US EARLY MORNING: US index futures are higher, Nasdaq-100 outperforms after META beat; FOMC avoids shaking the boat, ECB is ahead; US GDP data and jobless claims are also due

US PREMARKETS: US equity futures are trading with gains, with the Nasdaq-100 outperforming after Meta (META) earnings; the social media company – which holds a 3.5% weighting in the NDX – was up almost 7% in extended trading. The FOMC didn’t rock the boat, lifting rates by 25bps in line with the consensus view, and retained optionality to hike again in future meetings (see below for our recap). Today, the focus shifts onto the ECB, where a 25bps rate rise is likely, with traders looking for any commentary on future moves (our preview is below). The earnings slate is picking up, and the European morning saw a number of macro relevant companies reporting their earnings. Highlights included Mercedes (MBG GY), which saw profits surge, and it lifted guidance; Volkswagen (VOW3 GY) confirmed its FY view, but lowered its delivery outlook; in energy, Shell (SHEL LN) saw profits slide, but announced a new buyback, while TotalEnergies' (TTE FP) net income fell, but it kept the pace of its buybacks; in banks, Barclays (BARC LN) Q2 profits were in line, bad loans rose, it announced a buyback programme, while BNP Paribas (BNP FP) topped estimates owing to bond and debt financing services. In tech, STM Micro (STM FP) posted higher sales underpinned by solid automotive demand, while in Asia, Samsung Electronics (SSNGY) shares rose after earnings as the chip rally offset the battery slump. Today's corporate earnings schedule Stateside is similarly busy, with highlights including: HON, BMY, CMCSA, MCD, SPGI, ABBV, MA, TMUS, INTC, MDLZ. Additionally, the advanced Q2 GDP data will be released in the premarket, which traders will use to help shape expectations of whether the Fed is indeed likely to lift rates by another 25bps later this year; the central bank has said it remains focussed on price pressures, and will set policy in a data-dependent fashion, though many analysts argue that cooling inflation dynamics and gradually falling growth will prevent the central bank from lifting rates again in this cycle. The consensus view looks for US growth of +1.8% in Q2, cooling from the prior pace of +2.0%; as a reference point, the Atlanta Fed GDPnow model is currently tracking Q2 growth of +2.4%.

TODAY’S AGENDA:

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  DATA: In addition to the ECB policy meeting (preview below), the advanced GDP report for Q2 is due for release in the pre-market, which traders will use to help shape expectations of whether the Fed is indeed likely to lift rates by another 25bps later this year; the central bank has said it remains focussed on price pressures, and will set policy in a data-dependent fashion, though many analysts argue that cooling inflation dynamics and gradually falling growth will prevent the central bank from lifting rates again in this cycle. The consensus view looks for growth of +1.8% in Q2, cooling from the prior pace of +2.0%; as a reference point, the Atlanta Fed GDPnow model is currently tracking Q2 growth of +2.4%. Weekly initial jobless claims data will be released at the same time. On the supply front, the Treasury will sell USD 35bln of 7yr notes. The corporate earnings schedule is busy; today's highlights include: HON, BMY, CMCSA, MCD, SPGI, ABBV, MA, TMUS, INTC, MDLZ; our full Daily US Earnings Estimates sheet can be accessed here.


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  ECB PREVIEW (13:15BST/08:15EDT; PRESSER AT 13:45BST/08:45EDT): According to market pricing and analysts' consensus, the ECB is likely to raise its deposit rate by 25bps points to 3.75%. The Governing Council is concerned about high inflation, despite a slight cooling in headline rate of prices, the super-core metric has increased to 5.5% Y/Y from 5.3%. Attention will be on future tightening measures from September onwards, with a 50% probability of another 25bps. ECB President Lagarde is expected to rely on data, with July and August inflation reports and macro projections available by September. (Newsquawk)


