US EARLY MORNING: US equity futures are slightly red ahead of today's PCE data release

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  OVERNIGHT: On Wall Street, major indices firmed on Thursday, snapping a four-session losing streak and shrugging-off the sell-off seen in the NY morning after a knee-jerk hawkish reaction to the fall in initial jobless claims and upward revisions to Q4 Core PCE (see here). APAC stocks were mixed, trading mostly rangebound after the choppy performance on Wall St (see here); Nikkei outperformed as BoJ Governor nominee Ueda told a lower house hearing that current monetary policy was appropriate, and that Japan still needs more time for inflation to sustainably hit its target, adding that the BoJ would either need to move towards monetary policy normalisation or must consider ways to maintain YCC depending on if inflation improves significantly or not. European equities opened on the front foot, but are still on course for small weekly losses (see here).


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  US PRE-MARKETS: A choppy session on Wall Street saw stocks eke out gains on Thursday, although that upside has not continued in Friday's pre-markets, with major US equity futures trading with losses, and with the E-Mini S&P 500 on course to book a third straight week of losses. That said, the action is still above the psychological 4,000 mark, and the 50dma around 3995/6 has generally been respected. It might be fairer to describe the recent action as ‘consolidating’ between 4,000-4,050 after the upside data surprises of late; that range could be tested with the release of today’s US PCE data (preview below). Ahead of that, Treasury yields are little changed, while the Dollar Index is flat.


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  WEEKLY FLOWS: Bank of America weekly flow report notes flows of USD 4.9bln to bonds, USD 0.7bln from gold, USD 3.8bln from cash, USD 7.0bln from equities. Its Bull & Bear Indicator edged lower to 4.2 from 4.4. In terms of eqiuty flows in the week, BofA said US have seen outflows for the past 3 weeks (USD 9.0bln in latest week), Japan has outflows for the past 5 weeks (USD 1.5bln in latest week), Europe has seen outflows resume (with USD 50mln in the week), EMs have now seen inflows for the past 2 weeks (USD 2.1bln this week). By style, US value sees inflows of USD 0.3bln, US small caps see inflows of USD 0.2bln; US growth sees outflows of USD 1.6bln, and US large cap USD 6.1bln. By sector: inflows were seen in energy (USD 0.5bln), tech (USD 120mln); outflows were seen in real estate (USD 400mln), utilities (USD 500mln) health care (USD 500mln), consumer (USD 500mln), financials (USD 500mln), materials (USD 800mln). In fixed income flows, BofA said IG bonds have seen inflows for the past 9 weeks (USD 9.9bln in latest), HY Bonds have seen outflows for the past 2 weeks (USD 6.3bln this week), EM Debt has seen outflows for the past 2 weeks (USD 1.4bln), outflows in Munis has resumed (1.6bln), Govt/Tsy see largest inflows in 7 weeks(USD 5.7bln), while TIPS see outflows for the past 26 weeks (USD 0.6bln).

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: The European data and speakers’ slate is quiet, with the only notable item a speech from BoE dove Tenreyro, who will speak on inflation targeting. After hours, ratings review from Fitch on the Netherlands (AAA), and Moody’s on Sweden (Aaa) are due.


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  NORTH AMERICAN DATA/SPEAKERS: US President Biden will continue his tour in Europe, and is expected to announce another wave of sanctions on Russia. The highlight on the data slate is the Personal Income and consumption data from the US, which also includes the PCE prices data, also known as the Fed’s preferred inflation gauge; we have a brief primer below. Elsewhere, final University of Michigan sentiment data for February will be published; the prelim report saw the headline rise to the highest since January 2021, support by current conditions, but sentiment was still at a weak level overall; the short-term inflation expectations measure ticked up, likely as gasoline prices also rose in the month, but the longer-term print was unchanged, which analysts suggest that consumer inflation expectations remain well anchored. On the speakers front, Fed non-voters Mester and Fed’s Collins will give speeches, as will Fed Governor Waller (voter). On the energy front, weekly rig count data from Baker Hughes will be published after the European close.


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  SUPPLY: Italy will sell between EUR 5.0-6.0bln of 2028 and 2033 debt, and will sell between EUR 3.0-3.50bln of 2028 CCTEUs.


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  US CORPORATE EARNINGS: Today’s major corporate earnings include EOG . Our full US daily corporate earnings estimates can be accessed here.
  


