Daily Markets: Investors Parsing Earnings Results from Netflix, Ericsson, ASML, and Others
Today’s Big Picture
Equity indices in Asia were mostly in the red today with Japan’s Nikkei falling 2.0%, its second consecutive 2% decline. South Korea’s Kospi lost 1.5%, Australia’s ASX 200 fell 0.3%, and Hong Kong’s Hang Seng dropped 1.7% while China’s Shanghai Composite closes relatively unchanged and the Shenzhen Component rose 0.3%. By mid-day trading, European equity indices were positive across the board and U.S. futures point to a mixed open later this morning.
Investors are parsing earnings reports, including those from Netflix (NFLX), Ericsson (ERIC), and ASML (ASML), that offer conflicting quarterly results, likely leading investors to rethink underlying expectations for the rest of the season. To that rethink, we can add Proctor & Gamble’s (PG) price increase announcement, which comes just weeks after a similar one from Kimberly-Clark (KMB) - more on all of that in Stocks to Watch. With another light economic calendar for today, the fallout from today’s earnings reports will once again be the primary driver of the day’s trading.
Finally, we come to the most important question of the day, or perhaps even the month. What jeans cut are we supposed to wear when we finally venture out into the world from our yoga-clothes-are-zoom-appropriate-work-attire year of pandemic hibernation. We’ve heard (ahem) from others that a few of us may need a slightly larger size post-2020… and we’re pretty sure it’s got nothing to do with why Häagen Dazs and Ben & Jerry’s sales have been strong over the last few quarters.
According to Johns Hopkins University coronavirus data, daily new cases worldwide rose by over 5.4 million over the past week - a record pace since the start of this nightmare and more than 2x the weekly rate from mid-February. India is currently the hardest hit, but cases are on the rise in many other parts of the world, including Germany and Japan (not good for the upcoming Olympics), which means further delays in getting the global economy back on track.
South Korea’s PPI rose 3.9% YoY in March from an upwardly revised 2.1% in February and 0.9% MoM from 0.8% in February.
Retail Sales in Australia were stronger than expected, rising 1.4% MoM in March following a -0.8% decline in February from which they were expected to rebound to 1.0%.
The UK’s headline Inflation Rate rose less than expected, up 0.7% YoY in March from 0.4% in February, from which it was expected to rise to 0.8%. On a MoM basis, headline inflation came in as expected, rising to 0.3% from 0.1%. Core Inflation was in line with expectations at 1.1% YoY from 0.9% and on a monthly basis, Core Inflation rose 0.4% MoM after sitting flat at 0.0% MoM in February.
Yesterday was a light one for domestic economic data and that pace will pick up some later today with the usual weekly MBA Mortgage Applications for the week ended 16 April and the weekly EIA Energy Stocks report.
The S&P 500 declined 0.7% yesterday, marking the first back-to-back decline since March 30. The Dow Jones Industrial Average fell 0.8% while the Nasdaq Composite declined 0.9% and the Russell 2000 dropped 2.0%. Declining issues outpaced advancing issues by a 3:1 margin at the NYSE and Nasdaq. Lumber prices fell for the first time since March 26 - but did anyone hear it? Treasury yields bull flattened - is that something like a lean cut of beef? The 30-year Treasury hit a 6-week low of 2.25% while gold rose to $1,780 an ounce and the VIX has risen 15% over the past two days.
Stocks to Watch
Before U.S. equity markets open, there are a number of corporate earnings reports, including those from homebuilder NVR (NVR) and Verizon (VZ). We’ll be listening to both with an ear open for housing price trends with NVR while for Verizon we will be listening for 5G adoption among its customers as well as its 4G LTE and 5G capital spending plans.
In keeping with the incredible growth in retail investors, Interactive Brokers (IBKR) reported net revenues that were 21.7% above expectations and beat on EPS by 7.7% as total customer accounts rose 74% YoY and volumes (daily average revenue trades) rose 128% YoY. Customer margin loans rose 113% YoY to hit 42.2 billion.
Following a similar move by rival Kimberly Clark, Proctor & Gamble announced it will boost prices for a variety of its products, ranging from diapers to tampons this fall to offset rising input costs such as resins and pulps as well as higher transportation costs. The expected increase will be in the mid-to-high-single-digit percentage points and focus on baby products, adult diapers, and feminine-care brands. Kimberly-Clark said its percentage increases would be in the mid-to-high single digits and take effect in late June.
ASML reported better than expected March quarter revenue and EPS and issued upside revenue guidance for the current quarter. For its June quarter, the company now sees revenue in the range of €4.0-4.1 billion vs. €3.96 billion. ASML President and Chief Executive Officer Peter Wennink explained what was driving the company’s robust results: “Compared to three months ago, we are seeing a significant increase in demand across all market segments and our product portfolio. The build-up of the digital infrastructure with secular growth drivers such as 5G, AI, and high-performance computing solutions fuels demand for advanced and mature nodes in Logic as well as Memory. We now expect revenue growth towards 30% in 2021 compared to last year.”
