US EARLY MORNING: Equity futures are higher, recovering losses seen in wake of hawkish Fed minutes

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  OVERNIGHT: US indices were mixed after stale FOMC minutes (see here), while APAC stocks lacked firm direction amid holiday-thinned trading conditions, with Japan away for the Emperor's Birthday (see here). European shares open higher on Thursday amid a heavy slate of corporate earnings updates (see here) – we include the major ones in our equity specific news section, below.


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  US PRE-MARKETS: US equity futures are green, recovering from lows seen in wake of the hawkish FOMC meeting minutes released on Wednesday afternoon (we recap these below). Treasury yields are mixed, but ultimately not deviating too far from neutral. The Dollar Index is a touch softer. Crude futures are on the front foot, despite weekly API inventory data that reported larger than expected builds in crude stocks, while inventories of the products were also larger than expected – reviving Chinese demand is being cited for the upside in oil benchmarks today. Ahead, a second look at US GDP in Q4 and weekly jobless claims data are due.


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  FED MINUTES RECAP: Although somewhat stale, given that incoming economic data has turned more constructive recently, minutes to the FOMC's February meeting were judged as hawkish, noting that a "few" participants (non-voters Bullard and Mester, judging by their recent commentary) favoured a larger 50bps rate rise vs the 25bps the Committee ultimately hiked by. Additionally, there was no discussions on the conditions officials would need to see in order to pause the hiking cycle, with "all" participants judging that ongoing rate hikes were still appropriate. On financial conditions, some thought the minutes were a little more hawkish than remarks Chair Powell made at the post-meeting press conference; at the presser, Powell said that while financial conditions had loosened, they were tighter than in early 2022, and some loosening in financial conditions could reflect expectations of falling inflation, which was the intent of tighter financial conditions in the first place; but there was a comment in the minutes that said that a "number" of participants had observed that financial conditions had eased in recent months, which some noted could necessitate a tighter stance of monetary policy – Citi argues that this suggests a less benign view of financial conditions among Fed officials than was apparent three weeks ago. Ultimately, however, these minutes are stale given the February meeting preceded strong jobs, inflation and retail sales data, as well as the upside surprises in the ISM services survey. There are still further data on jobs and inflation ahead of the March 22nd FOMC, and accordingly, these data will shape expectations of what the Fed will do at that meeting (the base case still sees a 25bps rate hike, although the probability of a larger 50bps has increased recently).

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: Final Eurozone inflation data is usually a non-event, but may garner more attention than usual given that Eurostat used an estimate of the German figures (on account of technical issues), which could result in a revision to the 8.5% Y/Y flash print (the consensus looks for 8.6% Y/Y). In the UK, CBI distributive trades are expected to increase to -13 from -23. In the EMFX complex, traders will note the CBRT rate decision, where the central bank are likely to cut its weekly repo rate by 50bps to 8.50%. The speaker’s docket has a distinct BoE focus, with hawk Catherine Mann to speak in wake of cooler than expected inflation data, along with better growth data, which gives the BoE more scope to hike if it chooses to. BoE’s Cunliffe (considered a dove) will also be speaking in the morning. ECB’s de Cos will make remarks in the afternoon.


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  NORTH AMERICAN DATA/SPEAKERS: The pre-market data dump will include a second look at US GDP in Q4 (expected to be confirmed at 2.9%), while there will be attention on the components, including core PCE prices (the core rate is likely to be confirmed at 3.9%). Weekly initial jobless claims, which coincides with the BLS’ establishment survey window, is expected to be little changed (200k vs 194k last week), while continuing claims are seen picking up a little to 1.7mln from 1.696mln. The pre-market data slate wraps up with the release of the Chicago Fed’s national activity index for January – other regional Fed surveys have been mixed, although the S&P Global PMI series surprised to the upside in flash February data.  The speaker’s slate includes 2024 voters Bostic and Daly. EMFX traders will take note of the Banxico’s meeting minutes; at the policy meeting, the central bank surprised with a larger than expected hike, but alluded to a smaller rate hike at its next meeting.


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  ENERGY: The DoE will publish weekly energy inventories; for reference, the API’s weekly equivalent reportedly showed crude stocks +9.9mln (exp. +2.1mln), Cushing inventories +0.5mln, gasoline +0.9mln (exp. +0.1mln), and distillates +1.4mln (exp. -1.1mln).


