Daily Markets: Investors Parse Earnings, Jobs Numbers

Today’s Big Picture

Equity indices in the Asia-Pacific region that were open for trading today closed mostly higher - markets in China, Japan, and South Korea were closed today, and Hong Kong’s Hang Seng will now be closed through Monday, Feb. 15. By mid-day trading, equities in Europe were mostly higher, and U.S. futures imply a positive open. While we have a relatively light day of economic data, investors will likely parse the weekly jobless data out before the market open and we’ll be particularly focused on the continuing claims data as we digest the sea of earnings reports today.

Data Download

International Economy

German wholesale prices were flat in January after falling 1.2% in December and rose 2.1% on a MoM basis.

Mexico’s Industrial Production fell 2.1% YoY in December after a 3.7% decline in November, missing expectations for a 2.2% decline.

Domestic Economy

While core CPI was expected to rise 0.2% MoM in January, the actual numbers came in flat and are up only 0.5% annualized over the past two months, For context, that is in the bottom 2.0% of all readings, and is a significant deceleration from the 3.3% annualized pace over the two months ended September 2020. Used care prices rose 10% YoY and have materially outpaced new car prices but have fallen 3.1% over the past three months.

While federal government outlays increased in December and January (seasonally adjusted) tax receipts rose to the highest level on record outside of the volatile covid-induced volatile tax payments. The three-month trend for the national deficit is at 10% of GDP.

Later this morning, we will get the usual weekly jobless claims and we’ll have our eyes on the latest data for continuing jobless claims.

Markets

It was another sideways day in the domestic equity markets. After a strong open, the S&P 500 closed slightly in the red while the Dow added 0.2% and the Nasdaq fell 0.3%. Energy was the strongest sector, rising 1.8% with mixed breadth across the rest of the sectors. The Treasury yield curve has steepened remarkably with the yield on the long bond hitting 2.0% Monday compared to 1.2% in early August, pushing the spread between the five and the thirty-year yield to its widest since fall 2015.

Stocks to Watch

Investors will be chewing through a number of high-profile earnings reports this morning, including those from CyberArk (CYBR), Kellogg (K), Kimco Realty (KIM), Kraft Heinz (KCH), Laboratory Corp (LH), and Molson Coors Brewing (TAP).

December quarter EPS at PepsiCo (PEP) came in at $1.47 share, a touch above the $1.46 consensus with revenue for the quarter up 8.8% YoY to $22.45 billion, nicely ahead of the $21.76 billion consensus. Organic sales growth for the period came in at 5.7% vs. the 4.1% consensus. For the coming year, the company expects a mid-single-digit increase in organic revenue and a high-single-digit increase in core constant currency EPS. PepsiCo also targets total cash returns to shareholders of approximately $5.9 billion, comprised of dividends of approximately $5.8 billion and share repurchases of approximately $100 million.

December quarter EPS at Restaurant Brands (QSR) missed consensus expectations even though revenue for the quarter came in modestly ahead of the consensus forecast. For the quarter, its comp sales at Tim Horton's fell 11% vs. the consensus of -11.3%; Burger King was harder hit, dropping 7.9% vs. consensus of -4.5%, and Popeye's comp sales for the quarter dropped 5.8% vs. the consensus of -4.3%. Overall comps sales for the quarter fell 11.0% YoY and the company’s system-wide sales growth slumped 12.9% YoY. At the end of the quarter, Restaurant Brands had a total restaurant count of 4,949 units.

December quarter results at Nu Skin (NUS) were mixed with EPS coming in ahead of the consensus forecast, while revenue for the quarter came in modestly below the expected $749.67 million. The company issued 2021 guidance that calls for EPS of $3.80-4.10 vs. the $3.75 consensus with revenue up +5-9% YoY to $2.71-2.81 billion vs. the $2.82 billion consensus.

Equinix (EQIX) crushed December quarter EPS expectations with its reported $5.67 per share in earnings as revenue rose 10.4% YoY to $1.56 billion. While the company sees current-quarter revenue of $1.587-$1.607 billion, in-line with the consensus forecast, it sees its 2021 FFO in the range of $26.72-27.28, well ahead of the $19.85 consensus with revenue in the range of $6.58-6.64 billion.

International Flavors & Fragrances (IFF) reported better than expected December quarter top and bottom-line results. The company’s 2021 guidance that calls for sales to be approximately $11.5 billion assumes the pandemic will subside in the second half of the year.

