Yacine Ouldchikh from our North American Research Desks is here to fill you in on another concise update on the U.S. Markets and this weeks focus.
The S&P 500 increased by 2.06% last week.
On a daily chart, we remain bullish on the SPX as the index surpassed October highs and is about to test the record high of 2940. The index remains inside a bullish trend channel with a stop-loss at 2814, near the 20-day moving average and highs of October and November 2018, with upside targets of 2940 (record high) and 2993 (38.2% Fibonacci retracement level from the recent low of 2347 and March high of around 2814).
Regarding the sectors, the best-performing stocks this week were in the Automobiles & Components (+6.57%), Semiconductors & Semiconductor Equipment (+4.83%) and Materials (+4.24%) sectors.
The VIX continues its move lower. Friday's low represented its lowest point since October 2018.
On the Corporate Front:
- Wynn Resorts (WYNN +18.12% WoW to $140.94), MGM Resorts (MGM +6.94% WoW to $27.44) and Las Vegas Sands (LVS +8.14% WoW to $65.92) gained momentum after Macau casino revenue in March decreased by 0.4% YoY to 25.8B patacas, according to the city's Gaming Inspection and Coordination Bureau, compared to the expected drop of 3%. In other news, the Co might be able to keep its Massachusetts gaming license but might have to pay a "substantial fine and be subjected to regulatory probation and additional oversight", according to a Union Gaming analyst.
- Walgreens Boots Alliance (WBA -13.56% WoW to $54.69) reported 2Q adj. EPS down 5.4% YoY to $1.64 (estimated $1.72) on net sales up 4.6% YoY to $34.53B (forecasted $34.52B). Net income declined by 15.6% YoY to $1.14B. The Co cut its FY guidance on adj. EPS growth to be roughly flat vs. its prior view of a growth of 7%-12%.
- Lamb Weston Holdings (LW -4.43% WoW to $71.62) announced 3Q adj. EPS of $0.95 (estimated $0.82) vs. $0.91 a year ago on net sales up 7% YoY to $926.8M (expected $895.2M). The Co sees FY net sales to increase in the high single digits, up from a previous estimate in the mid-to-high single digits.
- Dow Inc (DOW +10.87% WoW to $57.24) completed its separation from DowDuPont (DWDP +5.75% WoW to $37.9). Shareholders in DowDuPont will receive 1 share of Dow for every 3 shares of DowDuPont common stock held as of the close on March 21st. In other news, the Co was initiated at "overweight" at Morgan Stanley, "outperform" at Credit Suisse, "buy" at Deutsche Bank and was reinstated to "buy" at Goldman Sachs.
- Delta Air Lines (DAL +11.77% WoW to $57.73) unveiled 1Q preliminary results with adj. EPS in the range of $0.85-$0.95 (expected $0.8) vs. prior view of $0.7-$0.9 and revenue growth of appx. 7%, vs prior view of 5%-6%. The Co remains on target to return about $2.5B to shareholders through dividends and share buybacks for the full year. Also, the Co shared its operational performance for March 2019 which shows that traffic rose by 5.3% while capacity rose by 5.4%.
- Ameriprise Financial (AMP +7.68% WoW to $137.94) agreed to sell its Auto & Home business to American Family Insurance for $1.05B in cash. The deal is set to close in the second half of 2019.
- Facebook (FB +5.42% WoW to $175.72) gained traction as an analyst from Deutsch bank sees a big revenue potential from Instagram Checkout "given high engagement in existing IG shoppable products, brand excitement, and the scale of the platform", according to Bloomberg.
- Tesla Motors (TSLA -1.75% WoW to $274.96) posted 1Q total deliveries of 63,000 vehicles, up 110% YoY, but down 31% QoQ and delivered about 50,900 Model 3 vehicles, lower than the expectations of 51,750 vehicles. The Co added: "Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted."
- Constellation Brands (STZ +10.25% WoW to $193.3) reported 4Q comparable EPS of $1.84 (estimated $1.71) vs. $1.89 a year ago on comparable net sales of $1.8B from $1.76B in the previous year. The Co declared a quarterly dividend of $0.75 per share and expects 2020 comparable EPS in the range of $8.5-$8.8.
- Harley Davidson (HOG +13.04% WoW to $40.31) is suing many online merchants in China and other nations for selling inferior and unlicensed merchandise to unsuspecting customers, thus violating U.S. trademark laws, according to Bloomberg.
- Acuity Brands (AYI +15.82% WoW to $138.99) reported 2Q adj. EPS of $1.99 (estimated $1.79) vs. $1.89 a year ago on net sales of $854.4M (forecasted $878.1M) from $832.1M in the previous year. Net income dropped by 32% YoY to $66.3M.
- Semiconductor stocks like Advanced Micro Devices (AMD +13.56% WoW to $28.98), Nvidia (NVDA +6.34% WoW to $190.95), Applied Materials (AMAT +8.52% WoW to $43.04), Micron Technology (MU +4.81% WoW to $43.32) and Western Digital (WDC +8.28% WoW to $52.04) rallied as a report suggested that a key Asian supplier is expecting more orders for smartphone chips in the second quarter, according to Bloomberg.
- Nielsen (NLSN +10.73% WoW to $26.21) rallied as Street Insider reported that a PE firm is in talks to acquire the Co for low $30s/share.
Company Preview:
- FAST US: On Thursday Fastenal is expected to report 1Q EPS of $0.67 vs. $0.61 a year ago on revenue of $1.3B from $1.2B in the previous year. In other news, the Co was recently cut to "sell" from "hold" at Morningstar. Technically speaking, the RSI is above 50 while the MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (respectively at 62.82 and 62.02). Finally, Fastenal is trading above its upper Bollinger band (standing at 65.38). Fastenal is currently trading near its 52 week high reached at 66.11 on 02/04/19. We expect to reach the next upside target of $69.7 with a stop-loss set at $64.
- JPM US: On Friday, JPMorgan is likely to post 1Q EPS of $2.36 vs. $2.31 last year on revenue relatively unchanged YoY at $28.4B compared to $28.5B a year earlier. According to Citywire, the Co is cutting hundreds of jobs across its asset and wealth management unit. From a technical point of view, the RSI is above its neutrality area at 50 while the MACD is below its signal line and negative. The penetration of 50 on the RSI should trigger further losses. Moreover, the stock is above its 20 and 50 day MA (respectively at 103.23 and 103.63). We are looking for prices to continue higher towards $110.5 with a stop-loss at $99.6.
- PNC US: On the same day, PNC Financial is anticipated to unveil 1Q EPS of $2.61 vs. $2.43 a year ago on higher revenue of $4.3B from $4.1B in the prior year. Also, the Co declared a quarterly cash dividend of $0.95 per share. Looking at the chart, 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 125.82 and 124.84). As long as $122.9 holds, we are looking to reach the next upside target of $138.3.
- WFC US: On the same day as well, Wells Fargo is awaited to announce 1Q EPS of $1.1 vs. $0.99 last year on lower revenue of $21B compared to $22.1B in the previous year. In other news, the Co was recently raised to "market perform" from "underperform" at Raymond James. From a chartist point of view, the RSI is below its neutrality area at 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 49.51 and 49.42). We expect the stock to trade lower towards $46.3 with a stop-loss at $50.8.
Happy Trading,
