Our Head of North American Research, Gary Christie gives us a look at notable U.S. equity news last week and some potential earnings movers for the week of May 20th.
The S&P 500 decreased by 0.58% last week.
We remain bullish on the S&P 500 as prices rebounded off of support from last Oct and Nov.
The percentage of stocks trading about the 200-day moving average is at around 60% which pulled back from 72% in April. As long as we stay above 50% we see further upside in U.S. stocks over the next 5 months.
The MSCI Emerging Markets LatAm index has turned bearish below 2787. We see strong support at the 2370 area to test last summers lows.
Finally, the VIX has turned bearish with key resistance at 18 which has lessened the pressure on U.S. markets.
Looking at the S&P 500 sectors, we are bullish the insurance and real estate sectors as they are currently outperforming the S&P 500.
S&P 500 Insurance sector
S&P 500 real estate sector
EQUITY SHAKERS AND MOVERS: These stocks had the biggest moves last week and may have some volatility in this weeks trading.
Nvidia (NVDA -7.93% WoW to $155.44) announced 1Q adj. EPS of $0.88 (estimated $0.81) vs. $2.05 last year on revenue of $2.22B (forecasted $2.19B) compared to $3.21B in the previous year. Gross margin on an adj. basis declined by 570bps YoY to 59%, as expected.
Deere & Co (DE -14.54% WoW to $133.37) unveiled 2Q adj. EPS of $3.52 (estimated $3.62) vs. $3.14 a year ago on total revenue of $11.34B compared to $10.72B a year earlier. The Co cut its FY guidance on net income to $3.3B (expected $3.56B) vs. prior view of $3.6B and downgraded its guidance on sales growth to 5% vs. prior view of 7%.
AO Smith Corp (AOS -13.16% WoW to $43.61) fell as J Capital issued a short report on the Co with a target price of $22.68.
Agilent Technologies Inc (A -10.39% WoW to $69.09) reported 2Q adj. EPS up 9% YoY at $0.71 (estimated $0.72) on net revenue up 3% YoY at $1.24B (forecasted $1.27B). The Co expects 3Q adj. EPS of $0.71-$0.73 (expected $0.73) and anticipates 3Q revenue of $1.23B-$1.25B (forecasted $1.27B). The Co still sees FY adj. EPS of $3.03-$3.07 (expected $3.07) and cut its FY guidance on revenue to a range of $5.09B-$5.13B (estimated $5.19B) vs. prior view of $5.15B-$5.19B.
Coty Inc (COTY +15.05% WoW to $13.5) gained momentum as the Chief Global Supply Officer Luc Volatier recently bought $5.19M of shares while the CFO Pierre-Andre recently bought $1.7M of shares.
Progressive (PGR +5.88% WoW to $77.75) reported combined ratio for April improving to 87.4% from 89.9% in the prior year. Also, net premiums earned and net premiums written in the same period reached $3.35B (vs. $2.88B a year ago) and $3.67B (vs. $3.23B last year) respectively.
Ralph Lauren (RL -9.11% WoW to $112.95) announced 4Q adj. EPS of $1.07 (estimated $0.9) vs. $0.9 a year ago on net revenue of $1.51B (forecasted $1.48B) compared to $1.53B in the prior year. Net income dropped by 23.5% YoY to $31.6M. Total comparable sales improved by 1%, lower than expectations of 1.2% while the Co boosted its quarter dividend to $0.6875 (estimated $0.65) from $0.625. The Co sees 1Q revenue growth of 3%-5% and expects 2020 revenue growth of 2%-3%.
Industrial stocks like Freeport-McMoRan (FCX -9.19% WoW to $10.33), Caterpillar (CAT -6.84% WoW to $122.35) and Deere & Co (DE -14.54% WoW to $133.37) fell as the editor-in-chief of the Global Times tweeted that China may stop purchasing U.S. "agricultural products and energy".
Company Earnings Preview:
HD: On Tuesday, Home Depot is likely to post 1Q EPS of $2.18 vs. $2.08 last year on higher revenue of $26.4B from $24.9B in the previous year. Fitch affirmed the Co's long-term issuer default rating at A with a "stable" outlook. Technically speaking, the RSI is below 50 while the MACD is below its signal line and negative. The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 200.56 and 194.85). We expect further pressure towards $179.9 with a stop-loss at $196.4.
ADI: On Wednesday, Analog Devices is expected to report 2Q EPS of $1.3 vs. $1.45 a year ago on revenue remaining unchanged YoY at $1.5B. In other news, the Co was raised to "hold" from "sell" at Morningstar. Looking at the chart, the RSI is below 50 while the MACD is below its signal line and negative. The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 113.4 and 110.58). Finally, Analog Devices is trading below its lower daily Bollinger band (standing at 106.65). As long as prices remain below $110.8, the stock will likely reach our downside target of $96.4.
LB: On the same day in the after-hours, L Brands is anticipated to unveil 1Q EPS breaking even vs. $0.17 last year on revenue unchanged YoY at $2.6B. The Co was initiated at "buy" at Odeon Capital. From a technical point of view, the RSI is below 50 while the MACD is below its signal line and negative. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at 24.73 and 26.07). L Brands is currently trading near its 52 week low at 21.82 reached on 15/05/19. We anticipate the stock to continue lower towards $20.1 with a stop-loss at $23.9.
FL:On Friday, Foot Locker is awaited to announce 1Q EPS of $1.6 vs. $1.45 a year ago on revenue of $2.1B compared to $2B in the prior year. In other news, the Co was upgraded to "buy" from "neutral" at B Riley. From a chartist point of view, the RSI is below 50 while the MACD is negative and below its signal line. The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 58.84 and 60.01). We anticipate prices to remain choppy and reach our lower target of $51.3 with a stop-loss at $60.3.
Happy trading !
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