US EARLY MORNING: Nasdaq-100 futures slump after disappointing earnings updates from AAPL, AMZN, GOOG; US jobs report ahead

SNAPSHOT: US equity futures are slumping after disappointing earnings from highly concentrated mega cap names (AAPL, AMZN, GOOG the chief culprits), which is souring sentiment and weighing on equity indices. The Nasdaq underperforms, currently lower by around 1.7%; within that, AAPL was -3.2% afterhours after reporting its first revenue decline since 2019 (11.8% NDX weight), AMZN was -5.1% afterhours as it saw softer cloud revenue growth and warned of slower growth ahead (6.7% NDX weight), GOOG fell -4.9% afterhours after reporting top- and bottom-line misses and lower-than-expected ad sales (3.9% NDX weight), QCOM was -3.0% afterhours as revenue fell and its outlook was glum (1.2% NDX weight), SBUX was -1.8% afterhours as results were hit by China’s COVID surge last year (1.0% NDX weight); additionally, TSLA was -2.2% afterhours (3.5% NDX weight), also contributing to the underperformance. Elsewhere, Treasury yields are mixed, with the long-end a touch lower, while shorter-dated yields are a little higher. The Dollar Index is flat ahead of today’s data docket, which sees the release of the January non-farm payrolls data (preview below). 

PAYROLLS AHEAD: US Nonfarm Payrolls (Jan 2023) will be released at 13:30GMT/08:30EST. The pace of payroll additions is expected to cool again in January, and while the unemployment rate is likely to have risen a little, it still points to a tight labour market. Recent data has alluded to an easing in wage pressures, and this is likely to continue again in January, which will be received well by Fed officials. A continued decline here may give traders further confidence to price a path for rates more dovishly than the Fed’s current projections, and conversely, any upside surprise in the wages metrics may lead to a hawkish repricing of forward rates. Meanwhile, annual payroll benchmark revisions are difficult to predict, but some think that it will result in downward revisions to many of the prints in the second part of 2022. To download the report, please click here.

WEEKLY FLOWS: BofA Weekly flow report notes inflow to stocks and bonds, outflows from cash and gold. BofA's Bull & Bear Indicator rose to 4.2 from 3.5, to the highest levels since March 2022, seeing its biggest 3-month surge since August 2020; the upside was driven by strong EM inflows, and strong stock market breadth, BofA said. Equities saw USD 16.0bln of inflows (USD 15.6bln into ETFs, USD 0.5bln into mutual funds), and have now see inflows for the last four weeks. By region, US has now seen inflows for the last two weeks (USD 6.7bln in the latest week); Japan has seen outflows for the past two weeks (USD 0.5bln in the latest week); Europe has now seen inflows for the last three weeks (a modest USD 21mln this week); while EMs have now see inflows for the past seven weeks (USD 7.7bln this week). By style, US large caps seen USD 5.1bl inflows, US value sees USD 2.1bln inflows, small caps attract USD 1.1bln); outflows were seen in US growth (of USD 0.4bln). By sector, financials led the inflows at USD 0.9bln, energy saw 0.3bln of inflows, materials USD 0.3bln,; tech saw small outflows of USD 35mln, as did consumer, utilities, real estate, and health care.

EQUITY SPECIFIC NEWS:

TECH:

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  Apple Inc (AAPL) - Q1 EPS 1.88 (exp. 1.94), Q1 revenue USD 117.15bln (exp. 121.1bln). Said its FX headwind in Q1 was 8% (exp. 10%). It had 935mln paid subscribers at the end of the quarter, and has over 2bln active devices as part of installed base. Q1 Greater China revenue -7.3% Y/Y at USD 23.91bln (exp. 21.8bln). For specific segments, Q1 product revenues were -7.7% Y/Y at USD 96.39bln (exp. 98.98bln), Q1 iPhone sales -8.2% Y/Y at 65.78bln (exp. 68.3bln), Q1 Mac sales -29% Y/Y at USD 7.74bln (exp. 9.72bln), Q1 iPad sales +30% Y/Y at USD 9.40bln (exp. 7.78bln), Q1 wearables, home and accessories sales -8.3% Y/Y at USD 13.48bln (exp. 15.32bln), while Q1 service sales +6.4% Y/Y at USD 20.77bln (exp. 20.47bln). Execs noted difficult macro environment and supply constraints, noting that production disruptions at Chinese manufacturing sites lasted through most of December, though it saw increased traffic in Chinese stores in December as lockdowns were lifted. Said Q2 revenue growth will be higher Y/Y, and expects 5% impact from FX rates in the quarter; it also sees iPhone revenue growth accelerating in Q2 Q/Q. Q2 gross margins are seen between 43.5%-44.5%.


