US EARLY MORNING: US index futures are a touch lower, yields a touch higher; Powell Part 2, Fedspeak and services ISM ahead

EQUITIES: US equity futures are trading mildly lower (-0.1% for ES, -0.3% for NDX); European counterparts attempted higher after the cash equity open, although ran out of steam amid a barrage of geopolitical headlines relating to the Russian invasion of Ukraine. Russia foreign minister Lavrov has suggested further talks are set to take place today, although there is not very much optimism among traders that any significant progress can be made yet.

TREASURIES: Treasury yields are higher by a couple of basis points, and the shape of the curve is mixed but little changed. Domestically, testimony from Fed Chair Powell on Wednesday gave a hat tip to money market pricing which expects the FOMC to lift rates by a 25bps increment at the March 16th confab, though Powell did suggest that the Committee could move in 50bps increment(s) if the situation called for it. Powell didn’t reveal much on balance sheet plans, and said these would not be finalised by the March FOMC, but he thinks the process of balance sheet normalisation could take around three years. Powell will repeat these themes in testimony to Senate lawmakers later today. Money markets price a 95% chance of a 25bps move in March, little changed vs 24hrs ago.  

CRUDE: Global oil benchmarks continue to tick up (Brent and WTI have added just shy of three bucks apiece), and this has resulted in inflation forward swaps continue to move higher. OPEC+ remained steady with policy on Wednesday, and will hike output by the planned 400k BPD in April, in line with its current policy; there was no discussion about Russia. Meanwhile, French officials earlier in the week wanted an Iran nuclear deal done by the end of this week, however, the latest commentary doesn't suggest we are any closer: diplomats were said to genuinely not know which way it was going on the Iran nuclear deal and most still think this could come together and confidence levels were low, according to some reports. Nevertheless, Iran reminds us that it can lift oil production to max capacity within a couple of months of a deal being reached (previously, it has said that production could be raised to around 4mln BPD from around 2.5mln in a three-month window) - and reminding us that there are some potential downside risks within the crude complex, although for now, the street still thinks events in Russia leaves the bias towards higher prices.

DAY AHEAD: The day ahead features ECB meeting minutes (primer here), US services ISM (expect a rise to 61.0 from 59.9 - watching prices carefully), Powell Testimony Part 2 (expect a copy and paste job). Fed’s Williams speaks afterhours, while BoC Governor Macklem delivers an economic progress report following the Canadian central bank’s 25bps rate hike yesterday (we’re interested in commentary around the balance sheet).

EQUITY NEWS:

RUSSIA:

• Russia's credit ratings cut to junk by Moody’s and Fitch. (WSJ)


• MSCI Russia Indexes to be reclassified from Emerging Markets to Standalone. (MSCI)

CONSUMER CYCLICAL:

• 
  American Eagle (AEO) - Dropped 6.5% in after hours on a cautious outlook. Q4 adj. EPS 0.35 (exp. 0.35), revenue USD 1.51bln (exp. 1.51bln). Consolidated store revenue +32%, total digital revenue -3%. Said it is taking a cautious view of 2022 due to macro uncertainties. Sees operating profit between USD 550-600mln (vs 603mln in 2021). Additionally, it said that due largely to stimulus in H1 2021, which contributed to an extraordinary Spring season, combined with continued freight pressures, it is forecasting an earnings decline in H1 22 followed by a recovery in H2. (AEO)


• 
  Entain (GMVHY) - FY21 revenue GBP 3.83bln (exp. 3.84bln), EBITDA 881mln (exp. 874mln). Does not propose FY21 dividend. Upgrading expectations for BetMGM new revenue from operations of over USD 1.3bln in 2022, expects positive EBITDA in 2023. (Newsquawk)


• 
  Greif (GEF) - Up 4% in after hours; Q1 adj. EPS 1.28 (exp. 1.19), Q1 revenue USD 1.56bln (exp. 1.46bln). Raised FY22 EPS view to between 6.30-6.90 (exp. 6.15, prev. 5.85-6.45), but lowered FY22 adj. FCF view to between 380-440mln (prev. 400M-460mln). (GEF)


• 
  MGM Resorts International (MGM) - Added 1.1% in after hours trade as Board authorised new USD 2bln share buyback. (MGM)


