US EARLY MORNING: NDX is outperforming after Meta's results; heavy day of key earnings and central bank events ahead

SNAPSHOT: US equity futures are mixed, with the ES, RTY and YM all near neutral levels, although the NDX outperforms after Meta Platforms (META) surged over 20% following its earnings (it has a weight of around 1% in the index, but is a bellwether for other tech/communications names). Meanwhile there was something for both the hawks and doves at yesterday's policy meeting - we recap the main points below. Treasury yields are around 1bps off unchanged. Today’s highlights are the ECB and BoE policy announcements (previews for both can be found below). Stateside, weekly initial jobless claims data comes ahead of Friday’s BLS jobs report (the survey windows do not overlap for this week’s claims); Q4 unit labour costs will also be released. Factory orders for December, and potential revisions to the durable goods data for that month are also due. 

Our full day ahead calendar can be accessed here; or click here for the PDF version.

PREVIEW - BOE POLICY ANNOUNCEMENT (12:00GMT/07:00EST): Analysts surveyed by Reuters and market pricing look for a 50bps hike in the Bank Rate to 4%. The decision to hike rates is expected at 7-2 with Mann and Tenreyro set to remain in the unchanged camp. Within the remaining seven, there is likely to be a split of views, the extent to which is hard to judge given the lack of comms from the MPC since December. HSBC has attempted to form a base case scenario with an out-of-consensus call for a 25bps hike in which Bailey, Cunliffe, Broadbent and Pill go for 25bps, whilst Mann, Haskell and Ramsden back a 50bps move. However, such a step down in the cadence of rate hikes would likely need to be accompanied by guidance that rates will still have further to run given developments in the labour market. Looking beyond February, a 25bps hike in March is priced at around 80% with markets split on whether a further 25bps would follow in Q2 to take the terminal rate to 4.5%. In terms of the accompanying forecasts, HSBC expects that the impact of the stronger GBP and softer energy prices will likely outweigh the impact from stronger growth and lower rates, which should therefore lead to a downward revision to the MPC's Q4 2023 inflation forecast to 6.9% from 7.9%. BoE rate decision, minutes and MPR due Thursday 2nd February 2023 at 12:00GMT/07:00EST, press conference due at 12:30GMT/07:30EST. Full Newsquawk preview here.

PREVIEW - ECB POLICY ANNOUNCEMENT (12:45GMT/07:45EST): Consensus and market pricing looks for a 50bps hike in the deposit rate to 2.5%; this would take the deposit rate into slightly restrictive territory. The December meeting saw President Lagarde state that "based on the information that we have available today, that predicates another 50-basis-point rate hike at our next meeting, and possibly at the one after that, and possibly thereafter". This statement saw consensus coalesce around the idea of a 50bps hike for the upcoming meeting and comms from ECB officials have done nothing to lead markets away from this view. That said, some confusion around the rate hiking cycle was observed after a Bloomberg report suggested that policymakers are reportedly beginning to consider just a 25bp hike in March. Nonetheless, commentary from policymakers has done little to suggest that the GC is considering such a step down at this stage and has leaned against such reporting. With regards to the balance sheet, the prior meeting saw the GC announce that from the beginning of March 2023 onwards, the APP portfolio will decline at an average pace of EUR 15bln per month until the end of Q2 with its subsequent pace to be determined over time. For the upcoming meeting, further technical details on the programme are set to be announced. ECB policy announcement due Thursday 2nd February; rate decision at 13:15GMT/08:15EST, press conference from 13:45GMT/08:45EST. Full Newsquawk preview here.

