US EARLY MORNING: Equity futures find stability after Tuesday's slide; Fed minutes ahead

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  OVERNIGHT: US stocks were lower on Tuesday after the long weekend amid hot flash PMIs on both sides of the pond spurring on fresh hawkish central bank repricing (see here). Asian stocks followed suit, and were subdued after Wall St suffered its worst day in two months (see here). European equities started the midweek session with losses after negative leads from Wall Street and the APAC trading session, bearing the brunt of hawkish repricing; analysts have been revising up projections of where the ECB’s key rates will peak, with Deutsche Bank today stating it now sees a peak of 3.75% (prev. it saw 3.25%). Final German inflation data was confirmed at 8.7% Y/Y, picking up one-tenth in January, while the HICP measure declined to 9.2% Y/Y from 9.6% in December, though both measures still allude to high inflation which the ECB will want to manage.


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  US PRE-MARKETS: US equity futures have found some stability after Tuesday’s slide, with the E-Mini S&P 500 regaining the psychological 4,000 mark. Treasury yields are mostly little changed, but yields are lower by around 2bps at the short-end. The hot run of incoming data continues, with a solid set of PMIs released on Tuesday (not just from the US), and that has pushed up market-implied expectations of the Fed terminal rate, which is currently seen at 5.35%, a shade beneath the midpoint of the 5.25-5.50% target range (recall, its recent projections, which will be updated in March, pencilled in terminal at 5.1%). The FOMC’s February meeting minutes will be released later today, and traders will be looking for clues on how much appetite there was at the meeting for a 50bps rate hike (recall, it lifted rates by 25bps at the meeting), which officials may again revert to if the run of hot data continues, many have argued. That could prove to be a risk for stocks. This week, Morgan Stanley’s bearish strategist Michael Wilson reiterated his view that US stocks were expensive, once again arguing that an earnings recession was coming, and added that the hot run of incoming data has also taken the prospects of a Fed policy pivot off the table. Meanwhile, BofA’s strategist Josh Hartnett has also been sounding the bearish siren, warning that the economic resilience in H1 portends a deeper recession in H2; Hartnett warns that the S&P 500 could fall to 3,800 in March. 

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: The delayed, final inflation metrics from German regions will be published through the morning; the final national measures have already been released and were in line with prelims. Italian final consumer prices will also be released. Germany’s February Ifo will be eyed to see if it mirrors the generally constructive tone of the recent S&P Global PMI data and the German ZEW data for the month. There are no ECB speakers scheduled. Riksbank's Thedeen will speak on the economic situation. Elsewhere, EMFX traders will note South Africa Finance Minister will present his 2023 Budget to parliament.


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  NORTH AMERICAN DATA/SPEAKERS: Weekly MBA mortgage applications, the weekly RedBook are the only US releases ahead of the FOMC meeting minutes (our preview here), which traders will be scouring for clues about how officials could react to the tone of hot incoming data, while others will be looking for any clues about how close it was to lifting rates by a 50bps increment at the February meeting. The NY Fed President Williams will be speaking after the close on Wednesday, and his comments will be looked at to frame the minutes.


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  ENERGY: The API will release its gauge of weekly energy inventories; this week, analysts expect headline crude stocks to build 1.2mln in the week, distillate stocks are seen drawing 1.0mln, while gasoline stocks are expected to draw by 600k.


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  SUPPLY: In Europe, Germany will sell EUR 5.0bln of 2033 Bunds; UK Will sell GBP 2.0bln of 2053 Gilts; Italy will sell between EUR 3.25-3.75bln of 2025 BTPs, and between EUR 1.0-1.5bln of 2033 linkers. The US will auction USD 43bln of 5yr notes, as well as USD 22bln of 2yr FRNs. Our full G7 bonds auction note can be accessed here.
  


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  US CORPORATE EARNINGS: Highlights include NVIDIA (NVDA), Monster Beverage (MNST), and TJX (TJX). Our full US daily corporate earnings estimates can be accessed here.

STOCK SPECIFIC NEWS:

TECH:

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  Coinbase Global, Inc. (COIN) - Q4 EPS -2.46 (vs 3.32 Y/Y), Q4 revenue USD 629.1mln (vs 2.5bln Y/Y). FY22 trading volume grew to USD 830bln (vs 193bln in FY20), FY22 subscription and services revenues to nearly USD 800mln (vs less than USD 50mln in FY20). Exec said its aim was now to improve adj. EBITDA in FY23. Expects 2023 to be a significant year for crypto policy in the US and abroad, could pave the way for crypto to realise its full innovative potential, but could also result in further actions by policymakers and regulators that would have a negative impact on the industry.