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  Alphabet Inc (GOOGL) - Q4 EPS 1.05 (exp. 1.18), Q4 revenue 76.05bln (exp. 76.53bln). Q4 revenue ex-TAC USD 63.12bln (exp. 63.24bln), and Q4 operating income 18.16bln. Q4 Google advertising revenue USD 59.04bln (exp. 60.64bln), YouTube ads 7.96bln (exp. 8.27bln). Q4 Google services sales of USD 67.84bln (exp. 68.9bln), and Google Cloud sales of USD 7.32bln (exp. 7.3bln). Said that long-term investments in deep computer science positions it well as AI reaches an inflection point. Said significant work was underway to improve all aspects of its cost structure, in support of investments in highest growth priorities. Exec said it was meaningfully slowing hiring in 2023, expects to incur employee severance and related charges of USD 1.9-2.3bln, majority of which will be recognised in Q1 2023.


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  Qualcomm Inc (QCOM) - Q1 Adj. EPS 2.37 (exp. 2.34), Revenue 9.46bln (exp. 9.6bln). Qualcomm noted a further deterioration of the macroeconomic environment, and sustained COVID restrictions in China, which has led to broad-based demand weakening across tiers and regions. CEO said it was implementing further spending reductions and streamlining operations. Sees Q2 revenue between USD 8.7-9.5bln (exp. 9.58bln), and sees Q2 adj. EPS view 2.05-2.25 (exp. 2.29).


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  Microchip Technology Inc (MCHP) - Q3 EPS 1.56 (exp. 1.55), Q3 revenue USD 2.17bln (exp. 2.15bln). Raises dividend to 35.8c/shr (prev. 32.8c/shr). Exec said supply was gradually improving, and for the first time in nine quarters, it was able to modestly reduce its large unsupported backlog; exec added that it was starting to see improvements in lead times in select technology corridors. Sees Q4 adj. EPS between 1.61-1.63 (exp. 1.57), and sees Q4 adj. gross margin view 68.1-68.3% (exp. 67.9%).


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  Atlassian Corporation (TEAM) - Q2 adj. EPS 0.45 (exp. 0.31), Q2 revenue USD 872.7mln (exp. 851.3mln). Reported subscription revenue growth of +40% Y/Y. Board authorised USD 1bln of stock repurchases. Exec said 2023 will be about helping customers navigate challenging times. Sees Q3 revenue between USD 890-910mln (exp. 900.9mln), and sees FY23 revenue growth of +25% Y/Y (exp. 3.49bln); said cloud revenue growth seen +35-40% Y/Y.


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  Cognizant Technology Solutions Corporation (CTSH) - Q4 adj. EPS 1.01 (exp. 1.02), Q4 revenue USD 4.8bln (exp. 4.8bln). Boosts quarterly dividend +7% Y/Y to 0.29/shr. Sees Q1 revenue between USD 4.71-4.76bln (exp. 4.9bln); said it was not providing FY guidance at this time, intends to provide an update in its next earnings release in early May.


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  Synaptics Incorporated (SYNA) - Q2 EPS 2.20 (exp. 2.34), Q2 revenue USD 353.1mln (exp. 365.4mln). Exec said customers continued to work down inventories, and remains cautious with its near-term demand forecasts. Sees Q3 revenue between USD 310-340mln (exp. 365.4mln).


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  Cirrus Logic, Inc. (CRUS) - Q3 adj. EPS USD 2.40 (exp. 1.99), Q3 revenue USD 590.6mln (exp. 544.6mln). Q4 revenue seen between USD 340-400mln (exp. 372mln).