PREVIEW - EARNINGS FROM GOOG AND AMZN (via JPM): GOOG: JPM says GOOG is still well owned amongst long-only funds, many of which added longs on the recent layoff headlines, although it says that it is still reasonably crowded on the short side (and a funder for META longs too). "Comps are tougher, and recent AI headlines have an air of existentiality to them," JPM says. The bank expects Q4 total revenues to grow +6% FXHN, with search reported numbers flat Y/Y, YouTube -3%, Cloud growth of around 32% (vs +38% in Q3). JPM adds that the Q3 buyback was USD 15.4bln, and investors are looking for something similar in Q4. AMZN: JPM says Azure sent a mixed message around the resilience and maturity of the business, and this seems like one of the more controversial quarters AMZN has faced in a while. The bank notes that positioning is "clean-ish", especially given the late 2022 sell-off. "Ultimately cost saves will come from AWS; AWS is also more exposed to Financials/Crypto/SMBs vs. Azure." JPM expects Q4 revenue to come in between USD 145-147bln, although the bank says it has a feeling it could be lower. AWS growth is expected to be "+20ish%" (vs. +27% in Q3); JPM says the forward commentary and exit rate will be important). It looks for AMZN to guide Q1 revenues between USD 123-125bln. Our full list of earnings expectations for the day can be accessed here.

FOMC RECAP: The Fed hiked its FFR by 25bps to 4.5-4.75%, as expected. The statement said the central bank continues to see "ongoing increases" in the Fed rate as being appropriate, coming against some expectations that the line could be dropped in order to give optionality for a lower terminal rate than the 5-5.25% median dot in the December SEPs. While that didn't happen, we did see a switch in language on guidance from the "pace of future increases" to the "extent of future increases," suggesting that debate is moving from the size of hike increments to how many hikes remain in the cycle, a dovish offset to the continued use of "ongoing increases". Elsewhere in the statement, the Fed acknowledged that inflation had eased somewhat, but remained elevated, while it also dropped references to public health as a factor in the bank's policy assessment. Chair Powell's post-meeting press conference was judged as mixed; despite markets cherry-picking the dovishness, where he seemingly looked to sit on the fence on many topics rather than cut off his options. The Fed Chair confirmed that the disinflation process was underway, albeit he was eager to highlight that core services inflation ex-housing had not shown progress. Powell said the Fed's focus was not on short-term moves in financial conditions, but that it's important for them to continue to reflect the policy restraints put in place. He believes that policy is still not 'sufficiently restrictive', but left optionality by stressing data dependence, later saying that it is possible that the Fed updates its policy path if the data came in differently to what it expects. Powell said the Fed has not yet made a decision on the terminal rate, and that it will look at the data between now and the March SEPs, adding that it was possible that it could be both lower or higher than the 5.1% seen in the December SEPs. Powell sees a path to getting inflation to 2% without significant economic decline, though it could take more slowing in the economy than it expects. Overall, there was something for both hawks and doves in his remarks, and at risk of fitting narrative to price action, perhaps that is the takeaway. Where Powell has previously tended to lean on the hawkish side, refuting the notion of any imminent Fed pivot, he now appears to be shifting to a more ambiguous stance, giving him the optionality to shift when needed.

EQUITY SPECIFIC NEWS:

COMMUNICATIONS:

• 
  Meta Platforms Inc (META) - The social media bellwether surged over 20% afterhours after Q4 results, where although EPS missed expectations, revenue topped estimates, as did DAUs for the group, while advertising revenue was also above the consensus view, and it boosted its buyback by USD 40bln. Q4 EPS USD 1.76 (exp. 2.22), Q4 revenue USD 32.17bln (exp. 31.53bln), Q4 DAUs 2.00bln (exp. 1.98bln), Q4 Facebook monthly active users 2.96bln (exp. 2.98bln); Q4 advertising revenue USD 31.25bln (exp. 30.86bln). Announced a USD 40bln increase in its share buyback programme. CEO said the progress it was making on its AI discovery engine and Reels were major drivers of reaching the milestone of 2bln daily active users. Said 2023 would be the 'Year of Efficiency' for Meta Platforms. Now expects to record an estimated USD 1bln in restructuring charges in 2023 related to consolidating office facilities, down from prior estimate of USD 2bln; adds it may incur additional restructuring charges as it progress efficiency efforts. Ahead, it sees Q1 revenue between USD 26bln-28.5bln (exp. 27.25bln). Sees FY capex between USD 30-33bln (prev. USD 34-37bln); reduced outlook reflects updated plans for lower data centre construction spend this year. FY23 total expenses now seen between USD 89-95bln (prev. 94-100bln), due to slower anticipated growth in payroll expenses and cost of revenue. Continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations.


