US EARLY MORNING: US index futures are a little better than flat; ECB, US GDP, and a lot more earnings ahead

SNAPSHOT: US equity futures have mostly relinquished overnight gains, and are trading slightly better than flat; Treasury yields have been rising, and are up between 2-5bps, with the underperformance concentrated in the belly ahead of 7yr supply later today. The Dollar Index is a little above neutral. Crude futures are lower, with some premising the downside on concerns about Chinese demand levels.

DAY AHEAD: US equity futures are holding up in wake of earnings disappointment from Meta Platforms (META - revenues generally in line, profits missed, costs were notable, guidance was soft, metaverse is sucking in money - more below), with many attributing the constructive tone of trading on the BoC’s decision on Wednesday to raise rates by less than the market was expecting. The BoC’s moves fuelled bets that the Fed could similarly surprise on the dovish side next week; however, we note recent reporting from the WSJ’s Fed watcher, who suggested that 75bps is the base case, and the Fed would discuss smaller increments for the December meeting. For what it is worth, money markets are still overwhelmingly priced for a 75bps rate rise next week, but are pencilling in a 50bps move in December. The ECB is expected to lift rates by 75bps later today, and there is certainly the possibility that it could be influential for global macro too (our ECB preview is here). Stateside, traders are awaiting the release of the advanced GDP report for Q3, which is expected to reveal 2.4% growth in Q3, bouncing back from the contraction of 0.6% in Q2; as always, traders will be carefully watching the PCE metrics within the release (NOTE: tomorrow will see the release of September personal income, spending, PCE and core PCE). Additionally, there will be focus on the Employment Costs metrics for Q3, which are expected to post 1.2% from the 1.3% in Q3. Final university of Michigan sentiment data for October is expected to see the prelim data confirmed, but again, there will be focus on the inflation sub-indices for a handle on how consumers see price pressures evolving ahead. Our full day ahead schedule is here. Earnings-wise, we can expect another busy slate today, with LIN, MRK, CAT, HON, CMCSA, MCD, SPGI, MA, INTC, AMZN, TMUS, as well as the mighty AAPL all due to release reports today; our list f earnings and expectations can be accessed here.

TECH:

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  Meta Platforms Inc (META) - Shares slipped after it published results where ad sales slowed, costs rose, and it posted a multi-billion dollar loss in its Metaverse division. Q3 EPS 1.64 (exp. 1.88), Revenue USD 27.7bln (exp. 27.4bln). Q3 Facebook DAUs 1.98bln (exp. 1.86bln), MAUs 2.96bln (exp. 2.97bln), Q3 average price per ad -18% (exp. -15.3%); CFO said that revenue from large advertisers remained challenged, while revenue among smaller advertisers was more resilient. Company said it faces near-term challenges on revenue, and sees reality labs operating losses in 2023 significantly higher; exec said FX was a significant headwind to advertising growth. Sees Q4 revenue view between USD 30-32.5bln (exp. 32.2bln). Is targeting 2023 expenses between USD 96-101bln (exp. 93bln).


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  Samsung Electronics (SSNGY) - The world's top manufacturer of memory chips and smartphones posted a 31% decline in Q3 profits. Q3 revenue KRW 76.8tln (vs guide of KRW 76tln), net profit KRW 9.4tln (exp. 7.9tln). Company said it expects to see a memory chips recovery in H2 2023, and expects tech and memory chip demand to remain weak in Q4. Aims to deliver memory shipments that exceed the market for both DRAM and NAND in Q4. Expects to deliver record foundry sales and operating profit on an annual basis for 2022. Expects a temporary slowdown in demand for foundry in H1 2023 but annual growth is expected from H2. 2022 total capex expected at KRW 54tln (vs 48.2tln in 2021); Chip Capex at KRW 47.7tln, Display Capex at KRW 3tln. Sees demand for smartphones and wearables increasing Q/Q in Q4, and said 2023 demand for smartphones and wearables was expected to grow.


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  Microsoft Corporation (MSFT) - Microsoft Gaming chief said Xbox Game Pass was already profitable, and accounts for around 15% of Xbox content and services revenue, The Verge reports.


