Toll Brothers profit, sales rise on housing demand

Toll Brothers Inc. reported higher second-quarter sales as demand for homes continued to outstrip supply......»»

Category: topSource: foxnewsMay 26th, 2021

Futures Rebound From Overnight Slide As Oil Keeps Rising

Futures Rebound From Overnight Slide As Oil Keeps Rising US equity-index futures erased earlier declines, rebounding from a loss of as much as 0.8% helped by the start of the European session and easing mounting concerns about stagflation from rising energy prices, signs of widening regulatory scrutiny by China, and the upcoming third-quarter earnings which is expected to post a sharply slower pace of growth and beats than recent record quarters. At 730am ET, Dow e-minis were up 5 points, or 0.1%, S&P 500 e-minis were up 7.25 points, or 0.16%, and Nasdaq 100 e-minis were up 46.75points, or 0.31%. Oiil rose 0.3% to $83.86/bbl while the dollar dipped and 10Y yield drifted back under 1.60%. Gains in tech stocks kept Nasdaq futures afloat on Tuesday, while energy names rose as Brent resumed gains, trading around $84/bbl on expectations that a power crisis from Asia to Europe will lift demand and tighten global balances. Higher oil prices and supply chain disruptions have set off alarm bells for businesses and consumers ahead of the third-quarter reporting season that kicks off on Wednesday with JPMorgan results.  "We believe that market participants could stay concerned over high energy prices translating into further acceleration in inflation, and thereby faster tightening by major central banks," said Charalambos Pissouros, head of research at JFD Group. In the pre-market, Tesla rose 0.7% after data showed the electric vehicle maker sold 56,006 China-made vehicles in September, the highest since it started production in Shanghai about two years ago. Oil firms including Exxon Mobil and Chevron Corp gained 0.1% and 0.3%, respectively, as Brent crude hit a near-three year high on energy crunch fears. Here are the notable movers: China’s Internet sector is one of the “most undervalued” in Morningstar’s coverage, says Ivan Su, an analyst, adding that Tencent (TCEHY US) and Netease (NTES US) are top picks MGM Resorts (MGM US) rises 2% in U.S. premarket trading after stock was upgraded to outperform from neutral and price target more than doubled to a Street-high $68 at Credit Suisse Quanterix (QTRX US) jumped 20% in Monday postmarket trading after the digital-health company announced that its Simoa phospho-Tau 181 blood test has been granted breakthrough device designation by the U.S. FDA as an aid in diagnostic evaluation of Alzheimer’s disease Relay Therapeutics (RLAY US) fell 7% in Monday postmarket trading after launching a $350 million share sale via Goldman Sachs, JPMorgan, Cowen, Guggenheim Securities Westwater Resources (WWR US) rose as much as 26% in Monday postmarket trading after its board of directors approved construction of the first phase of a production facility in Alabama for battery ready graphite products TechnipFMC (FTI US) in focus after co. was awarded a substantial long-term charter and services contract by Petrobras for the pipelay support vessel Coral do Atlântico Fastenal, which was one of the first companies to report Q3 earnings, saw its shares fall 2.4% in premarket trading on Tuesday, after the industrial distributor said the Covid-related boost was fading. The company said growth in the quarter was slightly limited by either slower expansion or contraction in sales of certain products related to the pandemic, when compared to the previous year quarter. While there was an uptick in sales of certain Covid-related supplies, the unit price of many products was down significantly, the company said in a statement.  Third-quarter sales and profit were in line with the average analyst estimate "While investors want to believe the narrative that stock markets can continue to move higher, this belief is bumping up against the reality of how the continued rise in energy prices, as well as supply-chain pressures, are likely to impact company profit margins,” said Michael Hewson, chief market analyst at CMC Markets in London. In Europe, losses led by basic resources companies and carmakers outweighed gains for utilities and tech stocks, pulling the Stoxx Europe 600 Index down 0.1%. Metals miner Rio Tinto was among the worst performers, dropping 2.7%. European equities climbed off the lows having lost over 1% in early trade. Euro Stoxx 600 was down -0.35% after dropping as much as 1.3% initially, led by basic resources companies and carmakers outweighed gains for utilities and tech stocks. The DAX is off 0.3%, FTSE 100 underperforms in a quiet morning for news flow. Miners, banks and autos are the weakest sectors after China reported a sharp drop in auto sales; utilities, tech and real estate post modest gains. European tech stocks slide, with the Stoxx Tech Index dropping as much as 1.4% in third straight decline, as another broker downgrades TeamViewer, while Prosus and chip stocks come under pressure. TeamViewer shares fall as much as 5.1% after Deutsche Bank downgrades the remote software maker to hold from buy following recent guidance cut. Asian stocks fell, halting a three-day rally as uncertainty over earnings deepened amid elevated inflation, higher bond yields and the risk of a widening Chinese crackdown on private industry. The MSCI Asia Pacific Index slid as much as 1.2%, led by technology and communication shares. Alibaba plunged 3.9% following a rally over the past week, while Samsung Electronics tumbled to a 10-month low after at least five brokers slashed their price targets, as China’s power crisis is seen worsening supply-chain disruptions. “Given the run-up in tech so far, it’s not difficult for investors to harvest profits first before figuring out if techs can maintain their growth when yields rise,” said Justin Tang, head of Asian research at United First Partners. Shares in Hong Kong and the mainland were among the worst performers after Chinese authorities kicked off an inspection of the nation’s financial regulators and biggest state-run banks in an effort to root out corruption. The MSCI Asia Pacific Index is down 12% from a February peak, with a global energy crunch lifting input prices and the debt crisis at China Evergrande Group weighing on the financial sector. Investors are waiting to see how this impacts earnings, according to Jun Rong Yeap, a market strategist at IG Asia.  “Increasing concerns on inflation potentially being more persistent have started to show up,” he said. “This comes along with the global risk-off mood overnight, as investors look for greater clarity from the earnings season on how margins are holding up, along with the corporate economic outlook.” Japan’s Topix index also fell, halting a two-day rally, amid concerns about a global energy crunch and the possibility of a widening Chinese crackdown on private industry. The Topix fell 0.7% to 1,982.68 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.9% to 28,230.61. SoftBank Group Corp. contributed the most to the Topix’s drop, decreasing 2.4%. Out of 2,181 shares in the index, 373 rose and 1,743 fell, while 65 were unchanged. “Market conditions were improving yesterday, but pushing for higher prices got tough when the Nikkei 225 approached its key moving averages,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.  The Nikkei’s 75-day moving average is about 28,500 and the 200-day moving average is about 28,700, so some investors were taking profits, he said. Japan’s spot power price increased to the highest level in nine months, as the global energy crisis intensifies competition for generation fuel before the winter heating season. In FX, the Bloomberg Dollar Spot Index reversed an overnight gain as the greenback slipped against all of its Group-of-10 peers. Risk sensitive Scandinavian currencies led gains, followed by the New Zealand and Australian dollars. The pound was little changed while speculators ramped up wagers on sterling’s decline at the fastest rate in more than two years, Commodity Futures Trading Commission data show, further breaking the link between anticipated rate increases and currency gains. The yen steadied after three days of declines. The Turkish lira extended its slide to a record low after President Recep Tayyip Erdogan hinted at a possible military offensive into neighboring Syria. Fixed-income was quiet by recent standards: Treasury futures were off lows of the day, improving as S&P 500 futures pare losses during European morning, and as cash trading resumed after Monday’s holiday. The 10Y yield dipped from 1.61% to 1.59% after hitting 1.65% based on futures pricing on Monday, but the big mover was on the front end, where 2-year yields climbed as much as 4bps to 0.35% the highest level since March 2020 reflecting increased expectations for Fed rate hikes, as Treasury cash trading resumed globally. Two coupon auctions during U.S. session -- of 3-and 10-year notes -- may weigh on Treasuries however.  Treasury and gilt curves bull-flatten with gilts outperforming at the back end. Bunds have a bull-steepening bias but ranges are narrow. Peripheral spreads tighten a touch with long-end Italy outperforming peers. In commodities, Crude futures drift higher in muted trade. WTI is up 0.25% near $80.70, Brent trades just shy of a $84-handle. Spot gold remains range-bound near $1,760/oz. Base metals are mixed with LME lead and nickel holding small gains, copper and aluminum in the red. Looking at the day ahead, central bank speakers include the Fed’s Vice Chair Clarida,Bostic and Barkin, as well as theECB’s President Lagarde, Makhlouf, Knot, Villeroy, Lane and Elderson. Data highlights from the US include the JOLTS job openings for August, and the NFIB’s small business optimism index for September which came in at 99.1, below last month's 100.1. The IMF will be releasing their latest World Economic Outlook. Market Snapshot S&P 500 futures little changed at 4,351.50 STOXX Europe 600 down 0.6% to 454.90 MXAP down 0.9% to 194.41 MXAPJ down 1.0% to 635.42 Nikkei down 0.9% to 28,230.61 Topix down 0.7% to 1,982.68 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite down 1.2% to 3,546.94 Sensex little changed at 60,149.85 Australia S&P/ASX 200 down 0.3% to 7,280.73 Kospi down 1.4% to 2,916.38 German 10Y yield fell 6 bps to -0.113% Euro up 0.1% to $1.1565 Brent Futures up 0.4% to $84.01/bbl Gold spot up 0.2% to $1,757.84 U.S. Dollar Index little changed at 94.29 Top Overnight Headlines from Bloomberg The EU drew record demand for its debut green bond, in the sector’s biggest-ever offering. The bloc registered more than 135 billion euros ($156 billion) in orders Tuesday for a sale of 12 billion euros of securities maturing in 2037 Investors are dumping negative-yielding debt at the fastest pace since February as concerns about inflation and reduced central bank stimulus propel global interest rates higher French President Emmanuel Macron unveiled a 30-billion-euro ($35 billion) plan to create the high-tech champions of the future and reverse years of industrial decline in the euro area’s second-largest economy British companies pushed the number of workers on payrolls above pre-coronavirus levels last month, an indication of strength in the labor market that may embolden the Bank of England to raise interest rates. As the Biden administration and governments around the world celebrate another advance toward an historic global tax accord, an obscure legal question in the U.S. threatens to tear it apart Chinese property developers are suffering credit rating downgrades at the fastest pace in five years, as a recent slump in new-home sales adds to concerns about the sector’s debt woes German investor confidence declined for a fifth month in October, adding to evidence that global supply bottlenecks and a surge in inflation are weighing on the recovery in Europe’s largest economy Social Democrat Olaf Scholz’s bid to succeed Angela Merkel as German chancellor is running into its first test as tensions emerge in talks to bridge policy differences with the Greens and pro-business Free Democrats A more detailed breakdown of global markets from Newsquawk Asian equity markets traded mostly lower following the indecisive mood stateside where the major indices gave back initial gains to finish negative amid lingering inflation and global slowdown concerns, with sentiment overnight also hampered by tighter Beijing scrutiny and with US equity futures extending on losses in which the Emini S&P retreated beneath its 100DMA. ASX 200 (-0.3%) was subdued as weakness in energy, tech and financials led the declines in Australia and with participants also digesting mixed NAB business survey data. Nikkei 225 (-0.9%) was on the backfoot after the Japan Center for Economic Research noted that GDP contracted 0.9% M/M in August and with retailers pressured after soft September sales updates from Lawson and Seven & I Holdings, while the KOSPI (-1.4%) was the laggard on return from holiday with chipmakers Samsung Electronics and SK Hynix subdued as they face new international taxation rules following the recent global minimum tax deal. Hang Seng (-1.4%) and Shanghai Comp. (-1.3%) adhered to the downbeat picture following a continued liquidity drain by the PBoC and with Beijing scrutinising Chinese financial institutions’ ties with private firms, while default concerns lingered after Evergrande missed yesterday’s payments and with Modern Land China seeking a debt extension on a USD 250mln bond to avoid any potential default. Finally, 10yr JGBs eked minimal gains amid the weakness in stocks but with demand for bonds limited after the recent subdued trade in T-note futures owing to yesterday’s cash bond market closure and following softer results across all metrics in the 30yr JGB auction. Top Asian News Alibaba Stock Revival Halted on Concerns of Rising Bond Yields Iron Ore Rally Pauses as China Steel Curbs Cloud Demand Outlook China’s Star Board Sees Rough Start to Fourth Quarter: ECM Watch Citi Lists Top Global Stock Picks for ‘Disruptive Innovations’ European bourses kicked the day off choppy but have since drifted higher (Euro Stoxx 50 -0.4%; Stoxx 600 Unch) as the region remains on standby for the next catalyst, and as US earnings season officially kicks off tomorrow – not to mention the US and Chinese inflation metrics and FOMC minutes. US equity futures have also nursed earlier losses and reside in relatively flat territory at the time of writing, with broad-based performance seen in the ES (Unch), NQ (+0.2%), RTY (-0.2%), YM (Unch). From a technical standpoint, some of the Dec contracts are now hovering around their respective 100 DMAs at 4,346 for the ES, 14,744 for the NQ, whilst the RTY sees its 200 DMA at 2,215, and the YM topped its 21 DMA at 34,321. Back to Europe, cash markets see broad-based downside with the SMI (-0.1%) slightly more cushioned amid gains in heavyweight Nestle (+0.6%). Sectors kicked off the day with a defensive bias but have since seen a slight reconfiguration, with Real Estate now the top performer alongside Food & Beverages, Tech and Healthcare. On the flip side, Basic Resources holds its position as the laggard following yesterday's marked outperformance and despite base metals (ex-iron) holding onto yesterday's gains. Autos also reside at the bottom of the bunch despite constructive commentary from China's Auto Industry Body CAAM, who suggested the chip supply shortage eased in China in September and expected Q4 to improve, whilst sources suggested Toyota aims to make up some lost production as supplies rebound. In terms of individual movers, GSK (+2.3%) shares spiked higher amid reports that its USD 54bln consumer unit has reportedly attracted buyout interest, according to sources, in turn lifting the FTSE 100 Dec future by 14 points in the immediacy. Elsewhere, easyJet (-1.9%) gave up its earlier gains after refraining on guidance, and despite an overall constructive trading update whereby the Co. sees positive momentum carried into FY22, with H1 bookings double those in the same period last year. Co. expects to fly up to 70% of FY19 planned capacity in FY22. In terms of commentary, the session saw the Germany ZEW release, which saw sentiment among experts deteriorate, citing the persisting supply bottlenecks for raw materials and intermediate products. The release also noted that 49.1% of expects still expect inflation to rise further in the next six months. Heading into earnings season, experts also expect profits to go down, particularly in export-tilted sectors such a car making, chemicals and pharmaceuticals. State-side, sources suggested that EU antitrust regulators are reportedly likely to open an investigation into Nvidia's (+0.6% Pre-Mkt) USD 54bln bid from Arm as concessions were not deemed sufficient. Top European News Soybeans Near 10-Month Low as Supply Outlook Expected to Improve EasyJet Boosts Capacity as Travel Rebound Gathers Pace Currency Traders Are Betting the BOE Is About to Make a Mistake Citi Lists Top Global Stock Picks for ‘Disruptive Innovations’ In FX, the Buck has reclaimed a bit more lost ground in consolidatory trade rather than any real sign of a change in fundamentals following Monday’s semi US market holiday for Columbus Day and ahead of another fairly light data slate comprising NFIB business optimism and JOLTS. However, supply awaits the return of cash Treasuries in the form of Usd 58 bn 3 year and Usd 38 bn 10 year notes and Fed commentary picks up pace on the eve of FOMC minutes with no less than five officials scheduled to speak. Meanwhile, broad risk sentiment has taken a knock in wake of a late swoon on Wall Street to give the Greenback and underlying bid and nudge the index up to fresh post-NFP highs within a 94.226-433 band. NZD/AUD - A slight change in fortunes down under as the Kiwi derives some comfort from the fact that the Aud/Nzd has not breached 1.0600 to the upside and Nzd/Usd maintaining 0.6950+ status irrespective of mixed NZ electric card sales data, while the Aussie takes on board contrasting NAB business conditions and confidence readings in advance of consumer sentiment, with Aud/Usd rotating either side of 0.7350. EUR/CAD/GBP/CHF/JPY - All rangy and marginally mixed against their US counterpart, as the Euro straddles 1.1560, the Loonie meanders between 1.2499-62 with less fuel from flat-lining crude and the Pound tries to keep sight of 1.3600 amidst corrective moves in Eur/Gbp following a rebound through 0.8500 after somewhat inconclusive UK labour and earnings data, but hardly a wince from the single currency even though Germany’s ZEW survey missed consensus and the institute delivered a downbeat assessment of the outlook for the coming 6 months. Elsewhere, the Franc continues to hold within rough 0.9250-90 extremes and the Yen is striving to nurse outsize losses between 113.00-50 parameters, with some attention to 1 bn option expiries from 113.20-25 for the NY cut. Note also, decent expiry interest in Eur/Usd and Usd/Cad today, but not as close to current spot levels (at the 1.1615 strike in 1.4 bn and between 1.2490-1.2505 in 1.1 bn respectively). SCANDI/EM - The Nok and Sek have bounced from lows vs the Eur, and the latter perhaps taking heed of a decline in Sweden’s registered jobless rate, but the Cnh and Cny remain off recent highs against the backdrop of more Chinese regulatory rigour, this time targeting state banks and financial institutions with connections to big private sector entities and the Try has thrown in the towel in terms of its fight to fend off approaches towards 9.0000 vs the Usd. The final straw for the Lira appeared to be geopolitical, as Turkish President Erdogan said they will take the necessary steps in Syria and are determined to eliminate threats, adding that Turkey has lost its patience on the attacks coming from Syrian Kurdish YPG controlled areas. Furthermore, he stated there is a Tal Rifaat pocket controlled by YPG below Afrin and that an operation could target that area which is under Russian protection. However, Usd/Try is off a new ATH circa 9.0370 as oil comes off the boil and ip came in above forecast. In commodities, WTI and Brent front-month futures are choppy and trade on either side of the flat mark in what is seemingly some consolidation and amid a distinct lack of catalysts to firmly dictate price action. The complex saw downticks heading into the European cash open in tandem with the overall market sentiment at the time, albeit the crude complex has since recovered off worst levels. News flow for the complex has also remained minimal as eyes now turn to any potential intervention by major economies in a bid to stem the pass-through of energy prices to consumers heading into winter. On that note, UK nat gas futures have been stable on the day but still north of GBP 2/Thm. Looking ahead, the weekly Private Inventory data has been pushed back to tomorrow on account of yesterday's Columbus Day holiday. Tomorrow will also see the release of the OPEC MOMR and EIA STEO. Focus on the former will be on any updates to its demand forecast, whilst commentary surrounding US shale could be interesting as it'll give an insight into OPEC's thinking on the threat of Shale under President Biden's "build back better" plan. Brent Dec trades on either side of USD 84/bbl (vs prev. 83.13-84.14 range) whilst WTI trades just under USD 81/bbl after earlier testing USD 80/bbl to the downside (USD 80-80.91/bbl range). Over to metals, spot gold and silver hold onto modest gains with not much to in the way of interesting price action, with the former within its overnight range above USD 1,750/oz and the latter still north of USD 22.50/oz after failing to breach the level to the downside in European hours thus far. In terms of base metals, LME copper is holding onto most of yesterday's gains, but the USD 9,500/t mark seems to be formidable resistance. Finally, Dalian and Singapore iron ore futures retreated after a four-day rally, with traders citing China's steel production regaining focus. US Event Calendar 6am: Sept. SMALL BUSINESS OPTIMISM 99.1,  est. 99.5, prior 100.1 10am: Aug. JOLTs Job Openings, est. 11m, prior 10.9m 11:15am: Fed’s Clarida Speaks at IIF Annual Meeting 12:30pm: Fed’s Bostic Speaks on Inflation at Peterson Institute 6pm: Fed’s Barkin Interviewed for an NPR Podcast DB's Jim Reid concludes the overnight wrap It’s my wife’s birthday today and the big treat is James Bond tomorrow night. However, I was really struggling to work out what to buy her. After 11.5 years together, I ran out of original ideas at about year three and have then scrambled round every year in an attempt to be innovative. Previous innovations have seen mixed success with the best example being the nearly-to-scale oil portrait I got commissioned of both of us from our wedding day. She had no idea and hated it at the closed eyes big reveal. It now hangs proudly in our entrance hall though. Today I’ve bought her a lower key gamble. Some of you might know that there is a US website called Cameo that you can pay famous people to record a video message for someone for a hefty fee. Well, all her childhood heroes on it were seemingly too expensive or not there. Then I saw that the most famous gymnast of all time, Nadia Comăneci, was available for a reasonable price. My wife idolised her as a kid (I think). So after this goes to press, I’m going to wake my wife up with a personalised video message from Nadia wishing her a happy birthday, saying she’s my perfect ten, and praising her for encouraging our three children to do gymnastics and telling her to keep strong while I try to get them to play golf instead. I’m not sure if this is a totally naff gift or inspired. When I purchased it I thought the latter but now I’m worried it’s the former! My guess is she says it’s naff, appreciates the gesture, but calls me out for the lack of chocolates. Maybe in this day and age a barrel of oil or a tank of petrol would have been the most valuable birthday present. With investor anticipation continuing to build ahead of tomorrow’s CPI release from the US, yesterday saw yet another round of commodity price rises that’s making it increasingly difficult for central banks to argue that inflation is in fact proving transitory. You don’t have to be too old to remember that back in the summer, those making the transitory argument cited goods like lumber as an example of how prices would begin to fall back again as the economy reopened. But not only have commodity aggregates continued to hit fresh highs since then, but lumber (+5.49%) itself followed up last week’s gains to hit its highest level in 3 months. Looking at those moves yesterday, it was a pretty broad-based advance across the commodity sphere, with big rises among energy and metals prices in particular. Oil saw fresh advances, with WTI (+1.47%) closing above $80/bbl for the first time since 2014, whilst Brent Crude (+1.53%) closed above $83/bbl for the first time since 2018. Meanwhile, Chinese coal futures (+8.00%) hit a record after the flooding in Shanxi province that we mentioned in yesterday’s edition, which has closed 60 of the 682 mines there, and this morning they’re already up another +6.41%. So far this year, the region has produced 30% of China’s coal supply, which gives you an idea as to its importance. And when it came to metals, aluminium prices (+3.30%) on the London Metal Exchange rose to their highest level since the global financial crisis, whilst Iron Ore futures in Singapore jumped +7.01% on Monday, and copper was also up +2.13%. The one respite on the inflation front was a further decline in natural gas prices, however, with the benchmark European future down -2.73%; thus bringing its declines to over -47% since the intraday high that was hit only last Wednesday. With commodity prices seeing another spike and inflation concerns resurfacing, this proved bad news for sovereign bonds as investors moved to price in a more hawkish central bank reaction. Yields in Europe rose across the continent, with those on 10yr bunds up +3.0bps to 0.12%, their highest level since May. The rise was driven by both higher inflation breakevens and real rates, and leaves bund yields just shy of their recent post-pandemic closing peak of -0.10% from mid-May. If they manage to surpass that point, that’ll leave them closer to positive territory than at any point since Q2 2019 when they last turned negative again. It was a similar story elsewhere, with 10yr yields on OATs (+2.6bps), BTPs (+3.9bps) and gilts (+3.1bps) likewise reaching their highest level in months. The sell-off occurred as money markets moved to price in further rate hikes from central banks, with investors now expecting a full 25 basis point hike from the Fed by the end of Q3 2022. It seems like another era, but at the start of this year before the Georgia Senate race, investors weren’t even pricing in a full hike by the end of 2023, whereas they’re now pricing in almost 4. So we’ve come a long way over 2021, though pre-Georgia the consensus CPI forecast on Bloomberg was just 2.0%, whereas it now stands at 4.3%, so it does fit with the story of much stronger-than-expected inflation inducing a hawkish response. Yesterday’s repricing came alongside a pretty minimal -0.15% move in the Euro versus the dollar, but that was because Europe was also seeing a similar rates repricing. Meanwhile, the UK saw its own ramping up of rate hike expectations, with investors pricing in at least an initial 15bps hike to 0.25% happening by the December meeting in just two months’ time. Overnight in Asia, stocks are trading in the red with the KOSPI (-1.46%), Shanghai Composite (-1.21%), Hang Seng (-1.20%), the Nikkei (-0.93%) and CSI (-0.82%) all trading lower on inflation concerns due to high energy costs and aggravated by a Wall Street Journal story that Chinese President Xi Jinping is increasing scrutiny of state-run banks and big financial institutions with inspections. Furthermore, there were signs of a worsening in the Evergrande debt situation, with the firm missing coupon payments on a 9.5% note due in 2022 and a 10% bond due in 2023. And there were fresh indications of a worsening situation more broadly, with Sinic Holdings Group Co. saying it doesn’t expect to pay the principal or interest on a $250m bond due on October 18. Separately in Japan, Prime Minister Fumio Kishida said on Monday that he will raise pay for public workers and boost tax breaks to firms that boost wages to try and improve the country’s wealth distribution. Back to yesterday, and the commodity rally similarly weighed on thin-volume equity markets, though it took some time as the S&P 500 had initially climbed around +0.5% before paring back those gains to close down -0.69%. Before the late US sell-off, European indices were subdued, but the STOXX 600 still rose +0.05%, thanks to an outperformance from the energy sector (+1.49%), and the STOXX Banks Index (+0.13%) hit a fresh two-year high as the sector was supported by a further rise in yields. On the central bank theme, we heard from the ECB’s chief economist, Philip Lane, at a conference yesterday, where he said that “a one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation.” So clearly making a distinction between a more persistent pattern of wage inflation, which comes as the ECB’s recent forward guidance commits them to not hiking rates “until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon”, as well as having confidence that “realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term”. Turning to the political scene, Brexit is likely to be in the headlines again today as the UK’s Brexit negotiator David Frost gives a speech in Lisbon where he’s expected to warn that the EU’s proposals on the Northern Ireland Protocol are insufficient. That comes ahead of a new set of proposals that are set to come from the EU tomorrow, with the two sides disagreeing on the extent of border controls required on trade from Northern Ireland with the rest of the UK. Those controls were put in place as part of the Brexit deal to prevent a hard border being put up between Northern Ireland and the Republic of Ireland, whilst also preserving the integrity of the EU’s single market. But the UK’s demands for adjustments have been met with opposition by the EU, and speculation has risen that the UK could trigger Article 16, which allows either side to take unilateral safeguard measures, if the protocol’s application “leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade”. On the data front, there wasn’t much data to speak of with the US holiday, but Italy’s industrial production contracted by -0.2% in August, in line with expectations. To the day ahead now, andcentral bank speakers include the Fed’s Vice Chair Clarida,Bostic and Barkin, as well as theECB’s President Lagarde, Makhlouf, Knot, Villeroy, Lane and Elderson. Data highlights from the US include the JOLTS job openings for August, and the NFIB’s small business optimism index for September. In Europe, there’s also UK unemployment for August and the German ZEW Survey for October. Lastly, the IMF will be releasing their latest World Economic Outlook.     Tyler Durden Tue, 10/12/2021 - 07:56.....»»