• 
  Manchester United plc (MANU) - England's most successful football club thrashed Nottingham Forest 5-0 on aggregate to reach the 2023 EFL Cup Final at Wembley, which will take place on February 26th, putting the club within one victory of their first trophy since 2017, BBC reported.


• 
  Publicis Groupe S.A. (PUBGY) - Said it sees further growth in 2023 as clients maintain spending on digital marketing. FY22 revenue EUR 12.57bln (exp. 12.50bln), FY EBITDA EUR 2.80bln (exp. 2.75bln), FY net EUR 1.22bln (exp. 1.56bln), FY EPS 4.87 (prev. 4.13). Proposes dividend of 2.90/shr (exp. 2.85/shr). FY23 share repurchase seen around EUR 200mln, and sees further deleveraging of circa EUR 100mln.

TECH:

• 
  Align Technology, Inc. (ALGN) - Q4 EPS 1.73 (exp. 1.56), Q4 revenue USD 901.5mln (exp. 892.8mln). Board authorised a new USD 1bln share repurchase programme which will succeed its current USD 1bln facility which is to be completed in Q2 2023. Exec noted a more stable environment in Q4, especially in the Americas and EMEA regions, as well as most APAC markets outside of China. Ahead, ALGN is cautiously optimistic for continued stability and an improving operating environment, but recognises that the macroeconomic situation is fragile.


• 
  Siltronic (WAF GY) - Reported record sales in 2022, in line with estimates. Q4 revenue EUR 472mln (prev. 474mln), Q4 EBITDA EUR 168mln (prev. 170.5mln). Continues to assume rising demand in the medium and long term.


• 
  Qorvo, Inc. (QRVO) - Q3 EPS 0.75 (exp. 0.63), Q3 revenue USD 743.3mln (exp. 725.8mln). Exec said it was encouraged by the channel inventory consumption in the December quarter, expects channel inventories to continue being consumed in the March quarter. Sees unit volumes across the businesses recovering later this year. Sees Q4 EPS between 0.10-0.15 (exp. 0.64), and sees Q4 revenue between USD 600-640mln (exp. 728mln).


• 
  Infineon Technologies (IFNNY) - Q1 revenues slightly miss expectations, but it confirmed its FY outlook. Q1 revenue EUR 3.95bln (exp. 3.99bln), adj. gross margin 47.2%, segment results EUR 1.1bln (prev. 1.05bln). Q2 revenue seen at EUR 3.9bln (exp. 3.8bln), FY revenue seen at EUR 15.5bln (exp. 15.4bln).


• 
  NETGEAR, Inc. (NTGR) - Q4 adj. EPS -0.03 (exp. -0.08), Q4 revenue USD 249.1mln (exp. 243.5mln). Exec noted a challenging environment in the quarter, but strong demand for its SMB products, which achieved record revenue for the third successive quarter. Q1 revenue seen between USD 185-200mln (exp. 221.1mln).


• 
  Avnet, Inc. (AVT) - Q2 adj. EPS USD 2.00 (exp. 1.85), Q2 revenue USD 6.7bln (exp. 6.53bln). Sees Q3 adj. EPS between USD 1.75-1.85 (exp. 1.69), and sees Q3 revenue between USD 6.45 (exp. 6.1bln).


• 
  DXC Technology Company (DXC) - Q3 adj. EPS 0.95 (exp. 0.83), Q3 revenue USD 3.556bln (exp. 3.57bln), Q3 FCF USD 463mln (exp. 310mln). Exec said the company had created momentum, and believes that the business is heading to an inflection at the end of FY23. Q4 adj. EPS seen between USD 1.00-1.05 (exp. 1.16), and Q4 revenue seen between USD 3.615-3.635bln (exp. 3.61bln). FY23 adj. EPS outlook is for 3.45-3.50 (exp. 3.48), and FY23 revenue seen between USD 14.46-14.47bln (exp. 14.5bln).


• 
  CSG Systems International, Inc. (CSGS) - Q4 EPS 0.84 (exp. 0.93), Q4 revenue USD 289.9mln (exp. 269.1mln). Lifts quarterly dividend +6% to 0.28/shr. FY23 EPS seen between USD 3.35-3.65 (exp. 3.79), and FY23 revenue seen between USD 1.13-1.17bln (exp. 1.08bln).


