US EARLY MORNING: Index futures lower after hot European regional inflation; second-tier data and Fed's Goolsbee ahead

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  OVERNIGHT: On Wall Street, stocks closed off highs, finding support from the move lower in US rates, paring some of the post-PCE move on Friday (see here). APAC stocks failed to sustain the initial momentum, with a flimsy risk tone seen at month-end amid mixed data releases. Australia reported a stronger-than-expected rebound in retail sales, while Japanese releases were mixed, including the largest monthly decline in industrial production in 8 months; BoJ Deputy Governor nominees reiterated the need to continue monetary easing; Chinese stocks failed to sustain early upside despite a firm liquidity operation by the PBoC, amid reports that the White House is scaling back plans to regulate US investments in China (see here). In Europe, stocks started Tuesday trading on a downbeat note following firmer than expected inflation data out of France and Spain, which resulted in yields ticking up in the fixed income complex, injecting some hawkishness into the implied path of ECB rates ahead. Before the data was released, ECB chief economist Lane was noting that forward looking indicators for food, energy and goods inflation suggests a slowdown; on the rates front, Lane said that once terminal has been reached, rates should be held at that plateau for some time, and could be in restrictive territory for a number of quarters, while hikes would only end once it was clear that inflation was heading to target (see here).


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  US PRE-MARKETS: US equity futures are trading with a negative bias, falling in sympathy with peers in Europe around the time of their open after hotter than expected prelim February inflation measures out of France and Spain, which pressured stocks and sent fixed income yields higher. Treasury yields are widening by 3-4bps, with the shape of the curve flattening (note the Tsy extension for the month is +0.12yrs). The Dolar Index is about flat on month-end; month-end models had suggested USD buying. Crude benchmarks are trading higher, with newswires attributing the strength to hopes of an economic rebound in China, which is offsetting expectations for inventory builds this week. The day ahead is thin for scheduled releases, although there will be attention on remarks due from the Chicago Fed's Goolsbee, who is reportedly in the running for the Fed Vice Chair job.

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: Italy’s January trade balance, December industrial sales, and Spain’s December current account are scheduled to be released in the morning. EMFX traders will note the NBH’s rate decision, where it is expected to hold its Base Rate at 13.00%. The speaker’s slate is quiet, though will feature BoE Chief Economist Pill who will be speaking at a conference, and the BoE’s Cunliffe on crypto assets.


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  NORTH AMERICAN DATA/SPEAKERS: The US data slate contains advanced good trade balance, the weekly RedBook, and Canada December/Q4 GDP data in the pre-market; Case Shiller and the FHFA will also release stale house price data for December will also be out before the open. After the start of cash equity trading, the Chicago PMI for February and the Richmond Fed’s February business survey will be due. the conference Board's gaugae of consuemr confidence will be eyed, particularly the inflation sub-indices Chicago Fed’s 2023 voter Goolsbee will deliver remarks; traders will note that he has been touted as a potential Fed Vice Chair candidate to replace Lael Brainard, who is now National Economic Council chief; (note other candidates recently touted include Harvard professor Karen Dynan and Kellogg School of Management professor Janice Eberly). The Fed’s discount rate minutes will be released in the afternoon.


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  ENERGY: Brent April 2023 future will expire today. The API is expected to report its gauge of weekly inventories after the US close today; this week, analysts expect crude stocks to build by 0.4mln, distillates are seen drawing 0.5mln, while gasoline stocks are expected to build by 0.7mln.


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  SUPPLY: Netherlands will auction EUR 1.5-2.5bln of 2038 DSL, while Germany will auction EUR 6.00bln 2025 Schatz. Our G7 bonds note can be accessed here.


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  US CORPORATE EARNINGS: Notable US Corporate earnings out today include TGT and MNST; our full daily earnings estimate sheet can be accessed here.

STOCK SPECIFIC NEWS:

TECH:

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  Apple Inc. (AAPL) - Supplier Foxlink will not be able to resume full operations at its India plant for two months following a fire, Reuters reports; Apple could potentially face disruptions in supply chain for iPhones due to Foxlink incident.