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  KLA Corp (KLAC) - Q1 adj. EPS 7.06 (exp. 6.24), Q1 revenue USD 2.72bln (exp. 2.60bln). Company notes signs of weakness across a broad set of electronics end-markets and an increasingly challenging macro-economic backdrop. Sees Q2 adj. EPS between 6.30-7.70 (exp. 6.04), and sees Q4 revenues between USD 2.65-2.95bln (exp. 2.55bln).


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  STMicroelectronics (STM) - Q3 revenue EUR 4.32bln (exp. 4.17bln), net EUR 1.09bln (exp. 0.9bln), EPS 1.16 (exp. 1.02). Sees Q4 revenue EUR 4.4bln (exp. 4.37bln).


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  Align Technology, Inc. (ALGN) - Q3 adj. EPS 1.36 (exp. 2.18), Q3 revenue USD 890.3mln (exp. 952.6mln). Exec said results reflect continued macro-economic uncertainty and weaker consumer confidence, a significant impact from unfavourable FX rates across all currencies. On a constant currency basis, total Q3 revenues were reduced by 2.7% sequentially, and 6.1% Y/Y - one of the largest FX impacts it has ever experienced in a single quarter.


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  Aspen Technology, Inc. (AZPN) - Q1 adj. EPS 2.20 (exp. 1.25), Q1 revenue USD 250.8mln (exp. 236.8mln). Sees FY23 adj. EPS between 6.76-6.91 (exp. 6.75), and FY23 revenue between USD 1.14-1.2bln (exp. 1.2bln).


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  Avnet, Inc. (AVT) - Q1 adj. EPS 2.00 (exp. 1.91), Q1 revenue USD 6.8bln (exp. 6.4bln). Q2 adj. EPS seen betwen 1.80-1.90 (exp. 1.82), and Q2 revenue expected to be between USD 6.35-6.65bln (exp. 6.25bln). Guidance includes a USD 60mln negative impact on sales at the mid-point of guidance from the continued strengthening of the USD.


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  CACI International Inc (CACI) - Q1 adj. EPS 4.36 (exp. 4.26), Q1 revenue USD 1.6bln (exp. 1.6bln). FY23 adj. EPS seen between 17.65-18.49 (exp. 18.25), and FY23 revenue seen between 6.475-6.675bln (exp. 6.6bln)


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  Flex Ltd. (FLEX) - Q2 adj. EPS 0.63 (vs 0.48 Y/Y), Q2 revenue USD 7.8bln (vs 6.23bln Y/Y). Sees Q3 adj. EPS between 0.57-0.63 (exp. 0.57), and sees Q3 revenue between USD 7.3-7.7bln (exp. 7.4bln). FY23 adj. EPS seen between 2.20-2.35 (exp. 2.22, prev. range 2.09-2.24), and lifts FY23 revenue outlook to USD 29.1-30.1bln (exp. 29.2bln, prev. range 28.4-29.4bln).

COMMUNICATIONS:

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  Twitter, Inc. (TWTR) - Banks have begun sending USD 13bln in cash backing Elon Musk's takeover of Twitter, WSJ reports, the latest sign the USD 44bln deal is on track to close by the end of the week. Additionally, Twitter issued a notice which said it is to be delisted from NYSE, effective on Friday. Separately, Elon Musk reportedly told Twitter employees that he does not plan to cut 75% of jobs, Bloomberg reports.


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  ServiceNow Inc (NOW) - Q3 adj. EPS 1.96 (exp. 1.84), Q3 revenue USD 1.83bln (exp. 1.85bln). Sees Q4 subscription revenue between USD 1.83-1.84bln (exp. 1.93bln), and sees FY subscription revenues between USD 6.865-6.87bln (exp. 6.97bln).


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  Streaming - TikTok is making a big push into gaming, adding a dedicated tab within the short-form video platform, its first venture into a different entertainment format, FT reports.


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  MSG Entertainment (MSGS) - Proposes spin-off of its traditional live entertainment and MSG Networks businesses. As previously announced, the proposed separation would be structured as a tax-free spin-off to all MSGE shareholders.