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  FOMC RECAP: The Federal Reserve raised interest rates, as expected, by +25bps to 5.25-5.50%. The statement was similar to the previous one from June, mentioning the possibility of further rate increases. It acknowledged that the economy is growing at a "moderate" pace instead of a "modest" one, and emphasised that job gains are strong, and the unemployment rate is low. Regarding inflation, the Fed remains cautious and watchful, not overreacting to a single data point. At his press conference, Chair Powell said future interest rate decisions will depend on data and the effects of tightening are not fully felt yet. He mentioned that that inflation still has a way to go cool to 2%, but noted improvements in the labour market. However, he highlighted that consumer spending growth has slowed compared to earlier this year. In Q&A, Powell did not give a clear signal about future rate decisions, again framing it around incoming data, adding that the Fed might raise rates in September if the data supports it. And while he suggested a slower pace of rate increases, lifting them at consecutive meetings was still possible. Powell mentioned that stronger economic growth could lead to higher inflation, requiring a policy response. He discussed the possibility of rate cuts in the future if inflation comes down convincingly. He wants to see inflation decrease sustainably, and wages may play a role in bringing it down. Analysts at ING noted that while the Fed has said that further policy firming may be appropriate, "with two months' worth of data to come before the next FOMC meeting, we suspect evidence of slowing inflation and softer activity won’t make that necessary." (Newsquawk)

EQUITY NEWS:

COMMUNICATIONS:

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  Meta Platforms (META) - Q2 EPS 2.98 (exp. 2.91), Q2 revenue USD 32.00bln (exp. 31.12bln); Q2 advertising revenue USD 31.50bln (exp. 30.42bln); Q2 DAUs 2.06bln (exp. 2.03bln), MAUs 3.03bln (exp. 3.00bln). Sees Q3 revenue between USD 32.00-34.50bln (exp. 31.18bln); lowers FY23 capex view to USD 27-30bln from 30-33bln due to both cost savings and shifts in capex into 2024 from delays in projects and equipment deliveries rather than a reduction in overall investment plans. Lifts FY23 expenses outlook to USD 88-91bln from 86-90bln due to legal-related expenses recorded in Q2. CEO said the annual run rate for Reels exceeds USD 10bln and Reels has exceeded 200bln plays per day across Facebook and Instagram. CEO said newly budgeted headcount growth will be relatively low; expects to have a sense by later this year of how much to budget for AI capex, sees AI in three categories which are features for advertisers, AI agents on chat and internal company productivity tools. Should get some portion of the revenue for Llama uses but will not be a large amount in the near-term.

TECH:

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  Alphabet (GOOG) - Waymo is shifting its focus from self-driving trucks to ride-hailing. The company sees more commercial opportunities in applying autonomous technology to ride-hailing services like robotaxis.


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  Samsung Electronics (SSNGY) - Final Q2 net profit reported as KRW 1.7tln (exp. 852bln), operating profit of KRW 669bln (vs prelim. KRW 600bln), revenue KRW 60tln (vs prelim. 60tln). In the Memory segment, said that server demand remained weak as customers continued to adjust inventories, but demand for high-density/high-performance products stayed strong, driven by increased investments focusing on AI by  major hyperscalers. Earnings increased sequentially despite continuing price declines and additional inventory valuation losses, particularly in NAND. Sees memory demand recovering gradually in H2 considering widened production cuts in the industry, while inventory adjustments by customers are likely to wind down. Said market demand for smartphones weakened sequentially due to  continued effects of macro factors, such as interest rates hikes and inflation. Said that Q1 sales were impacted due to waning effects of the S23 launch and a delayed recovery of the mass market. However, maintained solid sales of the S23 series throughout H1. Said the smartphone market would return to Y/Y growth in H2 led by rising demand, especially in the premium market. However, growth forecasts may be revised down if risks of a further prolonged global economic downturn are reflected.


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  ServiceNow (NOW) - Q2 adj. EPS 2.37 (exp. 2.05), Q2 revenue USD 2.15bln (exp. 2.13bln). Raises FY subscription revenue  forecast to USD 8.58bln-8.60bln from 8.47bln-8.52bln (exp. 8.51bln). Sees Q3 subscription revenue USD 2.19bln-2.20bln (exp. 2.15bln), and still sees FY subscription adj. gross margin 84% (exp. 84.3%).


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  STMicroelectronics (STM) - Q2 revenue USD 4.33bln (exp. 4.32bln), Q2 net income USD 1.01bln (exp. 1.01bln), Q2 EPS 1.06 (exp. 1.08), Q2 EBIT margin 26.5%, Q2 gross margin 49%; sees Q3 gross Margin 47.5% (exp. 46.4%), and Q3 revenue of USD 4.38bln (exp. 4.35bln).