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  Bill.com Holdings, Inc. (BILL) - Q2 adj. EPS 0.42 (exp. 0.13), Q2 revenue USD 260mln (exp. 243.5mln). Board approves share repurchase programme of up to USD 300mln. Q3 adj. EPS seen between USD 0.22-0.25 (exp. 0.12), and Q3 revenue seen between USD 245-248mln (exp. 250.8mln). Lifts FY23 EPS outlook to 0.99-1.05 (exp. 0.55) from 0.48-0.59, and lifts FY23 revenue outlook to USD 999-1.01bln (exp. 999mln) from USD 994-1.01bln.

CONSUMER CYCLICAL:

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  Amazon.com Inc (AMZN) - Q4 EPS 0.03 (exp. 0.18), Q4 revenue 149.2bln (exp. 145.42bln); Q4 online stores net sales USD 64.53bln (exp. 65.03bln), physical stores net sales USD 4.96bln (exp. 4.93bln), third-party seller services net sales USD 36.34bln (exp. 32.48bln), AWS net sales USD 21.38bln (exp. 21.76bln). Said Q4 operating income included approximately USD 2.7bln of charges. CFO said it has seen continued slowness in Q1 for AWS, and was seeing lower growth rates in UK and Europe due to inflation and Ukraine war. It was working working with Cloud customers to optimise costs, and expects to see some slower cloud growth rates for the next few quarters. On the health of the consumer, CFO said it remained nervous about consumer spending and how people will prioritise budgets moving forward. Sees Q1 net sales between USD 121.0bln-126.0bln (exp. 125.55bln), which includes an unfavourable impact of about 210bps from FX rates. Said that in the short-term, it faced an uncertain economy, but remained optimistic about the long-term opportunities. Said operating income guidance reflects consumer spending concerns and lower AWS and ad. growth rates.


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  Starbucks Corp (SBUX) - Q1 adj. EPS 0.75 (exp. 0.77), Q1 revenue USD 8.7bln (exp. 8.78bln). Q1 comp. sales +5% (exp. 6.79%); North America comps +10% (exp. +9.54%), US comps +10% (exp. +9.26%), International comps -13% (exp. -3.87%), China comps -29% (exp. -13.3%). For the US, average weekly sales in US operated stores rose to a record in Q1, and it added that momentum in Q1 continued into Q2. Exec said China comp sales were four times worse than it expected, but sees H2 FY23 in China to be stronger than in H1; exec said that although it previously projected a China recovery as early as Q3, it does not have a clear line of sight into the timing of the recovery. Keeps FY23 guidance unchanged.


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  Ford Motor Co (F) - Q4 adj. EPS 0.51 (exp. 0.62), Q4 revenue USD 41.8bln (exp. 40.37bln). will pay a supplemental dividend of USD 0.65/shr. Ford missed vehicle volumes by about 100k units vs its forecasts; said 60-65% of the shortfall was due to chips, and the rest due to other supplier issues. Said that the Midsize EV segment was "very competitive" after Tesla (TSLA) price cuts. On costs, it said there was more cost-cutting work to do in Europe, China, and the US, and it had "more to do" on job cuts. Plans significant cost cuts in 2023 and will be very aggressive on cost-cutting, beyond previous USD 3bln target. The automaker said some parts of its business were lagging and needed more work, adding that these results were not acceptable. Ahead, it continues to think that there will be volatility around chips this year. Sees 2023 adj. EBIT USD 9bln-11bln (exp. 9.94bln) and 2023 adj. FCF of about 6bln. Sees US industry new-car sales growing to about 15mln in 2023 from about 14mln in 2022.


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  Tesla (TSLA) - Reuters reports that it has cut prices of some models in South Korea on Friday.


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  Xpeng (XPEV) - The Chinese EV manufacturer launched an SUV and sedan in Europe.


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  Luxury Names - Hong Kong Macau Affairs Office said it will drop cross-border restrictions between the mainland, Hong Kong and Macau; will end pre-arrival PCR testing for some travellers, will resume group tours effective February 6th.


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  Kohl's Corporation (KSS) - Board appointed Tom Kingsbury as CEO, effective immediately; Kingsbury has served as Interim Chief Executive Officer since December.