Category: personnelSource: nytOct 12th, 2021

Regional Spotlight: 2022 California Housing Market Could See Decline in Single-Family Home Sales

Supply constraints and higher home prices will bring California home sales down slightly in 2022, but transactions will still post their second highest level in the past five years, according to a housing and economic forecast recently released by the California Association of REALTORS® (C.A.R.). The baseline scenario of C.A.R.’s “2022 California Housing Market Forecast” […] The post Regional Spotlight: 2022 California Housing Market Could See Decline in Single-Family Home Sales appeared first on RISMedia. Supply constraints and higher home prices will bring California home sales down slightly in 2022, but transactions will still post their second highest level in the past five years, according to a housing and economic forecast recently released by the California Association of REALTORS® (C.A.R.). The baseline scenario of C.A.R.’s “2022 California Housing Market Forecast” sees a decline in existing single-family home sales of 5.2% next year to reach 416,800 units, down from the projected 2021 sales figure of 439,800. The 2021 figure is 6.8% higher compared with the pace of 411,900 homes sold in 2020. The California median home price is forecast to rise 5.2% to $834,400 in 2022, following a projected 20.3% increase to $793,100 in 2021 from $659,400 in 2020. An imbalance in demand and supply will continue to put upward pressure on prices, but higher interest rates and partial normalization of the mix of sales will likely curb median price growth. Additionally, a shift in housing demand to more affordable areas, as the trend of remote working continues, will also keep prices in check and prevent the statewide median price from rising too fast in 2022. “A slight decline next year from the torrid sales pace of the past year-and-a-half will be a welcome relief to potential homebuyers who have been pushed out of the market due to high market competition and an extremely low level of homes available for sale,” said C.A.R. President Dave Walsh in a statement. “Homeownership aspirations remain strong and motivated buyers will have more inventory to choose from. They will also benefit from a favorable lending environment, with the average 30-year fixed rate mortgage remaining below 3.5% for most of next year.” C.A.R.’s 2022 forecast projects growth in the U.S. gross domestic product of 4.1% in 2022, after a projected gain of 6.0% in 2021. With California’s 2022 nonfarm job growth rate at 4.6%, up from a projected increase of 2.0% in 2021, the state’s unemployment rate will decrease to 5.8% in 2022 from 2021’s projected rate of 7.8%. Growing global economic concerns will keep the average for 30-year, fixed mortgage interest rates low at 3.5% in 2022, up from 3.0% in 2021 and from 3.1% in 2020 but will still remain low by historical standards. “Assuming the pandemic situation can be kept under control next year, the cyclical effects from the latest economic downturn will wane, and a strong recovery will follow,” said C.A.R. Vice President and Chief Economist Jordan Levine in a statement. “However, structural challenges will reassert themselves as the normalization of the market continues. Demand for homes will continue to outstrip available supply as the economy improves, resulting in higher home prices and slightly lower sales in 2022.” Source: C.A.R The post Regional Spotlight: 2022 California Housing Market Could See Decline in Single-Family Home Sales appeared first on RISMedia......»»

Category: realestateSource: rismediaOct 11th, 2021

Crescat Capital September 2021: The Psychology Of Inflation

Crescat Capital’s commentary for the month ended September 2021, titled, “The Psychology Of Inflation.” Q3 2021 hedge fund letters, conferences and more The Psychology Of Inflation Today’s macro environment is indeed very different than any other period we have experienced in the last four decades. Inflation is infiltrating the mindset of US households in a […] Crescat Capital’s commentary for the month ended September 2021, titled, “The Psychology Of Inflation.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The Psychology Of Inflation Today’s macro environment is indeed very different than any other period we have experienced in the last four decades. Inflation is infiltrating the mindset of US households in a way not seen since the wage-price spirals of the 1970s. Prices for the goods and services that individuals require to meet basic needs have been increasing at an accelerated pace. These necessities include shelter, food, energy, and transportation. The rising cost of living is due to both supply constraints and increased demand from fiscal and monetary stimulus. In the mix, net profit margins for S&P 500 companies at large are at record highs today, because these firms have been able to pass rising costs onto their customers in the short run. These windfall profit margins are unsustainable and poised to reverse quickly in our analysis. The two biggest costs of running a business that affect net profit margins are on track to rise imminently: taxes and labor. Corporate tax rate hikes are almost certain with the legislation now under consideration by the Democratic-controlled Congress and White House. Even less discounted by today’s buoyant stock market in our view is an impending rise in labor costs. Individuals and families cannot rely on continued government handouts to the degree they were provided during the pandemic lockdowns and the US government cannot afford to provide them. We believe a new and well-justified psychology of rising inflation will be forcing more of the population back into the labor force. At the same time, we are likely to see workers at large both demanding and receiving significantly higher wages and salaries contributing to a substantial squeeze to corporate profit margins in the years ahead. Increases in the general price level for goods and services and the rising inflation expectations that go along with them are a self-reinforcing helix that is set to become a durable feature of the economy. Just like the 1970s, these inflationary macro forces will likely lead to shorter economic expansions and more frequent stagflationary recessions in the 2020s and beyond than we have had in the last four decades under a generally disinflationary regime. These more contractions in real GDP due to rising inflation are likely to contrast with the deflationary recessions of the 2008-2009 Global Financial Crisis and the short-lived Covid recession in 2020. Starting from record valuations relative to underlying cash flows in the broad financial markets today, combined with historic loose financial conditions, we see substantial downside risk in crowded and highly speculative equity and fixed income markets at large. Rising inflationary pressures and ultimate Fed tightening measures needed to counter them will put downward pressure on hyper-overvalued, low yielding, long duration growth stocks and fixed income investments. We believe investors should be reducing exposure to these limited-upside and high downside-risk-areas of the financial markets today. We see a silver lining, however, in deep value and high near-term fundamental growth investments in the energy and materials sectors of the economy that are likely to be among the biggest beneficiaries of the new secular stagflationary environment ahead. These sectors are not without volatility but represent a calculated risk with substantial value-driven upside potential for investors who want to profit from the underlying fundamental tailwinds identified by Crescat’s equity and macro models. Diversifying among the best industries and companies within these sectors is what we are focused on now at Crescat with our own money and for clients with a like-minded outlook, risk tolerance, needs, and objectives. In our analysis, this approach is the highest probability path to generating strong risk-adjusted, real returns in the immediate years ahead. Supply Problems are Structural Supply chain disruptions will be with us for some time. They are due to complex structural problems that include a new deglobalization countertrend, particularly between the US and China. Another problem is the chronic underinvestment in the energy and basic materials sectors of the economy. As capital has overwhelmingly flowed to the information technology and innovation sectors of the economy in the last decade, the capital needs of the primary resource producing sectors of the economy got left behind. The goods produced by these industries are at the core of the supply chain and have long lead times with challenging permitting issues and heavy capital expenditure requirements. While demand continues to increase for the raw materials produced by these industries, companies are having difficulty filling jobs with qualified management and technical professionals to produce them efficiently. A decade of declining college enrollment in geosciences worldwide is one of the long-term structural imbalances affecting the oil and gas and mining industries. Skilled tradespeople in these industries are also in short supply. Source: Samuel Boone and Mark Quigley, University of Melbourne. Resource logistics issues are compounded by the environmental moment, which has captured both social norms and government technocrats, significantly adding to costs and lead times to produce basic resources. The push for the new green economy might be well intentioned but continues to have many blind spots regarding the need for traditional energy and material resources to ensure a healthy economy today as well as in the more environmentally friendly future. Stagflation is Here The problem is that while consumer prices are rising, we are also seeing signs that the global economy is starting to decelerate. China is the elephant in the room in that respect. The second largest economy in the world has achieved that spot while creating a property and credit bubble that, as measured by banking assets to GDP, is more than four times the size of the US housing and financial sector bubble ahead of the GFC. With its equity markets under pressure since February, the Evergrande collapse, and nationwide energy shortages, China’s economy appears to be in a serious meltdown. The spillover effects should not be underestimated. We need to start discounting now the ultimate new global fiscal and monetary stimulus that will be needed to counter China’s currently unfolding credit collapse and what that portends for its currency given its communist banking system with a whopping $52 trillion of suspiciously priced assets. As we have learned throughout the world in the post GFC era, the speed at which governments can create new central bank money is instantaneous. At the same time, and more than ever today, the speed at which countries can deliver the basic resources to meet their citizens’ needs is significantly impaired. The US economy has already started to slow significantly. The Atlanta Fed GDP nowcast, for instance, just went from 6% to 1.3% in the last couple of months. With business activity now decelerating as inflation remains historically elevated, the set of monetary and fiscal policies needed to fix one problem would worsen the other. At the same time, with historic high valuations for equity and credit markets in the US at large, there is much downside risk. The Fed is trapped to do anything to prevent a rotation out of speculatively priced assets with deteriorating fundamentals. Note the tight correlation between the real-time Atlanta Fed’s macro quantitative measure of real GDP growth and actual subsequently reported economic growth after inflation. Great Rotation Financial markets are not correctly priced for the stagflation that is already evident in the macro data. This creates both risks and opportunities for a large swath of investors who are crowded on the wrong side of this trade in our view. First and foremost, we see a major shift out of overpriced growth stocks and fixed income securities and into a much narrower group of deeply undervalued and high near-term growth stocks and commodity investments that will be the primary beneficiaries of stagflation, creating a reflexive inflationary loop. The smart money should be the first to make this move. We call it the Great Rotation. The motivation for such a shift in our research is that it is the most highly probable way to both protect against the downside risk of significantly rising inflation to financial assets at large while potentially substantially profiting from it at the same time. Investors should take note while overall price to book values for the broad market are at record highs along with many other fundamental measures, the relative price-to-book value of the Russell 1000 Growth compared to the Russell 1000 Value indices is about 60% higher than it was at the peak of the tech bubble in 2000, further illustrating the extreme imbalances and market risks along with the set-up for a growth to value rotation. Getting Ahead with Gold and Silver As inflation continues to develop in the economy, the chart below shows the incredible link between gold prices and CPI since the Global Financial Crisis. Note how after the pandemic lows, gold front ran the potential risk of a rise in consumer prices and the entire precious metals market appreciated sharply. Gold and silver not only diverged from CPI but also significantly outperformed the rest of the commodities market. It is important to remember that before recently peaking, gold had been going on a streak for two years already. The metal was up more than 75% from August 2018 to August 2020 and even reached historical highs during this period. Back then, with CPI around 1%, very few investors foresaw inflation as a risk to the economy. Now it is a real problem. We think gold likely appreciated too quick and too fast becoming what some thought as an obvious trade. Extreme sentiment probably explains the reason for its recent weakness after signaling way earlier than any other asset the possibility that an inflationary environment could be ahead of us. We are now on the other side of this extreme. Gold looks fundamentally cheap, technically oversold while inflation continues to gain traction. We think the historic relationship between precious metals and the growth in consumer prices will continue to be strong and the recent pullback in gold and silver related assets poses an incredible opportunity for investors to deploy capital at what we believe to be truly attractive levels. Also, keep in mind that we are using government reported numbers to gauge inflation in this analysis. We should all know by now that the true cost of goods and services is growing at a drastically faster pace than CPI. Recent Pullback in Precious Metals Presents Constructive Buying Opportunity The decline in Crescat’s strategies in the past two months has been almost entirely attributable to our precious metals long holdings which has been deliberately the largest exposure we have had firmwide. Our gold and silver names are ultra-cheap, worth an estimated 15 times their current market prices in aggregate according to our company-by-company model in the Crescat Precious Metals Fund. This fund was up 235% net in its first year ended in July and has experienced an 18.9% net pullback in August and September. The precious metals longs similarly have been the largest contributor to the last two-month decline in our Global Macro and Long/Short funds. These latter two funds also have significant short positions that have held the fund back year to date. We believe they are poised to deliver strong returns as the broad equity markets appear to finally be breaking down. We are not pleased at all with the recent pullback, but believe it is an inevitable part of the game. We think that accepting a moderate amount of volatility is necessary to build wealth and protect against rising inflation in the current environment of financial repression that we live in where governments maintain artificially low risk-free interest rates compared to true inflation. The goal of this policy is to resolve unsustainable debt-to-GDP imbalances with hidden inflation. We have been increasing our exposure to other resource industries in Large Cap, Global Macro, and Long/Short to add more diversification also with strong upside potential, based on our equity fundamental model scores within the energy and materials sectors. We remain highly committed and significantly exposed on the long side to activist positions in gold and silver mining companies with a strong focus on exploration under the guidance of our Geologic and Technical Director, Quinton Hennigh, Ph.D. We believe gold and silver commodity and equity markets are due for a major bull market resumption. This market may have already turned in our favor this month from deeply oversold levels for mining stocks and extreme negative sentiment despite incredibly positive fundamentals. All Crescat strategies are up month to date in October. Overvalued equity short positions in our Global Macro and Long/Short also generated positive profit attribution in September though modestly. We aim to increase our short exposure in these two funds to be able to take advantage of the abundant opportunities on this side of the market now that the risk of shorting has been decreased with inflationary pressures becoming more acknowledged and the Fed attempting to start tapering. With Crescat’s three high conviction macro themes coalescing, and after the recent pullback in Crescat’s strategies, we believe it is a highly constructive time for new and existing clients to be adding money to our strategies. HFM Award We are pleased to announce that the Crescat Global Macro Fund was just shortlisted for a HFM performance award in the macro category for funds with assets under $1 billion for the one-year period ended June 30, 2021. The final winner will be announced next month in NYC. We understand this is one of the most prestigious awards in the hedge fund industry. There is no guarantee that we will win, but for what it’s worth, according to Bloomberg and eVestment data, our fund was far-and-away the best performer for the period among all five shortlisted for the category. The fund was up 45% net over that time frame. September Performance Estimates Download PDF Version Sincerely, Kevin C. Smith, CFA Member & Chief Investment Officer Tavi Costa Member & Portfolio Manager For more information including how to invest, please contact: Marek Iwahashi Client Service Associate 303-271-9997 Cassie Fischer Client Service Associate (303) 350-4000 Linda Carleu Smith, CPA Member & COO (303) 228-7371 © 2021 Crescat Capital LLC Updated on Oct 11, 2021, 11:27 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 11th, 2021

