US EARLY MORNING: Equity futures stabilise after Tuesday slide; BoC could be a live wire today given ranging expectations

SNAPSHOT: After the tech/communications induced slide on Tuesday, index futures have stabilised, with ES futures at the bottom of the late November range and essentially flat on the session. Treasury yields are around flat. The Dollar Index is a little firmer, while crude benchmarks are negative. The playbook remains technical/positional/headline driven trading as we await further macro catalysts (CPI and FOMC next week, along with a host of other central banks). The BoC today (preview link below) could be a bit of a live wire, given ranging expectations, and this could influence the macro texture.

LOOKING AHEAD: Elsewhere, desks continue to analyse market themes as end-year approaches, and strategize for next year. Goldman Sachs notes that this year has been marked by valuation adjustments across most major asset classes, but US equities have cheapened by less than other long-duration assets, and are still screening as expensive vs bonds and credit. "Our macro model of equity valuations implies that current valuations are much higher than would usually be justified in the face of higher bond yields and inflation, even with quite a resilient economy," GS writes, "mapping our forecasts into our macro return models suggests that, all else equal, falling inflation will be offset by rising unemployment and rising bond yields to imply a lacklustre US equity return picture through the next year." Meanwhile, Citi observes that the risk-on trading patterns in November resulted in defensive styles underperforming, while value came out on top vs most other styles, and continues to be the best style this year, though the bank does not see that theme persisting into 2023. "Rolling recessions and continuing negative sentiment on inflation will create increasing headwinds for the Value vs Growth trade so we recommend a general defensive style tilt," it told clients, "despite Estimates Momentum being up YTD for Europe, we have a negative outlook on the style globally since the underlying drivers are waning."

DAY AHEAD: The US Day features weekly MBA mortgage applications data, and weekly energy inventories; Citi notes that API data reportedly showed a weekly crude draw of -6.4mln (exp. -3.3mln), Cushing stocks were unchanged +0.0mln, Gasoline stocks built +5.9mln (exp. +2.7mln), while distillates built +3.6mln (exp. +2.2mln). In Canada, the BoC rate decision today is a close call, and analysts are split on whether it will raise rates by 25bps or 50bps; there is also plenty of attention on the terminal rate, where analyst forecasts also vary, with some expecting just one more 25bps hike in December to a peak of 4.00% (RBC), while others see a final 50bps hike to 4.25% (CIBC, Scotia), or two more 25bps hikes (TD); there are also some calls (BMO, ING) for a 50bps today followed by a final 25bps hike. Our full BoC preview can be accessed here. Our full day ahead can be accessed here.

TECH:

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  Apple Inc. (APPL) - Mobile industry bellwether Murata Manufacturing expects Apple to reduce iPhone 14 production plans further in the coming months because of weak demand, which would force the supplier to again cut its outlook for its handset-component business, Bloomberg reports.


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  Guidewire Software, Inc. (GWRE) - Q1 adj. EPS -0.12 (exp. -0.39), Q1 revenue USD 195.3mln (exp. 191.7mln). Exec said it was off to a solid start to the FY, with Q1 ARR, revenue, and profitability all exceeding guidance, driven by subscription revenue growth and improved subscription and support gross margins. Q2 revenue seen between USD 221-226mln (exp. 221.4mln), and lifts FY23 revenue outlook to USD 886-896mln (exp. 889mln, prev. 885-895mln).


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  MongoDB, Inc. (MDB) - Q3 adj. EPS 0.23 (exp. -0.17), Q3 revenue USD 333.6mln (exp. 303.4mln). Sees Q4 adj. EPS between 0.06-0.08 (exp. -0.13), and sees Q4 revenue between USD 334-337mln (exp. 314.7mln). Exec said Q3 results were highlighted by 61% Atlas revenue growth; strength was driven by improved Atlas consumption trends and continued strength in new business activity. Lifts FY23 adj. EPS outlook to 0.29-0.31 (exp. -0.31, prev. guidance -17.5c at the midpoint), and lifts FY23 revenue outlook to USD 1.257-1.26bln (exp. 1.2bln, prev. guidance USD 1.196-1.206bln).


