Early Look

Friday, June 2, 2023

U.S. futures are sharply higher, posting the highs of the week as the U.S. avoided a possible default on its obligations. The U.S. Senate passed bipartisan legislation backed by President Joe Biden that lifts the government’s $31.4 trillion debt ceiling. The Senate voted 63-36 to approve the bill that had been passed on Wednesday by the House of Representatives, as lawmakers raced against the clock following months of partisan bickering between Democrats and Republicans. The Treasury Department had warned it would be unable to pay all its bills on June 5 if Congress failed to act by then. The attention now turns to the monthly jobs report at 8:30 AM where estimates call for nonfarm payrolls to rise +190K, private payrolls +165K, unemployment rate 3.5% and average hourly earnings +0.3%. Sharp movers on earnings/guidance last night included LULU, FIVE in retail and MDB in cloud while declines in GWRE, PD, Sentinel (S) all in technology. US listed China stocks bounce on headlines overnight that China was weighing up a property market support package to boost the economy. In Asian markets, The Nikkei Index jumped 376 points to settle at 31,524, the Shanghai Index gained 25 points to 3,230, and the Hang Seng Index surged 733 points or 4% to 18,949. In Europe, the German DAX is up 185 points or 1.15% to 16,037, while the FTSE 100 rises 1% or 75 points to 7,565.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 41.19 points, or 0.99%, to 4,221.02.

·     The Dow Jones Industrial Average rose 153.30 points, or 0.47%, to 33,061.57.

·     The Nasdaq Composite surged 165.70 points, or 1.28%, to 13,100.98.

·     The Russell 2000 Index advanced 18.29 points, or 1.05% to 1,767.94.

Economic Calendar for Today

·     8:30 AM ET            Nonfarm Payrolls for May…est. +190K

·     8:30 AM ET            Private Payrolls for May…est. +165K

·     8:30 AM ET            Unemployment Rate for May…est. 3.5%

·     8:30 AM ET            Average Hourly Earnings M/M for May…est. +0.3%

·     1:00 PM ET            Baker Hughes Weekly rig count data

Other Key Events:

·     American Society of Clinical Oncology (ASCO) Annual Meeting, 6/2-6/6, in Chicago, IL

Sector News Breakdown

Consumer

·     Lululemon (LULU) Q1 EPS $2.28 tops consensus $1.98; Q1 revs $2.0B vs. est. $1.92B; raised its annual sales forecast to $9.44B-$9.51B from prior $9.3B-$9.41B (est. $9.37B) as expects strong demand for its activewear; guides year EPS $11.74-$11.94 vs. est. $11.61; Q1 Total comp sales constant currency +17%, vs. estimate +14.5%.

·     Costco (COST) May total comparable sales -0.3%, estimate +0.5%; U.S. comparable sales excluding fuel, currencies +1.7%, vs. estimate +1.7%.

·     Bark Inc. (BARK) Q4 adj EPS loss (-$0.04) in line with ests on revs $126M vs. est. $120.97M; sees FY24 revenue flat to down 5% and sees FY24 adjusted EBITDA ($8M)-$2M.

·     ChargePoint (CHPT) Q1 EPS loss (-$0.23) vs. est. loss (-$0.17); Q1 revs $130M vs. est. $128.14M; sees Q2 revenue $148M-$158M vs. est. $165.29M; plans to reduce non-Gaap adjusted ebitda loss approximately two-thirds by Q4 of fiscal 2024 as compared to Q1.

·     Five Below (FIVE) Q1 EPS $0.67 vs. est. $0.63; Q1 revs $726.25M vs. est. $728.04M; Q1 comp sales increased by 2.7% vs. est. +3.9%; sees Q2 EPS $0.80-$0.85 vs. est. $0.88; sees Q2 revenue $755M-$765M below consensus $768.22M and Q2 net income $44M-$48M.

·     Tilly’s (TLYS) Q1 EPS loss (-$0.40) vs. est. loss (-$0.33); Q1 revs $123.6M vs. est. $123.75M; guides Q2 EPS loss (13c-27c) vs. est. 0c; revs $148M-$158M vs. est. $160.5M and sees Q2 comp sales down (10%-15%).

·     Zumiez (ZUMZ) Q1 EPS loss (-$0.96) vs. est. loss (-$0.86); Q1 revs $182.9M vs. est. $182.6M; net sales for four-week period ended May 27 decreased -12.8% y/y, comparable sales for four-week period ending May 27 decreased 14.3% from the comparable period in prior year; guides Q2 EPS loss wider than expected but better revs.

Energy, Industrials and Material

·     Exxon Mobil (XOM) and Chevron (CVX) are in advanced negotiations with Algeria on a deal that would allow the U.S. energy giants to drill for the first time in the gas-rich North African nation, according to the Algerian energy minister and people familiar with the discussions – WSJ.

