US EARLY MORNING: Stock futures are flat ahead of services ISM data

OVERNIGHT: On Wall Street, stocks were firmer on Thursday after "pause" chatter from Fed's Bostic unwound earlier losses (see here). Asia-Pac stocks traded mostly higher amid tailwinds from the US (see here); the Nikkei 225 outperformed peers after data which showed Tokyo-area headline and core inflation began to soften, while the Unemployment Rate edged lower. China shares gained after strong Caixin Services and Composite PMI data which showed the fastest pick-up in activity since August, but upside was capped heading into China’s ‘Two Sessions’ (see here for our Two Sessions primer). In Europe, stocks started the last session of the week on the front foot supported by strong leads from Wall Street and APAC trading; data showed Germany's trade surplus widening by more than expected in January (see here). Final Services and Composite PMI data out of France was revised up a touch for February, the German measures were revised down, while the aggregate Eurozone readings were revised lower too. 

US PRE-MARKETS: After the Bostic-inspired bounce on Thursday, US equity futures have traded around flat through the overnight session ahead of ISM services data due later today, where the headline is expected to pare back a touch. Treasury yields are lower by 3-5bps, with moderate flattening seen. The Dollar Index is sub neutral, back under 105.00. The macro tone into the end of the week (and ahead of next week’s data slate, which includes the key jobs data) will be shaped by the ISM data, and there will be particular attention on the prices component, after a hot reading within the manufacturing data earlier in the week exacerbated hawkish repricing of the expected course for rates this year. ING says that following the grim December numbers and encouraging January ones, the ISM services will tell us which of the last two reads was the aberration in the series; "all seems to point to December being a one-off drop, and levels above 54.0 will be enough to endorse the Fed’s hawkish tone and support USD," the Dutch bank writes.

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: EU producer price data for January will be released – we have already seen hotter-than-expected metrics for the HICP data, which has resulted in expectations of ECB terminal rate being revised upwards by both analysts as well market-implied measures. US President Biden will meet German Chancellor Scholz. On the speakers front, ECB Vice President de Guindos will speak, but no text is expected; remarks from the ECB's Holzman will also be due. On the CRA front, Fitch Ratings will review Austria's ratings (currently AA+) and Czech Republic's ratings (AA-), while Moody's will review Hungary's rating (Baa2).


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  US DATA/SPEAKERS: The Services ISM will be eyed; the manufacturing equivalent released earlier in the week was judged as hawkish after the prices paid component surged, and analysts will be looking to see if there are any similar dynamics within the services release. As is customary, the S&P Global final services and composite PMIs will be released, providing a convenient preview ahead of the ISM release. Fed voters Logan and Bowman, and non-voters Bostic and Barkin (non-voter) are all on the slate to speak.

STOCK SPECIFIC NEWS:

TECH:

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  Broadcom Inc (AVGO) - Q1 adj. EPS 10.33 (exp. 10.12), Q1 revenue USD 8.915bln (exp. 8.9bln). Exec said that Q1 performance reflected continued strength in infrastructure demand across all our end markets. Q1 Semiconductor Solutions USD 7.11bln (exp. 6.98bln), Q1 Infrastructure Software 1.81bln (exp. 1.88bln). Q2 revenue seen around USD 8.7bln (exp. 8.58bln), and expects Q2 adj. EBITDA of around 64.5% of projected revenue (exp. 62.2%). CEO forecasts ethernet switch shipments used in AI could grow to USD 800mln in 2023, citing expected exponential demand from hyperscalers. Expects AI-related tailwinds to drive networking revenue to grow another +20% Y/Y. Said it was making good progress with regulators on VMware (VMW) deal.


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  VMware Inc (VMW) - Q4 adj. EPS 2.13 (exp. 1.92), Q4 revenue USD 3.53bln (exp. 3.63bln). Q4 SaaS revenue USD 1.18bln (exp. 1.1bln), Q4 RPO USD 13.56bln (exp. 12bln). Exec said it looks forward to the merger with Broadcom, expected to close in Broadcom’s current fiscal year.


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  Hewlett Packard Enterprise Co (HPE) - Q4 adj. EPS 0.63 (exp. 0.54), Q4 revenue USD 7.81bln (exp. 7.43bln), Q4 Gross Margin 34.2% (exp. 33.5%). Q4 Compute revenue USD 3.46bln (exp. 3.35bln), Q4 HPC & AI revenue USD 1.06bln (exp. 906.4mln), Q4 Intelligent Edge revenue USD 1.13bln (exp. 975.6mln), Q4 Storage revenue USD 1.19bln (exp. 1.17bln). Sees Q2 adj. EPS between 0.44-0.52 (exp. 0.47), and sees Q2 revenue between USD 7.1-7.5bln (exp. 7.05bln). Raises FY EPS view: sees FY EPS between USD 2.02-2.10 (exp. 2.02, prev. 1.96-2.04).