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  Teradyne (TER) - Q2 EPS 0.79 (exp. 0.66), Q2 revenue USD 684mln (exp. 658.2mln). Sees Q3 EPS between USD 0.61-0.81 (exp. 0.71), Q3 revenue between USD 650-710mln (exp. 671.5mln). Exec said test demand for DRR5 and HBM memory devices for data centre applications remains strong, SOC test demand for automotive applications is incrementally stronger.


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  Seagate Technology (STX) - Q4 adj. EPS -0.18 (exp. -0.25), revenue USD 1.60bln (exp. 1.68bln). Said it has paused stock repurchases for remainder of FY due to macroeconomic environment. Sees Q1 adj. EPS between -0.36 to +0.04 (exp. +0.075), and sees revenue between USD 1.4-1.7bln (exp. 1.74bln).


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  Analog Devices (ADI) - Analog Devices invested over USD 1bln to expand its semiconductor facility in Beaverton, Oregon. The expansion will increase production capacity.


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  Lam Research (LCRX) - Q2 EPS 5.98 (exp. 5.07), revenue USD 3.21bln (exp. 3.13bln); Sees Q3 adj. EPS at USD 6.05 +/- 0.75 (exp. 5.60), and revenue USD 3.4bln +/- USD 300mln (exp. 3.3bln).


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  Cybersecurity Stocks - SEC adopts new rules for public companies to disclose cybersecurity breaches and risk management annually. Companies must report material cybersecurity incidents within four business days. The goal is to provide consistent and useful information for investors and benefit the markets.


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  Align Technology (ALGN) - Q2 EPS 2.22 (exp. 2.03), Q2 revenue USD 1bln (exp. 991.4mln). Align is investing in capital expenditures of approximately USD 200mln. CEO Joe Hogan highlighted strong growth in teen and younger patient volumes, with a notable increase in the teen segment. For FY23, the company forecasts revenue of USD 3.97-3.99bln (exp. 3.94bln), and sees Q3 revenue between USD 0.99-1.01bln.


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  PTC (PTC) - Q3 adj. EPS 0.99 (exp. 1.00), Q3 revenue USD 542mln (Exp. 523.7mln). Appoints Neil Barua as CEO, will succeed James Heppelmann. Q4 adj. EPS seen between 0.95-1.25 (exp. 1.22), Q4 revenue seen between USD 540-570mln (exp. 572.9mln). Sees FY23 adj. EPS between USD 4.07-4.38 (exp. 4.37), and FY23 revenue now seen between USD USD 2.09-2.12bln from USD 2.08-2.14bln.


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  Flex (FLEX) - Q1 adj EPS 0.57 (exp. 0.51), Q1 revenue USD 7.3bln (exp. 7.3bln). Sees Q2 adj. EPS between 0.55-0.60 (exp. 0.58), and sees Q2 revenue between USD 7.3-7.7bln (exp. 7.64bln). Reiterates FY23 adj. EPS outlook for between USD 2.35-2.55 (exp. 2.43), and its FY23 revenue outlook at between USD 30.5-31.5bln (exp. 30.9bln).


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  CACI (CACI) - CACI awarded USD 209mln fleet readiness contract from US Navy to provide global logistics and technical training support to Naval Forces Logistics.

CONSUMER CYCLICAL:

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  Amazon (AMZN) - Amazon Fresh is permanently cutting jobs for hundreds of "zone leads" who manage store sections in their grocery stores across the US, Washington Post reported. The layoff is part of a cost reduction plan, and affected employees will be paid for 60 days.


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  eBay (EBAY) - Q2 results topped estimates, but some were disappointed by the guidance. Q2 adj. EPS 1.03 (exp. 0.99), Q2 revenue USD 2.54bln (exp. 2.51bln); Q2 gross merchandise volume 18.2bln (exp. 18.4bln), active buyers 132.0mln (exp. 132.9mln); US gross merchandise volume 8.70bln (exp. 8.79bln), international gross merchandise volume 9.51bln (exp. 9.27bln). EBAY said 30% of its users tried AI feature in Q2. Sees Q3 net revenue between USD 2.46-2.52bln (exp. 2.46bln), and Q3 adj. EPS between 0.96-1.01 (exp. 0.92). Expects FY23 Non-GAAP operating margins between 27%-27.4%, margin forecast assumes headwind of about 1% related to recent M&A and eBay international shipping programme.