Futures Drift Before Taper-Triggering Jobs Report

Futures Drift Before Taper-Triggering Jobs Report US equity-index drifted in a tight range overnight, in a tight range before key jobs data that could provide clues on the Federal Reserve’s policy. As noted in our preview, unless the jobs report is a disaster, it will virtually assure the Fed launches tapering in one month. Markets drifted higher on Thursday after the Senate averted the risk of an immediate default, pushing global stocks on course for their best week since early September, but a late day selloff wiped away most gains and closed spoos below the critical 4400 level. At 07:30 a.m. ET, Dow e-minis were up 35 points, or 0.10%, S&P 500 e-minis were up 5.00 points, or 0.1%, and Nasdaq 100 e-minis were up 10.75 points, or 0.07%. Treasury Yields were 1 point higher after earlier tagging 1.60%, the highest since June. The dollar was flat while Brent topped $83 before paring gains. Bitcoin traded above $55,000. Uncertainty over the debt ceiling negotiations and a run-up in U.S. Treasury yields over elevated inflation were major concerns among investors earlier this week, injecting volatility in equity markets this week. High-growth FAAMG stocks slipped in premarket trading following sharp gains in previous session. Energy firms including Chevron Corp and Exxon Mobil gained about 0.8% tracking crude prices, while major U.S. lenders also edged up as the benchmark 10-year yield hit its highest level since June 4. Here are some of the biggest movers and stocks to watch today: Tesla (TSLA US) shares in focus after Elon Musk says a global shortage of chips and ships is the only thing standing in the way of the company maintaining sales growth in excess of 50% Sundial Growers (SNDL US) shares rise as much as 19% in U.S. premarket after the Canadian cannabis producer said it will buy liquor and pot retailer Alcanna for $276m in stock Allogene Therapeutics (ALLO US) plunges 36% in U.S. premarket trading after an early-stage study of its cell therapy was put on hold by U.S. regulators Prelude Therapeutics (PRLD US) fell in U.S. premarket trading, adding to Thursday’s 40% plunge on early- stage data for the company’s experimental cancer treatments that Barclays says came in below expectations Vaxart (VXRT US) rises 8% in U.S. premarket trading after its oral tablet vaccine candidate cut transmission of Covid-19 in animals, according to data from a study led by Duke University Faraday Future (FFIE US) slides 4% in U.S. premarket trading after J Capital says it is short on the stock. The short-seller says they don’t think the company “will ever sell a car” Codiak Biosciences (CDAK US) shares fell 6% in Thursday postmarket trading after disclosing that Sarepta Therapeutics is terminating a research license and option agreement Agile Therapeutics (AGRX US) tumbled Thursday postmarket after the women’s health-care company said that it intends to offer and sell shares of its common stock, as well as warrants to purchase shares of its common stock, in an underwritten public offering Looking to today's main event, economists expect September hiring to have surged by 500,000 jobs as the summer wave of COVID-19 infections began to subside, and as millions of Americans no longer receive jobless benefits, positioning the Fed to start scaling back its monthly bond buying.  “All roads lead to non-farm payrolls data which will decide, in the market’s minds, whether the start of the Fed taper is a done deal for December,” said Jeffrey Halley, senior market analyst at OANDA. “I do not believe that markets have priced in the Fed taper and its implications to any large degree yet. Even a weak number probably only delays the inevitable for another month.” Even “reasonably soft” payrolls and unemployment figures wouldn’t be enough to change the minds of its officials, according to Ipek Ozkardeskaya, senior analyst at Swissquote. “Only a shockingly low figure could do that,” she said. “The persistent rise in oil prices can only continue boosting inflation fears and the central bank hawks, limiting the upside potential in case of a further recovery in stocks.” “As soon as you start thinking about tapering it’s really hard to not then think about what that means for the Fed funds rate and when that might start to increase,” Kim Mundy, currency strategist and international economist at Commonwealth Bank of Australia in Sydney, said on Bloomberg Television. “We do see scope that markets can start to price in a more aggressive Fed funds rate hike cycle.” In Europe, tech companies led the Stoxx Europe 600 Index down 0.2%, with energy stocks and carmakers being the only industry groups with meaningful gains. Chip stocks fell, especially Apple suppliers, following a profit warning from Asian peer and fellow supplier AAC Technologies. On the other end, European travel stocks rose after U.K. confirmed the travel “red list” will be cut to just seven countries; British Airways parent IAG and TUI led the advances. Here are some of the biggest European movers today: Daimler shares gains as much as 3.2%, outperforming peers, after UBS upgrades stock to buy from neutral, calling it an earnings momentum story that stands to gain from strong demand, electrification trends and its future focus on passenger cars. Adler shares rise as much as 13% after shareholder Aggregate sells a call option to Vonovia for a 13.3% stake in the German real estate investment firm at a strike price of EU14 per share. Cewe Stiftung shares jump as much as 4.2%, their best day in over three months, after the photography services firm gets a new buy rating at Hauck & Aufhaeuser. Weir shares fall as much as 6.3%, to the lowest since Nov. 13, after the U.K. machinery maker announced that a ransomware attack will affect full-year profitability; Jefferies says it’s unlikely that guidance beyond that will be revised. Zur Rose slumps as much as 9.2% after Berenberg downgrades the Swiss online pharmacy to hold from buy, citing the expected negative impact from a delay in the implementation of mandatory e-prescriptions in Germany. Czech digital-payments provider Eurowag shares slide as much as 10% as it starts trading in London, after pricing its IPO below an initial range and making its debut a day later than planned. Asian stocks rose for a second day as China’s market reopened higher and the U.S. Senate approved a short-term increase in the debt ceiling. The MSCI Asia Pacific Index advanced as much as 1% in a rally led by consumer discretionary shares. Alibaba and Tencent were among the biggest contributors to the gauge’s climb. Shares in mainland China surged more than 1% as investors returned from the Golden Week holiday. Chinese property shares fell after a report that more than 90% of China’s top 100 property developers’ sales declined in September by an average of 36% from the same period last year, while investor concerns about developers’ liquidity rose after Fantasia bonds were suspended from trading. In mainland: CSI 300 Real Estate Index drops as much as 2%, Seazen Holdings falls as much as 5%, Poly Developments -4%. Asia’s stock benchmark is slightly down for the week, as rising bond yields weighed on tech-heavy indexes in South Korea, Taiwan and Japan. The gauge is down more than 1% this month amid an energy shortage in China and India.  “Markets may not want to commit directionally” given that we have non-farm payrolls data on the docket, making a follow-through of today’s rally suspect, said Ilya Spivak, the head of Greater Asia at DailyFX. Traders are expecting today’s U.S. employment data to provide clues on the direction of the world’s largest economy. On Thursday, the U.S. averted what would have been its first default on a debt payment. Most major benchmarks in Asia climbed, led by Japan, Indonesia and Australia. India’s central bank kept its lending rates at a record low at a policy meeting today. In Australia, the S&P/ASX 200 index rose 0.9% to close at 7,320.10. All industry groups edged higher. The benchmark rose 1.9% for the week, the biggest weekly gain since early August. Miners led the charge, having the best week since July, banks the best since the start of March. EML Payments tumbled after an update on its Ireland subsidiary from the country’s central bank. Chalice Mining continued its rebound, finishing the session the strongest performer in the mining subgauge.  There is a risk of excessive borrowing due to low interest rates and rising house prices, Reserve Bank of Australia said in its semiannual Financial Stability Review released Friday. In New Zealand, the S&P/NZX 50 index fell 0.1% to 13,086.60 In rates, Treasury futures remained under pressure after paring declines that pushed 10-year yield as high as 1.5995% during European morning, highest since June 4; the 1.60% zone is thought to have potential to spur next wave of convexity hedging. U.K. 10-year is higher by 4bp, German by 2.3bp - gilts underperformed, weighing on Treasuries as money markets continue to bring forward BOE rate-hike expectations. During U.S. session, September jobs report may seal case for Fed taper announcement in November.  In FX, the greenback traded in a narrow range versus G10 peers while 10-year Treasury yields approached 1.6%, outperforming Bunds.  Gilt yields rose 5-6bps across the curve; demand for downside protection in the pound eases this week as the U.K. currency moves off cycle lows amid money markets repricing. U.K. wage growth rose at its strongest pace on record in a survey of job recruiters, indicating strains from a shortage of workers are persisting. Turkish lira initially weakens above 8.96/USD before recouping half of its losses In commodities, oil extended a rebound, on track for a seventh weekly gain. Crude futures pushed to the best levels for the week. WTI rises 1.5% near $79.50, Brent pops back on to a $83-handle. Spot gold trades a $5 range near $1,757/oz. Base metals are mostly positive, with LME nickel gaining over 3.5%. Looking at the day ahead, the highlight will be the aforementioned September jobs report. Central bank speakers include ECB President Lagarde and the ECB’s Panetta. Market Snapshot S&P 500 futures little changed at 4,389.50 STOXX Europe 600 down 0.3% to 457.18 MXAP up 0.4% to 194.72 MXAPJ up 0.2% to 636.80 Nikkei up 1.3% to 28,048.94 Topix up 1.1% to 1,961.85 Hang Seng Index up 0.6% to 24,837.85 Shanghai Composite up 0.7% to 3,592.17 Sensex up 0.7% to 60,070.61 Australia S&P/ASX 200 up 0.9% to 7,320.09 Kospi down 0.1% to 2,956.30 Brent Futures up 1.4% to $83.09/bbl Gold spot up 0.0% to $1,756.25 U.S. Dollar Index little changed at 94.29 German 10Y yield up +3.4 bps to -0.151% Euro little changed at $1.1549 Top Overnight News from Bloomberg Global talks to reshape the corporate tax landscape are set to resume on Friday after Ireland’s decision to adhere to the world consensus on a minimum rate removed one hurdle to an agreement that still hangs in the balance Germany’s Social Democrats hailed a positive start in their effort to form a government after their first meeting with the Greens and the pro-business Free Democrats A U.S. nuclear-powered attack submarine struck an object while submerged in international waters in the Indo- Pacific region last week, the Navy said, adding that no life- threatening injuries were reported China drained the most short- term liquidity from the banking system in a year on a net basis as it reduced support after a week-long holiday. Government bond futures slid by the most since August China’s central bank will continue to push for the reform of its benchmark loan rate and make deposit rates more market-based, according to a senior official India’s central bank surprised markets by suspending its version of quantitative easing, signaling the start of tapering pandemic-era stimulus measures as an economic recovery takes hold U.K. government bond yields have climbed to levels last seen before the Brexit referendum in 2016 relative to German peers, as traders brace for inflation in Britain over the next decade to far outpace the rate in Europe’s largest economy A detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly higher as the region conformed to the global upbeat mood after the agreement in Washington to raise the debt ceiling which the Senate approved, with the overnight bourses also invigorated by the return of China and strong Caixin PMI data. The ASX 200 (+0.9%) was led higher by strength in mining names with underlying commodity prices boosted as Chinese buyers flocked back to market which helped the ASX disregard a record increase in daily COVID-19 cases in Victoria state. Nikkei 225 (+1.3%) was the biggest gainer and reclaimed the 28k level as exporters benefitted from a softer currency, while attention turns to PM Kishida who will outline his policy program today and is reportedly planning to present an additional budget after the election. Furthermore, there were recent comments from an ally of the new PM who suggested that capital gains tax could be raised to 25% from the current 20% without affecting stock prices, although this failed to dent the mood in Tokyo and weaker than expected Household Spending was also brushed aside. The gains for the KOSPI (-0.1%) were later reversed alongside the tentative price action in index heavyweight Samsung Electronics after its Q3 prelim. results showed oper. profit likely rose to its highest in three years but missed analysts’ forecasts. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) were mixed with the latter jubilant on reopen from the Golden Week holiday after improved Caixin Services and Composite PMI data which both returned to expansionary territory. This helped mainland stocks overlook the recent developer default fears and largest daily liquidity drain by the PBoC since October last year, although Hong Kong initially lagged amid heavy Northbound Stock Connect trade. Finally, 10yr JGBs declined on spillover selling from T-notes and with havens shunned amid the gains across riskier assets, although downside in JGBs was limited given the BoJ’s presence in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities. Top Asian News Gold Steadies Ahead of Key U.S. Jobs Report as Yields Climb Investors Fear Tax Talk in Kishida’s ‘New Japanese Capitalism’ China Coal Prices Plunge as Producers Vow to Ease Shortages China Developer Stocks Fall After Report of Monthly Sales Drop An initially contained to marginally-firmer European cash open followed an upbeat APAC handover (ex-Hang Seng) was short-lived with bourses coming under moderate pressure; Euro Stoxx 600 -0.3%. As such, major indices are all in the red, except for of the UK FTSE 100 which is essentially unchanged and bolstered by strength in heavy-weight energy and mining names given broader price action the return of China. Sectors were initially mixed at the open, but in-fitting with the action in indices, has turned to a predominantly negative performance ex-energy. Crossing to the US, futures have directionally been following European peers, but the magnitude has been more contained, with the ES unchanged as we await the September labour market report for any read across to the Fed’s policy path; however, officials have already made it clear that it would have to be a very poor report to spark a deviation from its announced intentions, where it is expected to announce an asset purchase tapering in November. Returning to Europe, Daimler (+2.5%) stands out in the individual stocks space, firmer after a broker upgrade and notable price target lift at UBS; Marks & Spencer (+1.5%) is also supported on broker action. To the downside lies Weir Group (-3.0%) after reports of a ransomware attack. Top European News Adler’s Largest Shareholder Sells Option on Stake to Vonovia; A Controversial Tycoon Sits on Adler’s $9 Billion Pile of Debt Chip Stocks Drag Tech Gauge Lower as Asian Apple Supplier Warns European Gas Rises as Bumpy Ride Continues With Cold Air Coming Lira Weakens to Fresh Low as Rising U.S. Yields Add Pressure In FX, the Dollar is trying to regroup and firm up again after its latest downturn amidst a further rebound in US Treasury yields, more pronounced curve re-steepening, and perhaps some relief that the Senate finally passed the debt ceiling extension bill, albeit by a slender margin and only delaying the issue until early December. Looking at the DXY as a benchmark, a marginally higher low above 94.000 and lower high below 94.500 is keeping the index contained as the clock ticks down to September’s jobs report that is expected to show a recovery in hiring after the prior month’s shortfall, but anecdotal data has been rather mixed to offer little clear pointers for the bias around consensus - full preview of the latest BLS release is available via the Research Suite under the Ad-hoc Economic Analysis section. From a technical perspective, near term support for the DXY resides at 94.077 (vs the current 94.139 base) and resistance sits at 94.448 (compared to a 94.338 intraday high). TRY - A double whammy for the already beleaguered Lira as oil prices come back to the boil and ‘sources’ suggest that Turkish President Erdogan’s patience is wearing thin with the latest CBRT Governor as the Bank waited until September to cut rates. Recall, Erdogan has already ousted a CBRT chief for not loosening monetary policy in his belief that lowering the cost of borrowing will bring inflation down, and although the reports have been by a senior member of his administration there is a distinct feeling of no smoke without fire in the markets as Usd/Try remains bid having only held below 9.0000 by short distance between 8.9707-8.8670 parameters. CHF/JPY - No real surprise that the low yielders and funders are underperforming, even though broadly upbeat risk sentiment during APAC hours has not rolled over to the European session. The Franc has retreated to 0.9300 vs the Buck and Yen is trying to fend off pressure on the 112.00 handle after failing to sustain momentum through 111.50 before weaker than expected Japanese household spending data overnight. However, decent option expiry interest from 111.85-75 (1.4 bn) may weigh on Usd/Jpy pending the aforementioned US payrolls outcome. AUD - Some payback for the Aussie after Thursday’s outperformance, as Aud/Usd loses a bit more momentum following its rebound beyond 0.7300 and with hefty option expiries at 0.7335 (2.7 bn) capping the upside more than smaller size at the round number (1.1 bn) cushions the downside. In commodities, WTI and Brent remain on an upward trajectory after the mid-week pullback; as it stands, crude benchmarks are near fresh highs for the week, with WTI for November eyeing USD 80/bbl once again. Fresh news flow for the complex has been sparse, aside from substantial UK press focus on the domestic energy price cap potentially set to increase next year. More broadly, US officials have largely reiterated commentary from the Energy Department provided on Thursday around not currently intending act on energy costs with a reserve release. The session ahead has just the Baker Hughes rig count specifically for crude scheduled, though the complex may well get dragged into a broader risk move depending on the initial reaction to and analysis on NFP. For metals, spot gold and silver are contained around the unchanged mark and haven’t been affected by any significant amount by the firmer USD or elevated yield space thus far. Elsewhere, base metals are buoyed by China’s return and strong Caixin data from the region, although it is worth highlighting that the likes of LME copper are well off earlier highs. US Event Calendar 8:30am: Sept. Change in Nonfarm Payrolls, est. 500,000, prior 235,000 Change in Private Payrolls, est. 450,000, prior 243,000 Change in Manufact. Payrolls, est. 25,000, prior 37,000 Unemployment Rate, est. 5.1%, prior 5.2% Sept. Underemployment Rate, prior 8.8% Labor Force Participation Rate, est. 61.8%, prior 61.7% Average Weekly Hours All Emplo, est. 34.7, prior 34.7 Average Hourly Earnings MoM, est. 0.4%, prior 0.6% Average Hourly Earnings YoY, est. 4.6%, prior 4.3% 10am: Aug. Wholesale Trade Sales MoM, est. 0.9%, prior 2.0%; Wholesale Inventories MoM, est. 1.2%, prior 1.2% DB's Jim Reid concludes the overnight wrap I’ve never quite understood why you’d go to the cinema if you’ve got a nice telly at home but such has been the nature of life over the last 19 months that I was giddy with excitement last night at booking tickets for James Bond at the local cinema next week. We’ve booked it on the same night as our first ever physical parents evening where I’ll maybe have the first disappointing clues that my three children aren’t going to be child prodigies and that maybe they’ll even have to settle for a career in finance! Markets have been stirred but not completely shaken this week and yesterday they continued to rebound thanks to the near-term resolution on the US debt ceiling alongside subsiding gas prices, which took the sting out of two of the most prominent risks for investors over the last couple of weeks. That provided a significant boost to risk appetite, and by the close of trade, the S&P 500 had recovered +0.83% in its 3rd consecutive move higher, which put it back to just -3.0% beneath its all-time high in early September, whilst Europe’s STOXX 600 was also up +1.60% and closed before a later US sell-off. Attention will today focus squarely on the US jobs report at 13:30 London time, which is the last one before the Fed’s next decision in early November, where a potential tapering announcement is likely bar an extraordinarily poor number today, or an exogenous event in the next few weeks. Starting with the debt ceiling, yesterday saw Democratic and Republican Senators agree to pass legislation to raise the ceiling by enough to get to early December, meaning we won’t have to worry about it for another 8 whole weeks. The Senate voted 50-48 with no Republicans blocking the legislation to increase the debt limit by $480bn, with House Majority leader Hoyer saying that the House would convene on Tuesday to pass the measure as well. To raise it for a longer period, the chatter out of Washington made it clear that Democrats would need to need to raise the debt ceiling in a partisan manner as part of the reconciliation process. As we mentioned in yesterday’s edition, this extension means that a number of deadlines have now been punted into the year end, including the government funding and the debt ceiling (both now expiring the first Friday of December), just as the Democrats are also seeking to pass Biden’s economic agenda through a reconciliation bill containing much of their social proposals, alongside the $550bn bipartisan infrastructure package. And on top of that, we’ve also got the decision on whether Chair Powell will be re-nominated as Fed Chair, with the decision 4 years ago coming at the start of November. So a busy end to the year in DC. The other main story yesterday was the sizeable decline in European natural gas prices, with the benchmark future down -10.73% to post its biggest daily loss since August. Admittedly, they’re still up almost five-fold since the start of the year, but relative to their intraday peak on Wednesday they’ve now shed -37.5%. So nearly a double bear market all of a sudden! The moves follow Wednesday’s signal that Russia could supply more gas to Europe. However, even as energy prices were starting to fall back from their peak, the effects of inflation were being felt elsewhere, with the UN’s world food price index climbing to its highest level in a decade in September. Looking ahead, today’s main focus will be on the US jobs report for September later on. Last month the report significantly underwhelmed expectations, coming in at just +235k, which was well beneath the +733k consensus expectation and the slowest pace since January. That raised questions as to the state of the labour market recovery, and helped to complicate a potential decision on tapering, with nonfarm payrolls still standing over 5m beneath their pre-Covid peak. This month, our US economists are expecting a somewhat stronger +400k increase in nonfarm payrolls, which should see the unemployment rate tick down to a post-pandemic low of 5.1%. On the bright side at least, the ADP’s report of private payrolls for September on Wednesday came in at an above-forecast 568k (vs. 430k expected), while the weekly initial jobless claims out yesterday for the week through October 2 were beneath expectations at 326k (vs. 348k expected). Ahead of that, global equities posted a decent rebound across the board, with cyclicals leading the march higher on both sides of the Atlantic. As mentioned at the top, the S&P 500 advanced +0.83%, which was part of a broad-based advance that saw over 390 companies move higher on the day. That said the index was up as much as +1.5% in early US trading before slipping lower in the US afternoon. The pullback was partly due to new headlines that China’s central bank plans to continue addressing monopolistic actions in internet companies that operate in the payments sector. Nonetheless, Megacap tech stocks were among the big winners yesterday, with the FANG+ index up +2.08%, whilst the small-cap Russell 2000 index was also up +1.58%. In Europe, the STOXX 600 (+1.60%) posted its strongest daily gain since July, and the broader gains helped the STOXX Banks index (+1.61%) surpass its pre-pandemic high, taking it to levels not seen since April 2019, even as sovereign bond yields moved lower. Speaking of sovereign bonds, yesterday saw a divergent set of moves once again, with yields on 10yr Treasuries up +5.2bps to 1.573%, their highest level since June, whereas those across the European continent moved lower. The US increase came against the backdrop of that debt ceiling resolution, and there was a noticeable rise in yields for Treasury bills that mature in December, which is where the debt ceiling deadline has now been kicked to. Elsewhere in North America, the Bank of Canada’s Macklem joined the global central bank chorus and noted inflation pressures were likely to be temporary, even if they’ve been more persistent than previously expected. Meanwhile over in Europe, lower inflation expectations helped yields move lower, with those on 10yr bunds (-0.3bps), OATs (-1.1bps) and BTPs (-3.6bps) all moving back. Overnight in Asia, all markets are trading in the green with the Nikkei (+2.16%) leading the way, along with CSI (+1.34%), Shanghai Composite (+0.60%), KOSPI (+0.22%) and Hang Seng (+0.04%). Chinese markets reopened after a week-long holiday so the focus will again be back on property market debt, and today the PBOC injected just 10bn Yuan with its 7-day reverse repos, resulting in a net liquidity withdrawal of 330bn Yuan. That comes as the services and composite PMIs did see a pickup from August level, with the services PMI up to 53.4 (vs. 49.2 expected), moving back above the 50 mark that separates expansion from contraction. In Japan however, household spending was down -3.0% year-on-year in August (vs. -1.2% expected) which came amidst a surge in the virus there. There’s also some news on the ESG front, with finance minister Shunichi Suzuki saying that the country would introduce ESG factors when considering the finance ministry’s foreign reserves. Looking forward, S&P 500 futures (+0.06%) are pointing to a small move higher. In Germany, as talks got underway today on a potential traffic-light coalition, it was reported by DPA that CDU leader Armin Laschet had signalled his willingness to stand down, with the report citing unidentified participants from internal discussions. In televised remarks last night, Laschet said that his party needs fresh voices across the board and that new leadership will be in place soon. This moves comes as Germany’s Social Democratic Party held talks with the Greens and the Free Democratic Party to enact a new three-way ruling coalition, which would leave the CDU out of power entirely. There wasn’t a massive amount of data yesterday, though German industrial production fell by -4.0% in August (vs. -0.5% expected), which follows the much weaker than expected data on factory orders the previous day. Elsewhere, the Manheim used car index increased +5.3% in September, its first positive reading in 4 months. Our US economics team points out that there tends to be around a two month lag between wholesale prices and CPI prints, so we aren’t likely to see this impact next week’s CPI print but it will likely prevent a bigger fall towards the end of the year. To the day ahead now, and the highlight will be the aforementioned September jobs report from the US. Central bank speakers include ECB President Lagarde and the ECB’s Panetta. Tyler Durden Fri, 10/08/2021 - 07:50.....»»

