Our Head of North American Research, Gary Christie is back with another update on the U.S. Markets and this weeks focus.
The S&P 500 increased by 1.2% last week.
On a daily chart, we remain bullish on the SPX as the index surpassed October highs. The index remains inside a bullish trend channel with a stop-loss set at 2790 and upside targets of 2900 and record highs of 2942.
The Dow Jones index is forming an interesting bullish symmetrical triangle continuation pattern. A break above 26100 would have strong bullish implications.
On a longer time horizon (weekly chart), the SPX remains bullish with a stop-loss set at 2675 to trail the 20-week moving average. The RSI remains bullish above its 50 level.
Regarding the sectors, the best performing stocks were in the Transportation (+3.87%), Consumer Durables & Apparel (+3.24%) and Household & Personal Products (+2.69%) sectors.
Looking at the sectors from a technical point of view, we upgraded the utilities, household and personal products and telecommunications sectors to Rise-Outperform as these sectors are outperforming the SPX.
The VIX has once again turned bearish with key resistance at the 50-day moving average around 15.70.
The Dow Jones Transportation index held key support at 9985 and broke above a falling wedge bullish continuation pattern.
Here are 8 stocks that might see increased activity due to last weeks market moves:
Lululemon Athletica (LULU +14.43% WoW to $163.87) reported 4Q adj. EPS of $1.85 (estimated $1.75) vs. $1.33 a year ago on net revenue up 26% YoY to $1.2B (forecasted $1.15B). Total comparable sales jumped by 17%, beating expectations of 16.6%, while the Board authorized a $500M share buyback program. The Co sees 1Q EPS in the range of $0.68-$0.7 (estimated $0.66) and expects net revenue to reach $740M-$750M (forecasted $744.5M). Finally, the Co sees FY EPS in the range of $4.48-$4.55 (expected $4.41) and anticipates net revenue to reach $3.7B-$3.74B.
PVH Corp (PVH +13.75% WoW to $121.95) announced 4Q adj. EPS of $1.84 (estimated $1.74) vs. $1.58 a year ago on revenue of $2.48B (forecasted $2.41B) compared to $2.5B in the prior year. The Co sees 1Q adj. EPS in the range of $2.4-$2.45 (expected $2.42) and expects revenue to grow by 2%. Finally, the Co anticipates FY adj. EPS in the range of $10.3-$10.4 (estimated $10.28) and expects revenue to grow by 4%.
Centene Corp (CNC -7.07% WoW to $53.1) has entered into a definitive agreement to acquire WellCare Health Plans (WCG +12.34% to $259.81) in a cash and stock transaction worth appx. $305.39 per share for an enterprise value of $17.3B. WellCare shareholders will receive 3.38 shares of Centene and $120 per share in cash and the combined company will include 22M members across 50 states. The deal is expected to close in the first half of 2020. Besides, the Co printed a new 52w low.
Southwest Airlines (LUV +5.25% WoW to $51.91) cut its forecast of 1Q2019 capacity growth to 1% vs. prior view of 3.5%-4% and downgraded its unit revenues to increase in the 2%-3% range vs. prior view of 3%-4%.
Carnival (CCL -10.1% WoW to $50.72) announced 1Q adj. EPS of $0.49 (estimated $0.44) vs. $0.52 a year ago on revenue of $4.67B (forecasted $4.31B) compared to $4.23B in the prior year. The Co sees 2Q adj. EPS of $0.56-$0.6 (expected $0.72) and cut its FY view on adj. EPS to the range of $4.35-$4.55 (estimated $4.76) vs. the prior view of $4.5-$4.8.
CBS (CBS +5.48% WoW to $47.53) is expected to approach its Board in the upcoming weeks to tell them they are ready to make a deal with Viacom (VIAB +7.64% to $28.33) after the latter resolved its contract dispute with AT&T (T +0.93% WoW to $31.36), according to the New York Post.
Viacom (VIAB +10.77% WoW to $28.07) jumped the most in seven months after it resolved its contract dispute with AT&T (T +0.93% WoW to $31.36), according to Bloomberg.
CarMax (KMX +13.26% WoW to $69.8) reported 4Q diluted EPS of $1.13 (estimated $1.03) vs. $0.67 a year ago on revenue of $4.32B (forecasted $4.37B) from $4.08B in the previous year. Net income jumped by 58% YoY to $192.6M.
Earnings preview this week:
WBA: On Tuesday, Walgreens is expected to post 2Q EPS of $1.72 vs. $1.73 a year ago on revenue of $34.5B from $33B in the previous year. In other news, the Co is planning to sell CBD products in 1,500 stores across Oregon, Colorado, New Mexico, Kentucky, Tennessee, Vermont, South Carolina, Illinois and Indiana, according to CNBC. Technically speaking, the RSI is below its neutrality area at 50 while the MACD is negative and above its signal line. The configuration is mixed. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 64.23 and 68.71). Walgreens Boots Alliance is currently trading near its 52 week low at 59.07 reached on 28/06/18. We expect higher prices towards $69.8 with a stop-loss at $59.8.
LW: On the same day, Lamb Weston Holdings is likely to unveil 3Q EPS of $0.823 vs. $0.91 last year on revenue of $895.2M compared to $863.4M in the prior year. Also, the Co declared a quarterly dividend of $0.20 per share payable on May 31st to stockholders of record at the close on May 3rd. Looking at the chart, the RSI is above 50 while the MACD is above its signal line and negative. The MACD must break above its zero level to trigger further gains. Moreover, the stock is above its 20 and 50 day MA (respectively at 70 and 70.37). As long as the stock remains above $69.3, we are confident the stock will reach $75.4.
STZ: On Thursday, Constellation Brands is awaited to report 4Q EPS of $1.72 vs. $1.9 a year ago on lower revenue of $1.7B vs. $1.8B a year earlier. In other news, the Co is in advanced talks to sell some of its wine brands to E&J Gallo, reported CNBC. From a technical point of view, the RSI is above its neutrality area at 50 while the MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (respectively at 169.15 and 169.45). We are looking to reach our final target of $184.6 with a stop-loss at $164.6.
DAL: On Thursday April 11th, Delta Air Lines is anticipated to announce 1Q EPS of $0.815 vs. $0.74 last year on revenue of $10.3B from $10B in the previous year. Also, the Co expects $8B of operating cash flow in 2019 and "opportunistically" repurchased $1.3B of stock in the March quarter, according to Bloomberg. From a chartist point of view, the RSI is above its neutrality area at 50 while the MACD is negative and below its signal line. The penetration of 50 on the RSI should trigger further losses. Moreover, the stock is above its 20 and 50 day MA (respectively at 50.07 and 49.88). We anticipate higher prices towards $53.5 with a stop-loss at $48.
Happy Trading!
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