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  SentinelOne, Inc. (S) - Q3 EPS -0.35 (exp. -0.22), Q3 revenue USD 115.3mln (exp. 111mln). Q3 ARR +106% to USD 487.4mln, Q3 total customers +55% to over 9,250; customers with ARR over USD 100k almost +100% to 827, dollar-based net revenue retention rate 134%. Q4 revenue seen at USD 125mln (exp. 125mln), and sees FY23 revenue between 420-421mln (exp. 416mln).


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  Zuora, Inc. (ZUO) - Q3 adj. EPS -0.02 (exp. -0.06), Q3 revenue USD 101.1mln (exp. 100.2mln). Exec said that macroeconomic dynamic has led it to make the decision to reduce workforce by 11%. Q4 adj. EPS seen between -7c to -6c (exp. -3c), and Q4 revenue seen between USD 99.5-101.5mln (exp. 103.1mln). Narrows FY23 EPS view to -16c to -15c (exp. -16c, prev. guidance -18c to -14c), lowes FY23 revenue outlook to USD 392.5-394.5mln (exp. 394.8mln, prev. guidance 394-400mln).

COMMUNICATIONS:

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  Madison Square Garden Entertainment Corp. (MSGE) - Board approves revised plan for potential spin-off, is now exploring a potential spin-off of its traditional live entertainment business. The proposed transaction would separate this business from the Company's MSG Sphere, MSG Networks and Tao Group Hospitality businesses.


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  Dave & Buster's Entertainment, Inc. (PLAY) - Q3 EPS 0.04 (exp. 0.04), Q3 revenue USD 481.2mln (exp. 473.6mln), Q3 pro forma combined comp store sales +13.3%. Exec said that through the first five weeks of Q4, pro forma combined comparable store sales +3.1% Y/Y, and +9.2% versus the comparable period in 2019. Pro forma combined walk-in comparable store sales decreased 2.4% versus the comparable period in 2021 and increased 15.7% versus the comparable period in 2019. Pro forma combined Special Event comparable store sales increased 65.3% versus the comparable period in 2021 and declined 21.7% versus the comparable period in 2019.


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  Pinterest, Inc. (PINS) - Announces partnership with Elliott Investment Management; will appoint Elliott Senior Portfolio Manager Marc Steinberg to the Board. Said it believes in engaging with key stakeholders consistently, and this "one-of-a-kind agreement" with Elliott is a result of that.

CONSUMER CYCLICAL:

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  Tesla Inc. (TSLA) - Tesla is offering further incentives to Chinese customers who buy and take delivery of new cars this month, Bloomberg reports, the latest move to boost sales in the world’s biggest electric vehicle market.


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  Stitch Fix, Inc. (SFIX) - Q1 EPS -0.50 (exp. -0.47), Q1 revenue USD 455.6mln (exp. 459.4mln), Q1 active clients of 3.709mln (-471,000 Y/Y, -11% Y/Y), Q1 net revenue per active client of USD 525. Exec noted difficult macro environment. Advertising was 9% of revenue in Q1. Exec said retail industry experienced pull forward in Q1, which continues to be more pronounced than expected. Will reduce marketing in back half of the year. Sees advertising to be 5-6% of revenue for the rest of the year due to marketing shift. Sees Q2 revenue between USD 410-420mln (Exp. 445mln). Lowers FY23 revenue outlook to USD 1.6-1.7bln (exp. 1.8bln) from USD 1.76-1.86bln.


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  Toll Brothers, Inc. (TOL) - Q4 EPS 5.63 (exp. 3.95), Q4 revenue USD 3.71bln (exp. 3.2bln), Q4 net signed contract value -56% Y/Y at USD 1.3bln, Q4 backlog value -7% Y/Y at USD 8.9B, Q4 homes in backlog -21% Y/Y at 8,098, Q4 homes delivered 3,765 generating home sales revenues of USD 3.6bln. Sees Q1 deliveries of 1,750-1,850 units, and sees Q1 average delivered price per home at USD 950-970k. Sees FY23 deliveries between 8,000-9,000 units, and FY23 average delivered price per home USD 965-985k.