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  Palo Alto Networks, Inc. (PANW) - Q2 adj. EPS USD 1.05 (exp. 0.78), Q2 revenue USD 1.7bln (exp. 1.65bln). CEO told CNBC that operating margins improved 440bps Y/Y, and PANW was three years ahead of guidance on operating margins. Sees Q3 adj. EPS between USD EPS 0.90-0.94 (exp. 0.78), sees Q3 revenue between USD 1.695-1.725bln (exp. 1.74bln), and sees Q3 billings between USD 2.2-2.25bln. Lifts FY23 adj. EPS outlook, sees between USD 3.97-4.03 (exp. 3.42) from USD 3.37-3.44, reiterates FY23 revenue outlook between USD 6.85-6.91bln (exp. 6.9bln), and raises FY23 billings outlook to USD 9.1B-9.2bln from USD 8.95-9.1bln.


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  Lam Research Corporation (LRCX) - Announced a series of changes to its management structure. Pat Lord to move into the newly created position of EVP and COO. Vahid Vahedi will become SVP and CTO, succeeding Rick Gottscho, who begins a new executive leadership position at the company focused on the innovation ecosystem.


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  Keysight Technologies, Inc. (KEYS) - Q1 adj. EPS USD 2.02 (exp. 1.85), Q1 revenue USD 1.38bln (exp. 1.37bln). Exec said that with demand moderating, it is staying disciplined, but remains confident in the secular, long-term growth trends of its markets. Sees Q2 adj. EPS between USD 1.91-1.97 (exp. 1.94), and sees Q2 revenue between USD 1.37-1.39bln (exp. 1.4bln).


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  Alight, Inc. (ALIT) - Q4 sales USD 942mln (exp. 917.8mln), Q4 net loss -66mln (vs net income of USD 72mln Y/Y). Sees FY23 adj. EPS between USD 0.62-0.67 (exp. 0.69), and sees FY23 revenue between USD 3.47-3.51bln (exp. 3.37bln).


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  Nokia (NOK) - Wins 10-year 5G deal in Singapore.

HEALTH CARE:

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  Amazon.com, Inc. (AMZN), 1Life Healthcare, Inc. (ONEM) - FTC will not challenge Amazon's USD 3.5bln acquisition of One Medical parent 1Life Healthcare, a move that will allow the deal to close later this week, Bloomberg said. FTC still plans to issue a letter warning that the investigation remains open despite the expiration of the statutory deadline for the antitrust review. Bloomberg added that the One Medical merger marks the second time that the FTC under progressive Chair Lina Khan has declined to block a major deal by Amazon, though the agency’s long-running probe into the retailer continues.


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  1Life Healthcare, Inc. (ONEM), Amazon.com, Inc. (AMZN) - 1Life Healthcare reported Q4 EPS of -0.49 (exp. -0.53), Q4 revenue USD 274.2mln (exp. 275.1mln); exec said "this past year at One Medical we extended the impact of our human-centred and technology-powered model, expanding to serve 836,000 total members, including 796,000 Consumer and Enterprise and 40,000 At-Risk members, and growing net revenue 68% year-over-year to USD 1.046bln." 1Life Healthcare is not providing guidance due to pending Amazon transaction.


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  Exact Sciences Corporation (EXAS) - Q4 EPS -0.72 (exp. -0.84), Q4 revenue USD 553mln (exp. 528.2mln). Exec said Cologuard and Oncotype DX(R) are setting the tone for an impactful year ahead. Sees FY23 revenue between USD 2.265-2.315bln (exp. 2.29bln), FY23 screening revenue seen between USD 1.66-1.69bln, FY23 Precision Oncology revenue between USD 600-620mln, and COVID-19 testing revenue USD 5mln.


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  Gilead Sciences, Inc. (GILD) - Announced positive data from three retrospective real-world studies which demonstrated that initiation of Veklury (remdesivir) within the first two days of hospital admission can help reduce mortality and hospital readmission rates among all patients hospitalized with COVID-19, regardless of disease severity. A reduction in mortality was also observed in vulnerable populations, such as people living with cancer or HIV. These studies evaluated routine clinical practice data from more than 800 hospitals throughout the United States to gain insights on patient outcomes as COVID-19 continues to evolve over time. These data will be presented at the 30th Conference on Retroviruses and Opportunistic Infections.