• 
  FleetCor Technologies, Inc. (FLT) - FleetCor acquires at-home EV charging software company Mina.


• 
  Ouster, Inc. (OUST), Velodyne Lidar, Inc. (VLDR) - Ouster and Velodyne Lidar announced the proposed designations for the Board of the combined company, subject to approval. Said merger was expected to drive significant value creation and result in a stronger financial position.

FINANCIALS:

• 
  Wells Fargo & Company (WFC) - The bank files for a mixed shelf of up to USD 93bln, according to an SEC filing.


• 
  Deutsche Bank (DB) - Reported Q4 metrics which topped expectations, contributing to its third annual year of profits, while it reaffirmed 2025 goals. Q4 revenue EUR 6.32bln (exp. 6.50bln), Q4 non-interest expenses EUR 5.19bln (exp. 4.89bln), Q4 FIC sales and trading revenue EUR 1.5bln (exp. 1.6bln), Q4 pre-tax EUR 775mln (exp. 1.25bln). Sees 2023 revenue between EUR 28-29bln (prev. "over EUR 28bln"). Provision for credit losses in 2022 was at EUR 1.2bln (prev. 515mln in 2021). Said credit provisions remained contained in a more challenging credit environment. Q4 asset management net revenues -4% Y/Y at EUR 2.6bln.


• 
  Credit Suisse (CS) - The bank is reportedly considering splitting its investment bank in China via the retention of a domestic unit, and moving the overseas unit to the new CS First Boston, Bloomberg reports.


• 
  Barclays (BCS) - The bank mulls boosting the bonus pool for its FICC traders, Bloomberg reports.


• 
  Banco Santander SA (SAN) - Q4 net profit rose, and higher revenues offset larger provisions. Q4 net income EUR 2.29bln (exp. 2.10bln), Q4 NII EUR 10.16bln (exp. 10.11bln), Q4 total income EUR 13.52bln (exp. 13.32bln), Q4 revenue EUR 13.5bln (prev. 11.8bln Y/Y).


• 
  ING Groep N.V. (ING) - Profits rose in the quarter while provisions fell. Q4 net income EIR 1.09bln (exp. 0.97bln), Q4 loan-loss provisions EUR 269mln (exp. 472.7mln), Q4 revenue EUR 4.87bln (prev. 4.62bln Y/Y), Q4 operating profit EUR 1.98bln (prev. 1.68bln), Q4 NII EUR 3.86bln (prev. 3.29bln). Risk costs declined to 17bps of average customer lending.


• 
  NatWest (NWG) - The Telegraph reports that CEO is reportedly refusing to attend the Treasury Select Committee next week, where banking execs will be questioned on a number of consumer issues, including why saving rates haven’t lifted in tandem with the BoE’s hikes. NatWest’s head of retail will attend instead.


• 
  Aflac Incorporated (AFL) - Q4 adj. EPS USD 1.29 (exp. 1.21), Q4 revenue USD 4bln (exp. 4.49bln). Company said the when adjusting for a material weakening in the JPY currency, it delivered another quarter of solid earnings results capping off a year of overall strong performance, adding that pandemic conditions in Japan were gradually improving, but impacted operations throughout the year, while in the US they have largely subsided.


• 
  Allstate Corporation (ALL) - Q4 adj. EPS -1.36 (exp. -1.36), Q4 revenue USD 13.65bln (exp. 11.4bln). Exec said its plan to return auto insurance margins to target levels continues, is expected to further increase average premiums, reduce expenses and lower policy growth.


• 
  MetLife, Inc. (MET) - Q4 adj. EPS 1.55 (exp. 1.65), Q4 revenue USD 16.32bln (exp. 17.32bln).

INDUSTRIALS:

• 
  Airbus (EADSY) - The industrial and Qatar Airways reached an amicable settlement in their legal dispute. Qatar Airways will get the first re-instated A321NEO in 2026, and A350 deliveries will resume in 2023. The two are in talks with regulators over the best way to return 30 grounded A350s into service.


