US EARLY MORNING: Equity futures are lower, led by the NDX after a disappointing update from Intel; US PCE ahead, and then traders will pivot focus onto next week's major events (Fed, NFP, ECI, ISM)

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  OVERNIGHT: Stocks on Wall Street rose on Thursday after higher-than-expected Q4 GDP data, and declining initial jobless claims, supporting hopes of a soft US economic landing (see here). Asia traded with a slight positive bias after strong US data, but with gains capped as attention turned to earnings and firm Tokyo inflation (see here). The European start today was lacklustre; luxury giant LVHM (MC FP) was lower despite revenue growth, with investors focussed on its weaker margins; other retail names were also pressured (see here); since the open, European shares have not deviated too far from neutral. 


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  US PREMARKETS: US equity futures are lower, with the downside being led by the Nasdaq-100 following soft earnings and guidance from Intel (INTC – holds a weighting of just over 1% in the NDX). Treasury yields are also higher across the curve by between 2-5bps, with the bulk of underperformance in the 10yr part of the curve. The Dollar Index is a little above neutral. The landscape today will likely be shaped by the PCE data for December, which will be a key input into the Fed’s decision making at its meeting next week. Core PCE is expected to rise 0.3% M/M in December, accelerating a little from the 0.2% in November, although the annual rate is seen paring to 4.4% Y/Y from 4.7% – see below for a few more detailed thoughts. Attention will also begin pivoting onto next week’s events, which include the key FOMC meeting (Wed), ISM reports (Wed and Thu), Employment Costs data for Q4 (Tue), as well as the jobs report (Fri). Elsewhere, energy traders will note Chevron kicks off the reporting season for US oil majors - see below for key themes. 

DAY AHEAD:

• Our full day ahead calendar can be accessed here.


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  US DATA: The main focus will be on the US PCE data for January, which is expected to show core PCE rising 0.3% M/M (prev. 0.2%), with the annual core rate expected to pare back to 4.4% Y/Y from 4.7%. We preview the data in a little more detail below. Meanwhile, the Personal Income is likely to rise 0.2% in the month, while Personal Spending is likely to fall by 0.1%. Elsewhere, the final University of Michigan consumer confidence data for January is expected to confirm the 64.6 reading in the flash data; as always, there will be attention on the inflation expectations components, after the flash data showed one-year inflation expectations rising by 0.1ppts to 3.0%, although the longer 5-10yr measure eased to 4.0% from 4.4% in December.


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  US PCE PREVIEW (13:30GMT/08:30EST): Core PCE is seen rising +0.3% M/M (prev. 0.2%), with the annual core rate expected to pare back to 4.4% Y/Y from 4.7%. Analysts are looking for a broad deceleration in core goods and services prices; the primary upside pressure in the core measure is likely to come from shelter. As a comparison, the consumer prices data for December showed core CPI rising 0.3% M/M, picking up slightly from the 0.2% pace in November; the annual rate pared back to 5.7% Y/Y from 6.0%, with the largest contributions to the upside from rents and hospital services; on the other side, used vehicle prices moderated strongly. It is worth noting that these data will be released during the Fed's blackout window ahead of the January 31-February 1st FOMC meeting; the current base case implied by both market pricing and analyst forecasts is that the central bank will lift rates by 25bps. However, many have caveated that view around incoming data, suggesting that if there is an upside surprise within the PCE data, then pricing for 50bps could pick up once again.


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  EARNINGS: Today's US corporate earnings highlights are: Chevron (CVX), HCA Healthcare (HCA), Colgate Palmolive (CL), American Express (AXP), Charter Communications (CHTR). Full earnings expectations can be accessed here. Our full daily earnings estimate sheet can be accessed here.

TALKING POINTS FOR TODAY’S MAJOR US EARNINGS: 

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  CVX: Chevron will begin the reporting season for the majors. RBC expects the oil company to "set a moderating tone for the sector amid a sequentially weaker macro in 4Q," and the bank notes that consensus earnings have been revised lower as we head into its reporting. In terms of the key areas to watch, Mizuho says the key debate revolves around inventory depth; "can the company meet its upstream growth aspirations without a degradation of capital efficiencies? Although we believe the company can get to its goal of around 3.8-4.0mln BOEPD by 2026e on the back of Permian growth, we estimate this would require around USD 17bn of annual capex – at the high end of the company’s outlook and around 25% above consensus." Mizuho adds that "strong inflationary pressures in the US onshore oilfield services sector could further exacerbate this problem, while slowing industry activity is likely a headwind for ‘royalty barrels’ in the basin."