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  Chipotle (CMG) - Q2 - Q2 adj. EPS 12.65 (exp. 12.31), Q2 revenue USD 2.51bln (exp. 2.53bln), SSS +7.4% (exp. +7.67%). Q3 SSS seen in the "low-single digits to mid-single digits" (exp. +5.9%), while its FY SSS view is seen "mid-single digits to high-single digits" (exp. +7.6%). CEO told CNBC that it has seen a pullback in delivery, believes more people will shift to order ahead and to Chipotlanes.


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  Mattel (MAT) - Q2 adj. EPS 0.10 (exp. -0.02), Q2 revenue 1.09bln (exp. 1.00bln). Exec said that "while comparisons improved from Q1, Q2 financial results were negatively impacted as retailers continued to manage inventory levels and by some overall industry softness." Reaffirmed FY23 guidance. Said the Barbie film was a phenomenon, and a milestone moment for the company. The film's success highlights the value of its intellectual property in the film industry.


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  Tesla (TSLA) - California AG is investigating complaints about Tesla's Autopilot safety and false advertising, CNBC reported. Customers are being contacted, and one suggested Tesla should provide a full refund option for unsatisfied Autopilot features, the report added.


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  Volkswagen (VWAGY) - Q2 revenue EUR 80.1bln (exp. 79.45bln), Q2 adj. operating profit EUR 5.6bln (exp. 6.09bln), Q2 adj. operating margin 7% (exp. 8.48%). Lowers FY23 deliveries outlook, but noted Chinese recovery towards end of Q2. Sees FY vehicle deliveries between 9.0-9.5mln units (exp. 9.19mln; prev. saw deliveries of 9.5mln). Said is will improve net cash flow in H2, and affirmed FY revenue guidance.


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  Mercedes-Benz (MBG GY) - Q2 revenue EUR 38.2bln (exp. 38.95bln), Q2 EBIT EUR 4.9bln (exp. 4.85bln), Q2 net income EUR 3.64bln (exp. 3.4bln), Q2 EPS 3.34 (exp. 3.31). Expects significantly lower energy prices for remainder of year. Order intake stabilising, supply chain is noticeable improved. Expects growth of global economy to remain "rather subdued" in H2. Said ongoing restrictive monetary policy is weighing on consumers and economic growth.


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  Renault (RNLSY) - H1 revenue EUR 26.8bln (exp. 25.56bln), H1 operating income EUR 2.09bln (exp. 1.65bln), net income EUR 2.1bln (exp. 1.2bln); Auto FCF EUR 1.78bbln, automotive operating cash flow EUR 1.78bln (exp. 1.0bln).


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  O'Reilly (ORLY) - Q2 EPS 10.22 (exp. 10.09), Q2 revenue USD 4.07bln (exp. 3.99bln). Q2 comparable sales +9% (exp. +7.15%); Q2 gross profit margin 51.3% (exp. 51.1%). CEO Greg Johnson to retire; Co-president Brad Beckham to succeed Johnson. Sees FY23 EPS between 37.05-37.55 (prev. 36.50-37, exp. 37.45), FY revenue between USD 15.4-15.7bln (prev. 15.2-15.5bln, exp. 15.56bln), and FY comp. sales up +5-7% (prev. +4-6%, exp. +6.28%).


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  National Vision (EYE), Walmart (WMT) - National Vision announced that its partnership with Walmart will end in 2024. They have been providing vision services in select Walmart stores, but now they will focus on their freestanding brands, America's Best and Eyeglass World.

CONSUMER STAPLES:

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  Nestle (NSRGY) - H1 revenue CHF 46.3bln (exp. 45.58bln), adj. EPS 2.43, organic growth 8.7% (exp. 8.1%), pricing growth 9.5% (exp. 8.7%), FCF EUR 3.4bln. Sees FY organic revenue growth of between +7-8% (prev. guided between +6-8%), and sees adj. EPS growth of between +6-10%, while it maintained guidance for adj. EBIT margins.