FINANCIALS:

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  Credit Suisse (CS) - Q3 net EUR -4.03bln (exp. -504.9mln). Announces a capital raise of around CHF 4.0bln, plans to radically restructure investment bank to significantly reduce risk-weighted assets. CS will issue new shares to a number of qualified investors, including Saudi National Bank - which committed to investing up to CHF 1.5bln in Credit Suisse with to achieve a shareholding of 9.9%. Sees restructuring charges and impairments of CHF 2.9bln until 2024. 5% workforce reduction underway in Q4. Plans to sell a majority of SPG to Apollo and PIMCO (confirming earlier reports).

INDUSTRIALS:

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  Ford Motor Co (F) - Ford posted a net loss in Q3 amid supply chain issues resulting in higher supplier costs, and investment in its Argo AI division. Q3 EPS -0.21 (exp. 0.27), Q3 revenue 39.4bln (exp. 36.25bln). CFO says profitable, self-driving vehicles are a long way off, and the company said it was resetting the expected timing and prioritisation of advanced driver assistance systems; has recorded a USD 2.7bln non-cash, pretax impairment on investment in Argo AI. Raises its FY22 FCF outlook to USD 9.5-10bln (prev. 5.5-6.5bln), and sees FY adj. EBIT around USD 11.5bln (prev. 11.5-12.5bln).


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  Boeing (BA) - Said 737 and MAX 10 might not enter service until 2024, according to a SEC filing.


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  Canadian Pacific (CP) - Q3 adj. EPS CAD 0.97 (vs 0.88 Y/Y), Q3 revenue CAD 2.312bln (vs 1.942bln Y/Y). Exec said Q3 saw strong demand in potash and intermodal, CP well-resourced to handle the volume increases it has seen.


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  Daimler Trucks (DTRUY) - Prelim Q3 adj. EBIT EUR 1.27bln (exp. 1.08bln). Raises FY22 Daimler Truck Group revenue view to EUR 50-52bln (prev. 48-50bln) and industrial business revenue to EUR 48-50bln (prev. EUR 46-48bln). Adj. EBIT and adj. return on sales for industrial business being significantly above market expectations for Q3. Adj. EBIT for industrial business EUR 1.22bln (exp. 1.03bln). Adj. return on sales for industrial business 9.4% (exp. 8.0%). Industrial FCF EUR 592mln (exp. EUR 654mln). Adj. return on sales of 7-9% (prev. 6-8%) is expected for Mercedes-Benz segment in 2022. FY forecasts for other segments remain unchanged. Forecast for group EBIT is updated to "slight increase" (prev. "at prior-year level").


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  Volkswagen (VWAGY) - Brand chief said it is targeting 9% profit margin for the volume brands by 2025; will exclusively produce electric cars in Europe from 2033. Separately, the automaker is focusing on the development of autonomous driving, but was no longer investing in Argo AI;  will remain working with Ford (F).


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  Volvo Cars (VLVLY) - Q3 revenue SEK 79.3bln (exp. 79.4bln), Operating Income SEK 2.1bln (prev. 3.3bln), EBIT SEK 2.1bln (exp. 3.4bln). Expects improved production run rate to continue into Q4 and 2023.


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  Spirit Airlines, Inc. (SAVE) - Q3 adj. EPS 0.03 (exp. -0.10), Q3 revenue USD 1.34bln (exp. 1.35bln). Exec said strong demand and sound revenue management coupled with excellent operational reliability and overall cost management helped mitigate the impacts of headwinds. Looking ahead to Q4, said leisure demand remained strong, expects Q4 unit revenue to be up 15-16.5% on 24.5% more capacity, vs Q4 2019.


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  United Rentals, Inc. (URI) - Q3 EPS 9.27 (exp. 9.06), Q3 revenue USD 3.05bln (exp. 3.07bln). Raises FY22 revenue view to USD 11.5-11.7bln (exp. 11.6bln, prev. guidance range 11.4-11.7bln). Announces new USD 1.25bln share buyback programme.