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  SUPPLY: Supply comes by way of USD 35bln 7yr notes from the US Treasury.


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  US CORPORATE EARNINGS: Today’s major corporate earnings include MRNA, KDP, AMT, INTU, BKNG. Our full US daily corporate earnings estimates can be accessed here.

STOCK SPECIFIC NEWS:

TECH:

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  NVIDIA Corp (NVDA) - Q4 adj. EPS 0.88 (exp. 0.81), Q4 revenue USD 6.05bln (exp. 6.01bln), Q4 data centre revenue USD 3.62bln (exp. 3.86bln). CFO said Cloud and Hyperscale opportunity was significant, driving strong growth in the data centre, which will accelerate through the year. Exec said AI was at an inflection point, setting up for broad adoption reaching into every industry, and it was seeing accelerated interest in the versatility and capabilities of generative AI; will offer AI-as-a-service. Gaming is recovering from the post-pandemic downturn. Sees Q1 revenue at USD 6.50bln (exp. 6.33bln).


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  NetApp, Inc. (NTAP) - Q3 EPS 1.37 (exp. 1.31), Q3 revenue USD 1.53bln (exp. 1.61bln). Exec noted that Q3 saw weakening IT spending environment, continued cloud cost optimisation, with customers taking increased budget scrutiny, requiring higher level approvals, resulting in smaller deal sizes, longer selling cycles, and some deals pushing out. Q4 EPS seen between USD 1.30-1.40 (exp. 1.43). Sees FY23 EPS between USD 5.30-5.50 (exp. 5.41), and sees FY23 gross margin 66.5%.


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  ANSYS, Inc. (ANSS) - Q4 adj. EPS 3.09 (exp. 2.80), Q4 revenue USD 694.1mln (exp. 647.4mln), Q4 annual contract value USD 818mln (exp. 780mln). Q1 adj. EPS seen between 1.53-1.71 (exp. 1.42), and Q1 revenue between USD 482.5-507.5mln (exp. 450.9mln). FY23 adj. EPS seen between USD 8.34-8.86 (exp. 8.41), and FY23 revenue seen between USD 2.242-2.322bln (exp. 2.2bln).


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  Five9, Inc. (FIVN) - Q4 EPS 0.54 (exp. 0.41), Q4 revenue USD 208.3mln (exp. 204.5mln). Sees Q1 EPS between USD 0.23-0.25 (exp. 0.21), and sees Q1 revenue between USD 207-208mln (exp. 209.7mln). FY23 EPS seen between USD 1.67-1.71 (exp. 1.57), and sees FY23 revenue between USD 900-903mln (exp. 900.6mln).

CONSUMER STAPLES:

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  Electrolux (ELUXY) - French competition regulators say Electrolux violated French antitrust rules. Electrolux said that given the alleged infringements and the nature of this investigation, it cannot be ruled out that the outcome could have a material impact on the Group’s financial result and cash flow. At this stage it is however not possible to evaluate the extent of such an impact.

CONSUMER CYCLICAL:

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  eBay Inc. (EBAY) - Q4 adj. EPS 1.07 (exp. 1.06), Q4 revenue USD 2.5bln (exp. 2.47bln), Q4 Gross Merchandise Volume USD 18.2bln (-12% on a reported basis, -6% FXN). Raises quarterly dividend +14% to 0.25/shr. Sees Q1 adj. EPS between USD 1.05-1.09 (exp. 1.06), and sees Q1 revenue USD 2.46-2.5bln (exp. 2.4bln). Does not provide a FY23 outlook given macro environment.


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  Lucid Group, Inc. (LCID) - Q4 EPS -0.28 (exp. -0.40), Q4 revenue USD 257.7mln (exp. 302.6mln), Q4 vehicles produced 3,493. Reserveation stood at "over 28k" (prev. 34k). Sees FY23 production between 10-14k (exp. 20.5k).


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  Etsy, Inc. (ETSY) - Q4 EPS 0.77 (exp. 0.80), Q4 revenue USD 807.2mln (exp. 751.8mln). Sees Q1 revenue between USD 600-640mln (exp. 621.6mln).