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  Anheuser-Busch InBev (BUD) - The brewer of Bud Light has laid off hundreds of workers in its US offices due to declining sales, WSJ reports. The restructuring affected less than 2% of its US workforce, focussing on corporate and marketing roles.

FINANCIALS:

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  Barclays (BCS) - Q2 revenue GBP 6.29bln (exp. 6.57bln), Q2 net GBP 1.22bln (exp. 1.43bln), FICC revenue GBP 1.19bln (exp. 1.28bln), Q2 PBT GBP 1.96bln (exp. 2.13bln), Q2 CIB revenue GBP 3.16bln (exp. 3.29bln). Intends to initiate a buyback of up to GBP 750mln.


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  BNP Paribas (BNPQY) - Q2 net income EUR 2.81bln (exp. 2.52bln), Notes an exceptional impact of EUR -125mln of provisions for litigation.


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  Western Union (WU) - Q2 adj. EPS 0.51 (exp. 0.39), Q2 revenue USD 1.17bln (exp. 1.05bln). Exec said its progress continued into Q2. Growth in C2C transactions was the highest since 2021, primarily driven by our branded digital go-to-market programme.


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  Raymond James (RJF) - Q2 adj. EPS 1.85 (exp. 2.16), revenue USD 2.91bln (exp. 2.91bln); Q2 AUM USD 1.28tln, +14% Y/Y; Q2 net interest income USD 601.0mln (exp. 581.4mln).


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  Ameriprise Financial (AMP) - Q2 adj. EPS 7.44 (exp. 7.38), Q2 revenue USD 3.88bln (exp. 3.81bln). Ameriprise announces additional USD 3.5bln share repurchase authorisation.

ENERGY:

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  Helmerich & Payne (HP) - Q3 EPS 0.93 (exp. 0.91), Q3 revenue USD 724mln (exp. 708.2mln). Exec said results showed was achieving economic returns in the low-to-mid teens, just above of its cost of capital; noted results came as rig activity was declining primarily due to weak natural gas prices; results also reflect a behavioural change that has transpired broadly within the energy industry.


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  Total Energies (TTE) - Q2 adj. net USD 4.96bln (exp. 5.34bln), Q2 adj. EPS 1.99 (exp. 2.19), Q2 adj. EBITDA USD 11.1bln (exp. 11.76bln). Announces a USD 2bln share buyback. CEO said they are in a favourable but softening oil and gas environment.


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  Shell (SHEL) - Q2 adj. EPS 0.75 (exp. 0.88), Q2 adj. profit USD 5.07bln (exp. 5.61bln), Q2 EBITDA USD 14.44bln (exp. 15.14bln). Announced a USD 3bln share buyback, and said it will continue to prioritise share repurchases given the value that shares represent. Declared dividend of USD 0.331 (exp. 0.330). Said cash flow from operations was USD 15.13bln in the quarter (exp. 13.85bln); lowers cash capex outlook range for FY23 to betwen USD 23-26bln.


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  SLB (SLB) - New Energy President Gavin Rennick sold 18k shares on July 24th for USD 1.01mln.


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  Sunnova Energy (NOVA) - Q2 EPS -0.74 (exp. -0.42), Q2 revenue USD 166.4mln (exp. 197.1mln). Exec noted strong customer groth, and it is increasing its customer additions guidance by 10k at the midpoint, projecting +40% customer growth vs 2023.

INDUSTRIALS:

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  3M (MMM) - A group of 22 states and territories opposes a USD 10.3bln settlement with 3M over water pollution from "forever chemicals," claiming that the deal doesn't hold the company accountable adequately for the damage caused by these harmful substances, Reuters reports.


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  L3Harris (LHX) - Q2 adj. EPS 2.97 (exp. 2.94), Revenue USD 4.69bln (exp. 4.37bln). Raises FY adj EPS guidance to 12.15-12.55 from 12.00-12.50; raises FY rev. guidance to USD 18bln-18.3bln from 17.4bln-17.8bln. However, lowers FY Adj EBIT margin view to 15% from 15.2%-15.7% (exp. 17.7%). Said FTC will not block AJRD deal, transaction set to close around July 28th.


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  Lockheed Martin (LMT) - Lockheed awarded USD 489.5mln Navy contract modification on a previously issued basic ordering agreement.