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  Dell Technologies Inc (DELL) - Q4 adj. EPS 1.80 (exp. 1.63), Q4 revenue USD 25.0bln (exp. 23.37bln). Q4 Client Revenue USD 13.4bln (exp. 12.5bln), Q4 Infrastructure Solutions USD 9.9bln (exp. 9.3bln). Raises annual cash dividend +12% to USD 1.48/shr. CFO Tom Sweet is to retire, Yvonne McGill named CFO effective Q3. Expects Q1 EPS at USD 0.80/shr +/- 0.15 (exp. 1.25).


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  Foxconn Intl Hld (FXCNY) - Apple (AAPL) supplier Foxconn is planning a USD 700mln Indian plant in a shift from China.


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  Infineon Technologies (IFNNY) - Infineon will acquire GaN Systems, a Canadian company which develops solutions for power conversion, for USD 830mln; will be funded out of liquidity.


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  Telefonaktiebolaget LM Ericsson (ERIC) - Ericsson has agreed to plead guilty and pay a criminal penalty of more than USD 206mln after breaching a 2019 Deferred Prosecution Agreement (DPA). Ericsson will plead guilty to engaging in a long-running scheme to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes, falsifying books and records, and failing to implement reasonable internal accounting controls in multiple countries around the world.


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  Nokia (NOK) - Aims to maintain a net cash position of 10-15% of sales.


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  Zoom Video Communications, Inc. (ZM) - Zoom abruptly terminated the employment of President Greg Tomb, a former Google executive who had only started at the videoconferencing company in June, Bloomberg reports. Tomb will receive severance benefits in accordance with arrangements that are payable upon a “termination without cause,” the company said in a regulatory filing. The move is effective Friday.


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  Marvell Technology Group Ltd. (MRVL) - Q4 adj. EPS 0.46 (exp. 0.47), Q4 revenue USD 1.42bln (exp. 1.4bln). Exec said it delivered record FY23 revenue, growing 33% Y/Y driven by strong growth from cloud, 5G, auto and enterprise networking. Q4 was driven by better-than-forecasted results from our datacenter end market. Added that while inventory corrections and resulting changes in product mix are impacting its guidance for Q1 revenue and gross margin, expects these headwinds to subside later in FY24 as inventory levels normalise. Sees Q1 adj. EPS between USD 0.24-0.34 (exp. 0.41), and sees Q1 revenue USD 1.3B +/- 5% (exp. 1.38bln).


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  C3.ai, Inc. (AI) - Q3 adj. EPS -0.06 (exp. -0.22), Q3 revenue USD 66.7mln (exp. 64.3mln). Exec said that as it enters Q4, it is seeing tailwinds from improved business optimism and increased interest in applying C3 AI solutions, adding that overall business sentiment appears to be improving. "This is a dramatic change from what we experienced in mid 2022." Sees Q4 revenue between USD 70-72mln (exp. 69.9mln). Sees FY23 revenue between USD 264-266mln (exp. 261.3mln).


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  Elastic N.V. (ESTC) - Q3 EPS 0.17 (exp. 0.05), Q3 revenue USD 275mln (exp. 273mln). Q3 total subscription count 19.9k (vs 19.7k Q/Q, vs 17.9k Y/Y), Q3 total customer count with Annual Contract Value (ACV) greater than USD 100k was over 1,110 (vs over 1,050 Q/Q, and over 890 Y/Y), Q3 Net Expansion Rate was approximately 120%. Sees Q4 EPS between USD 0.08-0.10 (exp. 0.07), sees Q4 revenue between USD 276-278mln (exp. 283.8mln), sees Q4 operating margin between 4.8%-5.2%. For the FY23, sees EPS between USD 0.11-0.14 (exp. -0.01), and sees FY23 revenue between USD 1.065-1.067bln (exp. 1.08bln).


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  Zscaler, Inc. (ZS) - Q2 EPS 0.37 (exp. 0.29), Q2 revenue USD 387.6mln (exp. 364.9mln). Exec said that even in this difficult macroeconomic environment, it continues to see customers consolidate multiple point products onto its integrated Zero Trust security platform, believes strong customer interest in our platform and growth in annual recurring revenue base supports the increase to its FY guidance. Raises FY EPS view to 1.52-1.53 from 1.23-1.25, raises billings outlook to USD 1.935-1.945bln from USD 1.93-1.94bln.

COMMUNICATIONS:

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  Bumble Inc. (BMBL) - Stockholders affiliated with Blackstone Inc. and its founder Whitney Wolfe Herd have commenced an underwritten public offering of 12.5mln shares of Bumble’s Class A common stock. Additionally, Blackstone intends to grant the underwriters a 30-day option to purchase up to an additional 1.875mln shares of Bumble’s common stock.


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  Universal Music Group (UNVGY) - Sales top expectations, CEO calls for new streaming model. Q4 adj. EBITDA EUR 620mln (exp. 612mln), Q4 revenue EUR 2.94bln (exp. 2.88bln).


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  Meta (META) - CEO said Brazil's Central Bank authorised launch of new WhatsApp payment feature.

CONSUMER STAPLES:

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  Walmart (WMT) - CEO Doug McMillon plans to helm the country’s largest retailer for at least three more years as the company continues work to identify a successor, WSJ reports citing sources.