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  Halozyme Therapeutics, Inc. (HALO) - Q4 adj. EPS 0.48 (exp. 0.47), Q4 revenue USD 181mln (exp. 192mln). Sees FY23 adj. EPS between USD 2.50-2.65 (exp. 2.78), and sees FY23 revenue between USD 815-845mln (exp. 868.1mln).


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  AstraZeneca's (AZN) - Calquence tablet formulation has been approved in the EU for patients with chronic lymphocytic leukaemia.

ENERGY:

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  Shell (SHEL) - The energy major has reportedly enlisted Lazard to review its domestic energy supply business in countries including the UK.


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  Chesapeake Energy Corporation (CHK) - Confirms sale of remaining Eagle Ford assets to INEOS Energy for USD 1.4bln. Reports Q4 adj. EPS of USD 4.22 (exp. 2.99), and sees FY23 CapEx between USD 1.765-1.835bln


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  Diamondback Energy, Inc. (FANG) - Q4 adj. EPS USD 5.29 (exp. 5.22), Q4 revenue USD 2.03bln (exp. 2.1bln), Q4 average production 226.1 MBO/d. Sees Q1 oil production between 248-252 MBO/d, Q1 CapEx of USD 625-675mln. Sees FY23 oil production between 256-262 MBO/d, and FY23 CapEx between USD 2.5-2.7bln.


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  Transocean Ltd. (RIG) - Q4 adj. EPS -0.49 (exp. -0.21), Q4 contract drilling revenues decreased sequentially by USD 85mln to USD 606mln primarily due to reduced activity for five rigs that were idle in Q4, partially offset by higher revenue efficiency and revenues earned by the newbuild ultra-deepwater floater Deepwater Atlas. Exec noted it secured approximately USD 4bln in incremental backlog, its largest annual backlog addition since prior to the industry downturn in 2014.

INDUSTRIALS:

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  Nikola (NKLA) - Announces additional HYLA branded hydrogen refuelling station in California; West Sacramento marks the fourth location as scaling of the Nikola hydrogen network continues to progress.


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  Lockheed Martin Corporation (LMT) - Lockheed delivered the first of five C-130J-30 Super Hercules tactical airlifters to the Indonesian Air Force.


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  Flowserve Corporation (FLS) - Q4 adj. EPS 0.63 (exp. 0.53), Q4 revenue USD 1.04bln (exp. 1.01bln). Sees FY23 adj. EPS USD 1.50-1.75 (exp. 1.67), FY23 revenue up 9-11% (exp. 3.95bln).


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  IAA, Inc. (IAA) - Q4 adj. EPS 0.61 (exp. 0.54), Q4 revenue USD 523.5mln (exp. 533.5mln).


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  Ritchie Bros. Auctioneers Incorporated (RBA) - Q4 adj. EPS 0.68 (exp. 0.60), Q4 revenue USD 443.9mln (exp. 416.2mln). 2022 GTV saw a record USD 6.0bln, exec said.


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  WillScot Corporation (WSC) - Q4 EPS 0.40 (exp. 0.44), Q4 revenue USD 590.55mln (exp. 589.6mln). Exec said it will achieve its USD 1bln adj. EBITDA milestone in FY23, adding that the early accomplishment of this milestone is based exclusively on the consistent outperformance of continuing operations.

MATERIALS:

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  Rio Tinto (RIO) - Cuts dividend as profits decline due to slower China demand.


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  MP Materials Corp. (MP), Sumitomo Corporation (SSUMY) - The two announced an agreement to diversify and strengthen rare earth supplies in Japan. Under the agreement, SC will serve as the exclusive distributor of NdPr oxide produced by MP Materials to Japanese customers. Further, the companies will collaborate on the supply of rare earth metals and other products.


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  Univar Inc. (UNVR) - Q4 adj. EPS 0.47 (exp. 0.54), Q4 revenue USD 2.6bln (exp. 2.66bln). Q1 adj. EBITDA seen between USD 200-220mln.

CONSUMER:

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  Stellantis (STLA) - Tops forecasts in H2, announces EUR 1.5bln share repurchase.


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  Richemont (CFRUY), LVMH (LVMUY) - Richemont saw strength on Tuesday amid reports it was a takeover target for LVMH.


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  Danone (DANOY) - Q4 sales top forecasts, sees profitable 2023.