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  Landstar System (LSTR) - Q2 EPS 1.85 (exp. 1.83), Q2 revenue USD 1.37bln (exp. 1.36bln). Exec said that the domestic freight environment softened sequentially vs Q1; reflective of these tough dynamics, the number of loads hauled via truck decreased by 16% Y/Y in Q2. Said the sequential decrease in demand for truck load services also caused additional downward pressure on rates, especially in the spot market; accordingly, Q2 revenue per load on loads hauled decreased 15% Y/Y.


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  Hertz (HTZ) - Interim CFO Alexandra Brooks named EVP and CFO, effective immediately. Senior Vice President and Controller Kelly Galloway appointed Chief Accounting Officer.


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  United Rentals (URI) - Q2 adj. EPS 9.88 (exp. 9.01), Q2 revenue USD 3.554bln (exp. 3.45bln). Exec said integration of Ahern was on track; is encouraged by the momentum it is carrying. Raises FY23 revenue outlook to USD 14B-14.3bln (exp. 14.1bln, prev. 13.7-14.2bln).


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  Idex (IEX) - Q2 adj. EPS 2.18 (exp. 2.11), Q2 revenue USD 846.2mln (exp. 851.4mln). Exec said view on core IDEX industrial markets continues to hold as inventory and backlog recalibrates in line with supply chain improvements, and lead time reductions. No longer expect market recovery within H2. Sees Q3 adj. EPS between 1.84-1.89 (exp. 2.16); FY23 adj. EPS seen between USD 7.90-8.00 (exp. 8.48)


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  TriNet (TNET) - Q2 adj. EPS 1.74 (Exp. 1.35), Q2 revenue USD 1.2bln (exp. 1.2bln). TriNet raises share repurchase plan by USD 1bln, brings total authorisation up to USD 1.4bln. Sees Q3 adj. EPS between 1.25-1.50 (Exp. 1.19), and Q3 revenue growth of -1% to flat; FY23 adj. EPS seen between 6.25-7.05 (exp. 6.11), and FY23 revenue growth expected between 1-2%)

MATERIALS:

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  Holcim (HCMLY) - H1 revenue CHF 13.07bln (exp. 13.12bln), H1 recurring EBIT CHF 2.04bln (exp. 1.92bln), EPS 2.19 (+15% Y/Y). Exec said that market environment is not the most friendly, but there was no recession at Holcim; added that they are seeing food pricing in all markets. Expects to see volume growth in North America, and LatAm, but sees softer European markets in H2.

HEALTHCARE:

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  Roche (RHHBY) - Q1 revenue CHF 29.78bln (exp. 30.09bln), Q1 core EPS CHF 10.10 (exp. 10.15); Affirms FY23 outlook.


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  Edwards Lifesciences (EW) - Q2 adj. EPS 0.66 (exp. 0.65), Revenue USD 1.53bln (exp. 1.5bln). Positive H1 performance and improved healthcare staffing gives increased confidence in FY outlook. Sees Q3 EPS between 0.55-0.61 (exp. 0.63), and Q3 revenue between USD 1.44-1.52bln (exp. 1.47bln). For the FY23, sees EPS between 2.50-2.60 (exp. 2.55, prev. 2.48-2.60), and revenue between USD 5.9-6.1bln (exp. 5.96bln, prev. high end of 5.6-6bln).


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  Bio-Rad (BIO), Qiagen (QGEN) - Bio-Rad and Qiagen settled their patent dispute related to digital PCR technology. The two have agreed to a cross-licensing agreement, granting mutual rights to their respective technologies.


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  Molina Healthcare (MOH) - Q2 EPS 5.35 (exp. 5.06), Q2 revenue USD 8.33bln (exp. 8.32bln). Lifts FY23 EPS outlook to at least USD 20.75 (exp. 20.39), reflects Q2 operating and investment income performance above the Company's expectations and higher expected investment income in H2.


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  Takeda Pharmaceutical (TAK) - Takeda's TAK-994, an oral orexin receptor 2 agonist, showed promising results in a Phase 2 study for narcolepsy type 1. It improved wakefulness and reduced daytime sleepiness but was associated with hepatotoxicity, requiring safer alternatives.

27 Jul 2023 - 09:30- Data- Source: Newsquawk