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  Costco Wholesale Corporation (COST) - Q2 EPS USD 3.30 (exp. 3.21), Q2 revenue USD 55.3bln (exp. 55.5bln), Q2 comparable sales +5.2%, Q2 adj. comparable sales +6.8%. Said inflation continues to seem to improve somewhat: saw inflation of around 8% in Q4, but was now tracking at +6-7% in Q1, easing to +5-6% in Q1, and lower in February. Says gross margin was higher Y/Y by 8bps, but noted most major departments in general were down with fresh food down a little more than others. Exec said they have seen some weakness in big ticket discretionary items. Expects to open a total of 27 new warehouses in FY23 including 3 relocations for a net increase of 24 new warehouses. February adj. comp sales +3.5% (exp. 5.3%).

CONSUMER CYCLICAL:

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  Starbucks Corp (SBUX) - US Senator Sanders on Thursday refused to back down on calls to make Starbucks interim CEO Howard Schultz, who is stepping down this month, testify at a hearing on the company's compliance with labour law, Reuters reports. Starbucks reiterated that it has no plans to send Schultz to a Senate committee hearing on March 9th.


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  Nordstrom, Inc. (JWN) - Nordstrom confirmed that it has decided to discontinue support for Nordstrom Canada's business operations, which operates six stores and seven Nordstrom Rack stores, as well as the Nordstrom.ca website, and employs approximately 2,500 people. Q4 EPS 0.74 (exp. 0.66), Q4 revenue USD 4.32bln (exp. 4.34bln). Exec said that as it enters FY23, it is focused on improving Nordstrom Rack performance, increasing inventory productivity and continuing to advance supply chain optimisation initiatives. Sees FY23 adj. EPS between USD 1.80-2.20 (exp. 1.93), and sees FY23 revenue decline of 4.0-6.0% Y/Y (exp. 15.5bln), including an approximately 250bps negative impact from the wind-down of Canadian operations, and approximately 130bps positive impact from the 53rd week.


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  Victoria's Secret & Co. (VSCO) - Q4 adj. EPS 2.47 (exp. 2.34), Q4 revenue USD 2.02bln (exp. 2.02bln), Q4 comparable store sales -6%. Sees Q1 adj. EPS between USD 0.30-0.60 (exp. 0.83), and sees Q1 revenue down mid-single digit range (exp. 1.47bln). FY23 revenue seen rising mid-single digits (exp. +3.3%), and sees adj. operating income rate to be similar Y/Y.


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  Salvatore Ferragamo (SFRGY) - Saw profits fall in FY22, but was smaller than expected, and says it has seen encouraging start to FY23. FY22 net EUR 69.6mln (exp. 73mln), FY revenue EUR 1.25bln (prev. 1.25bln Y/Y), FY EBITDA EUR 298.9mln (exp. 292.5mln). Said the beginning of the year has been encouraging in mainland China, does not see the need to move price levels significantly. No major store openings expected in 2023, is reducing exposure in the US.


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  Tesla Inc. (TSLA) - China CPCA said Tesla sold 74,402 China-made vehicles in February (prev. 66.1k in January).

CRYPTO:

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  Crypto - SEC chief Gensler said crypto platforms were not necessarily qualified custodians.


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  Riot Platforms, Inc. (RIOT) - FY22 adj. EPS -0.47 (exp -2.78), FY22 revenue USD 259.2mln (exp. 254.5mln). Exec notes significant growth in hash rate, and lowering of its cost of Bitcoin production.

INDUSTRIALS:

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  Caterpillar Inc (CAT) - The industrial giant said it had reached a tentative agreement with a union that represents workers at four of its facilities, dodging a possible walkout at a time when companies across the US are dealing with widespread labour shortages, Reuters reports.


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  Plug Power Inc. (PLUG) - Announced the historic flight of a regional airliner powered by the company's line of ProGen fuel cells. The flight marked a significant milestone.

HEALTH CARE:

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  Walgreens Boots Alliance, Inc. (WBA) - The pharmacy chain confirmed that it will not dispense abortion pills in several states where they remain legal — acting out of an abundance of caution amid a shifting policy landscape, threats from state officials and pressure from anti-abortion activists, Politico reported.


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  Cooper Companies, Inc. (COO) - Q4 EPS 2.90 (exp. 2.70), Q4 revenue USD 858.5mln (exp. 834.9mln). Exec said it started the year on a positive note with double-digit organic revenue growth and strong operational performances at both CooperVision and CooperSurgical. Sees FY23 EPS between USD 12.60-12.90 (exp. 12.52), and sees FY23 revenue between USD 3.5-3.55bln (exp. 3.5bln).

ENERGY:

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  Equinor (EQNR) - To acquire Suncor Energy UK for USD 850mln.

MATERIALS:

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  BHP (BHP) - Signs contracts with Shandong ports, which accounts for around a quarter of China's annual iron ore throughput, Global Times reports.

03 Mar 2023 - 09:31- Research Sheet- Source: Newsquawk