·     Chemours Company (CC), DuPont (DD) and Corteva (CTVA) announced they have reached an agreement in principle to comprehensively resolve all PFAS-related drinking water claims of a defined class of public water systems that serve much of the U.S. population. As part of the agreement, the companies will establish a settlement fund and contribute a total of $1.185 billion to the fund, with Chemours contributing about $592 million, DuPont adding about $400 million and Corteva contribution about $193 million.

Financials

·     Fed discount window borrowing at $3.97 billion on May 31 vs.$4.2 billion on May 24.

Healthcare

·     Cooper Companies (COO) Q2 EPS $3.08 vs. est. $3.03; Q3 revs $877.4M vs. est. $865.14M; sees FY23 EPS, $12.66-$12.96 vs. est. $12.78; sees FY23 revenue $3.51B-$3.57B vs. est. $3.54B; Q2 Gross margin of 66% compared with 64% in last year’s second quarter.

·     Universal Health (UHS) upgraded to Buy from Neutral at Bank America.

·     Surgery Partners (SGRY) upgraded to Buy from Neutral at Bank America.

Technology, Media & Telecom

·     Broadcom (AVGO) Q2 adj EPS $10.32 vs. est. $10.08; Q2 revs $8.73B vs. est. $8.71B; sees Q3 revenue approximately $8.85B vs. est. $8.72B; sees Q3 Adjusted EBITDA approximately 65% of projected revenue; said Q2 adjusted EBITDA margin increased YoY to 64%; generated $3.9 billion in FCF, representing a 16% increase YoY.

·     Asana Inc. (ASAN) Q1 EPS loss (-$0.09) beats by $0.09, beats on revs by almost $2M; guides JulQ EPS above consensus, revs in-line; guides FY24 EPS in-line, revs in-line.

·     Elastic NV (ESTC) Q4 EPS $0.22 vs. est. $0.10; Q4 revs $280M vs. est. $277.4M; Q4 Elastic Cloud Revenue of $112 million, up 28% y/y (30% in constant currency); sees FY24 EPS 94c-$1.06 above consensus $0.89; sees FY24 revenue $1.24B-$1.25B vs. est. $1.25B.

·     Guidewire Software (GWRE) Q3 adj EPS loss (-$0.08) vs. est. loss (-$0.14); Q3 rev $207.5M below consensus $214.31M; lowers FY23 revenue view to $890M-$900M from $894M-$904M (below consensus $903.43M).

·     MongoDB (MDB) Q1 EPS $0.56 vs. est. $0.19; Q1 revs $368.3M vs. est. $347.15M; Continued Strong Customer Growth with Over 43,100 Customers as of April 30, 2023; Atlas Revenue up 40% Year-over-Year; 65% of Total Q1 Revenue; guides FY24 EPS $1.42-$1.56 above ests $1.03 and revenue seen $1.52B-$1.54B vs. est. $1.51B.

·     PagerDuty (PD) Q1 EPS $0.20 vs est. $0.03; Q1 revs $103.2M vs est. $103.22M; sees Q2 EPS $0.10-$0.11 vs est. $0.09 and revs $103.5-$105.5M vs est. $108.6M; guides FY24 EPS $0.60-$0.65 vs est. $0.44 and revs $425-$430M vs. est. $448.3M.

·     Sentinel (S) Q1 adj EPS loss (-$0.15) vs. est. loss (-$0.17) and revs $133.4M vs. est. $136.6M; sees Q2 revenue $141M below consensus $151.92M and cuts FY24 revenue view to $590M-$600M from $631M-$640M (est. $638.49M) while raises FY24 adj op margin view to (29%)-(25%).

·     Stratasys Ltd. (SSYS) announced that it has received an unsolicited non-binding indicative proposal from 3D Systems Corporation (DDD) to acquire Stratasys for $7.50 in cash and 1.2507 newly issued shares of common stock of 3D Systems per ordinary share of Stratasys.

·     VMWare (VMW) Q1 adj EPS $1.49 vs. est. $1.58; Q1 revs $3.28B vs. est. $3.34B; Q1 Subscription and SaaS revenue rose 35% y/y to $1.22B and subscription and SaaS revenue constituted 37% of total revenue for the quarter.

·     Zscaler (ZS) said delivered 46% revenue growth, 40% billings growth to $482.3M & 135% operating profit growth, all exceeding our guidance from last quarter; Q3 EPS $0.48 s. est. $0.42; Q3 revs $418.8M vs. est. $415.66M; Q3 deferred revenue grows 44% y/y to $1,175.4M.

·     MKS Instruments (MKSI) 2M share Spot Secondary priced at $97.15.