March quarter results at Ericsson missed consensus expectations as revenue for the quarter was unchanged YoY. Networks sales increased by 15% YoY, adjusted for comparable units and currency, driven by market share gains and the company shared it sees “strong momentum in the global 5G demand with lead markets moving forward at high pace” even though it now sees 2021 as an “investment year” with Q2 earnings similar to the 1Q.
Shares of Netflix are under pressure following March quarter results that showed the streaming content company added just under 4 million subscribers in the quarter, well below the company’s own forecast of 6 million. Netflix expects to add just 1 million paid net subscribers in the current quarter compared to 10 million in the year-ago quarter. That revelation more than offset the company’s better-than-expected EPS guidance for the current quarter. Netflix also announced the approval of a $5 billion share buyback program that has no fixed expiration date and that program is expected to begin in the current quarter.
Amazon (AMZN) is expanding Amazon One, its palm-scanning payment system to a Whole Foods store in Seattle, the company announced Wednesday, the first of many planned rollouts at other locations.
Inter Parfums (IPAR) 1Q net sales crushed consensus expectations, coming in at $198.5 million vs. the $159.7 million consensus. At comparable foreign currency exchange rates, consolidated sales for the quarter increased 32.7%. Looking at the company’s largest brands within European operations, Montblanc, Jimmy Choo, Coach, and Lanvin, sales rose 27.4%, 66.7%, 8.8%, and 91.2%, respectively. The company issued upside guidance for its FY21 with EPS of $1.65 vs. the $1.46 consensus and revenue of approximately $700 million vs. the $667.4 million consensus.
The Transportation Department's Office of Inspector General says it will audit the Federal Aviation Administration's decision to unground the Boeing (BA) 737 MAX and other agency decisions.
Citigroup (C) CEO Jane Fraser shared the company's retail bank will exit 13 countries outside of the U.S. in an effort to bring its returns closer to that of its peers such as JPMorgan Chase (JPM) and Bank of America (BAC).
Iron Mountain (IRM) announced it closed an agreement to form a joint venture with Web Werks, one of India's top colocation data center providers that will expand its data center footprint in the country.
Manchester United (MANU) confirmed it will not be participating in the European Super League.
After today’s market close, Chipotle Mexican Grill (CMG), Discover (DFS), Lam Research (LRCX), Las Vegas Sands (LVS), and Whirlpool (WHR) will be among the companies reporting their quarterly results. Investors looking to get ready for those reports and the others to be had in the coming days should visit Nasdaq’s earnings calendar page.
On the Horizon
- April 22: Jobless Claims, Chicago Fed National Activity Index, Existing Home Sales
- April 23: Markit Manufacturing and Services PMIs, New Home Sales
- April 26: Durable Goods Orders, Dallas Fed Manufacturing
- April 27: S&P/Case-Shiller Home Price Index, Conference Board Consumer Confidence, API Crude Oil Stocks
- April 28: Goods Trade Balance, Wholesale Inventories, EIA Energy Stocks, Federal Reserve Interest Rate Decision and Press Conference
- April 29: US GDP Q1 (advance estimate), Jobless Claims, Pending Home Sales
- April 30: Personal Income and Spending, PCE Price Index, Employment Cost Index, Chicago PMI, Univ. Michigan Consumer Sentiment
- May 3: Markit Manufacturing PMI, Construction Spending, ISM Manufacturing, Total Vehicle Sales
- May 4: Balance of Trade, IBD/TIPP Economic Optimism, Factory Orders, API Crude Stocks
- May 5: ADP Employment Report, Markit Services PMI, ISM Non-Manufacturing PMI, EIA Energy Stocks
- May 6: Jobless Claims, Unit Labor Costs, Nonfarm Productivity
- May 7: Nonfarm Payrolls, Wholesale Inventories
- May 10: Consumer Inflation Expectations
- May 11: NFIB Business Optimism Index, JOLTs Job Openings, weekly Redbook retail sales, API Crude Oil Stock Change
- May 12: MBA Mortgage Applications, Inflation Rate, EIA Energy Stocks reports, World Agricultural Supply and Demand Estimates (WASDE) Report, Monthly Budget Statement
- May 13: PPI, weekly Jobless Claims, EIA Natural Gas Stocks
- May 14: Retail Sales, Import/Export Prices, Industrial Production, Manufacturing Production, Capacity Utilization, Business Inventories, Michigan Consumer Sentiment Report, Baker Hughes Oil Rig Count
Thought for the Day
“Always go too far, because that’s where you’ll find the truth.” ~Albert Camus
- Ericsson (ERIC), Marvell Technology (MRVL) are constituents of the Tematica BITA Digital Infrastructure and Connectivity Index.
- Chipotle Mexican Grill (CMG) is a constituent of Tematica Research’s Cleaner Living Index.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.