• 
  Boeing (BA) - Was awarded a USD 1.62bln Air Force contract for guidance subsystem support.


• 
  C.H. Robinson Worldwide, Inc. (CHRW) - Q4 adj. EPS 1.03 (exp. 1.38), Q4 revenue USD 5.1bln (exp. 5.68bln). Exec said the current point in the cycle is one of shippers managing through elevated inventories amidst slowing economic growth, causing unseasonably soft demand for transportation services. At the same time, prices for ground transportation and global freight forwarding were declining due to the changing balance of supply and demand. "While a correction in the freight forwarding market was certainly expected, the speed and magnitude of the correction in only two quarters was unexpected, with ocean rates on some trade lanes already back to pre-pandemic levels."


• 
  Electrolux AB (ELUXY) - Flagged a decline in sales volumes in FY23. Q4 net income SEK -1.9bln (exp. -0.6bln), adj. EBIT SEK -600mln (exp. -730mln), EPS -7.12. Expect FY23 volumes to decline, partly mitigated by mix improvements. In 2023, sees negative performance for all regions, APAC, Middle East and Africa which is “neutral”. Proposes no dividend for 2022.


• 
  Landstar System, Inc. (LSTR) - Q4 EPS USD 2.60 (exp. 2.62), Q4 revenue USD 1.67bln (exp. 1.77bln). Exec said current macroeconomic environment made for challenging comparisons against vs Q4 2021, despite the extra week of operations in the 2022 Q4. Added that softer demand during a weaker than typical peak season resulted in more readily available truck capacity and truck rates and volumes below the record prior year levels. The number of loads hauled via truck -5.5% vs Q4 2021. Revenue per load on loads hauled via truck -7% vs Q4 2021. Revenue generated in the aggregate via rail, air and ocean cargo carriers was also below guidance.


• 
  Regal Rexnord Corporation (RRX) - Q4 adj. EPS 2.64 (exp. 2.39), Q4 revenue USD 1.24bln (exp. 1.26bln).

MATERIALS:

• 
  Anglo American (NGLOY) - Q4 production +10% Y/Y; copper production +52% Y/Y due to ramp up of production from Quellaveco, Peru mine; Q4 rough diamond production +6% Y/Y. FY production guidance is for copper output of between 840-930k/T and diamonds 30-33mln/CT.


• 
  Corteva, Inc. (CTVA) - Q4 adj. EPS 0.16 (exp. 0.05), Q4 revenue USD 3.83bln (exp. 3.79bln). Exec noted unprecedented cost inflation and supply chain challenges in the quarter. Exec said the outlook for ag fundamentals remains robust; farm income levels remain strong as tight supply keeps crop prices over historical averages, leading farmers to continue to invest in technologies that increase productivity and yield. FY23 operating EPS seen between 2.70-2.90 (exp. 3.13), and FY23 revenue seen between USD 18.1-18.4bln (exp. 18.49bln).

ENERGY:

• 
  Shell (SHEL) - Announced record annual profits in FY22, and a USD 4bln buyback programme. For the quarter, Q4 adj. profit USD 9.81bln (exp. 8.26bln), EPS USD 1.39 (exp. 1.15), Q4 revenue USD 101.3bln (prev. 85.3bln). Announces a USD 4bln share buyback programme, boosted dividend by +15% Y/Y. Sees Oil & Gas output 2.83mln BOEPD (exp. 2.8mln). Separately, residents representing communities around the Niger Delta are suing the major over oil spills in the region, The Times reports; if successful, Shell could have to pay compensation and undertake the largest ever terrestrial oil clean-up.

CONSUMER DISCRETIONARY:

• 
  Bed Bath & Beyond (BBBY) - The retailer failed to pay interest on USD 1.2bln of bonds due on February 1st, WSJ reports.


• 
  Evolution AB (EVVTY) - Earnings rose in line with estimates. Q4 revenue EUR 407mln (exp. 404mln), Q4 EBITDA EUR 279mln (exp. 280mln), Q4 net income EUR 223mln (exp. 239mln). Proposes dividend of 2/shr (exp. 1.96/shr). In FY23,  it intends to release over 100 games, and expects EBITDA margins in the range of 68-71%.