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  Dutch Bros Inc. (BROS) - Q4 adj. EPS 0.03 (exp. 0.07), Q4 revenue USD 201.8mln (exp. 195.8mln), Q4 system same shop sales -0.6% (exp. -2.1%). Sees FY23 sales between USD 950-1.0bln (exp. 981mln), and same shop sales growth is estimated to be in the low single digits. Exec saidit has no plans to take additional menu pricing in 2023, expects low-single digits growth from pricing to roll-over into 2023 from menu pricing taken in 2022.


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  Luminar (LAZR), Mercedes-Benz (MBG) - Luminar and Mercedes announced an expanded partnership to enable fully automated driving for next-gen vehicles; Mercedes has also partnered with Google (GOOGL) to develop branded navigation for its new MB.OS operating system.


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  Pirelli (PRLLY) - Reports strong results, see scope for higher sales in 2023. Q4 FY22 adj. EBIT EUR 224mln (exp. 213mln), Q4 revenue EUR 1.58bln (exp. 1.50bln). Guides initial FY23 revenue view of EUR 6.6-6.8bln (exp. 6.7bln).

MATERIALS:

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  Mosaic Company (MOS) - Q4 adj. EPS USD 1.74 (exp. 2.26), Q4 revenue USD 4.48bln (exp. 4.28bln). Exec sees strong agricultural commodity pricing trends driving a recovery in demand for fertilisers in 2023. Provided a 2023 capital allocation strategy, anticipates returning virtually all of 2023 FCF to shareholders through a combination of regular common dividends, special dividends, and share repurchases, expects to initiate an accelerated share repurchase of USD 300mln in Q1. Will continue to evaluate its capital expenditure budget in 2023.


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  Anglo American (NGLOY) - Sales and EPS top expectations, underlying EBITDA short; takes an impairment charge of USD 1.7bln in relation to Woodsmith. FY22 adj. EPS GBP 4.97 (exp. 4.85), revenue GBP 35.1bln (prev. 20.6bln Y/Y), underlying EBITDA GBP 14.5bln (prev. 20.6bln), net GBP 4.51bln (prev. 8.56bln). Exec said that the continued softening in global macroeconomic conditions could see a contraction in consumer spending and demand for diamond jewellery, which may result in lower demand for rough diamonds in the near term. This may be partly mitigated by an increase in demand for diamond jewellery in China, following the removal of Covid-19 restrictions.


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  Heidelberg Materials (HDELY) - Sales rise, sees volatile energy and raw materials markets in 2023. FY22 revenue EUR 21.1bln (prev. 18.7bln Y/Y), FY operating EBIT EUR 2.28bln (prev. 3.10bln). CEO said demand in the construction sector was likely to remain mixed in the current year.

INDUSTRIALS:

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  BAE Systems (BAESY) - Profits rise on higher military spending. FY22 sales GBP 23.3bln (exp. 22.6bln), adj. EBIT GBP 2.49bln (exp. 2.39bln), Orders GBP 37bln, Order Backlog GBP 588.9bln, EPS GBP 0.555 (exp. 0.536), Dividend 0.27/shr (exp. 0.26/shr). CFO said that for 2023, it forecasts further top-line growth, continued margin expansion, higher EPS; is increasing its rolling three-year cash targets.


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  Rolls-Royce (RYCEY) - Tops expectations with 57% rise in profits. FY22 revenue GBP 13.5bln (prev. 11.2bln Y/Y), FY operating margin GBP 837mln (prev. 513mln), PBT GBP -1.5bln (prev. -294mln).

ENERGY:

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  Pioneer Natural Resources Company (PXD) - Q4 adj. EPS USD 5.91 (exp. 5.77), Q4 revenue USD 5.1bln (exp. 3.5bln). Sees Q1 oil production between 349-364 MBOPD, Q1 total production seen between 659-687 MBOEPD, Q1 production costs expected to average USD 11.75-13.25/BOE. Sees FY23 CapEx between USD 4.45-4.75bln (exp. 4.5bln).


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  APA Corporation (APA) - Q4 adj. EPS USD 1.48 (exp. 1.29), Q4 revenue USD 2.38bln (exp. 2.1bln). Exec said it continues to make good progress improving rig efficiencies and growing quarterly oil production. Volumes in the North Sea returned to the mid-40 thousand BOE per day level as facilities' uptime improved from prior quarters. Will invest between USD 2.0-2.1bln in upstream oil and gas capital in 2023, consistent with its preliminary guidance in Q3, and sees see production rising between 4-5% (exp. +4.4%).