EQUITY SPECIFIC NEWS:

TECH:

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  Intel Corp (INTC) - Q4 adj. EPS 0.10 (exp. 0.20), Q4 revenue USD 14.04bln (exp. 14.45bln); Q4 Client Computing revenue USD 6.63bln (exp. 7.42bln), Q4 Network & Edge revenue USD 2.06bln (exp. 2.21bln), Q4 Mobileye revenue USD 565mln (exp. 435.1mln). The semiconductor manufacturer said said actions underpin cost-reduction targets of USD 3bln in 2023, sets stage to achieve USD 8bln-10bln by end of 2025. Sees Q1 EPS -0.15 (exp. 0.26), adj. revenues of USD 10.5bln-11.5bln (exp. 14.0bln); CEO said it was seeing the largest inventory correction by customers in Q1, and added that persistent economic headwinds are expected through at least H1 2023, and semi ex-memory is expected to decline around mid-single digits. Sees macro difficulties lasting through H1, adding that consumption of servers in China was weak. Intel will not give annual forecasts for 2023.


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  Salesforce.com, inc. (CRM) - Activist investor Elliott Management is preparing to nominate a slate of directors at Salesforce, WSJ reports, a sign that a battle may be looming for board seats at the software maker.


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  KLA Corp (KLAC) - Q2 EPS 6.89 (exp. 7.08), Q2 revenue USD 2.98bln (exp. 2.82bln). Exec said 2023 will be a year of industry capacity adjustments, macro-driven slowdown and resulting increase in excess product inventories were having an impact on semiconductor device demand. Said customers were adjusting capex plans for the year to reflect lower demand, and 2023 will be a year of contraction after three strong years of growth. Sees Q3 adj. EPS between USD 4.52-5.92 (exp. 5.89), and sees Q3 revenue USD between 2.2bln-2.5bln (exp. 2.55bln).


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  Microsoft Corporation (MSFT) - Microsoft and Qcells announce strategic alliance to curb carbon emissions; Qcells to supply more than 2.5 gigawatts of solar panels and EPC services to solar project developers in partnership with Microsoft.


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  Fair Isaac Corporation (FICO) - Q1 EPS 4.26 (exp. 4.18), Q1 revenue USD 344.9mln (exp. 344.3mln). Exec said it had a strong start to FY23. Reiterated FY23 EPS outlook of 19.42/shr (exp. 19.56), and sees FY23 revenue at USD 1.463bln (exp. 1.48bln).

COMMUNICATIONS:

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  Match Group, Inc. (MTCH) - Announced leadership changes; Gary Swidler, previously COO and CFO of Match Group, will become President and CFO of Match Group; Will Wu will join as CTO in a newly-created role. Malgosia Green, previously CEO of Plenty of Fish, will become CEO of Match Group Asia. Hesam Hosseini, CEO of Match and Affinity brands, will take on a newly-created role as CEO of Evergreen & Emerging Brands.

FINANCIALS:

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  Visa Inc (V) - Q1 adj. EPS 2.18 (exp. 2.01), Q1 revenue USD 7.9bln (exp. 7.7bln). Q1 payments volume at constant currency +7% (exp. +8.29%), Q1 cross-border volumes at constant currency +22%, (exp. +24.2%),  Q1 change in cross-border volume nominal USD +11%, (exp. +15.4%), Q1 total Visa processed transactions +10%.


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  Arthur J. Gallagher & Co. (AJG) - Q4 adj. EPS 1.54 (exp. 1.50), Q4 revenue USD 2.03bln (exp. 1.94bln). During the quarter, core brokerage and risk management segments saw +16% revenue growth. Global primary P/C renewal premium increases were more than 9% in the quarter. Said its primary carrier partners were facing higher reinsurance costs and seeing rising loss costs trends, so expects continued premium increases.


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  W. R. Berkley Corporation (WRB) - Q4 operating EPS 1.16 (exp. 1.10), Q4 revenue USD 3.013bln (exp. 2.9bln).