Category: smallbizSource: nytOct 8th, 2021

Velan Inc. Reports Its Second Quarter 2021/22 Financial Results and a Significant Increase in Sales and Improved Margins that Combine for One of the Best Quarters of the Last Ten Years, With Net Income¹ of $5.0 Million, and Backlog² Remaining High

MONTREAL, Oct. 07, 2021 (GLOBE NEWSWIRE) -- Velan Inc. (TSX:VLN) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its second quarter ended August 31, 2021. Highlights: Sales for the quarter amounted to $101.9 million, an increase of 33.6 million or 49.1% compared to the same quarter of the previous fiscal year. This quarter's sales level represents the highest volume in the last six quarters. Gross profit for the quarter of $31.4 million, or 30.8%, an increase of $14.3 million or 580 basis points from the same quarter of the previous year. The gross profit percentage of 29.1% for the first six-month of the fiscal year is the highest in recent history, a performance essentially driven by the improved sales volume, a more profitable product mix delivered, as well as the margin improvement activities undertaken over the past fiscal years within the scope of the V20 restructuring and transformation plan. Net income1 of $5.0 million and EBITDA2 of $10.7 million for the quarter represent a significant improvement compared to last year's results. The better results are explained primarily by an increased gross profit, driven by an improved sales volume and product mix, despite notably lower Canada Emergency Wage Subsidies («CEWS»). Strong order backlog2 of $575.8 million at the end of the quarter. Net new orders ("bookings")2 of $81.6 million for the quarter, a decrease of $19.7 million or 19.5% compared to the same quarter of the previous fiscal year. The Company's book-to-bill ratio of 0.80 for the quarter has a stronger relation to the improved sales volume rather than the softer quarter in terms of bookings. Nonetheless, the book-to-bill ratio for the six-month period stands at a positive 1.12. The Company's net cash amounted to $68.1 million at the end of the quarter, an increase of $5.2 million since the beginning of the fiscal year. Yves Leduc, CEO of Velan Inc., said, "I am very pleased with our company's best quarterly results in years, but I am certainly not surprised. We are seeing the convergence of many of the positive factors reported in previous quarters, whose effects had either been slowed by the global economic crisis or were simply expected to materialize over time. Let's start with our sales, growing near 50% over the same period last year. Our Italian operations were able to overcome most of the shipping hurdles experienced in the first quarter, we achieved notable progress in reducing our North American operations' production delays caused by the many changes deployed during the first year of the pandemic, and both our Indian and Chinese operations are having a record production year. Still experiencing one of the highest backlogs in years, we did see a slower quarter in bookings, but they have outpaced billings in the first six months of the year and, good news, we are observing a recovery of our North American MRO business, as distributors are steadily increasing their stock. Another important aspect of our performance is the sustained growth in our margins. The quarter's gross margin and the first six months' were the highest recorded in at least ten years, at respectively 30.8% and 29.1%, compared to 25% and 24.4% last year, and 23.3% at the end of fiscal year 2019 when our V20 plan was announced. Here again, there should be no surprise, as the main goal of the plan was to drive our North American operations' margins up. And we are indeed meeting the goal through the elimination of significant structural costs in North America, the now completed transfer of our small forged valve production to India, and the much greater focus put on profitable orders from our new strategic businesses. As a result of those improvements and the growth in sales, to which each of our divisions is contributing, our EBITDA after six months improved by close to $10 million compared to the same period last year, despite lower Canadian federal subsidies and higher liability costs than last year to date. In summary, thanks to the relentless efforts and resilience of our employees in the last years, we are laying the base for a return to profitable growth. This does not mean we are out of the woods. On the coronavirus front, the global pandemic is far from over and we remain vigilant, committed to maintain our excellent record in keeping our work environment as safe as possible for our employees. Meanwhile, the negative effects of the economic crisis on global logistics and the price of metals are affecting our operations worldwide, and driving growth will require ruthless focus and execution as industry demand remains soft. Aware of those challenges, we take nothing for granted and are moving ahead with confidence." Financial Highlights Three-month periods ended   Six-month periods ended   (thousands of U.S. dollars, excluding per share amounts) August 31, 2021   August 31, 2020   August 31, 2021   August 31, 2020             Sales $ 101,893   $ 68,340   $ 176,422   $ 144,993   Gross profit   31,391     17,053     51,385     35,445   Gross profit %   30.8 %   25.0 %   29.1 %   24.4 % Net income (loss)1   5,015     (5,112 )   (58 )   (6,998 ) Net income (loss)1 per share – basic and diluted   0.23     (0.24 )   (0.00 )   (0.32 ) EBITDA2   10,657     (2,497 )   9,716     141   EBITDA2 per share – basic and diluted   0.49     (0.12 )   0.45     0.01   Second Quarter Fiscal 2022 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the second quarter of fiscal 2021): Sales amounted to $101.9 million, an increase of $33.6 million or 49.1% for the quarter. Sales were positively impacted by the Company's North American operations increased large project orders shipments primarily destined for the petrochemical and power markets. Sales were also positively impacted by the shipment of previously delayed orders by the Company's Italian operations. The delays were due to various customer-related and global logistics factors. Bookings2 amounted to $81.6 million, a decrease of $19.7 million or 19.5% for the quarter. This decrease is primarily attributable to lower large project orders recorded by the Company's French and North American operations. Gross profit amounted to $31.4 million, an increase of $14.3 million or 84.1% for the quarter. The gross profit percentage for the quarter of 30.8% was an increase of 580 basis points compared to last year‘s second quarter. The improvement in gross profit percentage for the quarter is primarily attributable to the higher sales volume, which helped to cover the Company's fixed production overhead costs more efficiently. The Company's improved margins are also stemming from the margin improvement activities implemented over the course of the past fiscal years within the scope of the V20 restructuring and transformation plan. Additionally, the Company's gross profit also benefited from favorable movements in unrealized foreign exchange translation primarily attributable to the fluctuation of the U.S. dollar against the euro and the Canadian dollar for the quarter when compared to the prior year. Finally, the increase in gross profit percentage was such that it could more than offset the impact of a lower amount of CEWS of $1.7 million for the quarter compared to last year. The subsidies are allocated between cost of sales and administration costs. Net income1 for the quarter amounted to $5.0 million or $0.23 per share compared to a net loss1 of $5.1 million or $0.24 per share last year. EBITDA2 for the quarter amounted to $10.7 million or $0.49 per share compared to a negative $2.5 million or $0.12 per share last year. The improvement in EBITDA2 for the quarter is primarily attributable to an increase in gross profit, thanks to the reasons mentioned above, the absence of restructuring and transformation costs in the current fiscal year which totaled $1.7 million in the previous quarter and a reduction in other expenses of $1.4 million for the quarter due to land clean-up costs of a former factory incurred in the second quarter of the prior year. On the other hand, these improvements were partially offset by an increase in administration costs of $4.3 million or 21.8% for the quarter which is primarily attributable to a decrease of $1.4 million in CEWS received by the Company compared to last year, an increase in sales commissions due to the higher sales volume and a general increase in administration expenses that had been significantly lowered when the global pandemic broke out last year. The subsidies are allocated between cost of sales and administration costs. The favorable movement in the Company's net income1 for quarter was primarily attributable to the same factors as explained above coupled with an unfavorable movement in income taxes. First Six months Fiscal 2022 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the first six months of fiscal 2021): Sales amounted to $176.4 million, an increase of $31.4 million or 21.7% for the six-month period. Sales were positively impacted by the Company's North American operations increased large project orders shipments primarily destined for the petrochemical and power markets. For the six-month period, the Company's French operations were able to show an improved sales volume due to their strong performance in the first quarter of the current fiscal year. Finally, the Company's MRO sales for the six-month period were negatively affected by the persistent unfavorable market conditions triggered by the novel coronavirus ("COVID-19") global pandemic which has significantly affected the Company's distribution channels' bookings in the previous fiscal year. The lower distribution channels' bookings in the latter part of the prior year translated in lower shipments of such orders in the first quarter of the current year. Bookings2 amounted to $197.9 million, an increase or $19.9 million of 11.2% for the six-month period. The increase is primarily attributable to large project orders recorded by the Company's Italian and North American operations, notably in the marine and oil and gas markets. The increase is also attributable to higher MRO orders recorded by the Company's North American operations. The Company is encouraged by the recovery of its MRO order bookings, which were severely impacted by the global pandemic at the end of the prior fiscal year, and ultimately adversely affected the sales of its current fiscal year as explained in the prior paragraph. The increase in bookings for the six-month period was partially offset by a reduction in large project orders recorded by the Company's French operations. As a result of bookings outpacing sales in the current six-month period, the Company's book-to-bill ratio2 was 1.12 for the period. Furthermore, the total backlog2 increased by $13.3 million or 2.4% since the beginning of the fiscal year, amounting to $575.8 million as at August 31, 2021. Gross profit amounted to $51.4 million, an increase of $15.9 million or 45.0% for the six-month period. The gross profit for the first six-month period of 29.1% represented an increase of 470 basis points compared to the same period last year and is also the highest in recent history. The improvement in gross profit percentage is primarily attributable to the higher sales volume, which helped to cover the Company's fixed production overhead costs more efficiently. The Company's improved margins are also stemming from the margin improvement activities implemented over the course of the past fiscal years within the scope of the V20 restructuring and transformation plan. Additionally, the Company's gross profit also benefited from favorable movements in unrealized foreign exchange translation primarily attributable to the fluctuation of the U.S. dollar against the euro and the Canadian dollar for the six-month period when compared to the prior year. Finally, the increase in gross profit percentage was such that it could more than offset the impact of a lower amount of CEWS of $3.1 million for the six-month period compared to last year. The subsidies are allocated between cost of sales and administration costs. Net loss1 for the six-month period amounted to $0.1 million or $0.00 per share compared to a net loss1 of $7.0 million or $0.32 per share in the prior period. EBITDA2 for the six-month period amounted to $9.7 million or $0.45 per share compared to $0.1 million or $0.01 per share in the prior period. The improvement in EBITDA2 for the six-month period is primarily attributable to and improved gross profit, primarily due to an increased sales volume, while reflecting the notably improved product mix and margins resulting from the Company's targeted efforts under V20, described earlier. The Company's gross profit also benefited from favorable movements in unrealized foreign exchange translation for the six-month period when compared to the prior year. The improvement is also attributable to the absence of restructuring and transformation costs in the current fiscal year which totaled $2.9 million in the previous six-month period as well as a reduction in other expenses of $1.4 million for the six-month period primarily due to land clean-up costs of a former factory incurred in the second quarter of the prior year. On the other hand, these improvements were partially offset by an increase in administration costs of $10.4 million or 27.8% for the six-month period, primarily attributable to a decrease of $2.5 million in CEWS received by the Company compared to last year, an increase in sales commissions due to the improved sales volume for the period, a general increase in administration expenses that had been significantly lowered when the global pandemic broke out last year as well as an increase of $1.4 million in the costs recognized in connection with the Company's ongoing asbestos litigation. The favorable movements in the Company's net loss1 for the six-month period was primarily attributable to the same factors as explained above coupled with an unfavorable movement in income taxes. Dividend At the end of fiscal 2020, the Board of Directors deemed appropriate to suspend the quarterly dividend. The decision remains unchanged and will be reviewed on a quarterly basis. Conference call Financial analysts, shareholders, and other interested individuals are invited to attend the second quarter conference call to be held on Thursday, October 7, 2021, at 04:00 p.m. (EDT). The toll free call-in number is 1-800-768-2878, access code 21998213. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21998213. About Velan Founded in Montreal in 1950, Velan Inc. ( is one of the world's leading manufacturers of industrial valves, with sales of US$302.1 million in its last reported fiscal year. The Company employs close to 1,700 people and has manufacturing plants in 9 countries. Velan Inc. is a public company with its shares listed on the Toronto Stock Exchange under the symbol VLN. Safe harbour statement This news release may include forward-looking statements, which generally contain words like "should", "believe", "anticipate", "plan", "may", "will", "expect", "intend", "continue" or "estimate" or the negatives of these terms or variations of them or similar expressions, all of which are subject to risks and uncertainties, which are disclosed in the Company's filings with the appropriate securities commissions. While these statements are based on management's assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that it believes are reasonable and appropriate in the circumstances, no forward-looking statement can be guaranteed and actual future results may differ materially from those expressed herein. The Company disclaims any intention or obligation to update or revise any forward-looking statements contained herein whether as a result of new information, future events or otherwise, except as required by the applicable securities laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Non-IFRS and supplementary financial measures In this press release, the Company has presented measures of performance or financial condition which are not defined under IFRS ("non-IFRS measures") and are, therefore, unlikely to be comparable to similar measures presented by other companies. These measures are used by management in assessing the operating results and financial condition of the Company and are reconciled with the performance measures defined under IFRS. Company has also presented supplementary financial measures which are defined at the end of this report. Reconciliation and definition can be found on the next page. Net earnings (loss) before interest, taxes, depreciation and amortization ("EBITDA") Three-month periods ended   Six-month periods ended   (thousands, except amount per shares) August 31, 2021$ August 31, 2020$   August 31, 2021$   August 31, 2020$             Net income (loss)1 5,015 (5,112 ) (58 ) (6,998 )           Adjustments for:         Depreciation of property, plant and equipment 2,394 2,450   4,808   4,975   Amortization of intangible assets 451 626   1,009   1,194   Finance costs – net 526 44   1,055   362   Income taxes 2,271 (505 ) 2,902   608             EBITDA 10,657 (2,497 ) 9,716   141   EBITDA per share         Basic and diluted 0.49 (0.12 ) 0.45   0.01   The term "EBITDA" is defined as net income or loss attributable to Subordinate and Multiple Voting Shares plus depreciation of property, plant & equipment, plus amortization of intangible assets, plus net finance costs plus income tax provision. The terms "EBITDA per share" is obtained by dividing EBITDA by the total amount of subordinate and multiple voting shares. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Definitions of supplementary financial measures The term "Net new orders" or "bookings" is defined as firm orders, net of cancellations, recorded by the Company during a period. Bookings are impacted by the fluctuation of foreign exchange rates for a given period. The measure provides an indication of the Company's sales operation performance for a given period as well as well as an expectation of future sales and cash flows to be achieved on these orders. The term "backlog" is defined as the buildup of all outstanding bookings to be delivered by the Company. The Company's backlog is impacted by the fluctuation of foreign exchange rates for a given period. The measure provides an indication of the future operational challenges of the Company as well as an expectation of future sales and cash flows to be achieved on these orders. The term "book-to-bill" is obtained by dividing bookings by sales. The measure provides an indication of the Company's performance and outlook for a given period. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.   1 Net earnings or loss refer to net income or loss attributable to Subordinate and Multiple Voting Shares2 Non-IFRS and supplementary financial measures – see explanation above. Velan Inc. Consolidated Statements of Financial Position     (Unaudited)    (in thousands of U.S. dollars)    As at     August 31, 2021 February 28, 2021     $ $ Assets               Current assets       Cash and cash equivalents             76,448           74,688 Short-term investments               1,703                285 Accounts receivable            126,075         135,373 Income taxes recoverable                3,590             3,798 Inventories           240,225         204,161 Deposits and prepaid expenses               9,969             8,670 Derivative assets                    74                196             458,084         427,171      .....»»