• 
  Travel + Leisure Co. (TNL) - Boosts quarterly dividend 5c to USD 0.40/shr. (TNL)


• 
  Victoria's Secret & Co. (VSCO) - Gained slightly in after hours trade as profit beat expectations, and it announced a buyback, offsetting weak guidance for the next quarter. Q4 EPS 2.70 (exp. 2.63), Q4 revenue USD 2.18bln (exp. 2.14bln). Q4 comp sales +1%. Announced USD 250mln share buybacks. Sees Q1 EPS between 0.70-0.95c (0.825 at midpoint vs exp. 1.32), and sees Q1 revenue between 1.43-1.5bln (exp. 1.53bln). Sees FY22 revenue 'flat to up low-single digits' (vs 2021 sales of USD 6.785bln, exp. 6.75bln). (VSCO)

TECH:

• 
  Anaplan (PLAN) - Gained over 6% in after hours trade. Q4 EPS -0.11 (exp. -0.10), Q4 revenue USD 163mln (exp. 155mln). Sees Q1 revenue between USD 164.5-165.5mln (exp. 163.6mln), and Q1 adj. operating margin between -6.5% to -7.5%. Raised FY23 revenue view to USD 745mln (exp. 730mln, prev. 730mln). (PLAN)


• 
  Box (BOX) - Rose 5.6% in after hours after earnings beat and it guided above expectations. Q4 EPS 0.24 (exp. 0.23), Q4 revenue USD 233.4mln (exp. 228.8mln). Sees Q1 EPS between 0.24-0.25 (exp. 0.24), and sees Q1 revenue between USD 233-235mln (exp. 230mln). For FY23, it guides EPS between 1.10-1.14 (exp. 1.10) and sees FY23 revenues at USD993mln (exp. 981mln). (BOX)


• 
  Logitech (LOGI) - Affirms FY22 revenue growth view of 2-5% (constant currency), sees FY23 revenue up mid-single digits; affirms long-term growth view. (LOGI)


• 
  Nutanix (NTNX) - Up 1.25% in after hours. Q2 adj. EPS -0.03 (exp. -0.19), Q2 revenue USD 413mln (exp. 407mln). Sees Q3 revenue between 395-400mln (exp. 401mln), and sees Q3 adj. gross margin around 82%. For FY22, it sees revenues between 1.625-1.63bln (exp. 1.63bln), and adj. gross margin around 82.5%. (NTNX)


• 
  Okta (OKTA) - Fell 6% after results on soft guidance. Q4 adj. EPS -0.18 (exp. -0.24), revenue USD 383mln (exp. 360mln). Sees Q1 adj. EPS around -0.35 (exp. -0.20), and sees Q1 revenue between USD 388-390mln (exp. 374mln). For FY23, it sees adj. EPS at around -1.25 (exp. -0.49), and sees FY23 revenue between USD 1.78-1.79bln (exp. 1.75bln) (OKTA). CEO told CNBC that it will stay cash flow positive.


• 
  Oracle (ORCL) - Has suspended operations in Russia. (BBC)


• 
  Pure Storage (PSTG) - Gained almost 9% in extended trade. Q4 adj. EPS 0.36c (exp. 0.26), revenue USD 708.6mln (exp. 629mln). Sees Q1 revenue at USD 520mln (exp. 515mln). Sees FY23 revenue USD 2.6bln (exp. 2.5bln), and sees FY23 adj. operating income of USD 300mln. Announced additional USD 250mln of share buybacks. (PSTG)


• 
  Snowflake (SNOW) - Dropped over 20% after reporting disappointing profits, in line guidance, and announced M&A. Q4 EPS -0.43 (exp. +0.03), Q4 revenue USD 383.8mln (exp. 373mln). Sees Q1 product revenue between USD 383-388mln (exp. 385mln), and sees FY23 product revenue between USD 1.88-1.9bln (exp. 1.89bln) (SNOW). Announced it has acquired Streamlit, no terms (SNOW).


• 
  Splunk (SPLK) - Rose 2% in after hours after profits, revenues and guidance topped expectations. Q4 EPS 0.66 (exp. -0.19), Q4 revenue USD 901mln (exp. 776mln). Sees Q1 revenue between USD 615-635mln (exp. 610mln). For FY23, it sees revenues between USD 3.25-3.30bln (exp. 3.0bln) (SPLK). Board member Gary Steele was named CEO, effective April 11, 2022 (SPLK).