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  Zoom Video Communications, Inc. (ZM) - Q4 EPS 1.22 (exp. 0.80), Q4 revenue USD 1.12bln (exp. 1.1bln), Q4 operating margin 36.2% (exp. 29.5%), Q4 Enterprise Customers 213k (exp. 216k). In Q4, Zoom One adoption continued to accelerate, helped drive Zoom Phone to grow more than 100% Y/Y, surpassing 5.5mln seats. Exec said that the macroeconomic situation continues to negatively impact overall growth. Q1 EPS seen between USD 0.96-0.98 (exp. 0.84), and Q1 revenue seen between USD 1.08-1.09bln (exp. 1.11bln). FY23 EPS seen between USD 4.11-4.18 (exp. 3.95), and FY23 revenue seen between USD 4.46-4.46bln (exp. 4.38bln).


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  Workday, Inc. (WDAY) - Q4 EPS 1.00 (exp. 0.91), Q4 revenue USD 1.65bln, Q4 subscription revenue USD 1.5bln (exp. 1.48bln), Q4 subscription backlog USD 16.45bln (exp. 15.6bln), Q4 operating margins 18.5% (exp. 17.4%). Announced Sayan Chakraborty to the role of co-president, Robynne Sisco as Vice Chair, Mark Hawkins named independent director. FY24 subscription revenue seen between USD 6.525-6.575bln.


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  MKS Instruments, Inc. (MKSI) - Q4 adj. EPS 2.00 (exp. 1.34), Q4 revenue USD 1.09bln (exp. 994mln). Sees February ransomware incident having a material impact on its Q1 results, with the full scope of the costs and related impacts of not yet fully determined. Accordingly, MKSI does not provide Q1 guidance at this time. Prior to the ransomware event, it was expecting Q1 revenue of approximately USD 1bln (exp. 928.2mln), and currently estimates the impact from the incident on Q1 revenue to be at least USD 200mln. Expects to resume normal guidance in Q2.


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  Robinhood Markets (HOOD) - Robinhood received an investigative subpoena from the SEC regarding its crypto operations shortly after the FTX crypto exchange filed for bankruptcy protection in November, CoinDesk reports.

COMMUNICATIONS:

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  Alphabet Inc. (GOOG) - Alphabet subsidiary Waymo said that it was starting fully-autonomous, driverless testing in LA; exec added that it was thrilled by the data confirming how well its ML-based 5th-gen driver generalises across cities.


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  News Corporation (NWS), Twenty-First Century Fox, Inc. (FOX) - Rupert Murdoch acknowledged that several hosts for his networks promoted the false narrative that the 2020 election was stolen from former President Donald Trump, and that he could have stopped them but did not, NYT reports.


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  Meta Platforms, Inc. (META) - CEO announced it was creating a new top-level product group focused on generative AI to turbocharge its work in this area.


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  TikTok - White House on Monday gave government agencies 30 days to ensure they do not have Chinese-owned app TikTok on federal devices and systems in a bid to keep US data safe, Reuters reports.

ENERGY:

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  Occidental Petroleum Corp (OXY) - Q4 adj. EPS 1.61 (exp. 1.80); authorises new USD 3bln share buyback programme, raises quarterly dividend +38.5% to 0.18/shr (prev. 0.13). Realised US natgas price per MCF USD 4.45 (exp. 4.87). Realised oil price per bbl USD 83.64 (exp. 83.46). Chemical pre-tax income USD 457mln (exp. 454.4mln). Oil & gas pre-tax income USD 2.5bln (exp. 2.63bln). Sees Q1 production 1,160-1,200 MBOED. Sees 2023 production of 1,150-1,210 MBOED (exp. 1.2mln). Sees CapEx midpoint at USD 5.8bln (exp. 5.66bln).


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  ONEOK Inc (OKE) - Q4 EPS 1.08 (exp. 1.03). Sees FY23 EPS between USD 5.03-5.69 (exp. 4.67), and sees FY23 adj. EBITDA between USD 4.43-4.73bln (vs 3.6bln Y/Y).


