-$16 on November 7th and will begin trading on Nasdaq Global.
    • GFL Environmental Holdings, Inc (GFL), the fourth largest diversified environmental services company in North America as measured by revenue and its North American operating footprint, is expected to price between $20 and $24 and trade on NYSE.
    • Saudi Aramco (ARMCO) - which is expected to be the largest IPO in history, produces about 1/10th of the world’s crude and is the world’s most profitable company - is set to being trading on the Saudi stock market in early December with the IPO prospectus released on November 10th. 
  • Dates to mark:
      • November 7 - Bank of England rate decision
      • November 8 - Shenandoah Telecommunications (SHEN) will replace Genomic Health (GHDX) that is being acquired by Exact Sciences in the S&P SmallCap 600 index before the market open. 
      • November 15 - US Retail Sales for October
      • November 19 - Huawei compliance deadline for US companies
      • November 28 - US Stock Market Closed for Thanksgiving Holiday
      • November 29 - Black Friday; US stock market closes at 1 PM ET
      • December 2 - Cyber Monday
      • December 5-6 - OPEC meeting

Thoughts for the Day 

It is Wednesday and I think many have moments when they have looked in the mirror and thought, "Oh dear God what am I doing and why am I here?" To that, we say, "We all have a few failures under our belt. It's what makes us ready for the successes." Randy K. Milholland

You are alive. Breathe deep, find some fun and kick a little booty.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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