• 
  Western Digital (WDC) - Cuts Q3 adj. EPS view to between 1.30-1.60, or 1.45 at the midpoint (exp. 1.50, prev. 1.50-1.80 or 1.65 at the midpoint). Cuts Q3 revenue guide to between USD 4.2-4.4bln (exp. 4.1bln, prev. 4.45-4.65bln). Says output at its Yokkaichi and Kitami JV plants have returned to normal; says flash availability will be reduced by around 7 exabytes, predominately in Q3 and Q4 financial quarters, as the facilities ramp back to full production output. (WDC)

COMMUNICATIONS:

• 
  ITV (ITVPY) - Mixed results. FY21 total revenue GBP 3.45bln (exp. 3.37bln), operating profit GBP 519mln (exp. 550mln), adj. EPS 0.153 (exp. 0.149). Launches new streaming service ITVX, aims to double digital revenue with new platform. (Newsquawk)


• 
  Netflix (NFLX) - Announced it has paused all future projects and acquisitions from Russia. (BBC)


• 
  Telecom Italia (TIIAY), KKR (KKR) - Telecom Italia CEO said KKR proposal appears to target a spin-off of network and other assets, which is what they are planning to do internally to benefit shareholders. Expects to close the deal with Ardian on the Inwit stake in H1, following the clearance of anti-trust and golden power hurdles. (Newsquawk)

MATERIALS:

• 
  Alcoa (AA) - The largest US aluminium producer said it will stop selling products to Russian companies and halt raw-material purchases from the country in response to the invasion of Ukraine. (Bloomberg)


• 
  CRH (CRH) - FY21 revenue USD 31bln (prev. 27.6bln). Expects underlying demand and pricing to remain favourable this year. (Newsquawk)

INDUSTRIALS:

• 
  Boeing (BA) - Awarded USD 498mln Navy contract, and USD 195mln SOCOM contract modification. (DoD)


• 
  Meggit (MEGGY) - FY21 revenue GBP 1.49bln (prev. 1.68bln Y/Y). EBITDA GBP 291mln (prev. 296.9mln). (Newsquawk)

FINANCIALS:

• 
  Goldman Sachs (GS) - Goldman cuts ties with block-trading hedge fund Islet; regulators are examining communications between banks and funds. Goldman and Islet have not been accused of any wrongdoing. (Bloomberg)


• 
  LSE (LNSTY) - FY21 adj. profit from cont. ops +44.6% Y/Y at GBP 1.823bln. Total income +0.8% Y/Y. Dividend 0.95/shr (exp. 0.88/shr). Expects adj. operating expenses to grow at low single digit rate in 2022 and 2023. Said Russian sanctions have little impact on its business. (Newsquawk)


• 
  PayPal (PYPL) - PayPal has stopped accepting new users in Russia. (Reuters)


• 
  Societe Generale (SCGLY) - Exposure to Russia is limited at EUR 18.6bln (with Eur 15.4bln related to Rosbank unit). (Newsquawk)


• 
  Visa Inc. (V) - Provided an update on its Russian exposure; said around 5% of its net revenues came from Russia+Ukraine (WSJ). Separately, it said February US payments volume was 145% vs 2019, +5 points vs January, with Credit +7 points to 135% and Debit at 154%, flat vs January. Said that across most categories relative to 2019, February spending rebounded from January, most notably with travel, entertainment and fuel up more than 8 points each (Visa).

HEALTH CARE:

• 
  Sanofi (SNY) - Nirsevimab significantly protected infants against RSV disease in Phase 3 trial. (Newsquawk)


• 
  Veeva Systems (VEEV) - Fell almost 11% after soft guidance for the next quarter. Q4 adj. EPS 0.90 (exp. 0.88), Q4 revenue USD 485.5mln (exp. 476mln). Sees Q1 adj. EPS between 0.91-0.92 (exp. 0.94), and sees Q1 revenue around 495mln (exp. 506mln). For FY23, sees adj. EPS of 4.02 (exp. 3.93), and FY23 revenue at 2.165bln (exp. 2.15bln). (VEEV)

03 Mar 2022 - 10:05- EquitiesResearch Sheet- Source: Newsquawk