ENERGY:

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  Chevron Corporation (CVX) - Mark Nelson named Vice Chairman and Executive Vice President, Strategy, Policy & Development; this new corporate officer role.

MATERIALS:

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  Eastman Chemical Company (EMN) - Q4 adj. EPS 0.89 (exp. 1.26), Q4 revenue USD 2.37bln (exp. 2.44bln). Exec said Q4 was challenging due to lower demand in key end markets and geographies, customer inventory destocking beyond normal seasonality, and limited benefit from lower raw material and energy costs in a reduced demand environment. Added that it expects aggressive inventory destocking to predominantly conclude in Q1 with modest volume recovery in the back half of the year. Ahead, it sees adj. EPS growth of +5-15% (implies USD 8.50/shr vs street consensus of USD 8.20).

HEALTH CARE:

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  ResMed Inc. (RMD) - Q2 EPS 1.66 (exp. 1.62), Q2 revenue USD 1.03bln (exp. 1bln). In Q2, it significantly increased production and delivery of flow generator devices to meet the incredible demand from customers, resulting in strong sales growth in the Americas, solid overall performance. CEO Mick Farrell was appointed Chair of the Board, succeeding current Chair Peter Farrell, who will become Chair Emeritus.


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  Eisai Co. (ESALY), Biogen Inc. (BIIB) - EMA accepts MAA for lecanemab for early Alzheimer's disease.

CONSUMER CYCLICALS:

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  Ford Motors (F) - Ford announced a complimentary Pickup & Delivery service for customers, and expanded mobile services. Ford noted that the JD Power 2022 US Customer Service Index data showed that customers who utilise remote experiences for vehicle repair were more likely to recommend the brand to a friend or family member.


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  Hasbro, Inc. (HAS) - Announced prelim Q4 EPS of USD 1.29-1.31 (exp. 1.48), and prelim Q4 revenue at USD 1.68bln (exp. 1.92bln). CEO said the Consumer Products business underperformed in the quarter against a backdrop of a challenging holiday consumer environment. Hasbro will layoff 1,000 staff in 2023 (approximately 15% of its global workforce). COO Eric Nyman is to step down. Sees FY22 EPS between USD 4.43-4.45 (exp. 4.64), and FY22 revenue around USD 5.86bln (exp. 6.1bln).

INDUSTRIALS:

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  Knight-Swift Transportation Holdings Inc. (KNX) - Q4 EPS 1.00 (exp. 1.12), Q4 revenue USD 1.74 (exp. 1.82bln), Q4 adj. operating ratio 82.7% (vs 74.7% Y/Y), Q4 operating income -36.5%. Exec said truckload revenue and margin were negatively impacted by lack of seasonal project business and softer than normal freight demand. Ahead, it expects truckload rates to continue being pressured, with Y/Y decreases in the mid-to-high single digits, before inflecting positive in Q4. Sees FY23 EPS between 4.05-4.25 (exp. 4.16).


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  L3Harris Technologies, Inc. (LHX) - Q4 adj. EPS 3.27 (exp. 2.97), and Q4 revenue USD 4.58bln (exp. 3.97bln). Sees FY23 adj. EPS between 12.00-12.50 (exp. 11.55), and FY23 revenue is seen between USD 17.4-17.8bln (exp. 16.1bln).


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  Lockheed Martin (LMT) - Declares a Q1 dividend of USD 3.00/shr (exp. 3.04).


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  Robert Half International Inc. (RHI) - The employment agency reported Q4 EPS of 1.37 (exp. 1.36), and Q4 revenue of USD 1.73bln (exp. 1.74bln). Revenues for the first two weeks of January were down 7% Y/Y, permanent placement revenues in December were -1% Y/Y, and for the first three weeks in January, permanent placement revenues were -23% Y/Y. Sees Q1 EPS between 1.10-1.20 (exp. 1.24), and sees Q1 revenue between USD 1.69-1.77bln (exp. 1.7bln).

REAL ESTATE:

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  Weyerhaeuser Company (WY) - Q4 EPS 0.24 (exp. 0.18), Q4 revenue USD 1.82bln (exp. 1.93bln). Announced a supplemental dividend of USD 0.90/shr.

27 Jan 2023 - 09:20- Research Sheet- Source: Newsquawk