• 
  Modine Manufacturing Company (MOD) - Q3 adj. EPS 0.48 (exp. 0.42), Q3 revenue USD 560mln (exp. 562.3mln). Reiterates FY23 revenue growth view of up 6-12% (exp. 2.3bln), and reiterates its FY23 adj. EBITDA outlook of between USD 190-200mln.


• 
  Murphy USA Inc. (MUSA) - Prelim Q4 EPS 5.21 (exp. 6.25), prelim Q4 revenue USD 5.37bln (exp. 5.38bln). Sees FY23 CapEx between USD 375-425mln, and FY23 new stores organic growth up to 45.

CONSUMER STAPLES:

• 
  Costco Wholesale Corporation (COST) - Costco reported net sales of USD 16.84bln for January, excluding the impacts from changes in gasoline prices and foreign exchange, an increase of 6.9% Y/Y (exp. 5.3%). Baird said the data showed Costco remained uniquely positioned to weather the increasingly choppy consumer spending backdrop.


• 
  Dollar General (DG) - DG enters into an agreement for USD 750mln, 364-day revolving credit facility.


• 
  Nestle (NSRGY) - Announced the wind down and exit of its Frozen Meals & Pizza business over the next six months in Canada.


• 
  Casino Guichard Perrachon SA ADR (CGUSY) - Casino and Teract confirm they are in preliminary talks to combine French retail arms.


• 
  e.l.f. Beauty, Inc. (ELF) - Q3 adj. EPS 0.48 (exp. 0.23), Q3 revenue USD 146.5mln (exp. 121.8mln). Lifts FY23 adj. EPS outlook to between USD 1.37-1.40 (exp. 1.12) from 1.07-1.10; lifts FY23 revenue outlook to between USD 541-545mln (exp. 490mln) from USD 478-486mln.

HEALTH CARE:

• 
  GSK plc (GSK) - Jesduvroq approved by FDA for anaemia of chronic kidney disease in adults on dialysis.


• 
  Roche Holding AG (RHHBY) - Flagged a decline in 2023 earnings due to a slump in sales of COVID products. Q4 revenue CHF 16.24bln (exp. 16.12bln), Q4 diagnostics sales CHF 3.88bln (exp. 3.79bln). FY revenue CHF 63.28bln (exp. 63.29bln), FY core EPS CHF 20.30 (exp. 20.61). Guides FXN FY23 sales decline in the low single digits, as it expects a sharp decline in COVID product sales in 2023.


• 
  McKesson Corporation (MCK) - Q3 adj. EPS 6.90 (exp. 6.35), Q3 revenue USD 70.49bln (exp. 71.0bln). Raises FY23 EPS outlook to USD 25.75-26.15 (exp. 24.80) from USD 24.45-24.95.


• 
  Siemens Healthineers AG (SMMNY) - Q1 profits fall after lower sales of COVID tests. Q1 adj. EBIT EUR 647mln (exp. 663mln), Q1 revenue EUR 5.077bln (exp. 5.2bln). Maintains FY23 revenue and adj. EPS guidance. Exec said margins will improve significantly over the course of the year; price measures have been effective, will have an impact in Q3/Q4, while considerable revenue improvement was expected in Q2.


• 
  Hologic, Inc. (HOLX) - Q1 adj. EPS 1.07 (exp. 0.91), Q1 revenue USD 1.07bln (exp. 1.0bln). Exec noted that each of its base franchises exceeded revenue expectations, and delivered profitability. Notes strong start to the year with double-digit organic revenue growth ex. COVID in its Diagnostics and Surgical businesses, and encouraging signs of recovery in its Breast Health business. It is increasing its guidance: sees Q2 adj. EPS between USD 0.80-0.90 (exp. 0.82), and sees Q2 revenue between USD 930-980mln (exp. 926.3mln). Lifts FY23 EPS outlook to between USD 3.55-3.85 (exp. 3.53) from 3.30-3.60, and lifts FY23 revenue outlook to USD 3.85-4.00bln (exp. 3.9bln) from USD 3.7-3.9bln.

02 Feb 2023 - 09:20- Data- Source: Newsquawk