Category: earningsSource: benzingaOct 7th, 2021

Lamb Weston (LW) Q1 Earnings Miss Estimates, Sales Rise Y/Y

Lamb Weston's (LW) first-quarter fiscal 2022 results reflect recovery in away-from-home frozen potato products demand, while declines in the retail channel were a drag. Lamb Weston Holdings, Inc. LW posted first-quarter fiscal 2022 results, with the top and the bottom line missing the Zacks Consensus Estimate. Sales improved year on year, while earnings reflected a decline.  While the company gained from recovery in away-from-home frozen potato products demand, declines in the retail channel were a drag. The company’s retail channel was affected by normalization of food-at-home purchases compared with pre-pandemic levels. Higher manufacturing and distribution costs, including cost inflation across key product inputs and transportation, as well as labor market headwinds adversely impacted the company’s gross profit.Management is optimistic about the recovery in the frozen potato category. However, impacts of adverse weather conditions along with pandemic-led industry wide challenges are likely to keep adding to the company’s cost burden, as the year progresses. Nevertheless, the company is undertaking prudent measures to mitigate the impacts of high costs and other supply chain headwinds.Quarter in DetailThe company’s bottom line came in at 20 cents per share came, which missed the Zacks Consensus Estimate of 38 cents. Earnings declined 67% from 61 cents reported in the prior-year quarter.Net sales amounted to $984.2 million, which advanced 13% year on year. The top line missed the Zacks Consensus Estimate of $999 million. Volumes rose 11% year over year, while price/mix went up 2%. Sales volumes were backed by a rebound in the away-from-home frozen potato products demand, with pandemic-led curbs on restaurants and other foodservice locations being lifted. This more than offset the volume decline in retail channel, which resulted from normalization of food-at-home purchases compared with the pre-pandemic levels. Price/mix were backed by higher prices charged from customers and favorable mix in all core segments.Gross profit plunged 29.2% to $151.3 million, as gains from higher sales volumes were offset by increased manufacturing and distribution costs on a per-pound basis. This reflects on double-digit cost inflation in key inputs such as edible oils as well as transportation, especially trucking and ocean freight. Volatility in the labor market were also a dragSG&A expenses escalated 16.6% to $91.1 million due to elevated incentive compensation and benefits as well as investments to enhance the company’s information technology, commercial and supply-chain operations. Rise in advertising and promotion expenses were mainly related to the launch of new products in the Retail segment.Adjusted EBITDA (including unconsolidated joint ventures) declined 39% to $123.4 million, due to lower income from operations and equity method investment earningsLamb Weston Holdings Inc. Price, Consensus and EPS Surprise  Lamb Weston Holdings Inc. price-consensus-eps-surprise-chart | Lamb Weston Holdings Inc. Quote Segment AnalysisSales in the Global segment increased 12% to $501.2 million. Volumes rose 10% and price/mix increased 2%. Sales volume was mainly backed by demand recovery in the United States, gains across key international markets as well as the benefits from limited time product offerings. Product contribution margin in the segment declined 45% to $42.6 million.Foodservice sales soared 36% to $321.4 million. Volumes and Price/mix increased 35% and 1%, respectively. Sales volumes were driven by a demand revival at small and regional chain restaurants, combined with independently-owned restaurants. Shipments to non-commercial customers like lodging and hospitality, schools and universities, sports and entertainment, healthcare as well as workplace environments improved year over year, though it remained below pre-pandemic levels. Product contribution margin increased 12% to reach $96.4 million.In the Retail segment, sales tumbled 14% to $132.5 million. Price/mix advanced 1% but volumes declined 15%. Sales volume were affected by reduced shipments of private label products and a slight decline in product sales volumes as food-at-home purchases began to normalize from the pre-pandemic levels. Product contribution margin slumped 59% to $14.8 million.Other Financial DetailsLamb Weston ended the quarter with cash and cash equivalents of $789.7 million, long-term debt and financing obligations (excluding current portion) of $2,698.6 million and total shareholders’ equity of $427.4 million. The company generated $161.8 million as net cash from operating activities for the 13 weeks ended Aug 29, 2021. Capital expenditures (including IT expenditure) amounted to $78.9 million. For fiscal 2022, the company expects cash used for capital expenditures (excluding buyouts) to be nearly $450 million.On Aug 11, 2021, the company amended its revolving credit facility to increase the capacity to $1 billion and extend the maturity date till Aug 11, 2026.During the first quarter, management paid out dividends worth $34.4 million and bought back shares worth $26 million, thereby returning $60.4 million to its shareholders. Lamb Weston has shares worth $144 million remaining under its current authorization of $250 million.Image Source: Zacks Investment ResearchGuidanceFor fiscal 2022, management expects net sales growth to exceed its long-term goal of low-to-mid single digits. For the second quarter, the company continues to expect net sales growth to be driven by higher volume, reflecting recovery in demand for frozen potato products as well as favorable comparison from the prior year quarter’s soft shipments. It continues to expect net sales growth in the second half of the year to project a balance of elevated volumes and better price/mix, as the company’s recent pricing actions are fully implemented.Net income and adjusted EBITDA (including unconsolidated joint ventures) are likely to be under pressure for the rest of fiscal 2022, as it continues to navigate through the impacts of the pandemic. In this respect the company has been grappling with supply-chain volatility, labor availability as well as considerable cost inflation of key production inputs, packaging and transportation. It also expects potato costs to rise on a per-pound basis due to adverse weather conditions in the Pacific Northwest. As a result, gross margin is anticipated to remain below pre-pandemic levels in fiscal 2022. Management previously expected earnings to slowly normalize and reach the pre-pandemic levels, in the second half of fiscal 2022.Apart from these, management expects operating expenses to rise in the near term due to continued investments in supply-chain, commercial and information technology operations. These investments are, however, likely to boost long-term growth and margin enhancement.Shares of the Zacks Rank #4 (Sell) company have declined 27.3% in the past three months compared with the industry’s fall of 2.7%.3 Consumer Staple Stocks You Can’t MissJ & J Snack Foods Corp. JJSF, flaunting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 200.4% in the last four quarters, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.Darling Ingredients Inc. DAR, also with a Zacks Rank #1, delivered an earnings surprise of 39.1% in the last four quarters, on average.United Natural Foods, Inc. UNFI has a trailing four-quarter earnings surprise of 13.1%, on average. It sports a Zacks Rank #1. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Darling Ingredients Inc. (DAR): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report J & J Snack Foods Corp. (JJSF): Free Stock Analysis Report Lamb Weston Holdings Inc. (LW): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 7th, 2021

Weyerhaeuser (WY) Expands Into Texas With AZEK Products Portfolio

Weyerhaeuser (WY) is set to offer TimberTech Outdoor Living products and AZEK Exteriors products with the latest collaboration. Weyerhaeuser Company WY has expanded its partnership with The AZEK Company AZEK in Texas, whereby the former will expand its offerings and introduce AZEK Exteriors and TimberTech premium outdoor living products to Texas customers.Through its Dallas and Houston distribution units, Weyerhaeuser will offer a wide range of low-maintenance and environmentally supportable TimberTech Outdoor Living products and AZEK Exteriors products throughout the Texas market with AZEK Building Products. With this partnership, Weyerhaeuser and AZEK Building Products will partner across 13 distribution centers throughout the United States.TimberTech Outdoor Living and AZEK Exteriors offer customers a range of high-performance products that are alternatives to wood with classy, natural aesthetics. Products come in a range of styles and are all supported by industry-leading warranties.A Look at Distribution BusinessWeyerhaeuser’s business segments — Timberlands, Real Estate, Energy and Natural Resources, and Wood Products — are categorized primarily on the basis of products and services. Now, the Wood Products unit is engaged in structural lumber, oriented strand board (OSB), engineered wood products and building materials distribution.Wood products earnings and adjusted EBITDA improved almost $0.5 billion sequentially for second-quarter 2021. The segment’s lumber, OSB and distribution businesses established new quarterly adjusted EBITDA records in the quarter. These exceptional results were delivered via navigating the ongoing challenges associated with transportation and resin availability in the quarter.Precisely, the segment’s distribution business’ adjusted EBITDA grew $36 million sequentially, reflecting a 92% improvement, given higher sales volumes for most products and improved margins.Share Price PerformanceImage Source: Zacks Investment ResearchShares of Weyerhaeuser have underperformed the Zacks Building Products - Wood industry so far this year. Nonetheless, despite rapidly changing market conditions owing to the COVID-19 pandemic outbreak, Weyerhaeuser’s operational excellence initiatives, solid momentum in U.S. housing, and solid repair and remodel demand bode well. The company delivered strong performance across businesses in second-quarter 2021 despite the uncertain lumber and resin market as well as rising transportation costs. It continues to focus on operational excellence and expects another $50-$75 million improvement across businesses in 2021.Zacks Rank & Key PicksWeyerhaeuser currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Some better-ranked stocks in the broader Construction space include Caesarstone Ltd. CSTE and Louisiana-Pacific Corporation LPX. While Caesarstone currently sports a Zacks Rank #1, Louisiana-Pacific carry a Zacks Rank #2 (Buy).Caesarstone and Louisiana-Pacific’s earnings are likely to increase 114.6% and 215.3%, respectively, this year. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Weyerhaeuser Company (WY): Free Stock Analysis Report LouisianaPacific Corporation (LPX): Free Stock Analysis Report Caesarstone Ltd. (CSTE): Free Stock Analysis Report The AZEK Company Inc. (AZEK): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 7th, 2021

Conagra (CAG) Q1 Earnings Top Estimates, Sales Down Y/Y

Conagra's (CAG) first-quarter fiscal 2022 earnings and sales decline year over year. Management raises fiscal 2022 organic net sales view. Conagra Brands, Inc. CAG posted mixed first-quarter fiscal 2022 results, with the top and the bottom lines declining year over year. Nevertheless, both metrics beat the Zacks Consensus Estimate. Sales in most segments were hurt by tough comparisons with the year-ago period’s initial demand surge. That said, the Foodservice segment benefited from a recovery in the restaurant traffic. Management also updated its fiscal 2022 organic net sales guidance upward.Quarter in DetailConagra’s quarterly adjusted earnings came in at 50 cents, which surpassed the Zacks Consensus Estimate of 48 cents per share, though it tumbled 28.6% year over year. The year-over-year downside was primarily caused by a lower gross profit.  Conagra generated net sales of $2,653.3 million, which inched down 1% year over year. The figure surpassed the Zacks Consensus Estimate of $2,547 million. The year-over-year sales decline was a result of the divestitures of the H.K. Anderson business, the Peter Pan peanut butter business and the Egg Beaters business. The divestitures are collectively referred to as Sold Businesses. Nevertheless, currency had a positive impact on sales.Organic net sales dropped 0.4% due to lower volumes to the tune of 2%, whereas price/mix improved 1.6%. Volumes were affected by tough comparisons with the year-ago period’s initial spike in at-home food demand stemming from the pandemic outbreak. Favorable price/mix was mainly a result of positive net pricing and brand mix. On a two-year compounded annualized basis, quarterly net sales went up 5.3% and organic net sales rose 7%.CONAGRA BRANDS Price, Consensus and EPS Surprise  CONAGRA BRANDS price-consensus-eps-surprise-chart | CONAGRA BRANDS Quote Gross profit declined 16.9% to $673 million, while gross margin contracted 486 basis points to 25.4%. The downside was a result of a decline in net sales, cost of goods sold inflation as well as lost profits related to Sold Businesses. Nevertheless, cost synergies associated with the buyout of Pinnacle Foods, supply-chain productivity and lower pandemic-induced costs offered some respite.Selling, general and administrative (SG&A) expenses, including advertising and promotional (A&P) costs increased 3.3% to $310 million. A&P costs grew 35.3% to $62 million thanks to increased e-commerce investments.Segmental DetailsGrocery & Snacks: Quarterly net sales in the segment came in at $1,075.1 million, down 4.9% year over year due to lower organic sales and impacts from Sold Businesses. Organic net sales declined 3.3%, with volumes down 3.3%. Volumes were mainly hurt by lapping of the year-ago quarter’s spike in at-home food demand. Price/mix was flat year over year. During the first quarter, Conagra saw an increased share in staple categories like canned tomatoes and chili as well as snacking categories like microwave popcorn and pudding.Refrigerated & Frozen: Net sales fell 2.5% to $1,101.8 million due to the impact of Sold businesses and reduced organic net sales. Organic sales inched down 1.7%, with volumes down 3.8%. Price/mix was up 2.1%. The company saw an improved share in categories like frozen handhelds, frozen single serve meals and whipped topping.International: Net sales increased 8.1% to $236.6 million, reflecting positive impact from foreign currency translations and improved organic net sales. However, adverse impact from the Solid Businesses was a downside. On an organic basis, net sales rose 2%, as volumes fell 4.6% and price/mix rose 6.6%.Foodservice: Sales advanced 20.9% to $239.8 million, owing to a rise in organic sales, slightly offset by the Sold Businesses’ impact. Organic sales surged 21.7% and volumes were up 20.1%, backed by recovering restaurant traffic. Price/mix inched up 1.6%.Other UpdatesConagra exited the quarter with cash and cash equivalents of $67 million, senior long-term debt, excluding current installments of $8,779.6 million and total stockholders’ equity of $8,635.9 million.During the quarter, Conagra paid out a quarterly dividend of 27.5 cents per share. The company repurchased nearly 1.5 million shares worth $50 million in the quarter.Image Source: Zacks Investment ResearchFiscal 2022 GuidanceThe company had earlier stated that it expects consumer demand for its retail products to be above historical levels during fiscal 2022, thanks to new consumer habits cultivated amid the pandemic. Taking into account the year-to-date trends, which includes better-than-anticipated consumer demand, lower-than-expected demand elasticities as well as improved pricing actions, management is raising its organic net sales view. Management reaffirmed its earnings guidance for fiscal 2022.Organic net sales are now anticipated to rise 1% year over year. The company had earlier expected the metric to be nearly flat year over year. Adjusted operating margin is anticipated to be nearly 16% and adjusted earnings per share are likely to be about $2.50.The company expects to see escalated cost of goods sold inflation. Although management is focused on undertaking relevant saving and pricing efforts to combat this inflation, the timing and gains from these initiatives are likely to be more skewed toward the second half of fiscal 2022.Shares of the Zacks Rank #3 (Hold) company have declined 4.5% in the past three months compared with the industry’s fall of 2.9%.3 Food PicksDarling Ingredients Inc. DAR, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 39.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.United Natural Foods, Inc. UNFI, currently flaunting a Zacks Rank #1, has a trailing four-quarter earnings surprise of 13.1%, on average.Sysco Corporation SYY, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 13.3%, on average. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CONAGRA BRANDS (CAG): Free Stock Analysis Report Darling Ingredients Inc. (DAR): Free Stock Analysis Report Sysco Corporation (SYY): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 7th, 2021

Reliance Steel (RS) Wraps Up Merfish United Acquisition

Reliance (RS) completes the acquisition of Merfish, in line with its strategy of taking over companies that have an immediate accretion. Reliance Steel & Aluminum Co. RS recently completed the acquisition of Merfish United, a leading U.S. distributor of tubular building products, from One Equity Partners, a middle market private equity firm. The acquisition is effective Oct 1, 2021. The plans for the takeover were announced in August 2021. The financial and other terms of the transaction have not yet been disclosed.Merfish United’s product portfolio includes full lines of steel pipe, copper tubing, plastic pipe, electrical conduit, and related products for the commercial, residential, municipal, and industrial building markets. For the 12 months ended Jun 30, 2021, Merfish United recorded net sales of roughly $500 million.Reliance maintained that the buyout is in sync with its strategy of taking over companies that have an immediate accretion coupled with strong management teams. This has also enabled the company to focus on adjoining businesses beyond traditional metal service centers and has broadened its exposure to the copper and plastic products domain.Reliance Steel’s shares have soared 28.3% over the past year compared with the industry’s 84.2% rise. The company’s estimated earnings growth rate for the current year is pegged at 147.7%.Image Source: Zacks Investment ResearchIn the second quarter, the company recorded adjusted earnings of $5.06 per share, which increased from $1.36 in the year-ago quarter and beat the Zacks Consensus Estimate of $4.94. It raked in net sales of $3,418.8 million, which jumped 69.3% year over year and topped the Zacks Consensus Estimate of $3,118.1 million.Reliance Steel remains optimistic about the business environment and sees robust demand in the majority of its end markets. However, factors such as bottlenecks in metal supply and supply-chain disruptions impacting shipments, which were prevalent in the second quarter, are expected to persist in the third quarter as well. Its estimates its tons sold to be down 1% to up 1% in the third quarter compared with the prior quarter. Moreover, the metal prices at the beginning of the third quarter are higher than the average in the second quarter. Due to this upside, the company anticipates its average selling price per ton sold for the third quarter to go up in the range of 7-9%. The company expects adjusted earnings per share in a band of $5.55 to $5.75 for the quarter.Reliance Steel & Aluminum Co. Price and Consensus Reliance Steel & Aluminum Co. price-consensus-chart | Reliance Steel & Aluminum Co. QuoteZacks Rank & Key PicksReliance Steel currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the industrial products space are Alcoa Corp. AA, Greif, Inc. GEF, each flaunting a Zacks Rank #1 (Strong Buy), and Century Aluminum Company CENX, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Alcoa has a projected earnings growth rate of roughly 637.9% for the current year. The company’s shares have skyrocketed 284.4% over the past year.Greif has an expected earnings growth rate of around 63.7% for the current fiscal. The company’s shares have gained 72.8% over the past year.Century has an expected earnings growth rate of 123.1% for the current year. The company’s shares have jumped 99.2% over the past year. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alcoa Corp. (AA): Free Stock Analysis Report Reliance Steel & Aluminum Co. (RS): Free Stock Analysis Report Greif, Inc. (GEF): Free Stock Analysis Report Century Aluminum Company (CENX): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 7th, 2021