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  Eni (E) - Net profit more than doubled in FY22, though were still slightly short of estimates. Q4 adj. net EUR 2.50bln (exp. 2.60bln), Q4 adj. operating profit EUR 3.59bln (prev. 3.81bln), Q4 production 1.62mln BOEPD (exp. 1.63mln BOEPD).


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  John Wood (WDGJY), Apollo Global Management (APO) - Confirmed it has received three takeover proposals by Apollo, which the board rejected unanimously.

HEALTH CARE:

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  EssilorLuxottica (ESLOY) - Sales rose 9% in the quarter, affirms FY22-25 revenue margin targets. FY22 revenue EUR 24.5bln (exp. 24.4bln), FY adj. net EUR 2.86bln (exp. 2.63bln), FY adj. operating profit EUR 4.12bln (prev. 3.47bn Y/Y). Affirms FY22-25 revenue and adj. operating margin targets.


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  Roche (RHHBY) - Launches two new antibodies to identify key clinical mutations in patients with brain cancer.


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  AstraZeneca (AZN) - Enters an agreement with KYM for CMG901.


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  Teladoc, Inc. (TDOC) - Q4 EPS -23.49 (exp. -0.25), driven by non-cash goodwill impairment charges of USD 23.26/shr in Q4. Q4 revenue USD 637.7mln (exp. 633.7mln). Sees Q1 EPS -0.50 at the midpoint (exp. -0.41), and sees Q1 revenue between USD 610-625mln (exp. 642.4mln). For the FY23, sees loss per share of between 1.75-1.25 (exp. -1.41), and sees FY23 revenue between USD 2.55-2.68mln (exp. 2.7bln).


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  DaVita Inc. (DVA) - Q4 adj. EPS 1.11 (exp. 0.91), Q4 revenue USD 2.92bln (exp. 2.93bln). Sees FY23 adj. EPS between USD 5.45-6.95 (exp. 6.73).

FINANCIALS:

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  UBS (UBS) - Is reportedly preparing to apply for a mutual-fund license in China, according to WSJ.


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  Lloyds (LYG) - Launches share buyback programme of up to GBP 2bln.


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  AXA (AXAHY) - FY earnings short of expectations, but raised its 2023 targets and will repurchase EUR 1.1bln of its shares. FY22 revenue EUR 102.4bln (prev. 99.9bln Y/Y), FY22 net EUR 6.68bln (prev. 7.29bln). Proposes dividend of EUR 1.70/shr, +10% Y/Y. Sees FY underlying EPS growth above mid-term targets.


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  Munich Re (MURGY) - Profits surpass targets in Q4. Q4 net income EUR 1.5bln (exp. 1.43bln). FY net income EUR 3.4bln (exp. 3.29bln). Dividend to rise to 11.60/shr (exp. 11.42). FY23 guidance: Net Income 4.0bln (exp. 4.04bln).

COMMUNICATIONS:

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  Altice USA, Inc. (ATUS) - Q4 EPS -0.43 (vs 0.56 Y/Y), Q4 revenue USD 2.37bln (exp. 2.4bln). Marc Sirota named new CFO following present CFO Michael Grau's decision to step down from the position in March. Q4 broadband organic net additions -7.7K (vs -43k in Q3), Q4 residential ending customer relationships 4.50mln (vs 4.63mln Y/Y).


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  Deutsche Telekom (DTEGY) - Reports higher profts, sees higher earnings in 2023. Q4 revenue EUR 29.8bln (exp. 30.2bln), Q4 adj. EBITDAaL EUR 9.96bln (exp. 9.86bln), Q4 Net EUR 1.98bln (prev. 1.23bln Y/Y).


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  WPP (WPP) - Sees 3-5% growth in FY23. FY22 revenue GBP 14.4bln (exp. 12.5bln), PBT GBP 1.16bln (exp. 1.5bln), Operating Profit GBP 1.35bln (exp. 1.47bln).

23 Feb 2023 - 09:31- Research Sheet- Source: Newsquawk