Uber (UBER) reported mixed December quarter results with EPS of $0.54 that topped expectations despite revenue of $3.17 billion (down 15.5% YoY) that missed the $3.56 billion consensus forecast. Gross bookings grew 16% QoQ to $17.2 billion, down 5% YoY with delivery gross bookings up 128% YoY and mobility gross bookings plummeting 47% YoY. Gross bookings fell 47% YoY in January. Uber continues to target achieving its profitability goals in 2021.

MGM Resorts (MGM) reported a December quarter loss of $0.90 per share vs. the -$0.93 consensus; revenue for the quarter fell 53.1% YoY to $1.49 billion, missing the $1.53 billion consensus. Of note, MGM China net revenues decreased 58% YoY to $305 million and overall casino revenue for the fell 38% YoY at the company's Las Vegas Strip Resorts, due primarily to operational restrictions and reduced travel related to the pandemic.

Hibbett Sporting Goods (HIBB) raised its 4Q20 EPS guidance to $1.30-$1.40 vs. its prior guidance of $1.00-$1.10 and the $1.09 consensus. Comps sales during the quarter rose 21.9%, well above the previous guidance of an increase in the high-single digits to low-double digits. For its coming fiscal 2022, the company sees EPS of $5.00-$5.50 with comp sales ranging from negative low-single digits to positive low-single digits in comparison to fiscal 2021.

Volkswagen Group's (VLKAF) Car.Software company will collaborate with Microsoft (MSFT) to build a cloud-based Automated Driving Platform on Microsoft Azure.

In response to the global chip shortage that is crippling factory lines, particularly in the auto industry, a group of U.S. chip companies, including Qualcomm (QCOM), Micron (MU), and Advanced Micro Devices (AMD) sent a letter to President Joe Biden urging him to provide "substantial funding for incentives for semiconductor manufacturing" as part of his economic recovery and infrastructure plans. As part of its December quarter results, General Motors (GM) warned a global semiconductor chip shortage could cut its earnings by $1.5-$2 billion this year.

The Financial Times reports Microsoft approached Pinterest (PINS) in recent months about a potential deal to acquire the social media company that is popular with hobbyists posting home decor, food, and wedding collages.

After today’s market close, Cloudflare (NET), Datadog (DDOG), Digital Realty Trust (DLR), GoDaddy (GDDY), Veeco Instruments (VECO), and Walt Disney (DIS) among many other companies are expected to report their quarterly results. Investors looking to get a jump on those reports to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• February 12: Lunar New Year in China: Year of the Ox, Michigan Consumer Sentiment, weekly Baker Hughes Oil Rig count
• February 16: NY Empire State Manufacturing, weekly Redbook, Net Capital Flows
• February 17: Retail Sales, PPI, Industrial Production, Capacity Utilization, Manufacturing Production, Business Inventories, NAHB Housing Market Index, FOMC Minutes, weekly API Crude Stock
• February 18: Housing Starts, Building Permits, Philadelphia Fed Manufacturing, weekly Jobless Claims, Import and Export Prices, EIA energy stocks
• February 19: Markit Manufacturing and Service PMI (flash), Existing Home Sales, weekly Baker Hughes Oil Rig report
• February 22: Chicago Fed National Activity, Dallas Fed Manufacturing
• February 23: S&P/Case-Shiller Home Prices, CB Consumer Confidence, weekly API Crude Oil Stocks
• February 24: New Home Sales, weekly EIA Energy Stocks
• February 25: Durable Goods, Weekly Jobless Claims, Pending Home Sales
• February 26: Personal Income & Spending, Goods Trade Balance, Chicago PMI, Michigan Consumer Sentiment

Thought for the Day

“You are usually about as happy as you make your mind up to be.” ~ Abraham Lincoln

Disclosures

• Digital Realty Trust (DLR), Equinix (EQIX), Qualcomm (QCOM) are constituents of the Tematica BITA Digital Infrastructure and Connectivity Index.
• CyberArk (CYBR), Cloudflare (NET) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index.
• International Flavors & Fragrances (IFF) is a constituent of the Foxberry Tematica Research Sustainable Future of Food Index
• International Flavors & Fragrances (IFF), Microsoft (MSFT), Nu Skin (NUS), PepsiCo (PEP), Qualcomm (QCOM) are constituents of Tematica Research's Thematic Dividend All-Stars Index.

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

Other Topics

Stocks Earnings Economy Jobs & Unemployment Companies