Kroger (KR) Unveils Holiday Hiring Plan, To Deploy 20K Staff

Kroger (KR) has been undergoing a complete makeover not only with respect to products but also in terms of the way consumers prefer shopping grocery. With the holiday season approaching, retailers need to channelize their strength and make strategic investments to provide consumers fast, convenient and safe shopping experience. Keeping all these aspects in mind, The Kroger Co. KR recently unveiled its hiring plan for the holidays.The grocery retailer plans to recruit more than 20,000 associates through its nationwide hiring event on Oct 13 for job roles in retail, e-commerce, manufacturing, supply chain, merchandising, logistics, corporate, and pharmacy and healthcare. Interviews will be conducted virtually as well as on-site, and new appointees can join in as little as three days.The job designations include store leaders, customer service managers, personal shoppers, e-commerce specialists, digital marketing managers, software engineers, data architects, delivery drivers, warehouse workers, machine operators, category and procurement managers, financial analysts, pharmacists, pharmacy technicians, project managers and administrative supporters. Image Source: Zacks Investment ResearchUndoubtedly, Kroger is committed toward its employees, and offers them competitive salaries and wages as well as healthcare and retirement benefits. It also provides on-demand, role-specific training to associates and aids them in career advancement. In the past three years, management has spent $800 million in associate wages and training, and is investing an additional $350 million this year. This has resulted in an increase in average hourly wage to more than $16 nationwide. Including benefits, total compensation amounts to more than $21 an hour.Tim Massa, senior vice president and chief people officer, said, “It's an exciting time to work in grocery retail, and as one of the leading retailers and employers in America, we're committed to offering associates a culture of opportunity and career with purpose, competitive pay and benefits, and flexible schedules.”Kroger has been undergoing a complete makeover not only with respect to products but also in terms of the way consumers prefer shopping grocery. This Cincinnati, OH-based company has been making significant investments to enhance product freshness and quality as well as expand digital capabilities and payment solutions. Shares of this Zacks Rank #1 (Strong Buy) company have rallied 26.5% so far this year against the industry’s decline of 2%. You can see the complete list of today’s Zacks #1 Rank stocks here.Other Retailers on a Hiring SpreeThe retail behemoth, Walmart WMT, had earlier announced plans of hiring 20,000 new workers at more than 250 distribution centers, fulfillment centers and transportation offices. Job roles included that of order fillers, lift drivers, freight handlers, technicians and management positions.Kohl's Corporation KSS had also unveiled plans of recruiting nearly 90,000 seasonal workers to cater to the high demand during this busy shopping period. We note that DICK’S Sporting Goods DKS had also announced plans of deploying roughly 10,000 seasonal workers — the highest in its history.No wonder, the festive season, which accounts for a sizable chunk of yearly revenues, is a make or break for retailers. Per Mastercard SpendingPulse, U.S. retail sales, excluding automotive and gas, are anticipated to increase 7.4% from a year earlier during the traditional holiday period that runs from Nov 1-Dec 24. With e-commerce still being one of the preferred modes for shopping, Mastercard SpendingPulse foresees online sales to rise by 7.6%. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Kohls Corporation (KSS): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis Report The Kroger Co. (KR): Free Stock Analysis Report DICKS Sporting Goods, Inc. (DKS): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 7th, 2021

TEN Ltd Reports Results for the Second Quarter and Six Months Ended June 30, 2021

Initiation of dual-fuel newbuilding program for up to six tankers chartered to a major oil concern Timely completion of four-vessel newbuilding program chartered to a US oil major Half-year revenues of $275 million despite challenging market $87 million further net debt reduction in first six months Total opex decrease irrespective of larger fleet and dry-dockings Strong cash reserves of $140 million ATHENS, Greece, Oct. 07, 2021 (GLOBE NEWSWIRE) -- TEN, Ltd (TEN) (NYSE:TNP) (the "Company") today reported results (unaudited) for the six months and second quarter ended June 30, 2021. SIX MONTHS 2021 SUMMARY RESULTSDuring the first half of 2021 TEN continued its countercyclical growth strategy, taking advantage of the weak markets created by the pandemic. In addition, and as a result of its balanced strategy with 60% of vessels under secured employment, TEN weathered the impact of market pressures and managed to contain its net loss to $18.7 million, before a non-cash loss of $5.8 million on the sale of three vessels. The sale related to the disposal of two suezmax crude tankers, a transaction that generated $44.7 million in proceeds and released $16.6 million of cash after related loan prepayments. In addition, a product carrier was transferred in May to our joint venture partners that released a further $4.4 million. Despite the prolonged weak market, gross revenues in the first half of 2021 amounted to $275.4 million and the daily time charter equivalent rate per vessel, for the same period, averaged $17,701. An overall positive rate, in most cases well above market spot rates per vessel category during this period, highlighting the contribution of our time charters in weak markets. Fleet utilization during the first half of 2021 was at 92.3% as a total of eight vessels underwent dry docking, four of which ahead of schedule in preparation for the anticipated market upturn. Total vessel operating expenses, reflecting pro-active cost controls, declined from the first half of 2020 and stood at $87.7 million. Average daily opex per vessel were very competitive at $7,834. G&A expenses fell by 5% compared to the first half of 2020. Depreciation and amortization exhibited slight but anticipated increases, due to the larger number of vessels in the fleet and the aforementioned dry-dockings. Operating losses, excluding those on vessel sales, were contained to $4.9 million. In line with the Company's debt reduction strategy, total debt fell by a further $87 million in the six months ended June 30, 2021. Net debt to capital at June 30, 2021 was 50%, while our overall cost of debt remained at a very competitive 2%, reflecting the quality of the fleet and the Company's long-standing track record in the tanker and debt markets. From the peak of 2016, the Company has reduced its debt by close to $340 million in addition to $100 million of preferred shares redemptions. Finance costs in the first six months of 2021 fell by $32.9 million or over 69%, due to the reduction in outstanding loans and benefits resulting from the bunker hedges in place. Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) for the first six months of 2021 was at $66.8 million, reflecting market conditions. Cash and cash equivalent levels, despite newbuilding installments in addition to loan repayments during the first six months of 2021, stood at a healthy $140 million. Q2 2021 SUMMARY RESULTS The second quarter of the year mostly followed the first six months in terms of activity and market rates, leading to a loss of $13.8 million before non-cash losses of $5.8 million. Voyage revenues totaled $136 million with utilization at 93%. Daily average TCE per vessel stood at $17,239, an overall positive rate, again well in excess of spot market rates per category of vessel. Operating expenses increased by a manageable $3.5 million due mainly to the impact of the heightened number of dry-dockings as four vessels were brought forward from their scheduled due date. On an average daily per vessel basis, operating expenses per ship per day reached $8,241, an increase that seems likely to reverse over the coming months as conditions normalize.   G&A expenses were again lower when compared to the 2020 second quarter. Interest and Finance costs declined by 46% to $7.5 million due to the $87 million reduction in total debt since the end of 2020, and positive bunker hedge valuations, cash gains and decreases in margins on certain loans. Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) for the second quarter of 2021 reached $29.5 million. SUBSEQUENT EVENTS Following the successful delivery of four vessels with long term charters to a US oil major, in September of 2021 the Company signed newbuilding contracts for the construction of four to up to six dual-fueled LNG powered aframax tankers against long-term employment to a major oil concern. Assuming all six are built, the expected gross revenues from these contracts could be approximately $350 million. DIVIDEND – COMMON SHARESThe Company paid a semi-annual dividend of $0.10 per common share on July 20, 2021, despite the challenging market environment. Inclusive of this payment, TEN has paid common shareholders approximately half a billion dollars in dividends, equating to about $26 million per annum since its 2002 NYSE listing. ATM PROGRAMThe Company's ATM program for both preferred shares and common shares has netted $19.6 million during the second quarter of 2021 and $15.7 million from the beginning of the third quarter to date. CORPORATE STRATEGY & OUTLOOKWith the pandemic gradually waning, the anticipated alignment of the tanker markets to those of the container and dry bulk sectors is beginning to take shape. The long-awaited resumption of air travel and overall economic activity is setting the foundations for a tanker lift-off. In view of this, we are seeing increased activity from major end-users and in particular long-term business. Such appetite is evidenced across all tanker segments and should result in firmer rates as we move into the winter months. Asset prices seem to have turned the corner as well with inquiries for second-hand tonnage on the rise. The basic favorable fundamentals that should help propel the sector remain firmly in place. In particular, the low orderbook, the advanced age of the global fleet, the high scrapping prices in the context of increases in oil supplies and the building of new refineries in distant locations. As Covid restrictions are lifted around the globe, the pent-up consumer demand of prior months raises hopes that oil demand could surpass 100 million barrels per day, helped, as in prior years, by Chinese and Indian imports, especially for their strategic petroleum reserves. There are also signs that product trade carriage is beginning to revive. As we have frequently indicated, our long-term strategy is to always seek opportunities to maintain a young and modern fleet profile, so we continue to dispose of older vessels and replace them with new generation tankers with long-term charters to first-class charterers. "In the first months of 2021, we experienced the worst tanker market in recent memory. However, the tried and tested balanced employment policy of the Company assisted to somewhat absorb the pressure. Capitalizing on our strong cash balance and access to capital, management continued the countercyclical investment strategy with the ordering of a minimum four up to six new technology dual fuel LNG powered tankers for our top tier clients, the first such investment in our Company's history. These newbuildings are expected to enhance the Company's revenue and profit generation capacity and reinforce the Company's environmental footprint." Mr. George Saroglou, COO of TEN commented. "With the majority of the vessels able to capture the anticipated upside, TEN is poised to be a primary beneficiary of the tanker upturn and continue to offer investors a mix of secured income, upside potential and dividend payments," Mr. Saroglou concluded. CONFERENCE CALL Today, Thursday, October 7, 2021 at 11:00 a.m. Eastern Time, TEN will host a conference call to review the results as well as management's outlook for the business. The call, which will be hosted by TEN's senior management, may contain information beyond that which is included in the earnings press release. Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 877 553 9962 (US Toll Free Dial In), 0808 2380 669 (UK Toll Free Dial In) or +44 (0)2071 928592 (Standard International Dial In). Please quote "Tsakos" to the operator. To listen to the archived audio file, visit our website and click on Corporate Presentations under our Investors Relations page. The audio replay of the conference call will remain available until Thursday, October 14, 2021. SIMULTANEOUS SLIDES AND AUDIO WEBCASTThere will also be a simultaneous live, and then archived, slides webcast of the conference call, available through TEN's website ( The slides webcast will also provide details related to fleet composition and deployment and other related company information. This presentation will be available on the Company's corporate website reception page at Participants for the live webcast should register on the website approximately 10 minutes prior to the start of the webcast. ABOUT TENTEN, founded in 1993 and celebrating this year 28 years as a public company, is one of the first and most established public shipping companies in the world. TEN's diversified energy fleet currently consists of 71 double-hull vessels, including one LNG carrier, one suezmax DP2 shuttle tanker and four dual-fuel aframax vessels under construction, constituting a mix of crude tankers, product tankers and LNG carriers, totaling 8.0 million dwt. ABOUT FORWARD-LOOKING STATEMENTSExcept for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. TEN undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. For further information, please contact: CompanyTsakos Energy Navigation Ltd.George SaroglouCOO+30210 94 07 Investor Relations / MediaCapital Link, Inc.Nicolas BornozisMarkella Kara+212 661                             TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES   Selected Consolidated Financial and Other Data   (In Thousands of U.S. Dollars, except share, per share and fleet data)                                 Three months ended     Six months ended       June 30 (unaudited)     June 30 (unaudited)   STATEMENT OF OPERATIONS DATA   2021       2020       2021       2020                               Voyage revenues $ 136,415     $ 190,770     $ 275,429     $ 369,669                               Voyage expenses   47,567       35,412       94,866       68,120     Charter hire expense   6,325       5,421       12,443       10,561     Vessel operating expenses   46,169       42,705       87,652       88,194     Depreciation and amortization   35,798       34,503       70,850       69,331     General and administrative expenses   7,627       7,665       14,471       15,269     Loss on sale of vessels   5,817       4,688       5,817       3,050     Impairment charges   -       13,450       -       13,450     Total expenses   149,303       143,844       286,099       267,975                                    Operating income (loss)   (12,888 )     46,926       (10,670 )    .....»»

Category: earningsSource: benzingaOct 7th, 2021

Why Nike Hasn’t Weighed In on NBA Superstar Kyrie Irving’s Vaccine Hesitancy

Brooklyn Nets star point guard Kyrie Irving has put Nike in an awkward position. And that’s not even referring to the time in July when he called the company’s design of the latest Kyrie 8 signature shoes “trash” on social media. (Irving subsequently walked those comments back.) Irving, one of the most dazzling players on… Brooklyn Nets star point guard Kyrie Irving has put Nike in an awkward position. And that’s not even referring to the time in July when he called the company’s design of the latest Kyrie 8 signature shoes “trash” on social media. (Irving subsequently walked those comments back.) Irving, one of the most dazzling players on the globe who every game seems to pull off some basketball magic trick heretofore never seen, has to this point hesitated to receive a COVID-19 vaccination, a position that has caused everyone from Kareem Abdul-Jabbar, New York City mayor Bill de Blasio, and Spain’s prime minister to oppose his stance. Under New York City law, Irving cannot compete in Brooklyn home games, or practice at the team’s facility, without at least one does of a COVID-19 vaccine. [time-brightcove not-tgx=”true”] (While Irving has not publicly confirmed he’s unvaccinated, he participated in Nets media day remotely on Sept. 27, and did not practice with the team in Brooklyn on Tuesday due to the city’s vaccination protocols.) Nike, Irving’s biggest sponsor, plans to release the Kyrie 8s in November. Sales woulds benefit if he were actually playing, full time. The company—not to mention the NBA, his Nets teammates and fans—wants Irving to receive a vaccine; some 95% of NBA players are already vaccinated. TIME reached out to Nike for comment on the Irving situation. Nike is chose to stay mum on the matter. Read More: Brands Continue to Back Naomi Osaka, Showing An Evolution in How Sponsors Treat Athletes We’re living in an age when consumers demand that companies take stands on important issues. Nike itself, for example, threw its full support behind Colin Kaepernick after his social justice protest effectively got him fired from the NFL. Supporting vaccines—and public health—would seem like a worthy cause for the company. Not to mention in its own self-interest. If Irving gets sick, his performance could suffer. If he spreads the disease, his reputation could take a serious hit. So by staying silent on Irving, is Nike being hypocritical, or just carrying out a smart business strategy that protects a company that generated $44.5 billion in revenues in its most recent fiscal year? It’s probably some combination of both. Nike’s new vaccine mandate Just this week, Nike announced that all U.S. office-based employees will need to be vaccinated. The company plans on calling its workers back to offices on January 10. So while Irving may not technically be a Nike employee, the company’s position could be interpreted as a double standard. “If Nike and other sponsors believe that vaccines are important and everyone should get them, they should say the same about their athletes,” says Ricardo Fort, former VP of global sports and entertainment partnerships at Coca-Cola who now has is own consulting firm. “I don’t see a reason for having two different approaches.” From a strategic perspective, however, Nike has good reason to stay on the sidelines. First off, Irving may soon receive his shot: the Nets’ first game in Brooklyn is on October 24, and he only needs a first vaccination shot to be eligible to play. So Irving has some time to decide whether he’s willing to miss games. And while some consumers may be upset about Kyrie’s stance, they’re not taking it out on Nike—at least not yet. So the company has little incentive to inject itself into the vaccine wars. “Look, their business is built on on selling sneakers and apparel,” says Scott Rosner, a sports consultant and academic director of Columbia University’s sports management program. “There’s a social justice component of what they do. But that’s not what drives their business and their growth.” No stance, more profit? While the numbers would indicate that most consumers disagree with Irving’s stance—62% of Americans have received at least one vaccine dose, and 56% are fully vaccinated—that might not really matter. “From Nike’s perspective, athletes do have freedom of choice,” says Rosner, “and, at the end of the day, the bottom line is still the bottom line. Kyrie Irving sells a significant number of sneakers for Nike. That kind of thing, at least for the time being, allows them to take more of a hands off approach.” If Irving ultimately decides to sit out his home games, Nike may have to craft some sort of response. But the timing of his decision—on the heels of the release of his latest Nike shoe—would likely prove more harmful to business than any kind of mass backlash. “Brand shaming and virtue signaling by advocacy groups of all types have become so commonplace as to have lost part of their power and influence,” says David Carter, founder of the Sports Business Group and adjunct professor at the University of Southern California’s Marshall School of Business. Remember, when Nike threw its weight behind Kaepernick, loud calls for Nike boycotts followed. Instead, sales rose. “We can disagree with Irving’s misunderstanding of science,” says Rosner. “But does that make it rise to the level of a boycott, where there’s going to be a mass boycott against Kyries? I don’t think so.” Irving is a complicated character. He’s done plenty of good, like committing $1.5 million to supplement the income of WNBA players who chose to sit out their 2020 season due COVID-19 concerns or to work on social justice issues. But he has also shared flat-earth theories, and last season broke NBA safety protocols by attending a family birthday party maskless. Now on the eve of the NBA’s 75th season, he’s created a vaccine controversy. “It’s a bad spot,” says longtime sports business professor Kenneth Shropshire, who leads Arizona State’s Global Sports Institute. “It’s hard for Nike to lay low. But I think that’s the best thing they can do.” While hoping he just gets that jab.        .....»»