INDUSTRIALS:

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  Airbus (EADSY) - Has dropped its numerical forecast for "around 700" jet deliveries in 2022, as it limped towards the end of a year haunted by disruption in factories and supply chains, Reuters reported. Said that while the target was out of reach, it did not expect to fall "materially short" of that estimate.


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  AeroVironment, Inc. (AVAV) - Q2 adj. EPS 0.00 (exp. 0.20), Q2 revenue USD 111.6mln (exp. 113.2mln). Lowers FY23 adj. EPS outlook to USD 1.26-1.58 (exp. 1.57, prev. guidance 1.35-1.65), but lifts FY23 revenue outlook to USD 505M-525mln (exp. 510mln, prev. guidance 490-520mln).


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  Smith & Wesson Brands, Inc. (SWBI) - Q2 adj. EPS 0.26 (exp. 0.40), Q2 revenue USD 121mln (exp. 145.4mln). Exec said that firearm demand continues to normalise, but consumer demand for firearms was still significantly down Y/Y, coinciding with a broader consumer slowdown driven by persistently high inflation, the beginning of the winter heating season across the northern half of the country, and rising interest rates. Exec added that an ongoing inventory correction combined with the impact of promotional activity by our competitors and the trading down by consumers to lower priced  products negatively affected quarterly sales.

HEALTH CARE:

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  GSK Plc (GSK), Pfizer Inc (PFE), Sanofi SA (SNY), Boehringer Ingelheim (BHGR) - The pharma companies were spared thousands of US lawsuits claiming that the heartburn drug Zantac caused cancer, Reuters reports; judge found the claims were not backed by sound science. Reuters said the ruling knocks out about 50,000 claims in federal court, though it does not directly affect tens of thousands of similar cases pending in state courts around the country.


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  Novartis (NVS) - Kisqali prolonged PFS benefit for pre- and perimenopausal patients with aggressive HR+/HER2− metastatic breast cancer compared to chemotherapy.


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  HealthEquity, Inc. (HQY) - Q3 EPS 0.38 (exp. 0.35), Q3 revenue USD 216.1mln (exp. 206.8mln). Q3 new HSA sales 170k (vs 151k Y/Y), HSAs at end-October were 7.7mln (+23% Y/Y). Lifts FY23 EPS outlook to UDS 1.26-1.35 (exp. 1.27) from USD 1.23-1.32, and lifts FY23 revenue outlook to USD 850-860mln (exp. 840mln) from USD 834-844mln. FY24 revenue is seen between USD 950-970mln (exp. 948mln).

MATERIALS:

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  Mosaic (MOS) - Announced that it has temporarily curtailed production at its Colonsay potash mine in Saskatchewan, Canada. Prior to the curtailment, Colonsay had been operating at an annual run rate of 1.3mln tons, with plans to expand annual output to 1.8-2.0mln tonns by late 2023 following the restart of mine's second mill. MOS said that with demand returning slower than expected in H2 2022, inventory levels were sufficient to meet near-term demand. Said underground development work will continue in anticipation of the restart of both mills in early 2023.

ENERGY:

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  Energy Names - UK CMA says there is evidence of 'rocket and feather' pricing in the fuel market, will look into whether this drove greater retailer profits, BBC reports.

FINANCIALS:

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  Mastercard Incorporated (MA) - Boosts quarterly dividend +16% to 0.57/shr. Authorised new USD 9bln share buyback, which will become effective at the completion of the company's previously announced USD 8bln program, of which it has around USD 4.1bln remaining.


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  Credit Suisse (CS) - Credit Suisse bankers are trying to entice rich clients with higher-yield notes and bonus deposit rates in a bid to quickly recoup as much as possible of the almost USD 90bln pulled recently from the bank, BBG reports. Elsewhere, has cut a deal with the owner of the First Boston trademark to enable the Swiss lender to use the historic brand on its spun-out investment bank, FT reports.

07 Dec 2022 - 09:21- Research Sheet- Source: Newsquawk