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  CORE PCE PREVIEW (13:30GMT/08:30GMT): The street expects core PCE to rise 0.4% M/M in January, matching the pace seen in December, while the annual rate is likely to ease to 4.3% Y/Y from 4.4%. The data will be read in the context of the hot CPI and PPI data for the month of January, which demonstrates that the road to normalising inflation will not be linear. The PPI and CPI data (combined with other measures of a solid economy, like the January jobs data and Services ISM) have raised fears around inflation releases, concerns supported by some consumer surveys which have recently shown a ticking up in short-term inflation expectations. “Core CPI continued to moderate in January, but much of the weakness was driven by components that don’t impact PCE estimates,” Credit Suisse says, “meanwhile, PPI inflation surprised on the upside, including a pickup in health care, air fares, and financial services, all categories which pass through directly into PCE calculations.” As an aside, analysts have been flagging up potential risks around revisions to the prior months' PCE data; Wrightson, for instance, notes that revisions to prior data, which could potentially provide a distorting factor to the annual Y/Y measures ("technical distortions resulting from last week's CPI seasonal factor revisions are likely to create a small but perverse upward bias in the Y/Y growth rate of the PCE Price index in the near-term", Wrightson writes).

STOCK SPECIFIC NEWS:

TECH:

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  Adobe Inc. (ADBE) - DoJ is preparing a suit to block Adobe's USD 20bln deal for Figma, Bloomberg reports. Case expected to be filed next month, although the timing could slip. The deal requires approval from several antitrust authorities, Blooberg notes, and the merger agreement allows for a possible extended regulatory review with an outside completion deadline of March 2024. Adobe had a meeting with the DOJ yesterday.


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  Autodesk Inc (ADSK) - Q4 adj. EPS 1.86 (exp. 1.81), Q4 Revenue USD 1.32bln (exp. 1.31bln), Q4 billings USD 2.1bln (exp. 1.93bln). Exec said demand environment in Q4 remained consistent with Q3 with the approaching transition from up-front to annual billings for multi-year contracts, and a large renewal cohort, providing a tailwind to billings and free cash flow. Sees Q1 revenue between USD 1.26-1.28bln (exp. 1.27bln), sees Q1 EPS between 1.50-1.56 (exp. 1.63). FY EPS seen at 7.15 (exp. 7.33), FY billings seen between USD 5.025-5.175bln (exp. 5.3bln).


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  Block, Inc. (SQ) - Q4 EPS 0.22 (exp. 0.30), Q4 revenue USD 4.65bln (exp. 4.60bln), Q4 Gross Payment Volume USD 48.6bln (vs 42.6bln Y/Y), Q4 cash app gross profit USD 848mln (vs 518mln Y/Y), Q4 adj. EBITDA USD 281mln (vs 184mln Y/Y). FY23 adj. EBITEA seen at USD 1.3bln (vs 991mln y/Y), sees adj. EBITDA margin expanding by at least 1ppt Y/Y, sees combined company gross profit in January-February +25%


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  Intuit Inc (INTU) - Q2 adj. EPS 2.20 (exp. 1.44), Q2 Revenue USD 3.04bln (exp. 2.91bln). Names Sandeep Singh Aujla as new CFO effective August 1st. Sees Q3 adj. EPS USD 8.42-8.49 (exp. 8.91), Q3 revenue growth seen between +8-9%. For the FY, it reiterates guidance, sees EPS between 13.59-13.89 (exp. 13.68), and sees FY revenue between USD 14.04bln-14.25bln (exp. 14.12bln).

COMMUNICATIONS:

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  Manchester United plc (MANU) - The world's most iconic football club Manchester United came from a goal down to beat Spain's La Liga table toppers Barcelona 2-1, securing a memorable 4-3 aggregate victory over two legs to reach the Europa League last 16, as their revival under Dutch manager Erik ten Hag continues. Man Utd remain in contention for four competitions, and will aim to end their silverware drought on Sunday when they take on Saudi-owned Newcastle United in the League Cup Final at Wembley. The Manchester club's maligned US owners, the Glazer Family, are currently soliciting offers for the global sporting institution, reportedly aiming to achieve a GBP 6bln valuation (vs current market cap of around GBP 3.1bln).


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  Warner Bros Discovery Inc (WBD) - Q4 EPS -0.86 (exp. -0.21), Q4 Revenue USD 11.01bln (exp. 11.36bln), Q4 EBITDA USD 2.603bln (exp. 2.59bln), Q4 FCF USD 2.482bln (exp. 2.0bln). Streaming subscriptions 96.1mln at the end of Q4 (exp. 96.2mln), Q4 streaming EBITDA USD -217mln (exp. -515mln). Said 'Hogwarts Legacy' game has sold over 12mln units in its first two weeks of release. New Line and Warner Bros Animation working on 'The Lord of the Rings: The War of the Rohirrim', slated to release in April 2024.


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  Live Nation Entertainment, Inc. (LYV) - Q4 revenue USD 4.29bln (exp. 3.6bln), Q4 concert revenue +66% to USD 3.395bln, Q4 adj. operating income -39% to USD 97.8mln, Q4 FCF -30mln. Exec said it continues to see very strong consumer demand globally, with no sign of any slowdown, adding that its four key leading indicators all point towards another record year ahead.