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  John Bean Technologies Corporation (JBT) - Q3 adj. EPS 1.27 (exp. 1.19), Q3 revenue USD 555mln (exp. 558.4mln). Lowers FY22 EPS outlook to 4.65-4.80 (exp. 4.89, prev. range 4.90-5.10), and narrows FY22 consolidated revenue growth outlook to 15.75-16.25% (prev. 15-17%); said it was updating outlook to account for greater than expected FX headwinds, as a result of the strong dollar, timing of margin progression at AeroTech, and the addition of Bevcorp.

REAL ESTATE:

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  Digital Realty Trust, Inc. (DLR) - Q3 core FFO/shr 1.67 (exp. 1.67). Saw record quarterly bookings in Q3 reflecting the strong global demand for data centre solutions, it said. Lowers FY22 core FFO/shr outlook to 6.70-6.75 (prev. range 6.75-6.85), and lowers FY22 revenue view to USD 4.65-4.7bln (prev. range 4.65-4.75bln).


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  Invitation Homes Inc. (INVH) - Q3 core FFO/shr 0.42 (exp. 0.43), Q3 revenue USD 569mln (exp. 566.7mln). Lowers FY22 core FFO outlook 1.63-1.67 (exp. 1.70, prev. range 1.66-1.72).


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  Meritage Homes Corporation (MTH) - Q3 EPS USD 7.10 (exp. 6.45), Q3 revenue USD 1.57bln (exp. 1.65bln). Sees Q4 home closings between 4,300 to 4,700. Sees Q4 adj. EPS between USD 6.50-7.40 (exp. 6.92). Exec said it continues to monitor shifting market conditions.

CONSUMER STAPLES:

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  Unilever (UL) - Q3 sales EUR 15.8bln (exp 14.88bln), price growth increase to 12.5% with volumes declining 1.6%. Second tranche of the buyback announced in September will conclude in December. Maintains interim dividend at 0.4268/shr. FY22 sales guidance upgraded. CEO says China remains quite subdued by ongoing lockdowns.


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  AB InBev (BUD) - Q3 revenue USD 15.09bln (exp. 15.1bln), EBIT USD 4.055bln (exp. 4.09bln). Raising the bottom-end of FY22 EBITDA guidance.


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  Carrefour (CRRFY) - Q3 sales EUR 23.5bln (prev. 20.47bln Y/Y); French sales EUR 10.55bln (prev. 9.88bln Y/Y). Net free cash flow target raise to be comfortably above EUR 1bln in 2022. On inflation, it observed acceleration of shift in purchasing behaviour that started in Europe in Q2. Says activity is progressing in-line with market expectations for 2022 EBIT.

CONSUMER CYCLICALS:

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  Tesla (TSLA) - Faces US criminal probe over its autopilot technology; US DoJ probe involves the company's claims that Tesla cars can drive themselves with its autopilot activated, according to Reuters.


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  V.F. Corporation (VFC) - Q2 adj. EPS 0.73 (exp. 0.73), Q2 revenue USD 3.1bln (exp. 3.1bln). Actively addressing near-term challenges at Vans, ongoing COVID-related disruption in China, the broader macro-economic and geopolitical headwinds, which have created tremendous uncertainty. Said it was tightly controlling all non-strategic spending. Lowers FY23 adj. EPS outlook to 2.40-2.50 (exp. 2.63, prev. range 2.60-2.70) to reflect increased negative impacts from foreign currency fluctuations as well as heightened inventory levels and increased promotional activity in the marketplace; sees total VF revenue up 5-6% in constant dollars (unchanged).


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  Moncler (MONRY) - Q3 revenue EUR 638.3mln (exp. 637mln). Executive said the situation in China remains volatile, South Korea is very strong, Europe doing well thanks to local demand and US tourists, US market partially slowing due to hard comparisons. Executive sees price hikes for next Spring/Summer of around 10% in Europe and more or less the same increase in fall/winter.


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  O'Reilly Automotive, Inc. (ORLY) - Q3 EPS USD 9.17 (exp. 8.51), Q3 revenue USD 3.8bln (exp. 3.71bln). Comp store sales +7.6% in Q3. Sees FY22 EPS between 32.35-32.85 (exp. 31.87), and sees FY22 revenue between USD 14.1-14.3bln (exp. 14.2bln), FY22 comparable store sales seen up 4.5-5.5%.