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  Nordstrom, Inc. (JWN) - Activist investor Ryan Cohen is amassing a sizable stake in Nordstrom, to urge the department-store chain to make changes to its board following a steep share-price decline, WSJ reports.


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  Deckers Outdoor Corporation (DECK) - Q3 EPS USD 10.48 (exp. 9.61), Q3 revenue USD 1.35bln (exp. 1.26bln). Lifts FY23 EPS outlook to USD 18.00-18.50 (exp. 18.20), and anticipates FY23 revenue between USD 3.5-3.53bln (exp. 3.53bln). FY23 gross margins still expected to be approximately 50.5%.


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  Skechers USA, Inc. (SKX) - Q4 adj. EPS 0.48 (exp. 0.36), Q4 revenue USD 1.88bln (exp. 1.77bln), Q4 wholesale sales +15.7%, Q4 direct-to-consumer sales +10.8%. Sees Q1 EPS between USD 0.55-0.60 (exp. 0.84), and sees Q1 revenue between USD 1.8-1.85bln (exp. 1.96bln). FY23 EPS is seen between USD 2.80-3.00 (exp. 3.04), and sees FY23 revenue between USD 7.75-8.0bln (exp. 8.06bln). Sees FY23 capital expenditures between USD 300-350mln.

FINANCIALS:

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  Silvergate Capital Corporation (SI) - DoJ is looking into Silvergate's dealings with collapsed crypto exchange FTX and Alameda Research, and is investigating the hosting of FTX accounts.


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  Carlyle Group LP (CG) - Carlyle spoke to ex-Goldman Sachs executive Harvey Schwartz about taking over as the private equity group’s CEO, FT reports, as the company tries to complete a protracted search for a new leader after Kewsong Lee’s abrupt resignation in August.


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  Hartford Financial Services Group, Inc. (HIG) - Q4 core EPS 2.31 (exp. 1.87), Q4 revenue USD 5.82bln (exp. 5.74bln). Exec said its results reflected strong underwriting, with solid premium growth across the business.

HEALTH CARE:

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  Gilead Sciences Inc (GILD) - Q4 adj. EPS 1.67 (exp. 1.50), Q4 revenue USD 7.4bln (exp. 6.64bln). Raises dividend to USD 0.75/shr. Quarterly veklury sales -26% to USD 1.0bln. Sees FY23 total product sales between USD 26.0-26.5bln. (exp. 25.76bln), and sees FY23 adj. EPS between USD 6.60-7.00 (exp. 6.73).


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  Sanofi (SNY) - Q4 revenue EUR 10.73bln (exp. 10.56bln), Q4 business EPS EUR 1.71 (exp. 0.83), Q4 net EUR 2.14bln (prev. 1.73bln). Vaccines gross margin was 58.9% (exp. 59%). FY dividend 3.56 (exp. 3.51). Guides initial FY23 EPS growth in the low single digits.

CONSUMER STAPLES:

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  Post Holdings, Inc. (POST) - Q1 EPS 1.52 (exp. 0.68), Q1 revenue USD 1.57bln (exp. 1.5bln). Lifts FY23 adj. EBITDA outlook to USD 1.025-1.065bln (prev. saw USD 990-1.04bln), and now sees FY23 CapEx between UDS 275-300mln.


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  Clorox Company (CLX) - Q2 adj. EPS 0.98 (exp. 0.65), Q2 revenue USD 1.72bln (exp. 1.66bln). FY23 adj. Exec said actions it took to rebuild margins were working, and it is driving additional improvements. EPS outlook lifted to USD 4.05-4.30 (exp. 4.17) from USD 3.85-4.22, while FY23 net sales now seen between -2% and +1% (prev. saw between -4% to +2%). Q2 gross margin seen +320bps to 36.2% (vs 33% Y/Y). Anticipates a two point reduction to FY23 revenues due to FX headwinds.

MATERIALS:

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  United States Steel Corp (X) - Q4 adj. EPS 0.87 (exp. 0.63), Q4 revenue USD 4.34bln (exp. 3.94bln), Q4 EBITDA USD 431mln (exp. 402mln).

03 Feb 2023 - 09:20- Research Sheet- Source: Newsquawk