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  Toll Brothers, Inc. (TOL) - Q1 EPS USD 1.70 (exp. 1.41), Q1 revenue USD 1.78bln (exp. 1.73bln), Q1 adj. home sales gross margin 27.5% (vs 25.6% Y/Y). Exec said it delivered 1,826 homes, generated USD 1.75bln in home building revenue, increased adj. gross margin 190bps Y/Y, decreased our SG&A expenses by 130bps Y/Y. Quarter-end backlog of USD 8.6bln and 7,733 homes; reaffirms FY23 guidance of an adj. gross margin of 27.0% and EPS between USD 8.00-9.00 (exp. 8.41). Exec added that since the start of the calendar year, has seen a marked increase in demand beyond normal seasonality, as buyer confidence appears to be improving. Believes the recent pick-up in demand is a sign that the long-term fundamentals underpinning the housing market remain intact.


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  Caesars Entertainment Corporation (CZR) - Q4 EPS from continuing operations USD -0.70 (exp. -0.17), Q4 revenue USD 2.82bln (exp. 2.8bln), Q4 Same- Store adj. EBITDA USD 957mln (vs USD 581mln Y/Y). Exec said Las Vegas segment set a new FY record for adj. EBITDA. Sportsbook delivered significantly improved operating results. Expects sports betting and iGaming to be EBITDA positive in 2023. Exec adds that consumer demand remains strong in all verticals, is optimistic for the year ahead.


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  Bath & Body Works, Inc. (BBWI), Hershey Company (HSY) - Bath & Body Works announced that Hershey VP and CFO Steve Voskuil has been appointed as a new independent member of the company's board of directors.


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  La-Z-Boy Incorporated (LZB) - Q3 EPS 0.91 (exp. 0.66), Q3 revenue USD 572.7mln (exp. 529.6mln). Exec said that it worked down the majority of excess backlog in the quarter, getting close to normal lead times. Sees Q4 delivered sales between USD 525-545mln.

REAL ESTATE:

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  CoStar Group, Inc. (CSGP) - Q4 EPS 0.31 (exp. 0.36), Q4 revenue USD 573mln (exp. 576mln). CoStar and Apartments.com, delivered revenue growth of 15% and 16%, respectively; LoopNet revenue grew 12% to end the year. News Corp (NWSA) confirmed that it is no longer engaged in discussions with CoStar on a potential sale of Move, Inc, operator of Realtor.com. Sees Q1 adj. EPS 0.25-0.26 (exp. 0.36), and sees Q1 revenue between USD 575-580mln (exp. 585.6mln). Sees FY23 adj. EPS USD 1.06-1.09 (exp. 1.47), and sees FY23 revenue of between USD 2.46-2.48bln (exp. 2.5bln).


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  Public Storage (PSA) - Q4 core FFO/shr USD 4.16 (exp. 3.99), Q4 revenue USD 818.9mln (exp. 1.1bln). Increased Same Store direct net operating income by 15.0%, resulting from a 13.0% increase in Same Store revenues. Achieved 81.2% Same Store direct net operating income margin, an increase of 1.8% relative to the same period in 2021. Sees FY23 core FFO/shr between USD 16.10-16.80 (exp. 16.82).


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  Realty Income Corporation (O) - Q4 AFFO/shr USD 1.00 (exp. 0.98), Q4 revenue USD 888.7mln (exp. 855.8mln). To increase March dividend +2.4%.


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  SBA Communications Corporation (SBAC) - Q4 AFFO/shr USD 3.12 (exp. 3.13), Q4 revenue USD 686.1mln (exp. 680.6mln). Approved 20% increase to quarterly dividend. Exec said the US market remains active, believes domestic activity will remain solid through 2023. International gross leasing demand expected to remain solid. CEO Jeff Stoops to retire in December, Board appointed Executive Vice President and Chief Financial Officer Brendan Cavanagh as Stoops successor. Sees FY23 AFFO/shr between USD 12.46-12.83 (exp. 12.75), and sees FY23 revenue between USD 2.67-2.71bln (exp. 2.7bln).

FINANCIALS:

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  Lloyds Banking Group (LYG) - FY profits flat after bad loan charge. Ageas (AGS BB) FY net income tops estimates, proposes dividend of EUR 1.50/shr.

COMMUNICATIONS:

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  KKR & Co. L.P. (KKR), Telecom Italia S.p.A. (TIIAY) - KKR extends bid for Telecom Italia landline network, CDP could join KKR on a potential joint bid.

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