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  Allison Transmission Holdings, Inc. (ALSN) - Q3 EPS 1.45 (exp. 1.28), Q3 revenue USD 710mln (exp. 681.2mln). Exec said that given Q3 results and current end markets conditions, is raising FY22 guidance midpoints and narrowing ranges. Narrows FY22 revenue outlook to USD 2.69-2.74bln (exp. 2.7bln, prev. range 2.65-2.75bln).


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  Skechers USA, Inc. (SKX) - Said it has no intention of working with Kanye West, after he arrived unannounced and without invitation at one of Skechers' corporate offices in Los Angeles.

ENERGY:

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  Russian Oil Price Cap - According to a Bloomberg, the US has been forced to scale back a plan to impose a cap on Russian oil prices, following scepticism by investors and growing risk in financial markets brought on by crude volatility and central bank efforts to tame inflation; BBG says that instead of imposing a strict cap on Russian oil prices, the US and EU are likely to settle for a more loosely policed cap at a higher price than once envisioned.


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  Shell (SHEL) - Q3 adj. Earnings USD 9.45bln (exp. 9.49bln), adj. EBITDA USD 21.5bln (exp. 20.2bln). Announces a new share buyback programme, resulting in an additional USD 4bln of distributions. Plans to increase dividend in Q4 by 15%. Wael Sawan (currently Director Integrated Gas, Renewables and Energy Solutions) to become CEO from January.


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  TotalEnergies (TTE) - Q3 adj. net income USD 9.9bln (exp. 9.7bln), adj. EBITDA 19.4bln (exp/ 18.7bln), interim dividend 0.69/shr. Impairment of USD 3.1bln relating to Russia. Is in talks with QatarEnergy to join Lebanon gas consortium within three months, according to Reuters. Total has secured temporary control of Block 9 Offshore Gas project in Lebanon.


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  Phillips 66 (PSX) - Has begun reducing staff at several refineries, refined products terminals and offices as part of a restructuring programme, according to Reuters. Phillips 66 said that some jobs were being eliminated in an effort to optimise its cost structure.

MATERIALS:

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  Anglo American (NGLOY) - Q3 production update: Copper -6%, Rough Diamond +4%. FY guidance: Copper 640-680k/T, Diamond 32-34MCT.


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  Celanese Corporation (CE) - Celanese lifts force majeure on certain Western hemisphere Acetyl Chain products.


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  Teck Resources (TECK), Suncor Energy (SU) - Teck Resources to sell its 21.3% Fort Hills stake for USD 1.0bln to Suncor Energy.


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  Wacher Chemie (WCH) - Q3 sales EUR 2.13bln (exp. 1.8bln), Net Income EUR 259mln (exp. 277mln). FY22 guidance confirmed to the upper-half of the forecast range.

HEALTH CARE:

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  Teladoc, Inc. (TDOC) - Q3 EPS -0.45 (exp. -0.55), Q3 revenue USD 611.4mln (exp. 610mln). Expects to post a Q4 loss per share between -40c and -10c (exp. -0.26), and expects Q4 revenues of USD 625-640mln (exp. 637.3mln). FY22 EPS seen between -61.40 and -61.10 (exp. -56.42), and FY revenue seen between USD 2.395-2.41bln (exp. 2.4bln).


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  Bayer (BAYRY) - Health Canada approves Bayer's Kerendia to treat kidney disease in diabetes patients.


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  GSK (GSK) - FDA's Cardiovascular and Renal Drugs Advisory Committee said treatment with daprodustat did not support that the benefit of treatment with daprodustat outweighs the risks in adult non-dialysis patients, with a 5 to 11 vote.


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  Merck (MRK) - Merck announced Robert Davis will succeed Kenneth Frazier as Chair.


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  Pfizer (PFE) - Is reportedly being probed in Italy over allegedly hiding USD 1.2bln profit, according to Bloomberg.


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  Roche (RHHBY) - Vabysmo attained the primary endpoint in its Phase III trial.

27 Oct 2022 - 09:06- Research Sheet- Source: Newsquawk