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  Range Resources Corporation (RRC) - Q4 EPS 1.30 (exp. 1.20), Q4 revenue USD 1.63bln (exp. 975.3mln). Sees FY23 CapEx between USD 570-615mln (exp. 564mln).

INDUSTRIALS:

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  Trex Company, Inc. (TREX) - Q4 adj. EPS 0.23 (exp. 0.21), Q4 revenue USD 192.1mln (exp. 185.3mln). Exec said Q4 performance was driven by a strong sequential recovery in both gross margin and adjusted EBITDA margin amid channel inventory recalibration; underlying consumer demand remained steady. Exec said channel inventory recalibration was completed by year-end 2022. Sees Q1 revenue at USD 235mln (exp. 245mln). Sees FY23 EBITDA margins between 26-27% (exp. 26.5%).

CONSUMER:

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  Tesla Inc (TSLA) - The automaker and its CEO are being sued by shareholders accusing them of overstating the effectiveness and safety of their electric vehicles' Autopilot and Full Self-Driving technologies, Reuters reports.


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  Toyota Motor (TM) - The automaker has reportedly set domestic output plan for March-May period at about 880k units, according to Chubu Keizai newspaper.


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  Darling Ingredients Inc. (DAR) - Q4 EPS 0.96 (exp. 1.34), Q4 revenue USD 1.77bln (exp. 1.7bln), Q4 EBITDA USD 413mln (exp. 430mln). Sees FY23 EBITDA between USD 1.80-1.85bln (exp. 1.9bln).

HEALTH CARE:

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  Bayer (BAYRY) - Earnings top estimates, but sees lower FY23 operating profits due to cost inflation. Q4 revenue EUR 12bln (exp. 12.04bln). Said AskBio attained European Commission orphan drug designation. FY22 EBIT EUR 7bln (exp. 8.5bln), FY22 net EUR 4.15bln (exp. 7.6bln), FY22 EPS 7.94 (exp. 7.79). Proposes a dividend of 2.40/shr (exp. 2.32/shr). Sees FY23 sales between EUR 51-52bln (exp. 50.8bln).


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  Roche (RHHBY) - Roche has joined with the US CDC to strengthen lab systems to combat HIV and tuberculosis epidemics.


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  Eisai (ESALY), Biogen (BIIB) - The two announced that the Biologics License Application for lecanemab, an investigational anti-amyloid beta protofibril antibody, has been designated for Priority Review by the National Medical Products Administration in China.


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  BioMarin Pharmaceutical Inc. (BMRN) - Q4 EPS 0.00 (exp. -0.07), Q4 revenue USD 537.5mln (exp. 537mln). Sees FY23 EPS between USD 1.80-2.05 (exp. 1.61; note management's new EPS methodology, where it defines Non-GAAP Income as GAAP Net Income excluding amortization of intangible assets, stock-based compensation expense, and certain other specified items), and sees FY23 revenue between USD 2.375-2.5bln (exp. 2.6bln).


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  Perrigo Company plc (PRGO) - Q4 EPS 0.75 (exp. 0.70), Q4 revenue USD 1.15bln (exp. 1.19bln). FY22 EPS -0.97 (vs -0.98 Y/Y), FY22 revenue USD 4.45bln (vs 4.14bln Y/Y). Management will unveil its 2023-2025 strategic plan on call today, where it will provide FY23 guidance.


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  Alcon Inc. (ALC) - Q4 EPS 0.42 (exp. 0.42), Q4 revenue USD 2.16bln (exp. 2.15bln). Exec said that it saw a strong 2022 despite a consistently challenging macroeconomic environment, including inflationary pressure, supply chain headwinds and a strong US dollar; notes resilience of its markets, underlying strength of business. Sees FY23 EPS between USD 2.55-2.65 (exp. 2.52), and sees FY23 revenue between USD 9.2-9.4bln (exp. 9.2bln).


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  Universal Health Services, Inc. (UHS) - Q4 adj. EPS 3.02 (exp. 2.96), Q4 revenue USD 3.45bln (exp. 3.4bln). Sees FY23 adj. EPS between 9.50-10.50 (exp. 10.79), and sees FY23 revenue between USD 14.044-14.314bln (exp. 13.98bln).

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