CONSUMER CYCLICAL:

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  Booking Holdings Inc (BKNG) - Q4 EPS (exp. 22.24), Q4 Revenue USD 4.05bln (exp. 3.89bln), Q4 adj. EBITDA USD 1.24bln (exp. 1.18bln), Q4 Gross bookings 27.29bln (exp. 25.56bln). Announces a USD 20bln share repurchase authorisation. Exec said it was encouraged by the continued strength and resiliency of demand from travellers last year and into the new year.


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  Carvana Co. (CVNA) - Q4 EPS -7.61 (exp. -2.19), Q4 Revenue 2.84bln, Q4 used vehicle unit sales -23% Y/Y at 86,977 (exp. 94,394). Expects a sequential reduction in retail units sold in Q1 2023 (vs to Q4 2022) as it continues to normalise inventory size, optimise marketing spend, progress on profitability initiatives. Through the first seven weeks of Q1, it has averaged ~5,600 retail units sold per week; said that historically, it has seen an increase in retail unit sold volume in March during tax refund season, but it has been decreasing rather than increasing advertising, inventory, and staffing levels, and it therefore expects the March increase to be muted this year.


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  Floor & Decor Holdings, Inc. (FND) - Q4 EPS 0.64c (exp. 0.57), Q4 revenue USD 1.05bln (exp. 1.06bln), Q4 SSS +2.5%. Sees FY23 EPS between USD 2.55-2.85 (exp. 2.85), and sees FY23 revenue between USD 4.61-4.75bln (exp. 4.83bln), Sees FY23 SSS -3% to flat (exp. flat).

CONSUMER STAPLES:

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  Beyond Meat, Inc. (BYND) - Q4 EPS -1.05 (exp. -1.18), Q4 revenue USD 79.9mln (exp. 75.8mln). Sees positive cash flow in H2. FY23 revenue seen between USD 375-415mln (exp. 394mln), sees FY23 gross margin in the low double-digits, increasing sequentially throughout the year.

INDUSTRIALS:

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  Boeing Company (BA) - FAA said Boeing had temporarily halted deliveries of its 787 Dreamliner jets as it conducts additional analysis on a fuselage component, Reuters reports. Deliveries will not resume until FAA is satisfied that the issue has been addressed. 787 production is continuing, and Boeing has not tweaked guidance.

MATERIALS:

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  BASF (BASFY) - Q4 earnings miss expectations, flags earnings decline, job cuts due to high costs in Europe. Q4 revenue EUR 19.3bln (exp. 19.6bln), Q4 adj. EBIT EUR 373mln (exp. 379mln), Q4 net income EUR -4.8bln (exp. 0.4bln). Intends to eliminate 2,600 jobs in a cost cutting initiative, as part of planned cost savings measures of over EUR 500mln by end-2024. Terminates buyback ahead of schedule, due to profound changes in the global economy. Sees FY23 revenue between EUR 84-87bln (exp. 83bln), FY23 adj. EBIT between 4.80-5.40bln (exp. 5.16bln).


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  Holcim (HCMLY) - Reported record performance for net sales, CEO to take over as Chair in dual mandate role. FY22 revenue CHF 29.2bln (exp. 29.2bln), FY EBIT CHF 4.75bln (exp. 4.5bln), FY adj. EPS CHF 4.96 (exp. 4.58). Intends to propose CEO Jenisch as new Chairman at the AGM. Proposes a CHF 2.50/shr dividend (exp. 2.27/shr).


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  Celanese Corporation (CE) - Q4 adj. EPS 1.44 (exp. 1.66), Q4 revenue USD 2.35bln (exp. 2.4bln). Announced two joint venture actions on food ingredients with Mitsui & Co (MITSY). Sees Q1 adj. EPS between USD 1.50-1.75 (exp. 2.44). Said March order books reflect improvement in many of the recent external challenges, is taking action to address those which still persist. Confident that the back half of Q1 will represent an inflection point.

HEALTH CARE:

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  Insulet Corporation (PODD) - Q4 adj. EPS 0.55 (exp. 0.21), Q4 revenue USD 369.7mln (exp. 330.4mln). Sees Q1 revenue growth between USD 11-14% (exp. 333.9mln). Sees FY23 revenue growth between +14-19% (exp. 12.4%).

FINANCIALS:

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  Credit Suisse Group AG (CS), Deutsche Bank AG (DB) - Deutsche Bank reportedly mulled Credit Suisse deal options last Autumn. Separately, Credit Suisse expects a valuation adjustment for Real Estate Fund International against the backdrop of developments in underlying markets.

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