Category: topSource: timeOct 6th, 2021

Constellation Brands (STZ) Q2 Earnings Lag Estimates, Sales Beat

Constellation Brands (STZ) Q2 results reflect gains from robust consumer demand, strength in the beer business. and organic sales growth in the wine and spirits business. Constellation Brands Inc. STZ reported lower-than-expected earnings in second-quarter fiscal 2022 results, while the top line beat the Zacks Consensus Estimate. Sales also improved year over year driven by continued growth in the beer business and robust consumer demand. Constellation Brands raised its comparable earnings per share view for fiscal 2022.Constellation Brands posted fiscal second-quarter comparable earnings of $2.38 per share, which declined 14% year over year and missed the Zacks Consensus Estimate of $2.78. On a reported basis, the company’s earnings per share was 1 cent, which included Canopy Growth equity losses of 13 cents. Excluding the impact of Canopy Growth, it posted comparable earnings of $2.52 per share, down 13% from the year-ago period.Net sales improved 5% to $2,371.1 million and beat the Zacks Consensus Estimate of $2,316.4 million. Organic net sales advanced 14% year over year. Sales benefited from double-digit net sales growth at the beer business, and organic sales growth in the wine and spirits business.Constellation Brands Inc Price, Consensus and EPS Surprise Constellation Brands Inc price-consensus-eps-surprise-chart | Constellation Brands Inc QuoteAt the company’s beer business, sales climbed 14% to $1,861.3 million, including an 11.7% increase in shipment volumes and 7.3% depletion volume growth. Sales growth at the segment was driven by robust consumer demand for its     iconic brands. Depletion volume benefited from continued strength in Modelo Especial and Corona Extra.Depletion volume increased 16% for the Modelo Especial and nearly 5% for Corona Extra. The Modelo Especial became the No. 1 beer brand, thus strengthening its leadership position in the high-end category. It was also the largest share gainer in dollar sales in the U.S. beer category in IRI channels. Meanwhile, Corona Extra was the No. 2 share gainer and No. 3 in the high-end in IRI channels.Sales in the wine and spirits segment decreased 18% to $509.8 million in the fiscal second quarter. Organic net sales for the segment advanced 15%. Organic net sales were driven by gains from consumer-driven innovation initiatives. Solid performances by The Prisoner Brand Family, Kim Crawford, and Meiomi were key growth drivers.Shipment volume in the wine and spirits business slumped 36.2%, while depletions fell 2.3%. Organic shipment volume was up 5.7%. In the United States, the shipment volume plunged 41.1%, while organic shipment was flat with last year.In the past three months, shares of this Zacks Rank #3 (Hold) company declined 6.1% compared with the industry’s fall of 11.4%.Image Source: Zacks Investment ResearchMarginsAdjusted gross profit rose 2% year over year to $1,214.5 million. Meanwhile, adjusted gross profit margin contracted 130 basis points (bps) to 51.2%.Constellation Brands' comparable operating income declined 8% to $730.3 million, while comparable operating margin contracted 450 bps to 30.8%.The operating margin in the beer segment contracted 530 bps to 37.2% due to higher cost of goods sold (COGS), marketing investments and SG&A expense, which more than offset gains from favorable pricing, mix and positive currency translations. This was somewhat negated by a rise in marketing spend and a higher cost of goods sold. Increased COGS primarily stemmed from obsolescence of $66 million associated with excess inventory of hard seltzers, due to a slowdown in the overall category in the United States.The wine and spirits segment’s operating margin contracted 620 bps to 19.7% on the bulk sales of smoke-tainted wine, which was margin-dilutive, and higher SG&A and marketing expenses and increased COGS. This was partly offset by gains from improved mix stemming from the existing portfolio and divestitures.Financial PositionConstellation Brands ended the fiscal second quarter with cash and cash equivalent of $103.4 million. As of Aug 31, 2021, it had $10,081.7 million in long-term debt (excluding current maturities) along with total shareholders’ equity (excluding non-controlling interest) of $11,192.7 million.On Aug 31, 2021, the company generated an operating cash flow of $1,525.9 million and adjusted free cash flow of $1,172.5 million. It has repurchased 6.2 million shares for $1.4 billion through September of fiscal 2022.On Oct 5, 2021, the company announced a quarterly dividend of 76 cents per share for Class A stock and 69 cents for Class B stock. The dividend is payable on Nov 19 to its shareholders of record as of Nov 5.OutlookBacked by its strong core beer business results and ongoing share repurchase activity, Constellation Brands updated its earnings guidance for fiscal 2022. The company now expects net sales growth of 9-11% for the beer segment compared with 7-9% growth mentioned earlier. Operating income for the beer business is anticipated to increase 4-6%, compared with 3-5% growth predicted previously. The raised beer business guidance is backed by solid performance of its core beer portfolio.The company continues to predict net sales and operating income for the wine and spirits business to decline 22-24% and 23-25%, respectively. Organic sales for the wine and spirits segment are likely to grow 2-4%.The company now expects interest expenses of $355-$365 million for fiscal 2022 compared with $360-$370 million expected earlier. It anticipates a reported tax rate of 83% and comparable tax rate of 20%, excluding Canopy equity earnings impact. Weighted average diluted shares outstanding is expected to be 192 million. The company expects share repurchases worth $1.4 billion in fiscal 2022.Including the share repurchases through September only, Constellation Brands now estimates reported earnings per share of 30-60 cents, down from $2.70-$3.00 stated earlier. On a comparable basis, excluding the Canopy business, earnings per share are expected to be $10.15-$10.45, up from $10-$10.30 mentioned earlier. The company reported earnings per share of $10.23 on a reported basis and $10.44 on a comparable basis, excluding Canopy Growth in fiscal 2021.Constellation Brands expects to generate an operating cash flow of $2.4-$2.6 billion for fiscal 2022, while free cash flow is estimated to be $1.4-$1.5 billion. The company plans to incur capital expenditure of $1-$1.1 billion in fiscal 2022, excluding $900 targeted for the Mexican beer operations’ expansion activities.Better-Ranked Stocks to ConsiderAlbertsons Companies, Inc. ACI has a long-term earnings growth rate of 12%. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Coca-Cola FEMSA S.A.B. de C.V. KOF, with a Zacks Rank #2 at present, has a long-term earnings growth rate of 14.3%.Coca-Cola Europacific Partners CCEP, a Zacks Rank #2 stock, has a long-term earnings growth rate of 21.1%. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Albertsons Companies, Inc. (ACI): Free Stock Analysis Report Constellation Brands Inc (STZ): Free Stock Analysis Report Coca Cola Femsa S.A.B. de C.V. (KOF): Free Stock Analysis Report CocaCola Europacific Partners (CCEP): Get Free Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 6th, 2021

Fed: Singing The Inflation Blues

With inflation surging and Powell praying for a “transitory” miracle, the troubles confronting the Fed are accelerating, not decelerating. Q3 2021 hedge fund letters, conferences and more “I got the blues, Got those inflation blues” — B.B. King How The Fed Can Control Inflation To explain, I wrote on Sep. 24: I’ve warned on several […] With inflation surging and Powell praying for a “transitory” miracle, the troubles confronting the Fed are accelerating, not decelerating. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Icahn eBook! Get our entire 10-part series on Carl Icahn and other famous investors in PDF for free! Save it to your desktop, read it on your tablet or print it! Sign up below. NO SPAM EVER (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more “I got the blues, Got those inflation blues” -- B.B. King How The Fed Can Control Inflation To explain, I wrote on Sep. 24: I’ve warned on several occasions that the only way for the Fed to control inflation is to increase the value of the U.S. dollar and decrease the value of commodities. However, with commodities’ fervor accelerating on Sep. 23 – a day when the USD Index declined – the price action should concern Chairman Jerome Powell. As a result, FOMC participants’ 2022 inflation forecast is likely wishful thinking and they may find that a faster liquidity drain (which is bullish for the U.S. dollar) is their only option to control the pricing pressures. To that point, with energy prices increasingly unhinged and WTI on pace for its seventh-straight week of weekly gains, the S&P Goldman Sachs Commodity Index (S&P GSCI) has been on fire recently. For context, the S&P GSCI contains 24 commodities from all sectors: six energy products, five industrial metals, eight agricultural products, three livestock products and two precious metals. However, energy accounts for roughly 54% of the index’s movement. Please see below: To explain, the green line above tracks the S&P GSCI’s current rally off of the bottom, while the red line above tracks the S&P GSCI’s rally off of the bottom in 2009-2010 (following the global financial crisis). If you analyze the middle of the chart, you can see that the S&P GSCI has completely run away from the 2009-2010 analogue. For context, at this point in 2009-2010, the S&P GSCI had rallied by 77% off of the bottom. However, as of the Oct. 5 close, the S&P GSCI has now rallied by 154% off of the April 2020 bottom. Furthermore, with higher energy and materials prices exacerbating the cost-push inflationary spiral, signs of stress remain abundant. For example, IHS Markit released its U.S. Manufacturing PMI on Oct. 1. And while the headline index declined from 61.1 in August to 60.7 in September, Chris Williamson, Chief Business Economist at IHS Markit, said that “prices charged for those goods leaving the factory gate also surged higher again in September, rising at a rate exceeding anything seen in nearly 15 years of survey history.” Please see below: Source: IHS Markit Singing a similar tune, the Institute for Supply Management (ISI) released its Services PMI on Oct. 5. For context, the U.S. service sector has suffered the brunt of the Delta variant’s wrath. And though pricing pressures aren’t as feverish as they are in the U.S. manufacturing sector, the report revealed that inflation increased at a “faster” pace and that “all 18 services industries reported an increase in prices paid during the month of September.” PepsiCo 3Q21 Earnings In addition, PepsiCo, Inc. (NASDAQ:PEP) released its third-quarter earnings on Oct. 5. And after beating analysts’ estimates on both the top and bottom lines, the beverage giant raised its full-year guidance. However, while demand remains resilient, 11.6% year-over-year (YoY) consolidated net revenue growth coincided with a 3% decline in diluted earnings per share (EPS). Despite that though, CEO Ramon Laguarta told analysts during the company’s Q3 earnings call that “what we're seeing across the world is much lower elasticity on the pricing that we've seen historically,” and as a result, price hikes are scheduled to commence in the coming months. For context, ‘elasticity’ attempts to quantify the change in demand that results from a change in price. And with CFO Hugh Johnston expecting charge inflation to outpace cost inflation going forward, “lower elasticity” is materially problematic for the Fed. Please see below: Source: PepsiCo/The Motley Fool If that wasn’t enough, BMO Harris Bank announced on Oct. 5 that it will increase its minimum hourly wage for all branch and call-center employees by a “20 Percent Minimum” to $18 an hour. For context, BMO Harris Bank has more than 500 branches and more than 12,000 employees in the U.S. Please see below: Source: BMO Harris Bank Powell’s Inflationary Conundrum More importantly, though, with Powell’s inflationary conundrum helping swing the double-edged sword that’s been fundamentally slashing the PMs, the USD Index rallied by 0.20% on Oct. 5 and U.S. Treasury yields strengthened across the board. Please see below: Source: As it relates to the dollar story, the USD Index’s fundamental strength is underwritten by the ‘dollar smile.’ To explain, when the U.S. economy is trudging along, the U.S. dollar tends to underperform. However, when the U.S. economy craters and a safe-haven bid emerges, the U.S. dollar often outperforms. Conversely (and similarly), when the U.S. economy is booming and higher interest rates materialize, the U.S. dollar also outperforms. By the way, I’ve discussed the situation in the USD Index at length in today’s video. For context, I indicated on Sep. 22: The USD Index and U.S. Treasury yields can move in the same direction or forge different paths. However, while a stock market crash is likely the most bearish fundamental outcome that could confront the PMs, scenario #2 is next in line. When U.S. economic strength provides a fundamental thesis for both the USD Index and U.S. Treasury yields to rise (along with real interest rates), the double-edged sword often leaves the PMs with deep lacerations. To that point, with a mix of both playing out in the present, Sebastien Galy, senior macro strategist at Nordea, signalled clients that the dollar smile remains alive and well: “The dollar should continue to be supported by expectations of an eventual series of Fed rate hikes and the value of the dollar as a safe haven against a potential equity correction…. The downward trend in EUR/USD is likely to return in the coming weeks and months, suggesting EUR/USD around the 1.10 handle and potentially below that before moving higher.” As for the yield story, Lindsey Piegza, chief economist at Stifel Financial, told clients that “markets appear increasingly jittery as the realization of a higher sustained level of inflation eventually resulting in a higher level of rates appears to be finally sinking in.... Against the backdrop of elevated inflation and rapidly rising energy costs, many market participants are skeptical the FOMC will be able to maintain these low rates for another year, let alone two.” The bottom line? With inflation running away from the Fed, suppressing commodity prices (by strengthening the U.S. dollar and/or raising interest rates) is the only way to calm the inflationary pressures. If not, surging commodity prices will likely further suppress consumer confidence, upend corporate profit margins, culminate with demand destruction and the stock market should suffer mightily (which is also bullish for the U.S. dollar). As a result, with Powell creating an even larger inflationary wildfire the longer he waits, the PMs could confront immense volatility over the medium term. In conclusion, the PMs were mixed on Oct. 5, though trouble looms large in the months ahead. With the USD Index and U.S. Treasury yields ripe for upward re-ratings, the Fed’s “transitory” narrative hasn’t aged well. And with the PMs’ main villains doing a lot of their fundamental damage since Powell turned hawkish, more upside catalysts should emerge over the medium term. As a result, the PMs’ outlook remains profoundly bearish over the next few months. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and silver that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Updated on Oct 6, 2021, 11:38 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 6th, 2021

Toll Brothers (TOL) Inks Partnership With PGIM, Boosts Expansion

Toll Brothers (TOL) is on an expansion spree, unveiling its partnership with PGIM Real Estate to develop Momentum Midtown community in Atlanta, GA. Toll Brothers Inc. TOL recently announced that its rental subsidiary — Toll Brothers Apartment Living — has entered into an agreement with PGIM Real Estate (PRKAX) to build Momentum Midtown in Atlanta, GA. This strategic partnership has arranged a $96-million construction loan from Wells Fargo Bank N.A through Toll Brothers’ in-house Finance Department.Momentum Midtown will be a 36-storied, 376-unit luxurious rental apartment at 1018 West Peachtree Street in the prime location of Atlanta’s tech community. Being located in the neighborhood of MARTA rail station and the Hartsfield-Jackson International Airport, the community is easily accessible to the city’s prime transportation corridors and employment centers.Concerning this, Charles Elliott, president of Toll Brothers Apartment Living, stated, “Momentum Midtown will mark our fourth project in the thriving Atlanta market. We’re looking forward to building another community with the same elevated customer experience and quality that we are known for nationwide.”Locational Advantage & Strategic Partnership Driving GrowthThe U.S. housing market is witnessing an impressive comeback on major data points post the COVID-led shutdowns, with home sales rising at a record pace, defying low inventory levels, and broad-based economic and public health risks. The housing market rebound, followed by coronavirus vaccine rollout, assures that 2021 will be a good one.Given the significant pent-up housing demand, Toll Brothers has secured some of the most sought-after urban locations in the country, where land is scarce, and approvals are not easy to obtain. Toll Brothers uses its strong liquidity position to secure the most sought-after urban locations in the country like New York City Market, Northern New Jersey, Washington DC and Philadelphia. The company’s solid land position places it well to meet the growing demand in these regions, thus lending it a competitive edge over its peers who are presently facing land availability constraints.On Aug 24, 2021, Toll Brothers announced a strategic partnership with Equity Residential to selectively acquire and develop sites for new rental apartment communities in Metro Boston, MA; Atlanta, GA; Austin, TX; Denver, CO; Orange County/San Diego, CA; Seattle, WA, and Dallas-Fort Worth, TX.Shares of Toll Brothers have gained 27% so far this year compared with the Zacks Building Products - Home Builders industry’s 9.8% rise. The company has been benefiting from its strategy of broadening the product lines, price points and geographies. Image Source: Zacks Investment ResearchZacks Rank & Key PicksCurrently, Toll Brothers carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the same industry include M/I Homes, Inc. MHO, Taylor Morrison Home Corporation TMHC and Landsea Homes Corporation LSEA. M/I Homes sports a Zacks Rank #1 (Strong Buy), while Taylor Morrison Home and Landsea Homes carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.M/I Homes Home and Taylor Morrison Home’s earnings for 2021 are expected to grow 63.3% and 173.4%, respectively.Landsea Homes has a trailing four-quarter earnings surprise of 68.3%, on average. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Toll Brothers Inc. (TOL): Free Stock Analysis Report Taylor Morrison Home Corporation (TMHC): Free Stock Analysis Report MI Homes, Inc. (MHO): Free Stock Analysis Report Landsea Homes Corporation (LSEA): Free Stock Analysis Report To read this article on click here......»»

Category: topSource: zacksOct 6th, 2021

Why Builders FirstSource (BLDR) is a Solid Pick Right Now

A solid housing market backdrop, buyouts and digital solutions are encouraging for Builders FirstSource (BLDR). Solid momentum in housing and repair & remodeling markets has been a boon for building product companies. The migration of consumers to larger suburban and second homes is resulting in substantial square footage growth, thereby driving accelerated building products demand.Among the industry forerunners, Builders FirstSource, Inc. BLDR has been riding high, given its focus on strategic acquisitions and divestitures, cost synergies as well as digital solutions. Shares of this leading supplier of building materials, manufactured components and construction services have rallied 57.3% over the past year, outperforming the Zacks Building Products – Retail industry’s 17.2% growth.Full-year 2021 earnings estimates for this Zacks Rank #1 (Strong Buy) company have moved 38.7% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.Image Source: Zacks Investment ResearchLet’s delve into the major driving factors.Inorganic DriveBuilders FirstSource remains focused on systematic acquisitions to supplement organic growth and expand extensively across vast geographic boundaries. The company’s first selective targets are those entities manufacturing prefabricated components such as factory-built roof and floor trusses, wall panels, stairs, and engineered wood as well as other value-added products such as vinyl windows and millwork. Secondly, the company intends to enter some of the homebuilding markets wherein it does not currently operate.On Sep 9, 2021, Builders FirstSource acquired Apollo Software from Katerra — a construction automation startup company. This buyout will help Builders FirstSource align its overall construction process, and transform the construction industry into a modern age of technological revolution and development. During second-quarter 2021, acquisitions contributed to net sales growth of 3.5%.Also, the company is strategically divesting businesses to focus on long-term plans of pursuing growth initiatives in core value-added business operations. In July 2021, Builders FirstSource agreed to divest Eastern U.S. Gypsum Distribution Operations (“Eastern Gypsum Operations”) to L&W Supply (“L&W”).Focus on Digital SolutionsBuilders FirstSource remains focused on investing in innovations and enhancing digital solutions for customers. During second-quarter 2021, the company adopted new logistics technologies, mainly delivery and dispatch management system. Its digital strategy includes three major areas, firstly to focus on internal processes and productivity by investing in technology to drive operational efficiency as well as excellence, secondly to help streamline interactions with vendors and customers, and lastly to focus on external innovation and investment to offer value-added digital products and services that support customers' success and growth.Cost-Saving EffortsBuilders FirstSource remains focused on achieving higher operating leverage on the back of increased sales and robust expense controls by offsetting greater variable costs. The company is focused on cost-saving initiatives and implementing various plans for the same. Owing to this, it is expected to provide greater resources to invest in growth, innovation and non-stop value creation for all shareholders. The company’s elevated scale and a very comfortable balance sheet position enable it to project an annual run-rate synergy of $140-$160 million by 2022-end, indicating an overachievement in just two years compared with the original three-year commitment of $130-$150 million.Solid Expected Earnings GrowthIt has solid prospects, as is evident from the Zacks Consensus Estimate for 2021 earnings of $6.27 per share, which indicates 108.3% year-over-year growth. Builders FirstSource is a great pick, supported by a VGM Score of A.Other Key Picks in Building Products SpaceOther top-ranked stocks in the Zacks Retail-Wholesale sector include GMS Inc. GMS, Tecnoglass Inc. TGLS and Fastenal Company FAST. While GMS and Tecnoglass each sport a Zacks Rank #1, Fastenal carries a Zacks Rank #2 (Buy).GMS’ earnings for fiscal 2022 are expected to rise 59%.Tecnoglass’ earnings for 2021 are expected to rise 74.7%.Fastenal has a trailing four-quarter earnings surprise of 2.04%, on average. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastenal Company (FAST): Free Stock Analysis Report Builders FirstSource, Inc. (BLDR): Free Stock Analysis Report Tecnoglass Inc. (TGLS): Free Stock Analysis Report GMS Inc. (GMS): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 6th, 2021

5 Solid Stocks to Buy on a Thriving Semiconductor Industry

Growing demand for microchips amid supply crunch has been helping companies like NVIDIA Corporation (NVDA), Semtech Corporation (SMTC) and Texas Instruments (TXN). Several industries have been hit hard owing to the global semiconductor shortage. Even microchip makers are struggling to meet the global demand. However, that has been working miracles for the semiconductor industry, with sales surging every month.According to the Semiconductor Industry Association (SIA), global microchip sales rose both month over month and year over year in August. And with no signs of the shortage easing, sales are likely to be high in the coming months.Semiconductor Sales Rise in AugustThe SIA said on Oct 5 that global semiconductor sales reached $47.2 billion in August, jumping 29.7% year over year from $36.4 billion. Moreover, sales rose 3.3% from July’s total of $45.7 billion.According to SIA, chip shipments have been on the rise and hit record highs in recent months as the industry continued to ramp up production owing to a huge demand for microchips across major industries, including auto, computers and electronic goods.Sales grew across all regions on a year-over-year basis in August, with sales jumping 33.5% in Europe, 30.8% in China, 28.2% in the Asia Pacific, 30.6% in the Americas and 23.8% in Japan. Month over month,sales increased 4.9% in Americas, 3.4% in China, 3.3% in Japan, 2.6% in Asia Pacific/All Other,and 1.5% in Europe.Semiconductor Industry BoomingAfter an outstanding 2020, the dream run for the semiconductor industry has continued this year. While the pandemic took its toll on several industries, the semiconductor industry continued to thrive. As more people worked and learned from home, they invested heavily in electronic items, computers and accessories. This gave a thrust to the demand for microchips, thus helping drive sales.However, the problem now seems to be a different one. While microchip has been soaring on higher demand, industries are now facing supply shortages that are affecting them. The auto industry and computer makers seem to be the biggest sufferers of this shortage.According to IHS Markit, microchip shortage will see a cut in production of vehicles by 700,000 in the third quarter, as carmakers continue to halt production temporarily. According to Bloomberg, this could result in a loss of $61 billion in revenues by the end of this year.Industry executives now believe that this supply crunch could continue into 2022 and even 2023. However, this will only benefit the semiconductor industry. Semiconductor sales came in at $133.6 billion in the second quarter, reflecting an increase of 29.2% year over year and a jump of 8.3% from the first quarter of 2021.Our ChoicesGiven the rising demand for semiconductors and continuing supply crunch, the semiconductor industry is only likely to benefit in the near term. Below are five chip stocks that investors can gain from in the current scenario.Texas Instruments Incorporated TXN is an original equipment manufacturer of analog, mixed-signal and digital-signal processing integrated circuits. The company recently announced that it wouldbe introducing a new TI-84 graphing calculator that will support the programing language Python.The company’s expected earnings growth rate for the current year is 31.7%. Its shares advanced 2.1% in the past 30 days. Texas Instruments carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.NVIDIA Corporation NVDA is the worldwide leader in visual computing technologies and inventor of the graphic processing unit, GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.The company’s expected earnings growth rate for the current year is 68%. The Zacks Consensus Estimate for current-year earnings improved 5.8% over the past 60 days. Nvidia has a Zacks Rank #2.Analog Devices, Inc. ADI is an original equipment manufacturer of semiconductor devices, specifically analog, mixed-signal and digital signal processing integrated circuits.The company’s expected earnings growth rate for the next year is 30.6%. The Zacks Consensus Estimate for current-year earnings improved 2.2% over the past 60 days. Analog Devices carries a Zacks Rank #2.Semtech Corporation’s SMTC devices are used in a variety of applications including computer, communications, industrial, military-aerospace and automotive. The company also provides a limited amount of wafer foundry services to other electronic component manufacturers.The company’s expected earnings growth rate for the current year is 45.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the past 60 days. Semtech has a Zacks Rank #1.Vishay Intertechnology, Inc. VSH is a global manufacturer and supplier of semiconductors and passive components. Its products include metal oxide semiconductor field-effect transistors, Diodes and Optoelectronic Components.The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 8.3% over the past 60 days. Vishay Intertechnology has a Zacks Rank #2. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI): Free Stock Analysis Report Texas Instruments Incorporated (TXN): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Semtech Corporation (SMTC): Free Stock Analysis Report Vishay Intertechnology, Inc. (VSH): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 6th, 2021

Futures Rebound As Energy Prices Soar

Futures Rebound As Energy Prices Soar US equity futures and European markets rebounded from a tech rout on Monday that was triggered by fears of soaring energy costs, stagflation, tech overvaluation and escalating Chinese property distress even as Asian shares tracked Monday's broad Wall Street sell-off to weaken for a third straight session. The dollar rose and yields rebounded back ato 1.50% as the rise in oil continued, pushing Brent above $82/bbl. At of 7:15am ET, S&P futures were up 16.25 points, or 0.38%, to 4,307; Dow futs were up 116 points and Nasdaq futures rose 47.25 points as technology shares bounced in Europe. Bitcoin jumped above $50,000 for the first time since Sept 7. The “market correction, initially sparked by tapering expectations and China’s property sector worries, is now being driven by record energy prices as well as lingering political uncertainties in the U.S. about the crucial question of the debt ceiling,” said Pierre Veyret, a technical analyst at ActivTrades. “Markets are likely to stay volatile this week and with no clear direction until there is significant progress on the existing concerns.” Additionally, the recent calm in global markets which hit an all time high as recently as a few weeks ago, has been shattered by a growing wall of worry spanning a debt crisis in China, elevated inflation on the back of commodity supply shocks, fading economic recovery and U.S. political bickering. Meanwhile, investors brace for a tapering of stimulus by the Federal Reserve. Nerves eased on Tuesday, however, led by a tech rebound following Monday's Facebook-led rout, and big bank stocks were higher in premarket trading as 10-year Treasury yields climbed to about 1.5% led again by breakevens as oil not only held onto recent impressive gains - along with most other commodities after a gauge of commodities soared to an all-time record - but Brent rose above $82 . As to the insanity in Europe's gas sector, European natural gas contracts soared on Tuesday to an unprecedented 111.70 euros per megawatt-hour, compared with 15.49 euros in February. The continent is bracing for a winter crunch in energy supply, with German front-month power contracts also jumping to record levels. Global shortages of gas and coal are pushing energy prices higher, disrupting markets from the U.K. to China, as economies emerge from the pandemic. Surging costs are threatening to raise inflation and starting to weigh onindustrial production, with some companies in Europe forced to cut output. “The fiercely nervous sentiment on the market continues due to fears of reduced supply during the winter,” trader Energi Danmark wrote in a note Tuesday. “Everything looks set for another week of price climbs.” In U.S. premarket trading, Facebook found dip buyers in premarket trading after a 4.9% plunge on Monday amid an hours-long service disruption. The stock added 1.6% in the early New York session. Lordstown Motors shares declined as much as 4.6% after the electric vehicle automaker was downgraded to underweight by Morgan Stanley, while the PT was also cut to $2 from $8. Uphealth fell after pricing its share offering at a discount. And Facebook was up 1.5% following Monday’s slump after it blamed a global service outage that kept its social media apps offline for much of yesterday on a problem with its network configuration. Here are some other notable premarket movers: Amplify Energy (AMPY US) rises 10% in U.S. premarket trading, paring some of Monday’s 44% plunge tied to an oil spill from a California offshore pipeline operated by the company Comtech Telecom (CMTL US) slid more than 7% Monday postmarket after it reported adjusted earnings below average analyst estimates It is “the period of a multiplicity of shocks percolating through the financial markets leaving them in the fog, with many watching from the sidelines for clarity,” Sebastien Galy, a senior macro strategist at Nordea Invetsment, wrote in a note. The technology subgroup in Europe’s benchmark Stoxx 600 advanced for the first time in eight days. European natural-gas contracts jumped as much as 16% and West Texas Intermediate crude headed for a seven-year high. Earlier in the session, MSCI's broadest index of Asia-Pacific shares outside Japan dropped as much as 1.3%, declining for a third consecutive session. Japan stocks were down 2.5%, South Korea gave up 2% and Australia shed 0.4%. The drop in markets took MSCI's main benchmark to 619.77, the lowest since November 2020 but it pared losses to be down 0.6% in late Asia trade. The index has shed more than 5% this year, with Hong Kong and Japanese markets among the big losers. "Investors are clearly worried about inflation due to supply chain disruptions and the rally in energy prices," said Vasu Menon, executive  director of investment strategy at OCBC Bank.  "We have seen tech stocks outperform value stocks, so if inflation remains a worry, then tech stocks tend to get hit," Menon said. In rates, Treasuries were under pressure with yields near session highs, cheaper by up to 2.5bp across belly of the curve. Yields rose not only on the continued surge in commodities, but about the total chaos over the debt ceiling D-Date which will be hit in two weeks. Gilts lag amid bond auctions, adding to upside pressure on yields, while S&P 500 futures pare about a third of Monday’s 1.3% slide. The RBA kept monetary policy unchanged as expected.  In FX, the dollar rose against most Group-of-10 currencies near a one-year high versus major peers ahead of key U.S. payrolls data due at the end of the week; the pound bucked the trend, advancing for a fourth session. The euro fell 0.25% to $1.1592, while the yen rose 0.29% to $111.18. Leveraged funds sold the kiwi aggressively after a New Zealand business survey showed weak third-quarter economic sentiment.  Sentiment on the euro over the next year reached its most bearish since June 2020 on Friday amid a widening policy divergence between the Federal Reserve and the European Central Bank. In commodities, oil prices reached a three-year high on Monday (and continued higher on Tuesday) after OPEC+ confirmed it would stick to its current output policy as demand for petroleum products rebounds, despite pressure from some countries for a bigger boost to production. Underscoring the rise in commodity prices, the Refinitiv/CoreCommodity CRB index rose to 233.08 on Monday, the highest in more than six years. U.S. oil rose 1.15% to $78.51 a barrel, a day after hitting its highest since 2014. Brent crude stood at $82.2 after rising to a three-year top. Gold prices eased to $1,757 per ounce, after rising on Monday to the highest since Sept. 23. "OPEC+ may inadvertently cause oil prices to surge even higher, adding to an energy crisis that primarily reflects very tight gas and coal markets," said Commonwealth Bank of Australia's commodities analyst Vivek Dhar. "That potentially threatens the global economic recovery, just as global oil demand growth is picking up as economies re‑open on the back of rising vaccination rates," Dhar said in a note. Traders are now turning their attention to Friday’s nonfarm-payrolls data to gauge the timing of the Fed’s taper. In the latest Fed comments, St. Louis President James Bullard said elevated price pressures may be changing the mentality of businesses and consumers by making them more accustomed to higher inflation. Australia’s central bank kept its monetary settings unchanged. Looking at the day ahead now, the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Market Snapshot S&P 500 futures up 0.2% to 4,301.00 STOXX Europe 600 up 0.4% to 452.37 MXAP down 0.7% to 192.58 MXAPJ down 0.3% to 626.41 Nikkei down 2.2% to 27,822.12 Topix down 1.3% to 1,947.75 Hang Seng Index up 0.3% to 24,104.15 Shanghai Composite up 0.9% to 3,568.17 Sensex up 0.4% to 59,531.35 Australia S&P/ASX 200 down 0.4% to 7,248.36 Kospi down 1.9% to 2,962.17 Brent Futures up 0.7% to $81.86/bbl Gold spot down 0.6% to $1,758.11 U.S. Dollar Index up 0.15% to 93.92 German 10Y yield fell 1.2 bps to -0.225% Euro down 0.2% to $1.1603 Top Overnight News from Bloomberg China’s heavily leveraged property firms saw their stocks and bonds tumble after a failure by developer Fantasia Holdings Group Co. to repay notes deepened investor concerns about the sector’s outlook A steep surge in inflation in the euro area has started to take its toll on the economy, according to a survey by IHS Markit China will strictly prevent bank and insurance funds from being used in speculating commodities in a push to maintain market order and stabilize prices The Federal Reserve said that its internal watchdog plans to open an investigation into trading activity by senior U.S. central bank officials, following revelations about transactions in 2020 Facebook Inc. blamed a global service outage that kept its social media apps offline for much of Monday on a problem with its network configuration, adding that it found no evidence that user data was compromised during the downtime A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were pressured following the tech sell-off in the US and amid several headwinds for global markets including US-China trade frictions, China's record incursion into Taiwanese airspace and with higher oil prices stoking inflationary concerns. ASX 200 (-0.6%) was dragged lower after the losses in tech rolled over into the region and following somewhat mixed Trade and PMI data releases, but with downside stemmed by resilience in gold miners and the energy sector, after gains in the underlying commodity prices including the rally in oil to a seven-year high. Nikkei 225 (-2.2%) slumped below the 28k level and briefly entered into correction territory as it suffered intraday losses of as much as 3% and with index heavyweights Fast Retailing and SoftBank dominating the list of worst performers, while KOSPI (-1.9%) also fell into a correction with the index at least 10% below the record highs registered earlier this year despite efforts by South Korea’s antitrust regulator to dispel fears of a harsh tech crackdown. Hang Seng (+0.3%) was pressured at the open amid tech woes and default fears after reports that Fantasia Holdings missed payments due yesterday for USD 206mln of bonds, although the Hong Kong benchmark then pared its losses with notable strength seen in Chinese oil majors as they benefit from the rising energy prices. Finally, 10yr JGBs were initially kept afloat by the risk aversion but then reversed course amid the uninspired mood in T-notes and Bund futures, as well as weaker metrics from the 10yr JGB auction which attracted a lower bid to cover despite a decline in accepted prices. Top Asian News Gold Drops After Three-Day Gain as Yields and Dollar Push Higher ‘Kishida Shock’ Hits Japan Markets Wary of Redistribution Plan China Orders Banks to Ramp Up Funding to Boost Coal Output S.Korea’s NPS Could Lose $3.5m From Evergrande Stock Investment European equities (Euro Stoxx 50 +0.9%; Stoxx 600 +0.7%) have extended on the marginal gains seen at the open as indices attempt to claw back some of yesterday’s losses. Incremental macro newsflow since the close has not provided much cause for optimism and therefore it remains to be seen how durable any recovery will be. Overnight, the APAC session was mostly downbeat as the region contended with the negative US lead, ongoing US-China trade frictions, China's record incursion into Taiwanese airspace and higher oil prices stoking inflationary concern. Final PMIs for the Eurozone saw the composite revised very modestly higher to 56.02 from 56.1 with IHS Markit noting “the current economic situation in the eurozone is an unwelcome mix of rising price pressures but slower growth”. Stateside, futures are exhibiting gains of a similar magnitude to their European counterparts with the ES +0.2% and no real discernible theme across the US majors as traders await further progress in Washington. Sectors in Europe are mostly higher with clear outperformance in banking names with JP Morgan bullish on the sector; Credit Agricole sits at the top of the CAC after launching a new EUR 500mln share repurchase scheme. To the downside, laggards include Construction & Materials and Autos. Individual movers include Greggs (+8.7%) at the top of the Stoxx 600 after raising its profit outlook for the FY despite concerns over supply chain disruptions and staffing issues. Elsewhere, Infineon (+2.8%) has provided some support for the IT sector after confirming its FY 21 forecasts and being confident about the FY22 outlook. Finally, Melrose (-2.2%) is a notable laggard after the Co. cautioned on the fallout of the global chip shortage which has prompted a surge in client cancellations. Top European News European Banks Have Upside on Capital Returns, Yields, JPM Says Romania Edges Toward First Rate Hike Since 2018: Decision Guide Romania Approves Partial Compensation for Higher Energy Costs Morgan Stanley Expands Diversity-Focused ‘Shark Tank’ to Europe In FX, the broader Dollar and index remain firmer on the session, with the latter on either side of 94.000 from a 93.804 overnight base, but still within yesterday’s 93.675-94.104 range which marks the first immediate points of support/resistance. State-side, US President Biden spoke with 12 progressive members of Congress in which they agreed to follow through on key priorities, while it was also reported that President Biden told House progressives the spending package needs to be between USD 1.9tln-2.2tln. Biden will meet with moderate House Democrats virtually today. It is also worth keeping an eye on the Fed’s review of trading activities which could lead to a shift in the balance between hawks and doves, following the parting of hawks Rosengren (2022 voter) and Kaplan (2023 voter), who were set to be voters during the projected rate hike period. Ahead, the US ISM Services PMI will likely be the focal point from a state-side data standpoint. EUR, GBP - The EUR and GBP continue to diverge. Sterling extends on earlier gains, seemingly a function of the EUR/GBP cross topping out just before its 50 DMA (0.8546) before taking out yesterday’s 0.8529 low on its way towards 0.8500. The Sterling strength has helped Cable regain 1.3600+ status from a 1.3585 low. EUR/USD meanders around 1.1600 in a relatively narrow 1.1591-1.1622 current intraday band – with yesterday’s low at 1.1586 ahead of the 200 WMA at 1.1572. Europe saw the release of final Services and Composite PMIs, which continue to highlight the theme of rising prices and spillover into demand. AUD, NZD, CAD - he non-US Dollars see mild losses but trade off worst levels as the Dollar recedes and as market sentiment holds an upside bias. The AUD/NZD cross meanwhile remains in focus amid this week’s RBA/RBNZ central bank standoff. The RBA overnight provided no surprises and did not contain any significant new observations, with the currency experiencing choppiness upon the release. The RBNZ, meanwhile, is poised for a 25bps OCR hike at its announcement at 02:00BST/21:00EDT tomorrow. The AUD/NZD cross resides around session lows near 1.0455, whilst OpEx sees some AUD 2.1bln at strike 1.0410. The Loonie sees an underlying bid from crude prices, with USD/CAD back under its 50 DMA at 1.2600 ahead of Canadian trade data. JPY, CHF - The traditional havens are at the foot of the G10 bunch in what is seemingly a risk-influenced move. USD/JPY within a tight 110.88-111.25 band vs yesterday’s 110.50-112.07 range. USD/CHF, meanwhile, has popped above its 21 DMA (0.9250) and trades towards the top of its current 0.9238-70 parameter. In commodities, WTI and Brent front month futures are choppy but ultimately hold an upside bias in the aftermath of the OPEC+ meeting yesterday. Nonetheless, the benchmarks remain near yesterday’s highs which saw Brent Dec test USD 82.00/bbl to the upside. Brent resides around USD 81.50/bbl at the time of writing whilst WTI Nov hovers just under USD 78/bbl. With OPEC out of the way and until the next meeting, traders will be eyeing developments (if any) regarding the Iranian nuclear talks, alongside the electricity situation in China. Furthermore, traders must be cognizant of potential intervention by governments in a bid to control rising energy prices. As a reminder, the White House held talks with Saudi counterparts before the recent OPEC+ meeting and expressed concern on prices. Aside from that, news flow for the complex has been light during the European morning. Elsewhere, precious metals are softer on the day but spot gold and silver trade off worst levels with the yellow metal still holding into USD 1,750/oz-status and spot silver back above USD 22.50/oz. Over to base metals, LME copper remains pressured in what seems to be a continuation of the lacklustre trade seen during APAC hours amid a lack of demand as China remains on holiday. US Trade Calendar 8:30am: Aug. Trade Balance, est. -$70.8b, prior -$70.1b 9:45am: Sept. Markit US Composite PMI, prior 54.5 9:45am: Sept. Markit US Services PMI, est. 54.4, prior 54.4 10am: Sept. ISM Services Index, est. 59.8, prior 61.7 DB's Jim Reid concludes the overnight wrap I’m hoping you all survived without WhatsApp, Instagram and Facebook yesterday after the outage. We actually had to resort to a conversation over dinner last night. It was a bit weird without hearing pings go off every few minutes. Once the conversation dried up we went on Twitter and then watched Netflix so it wasn’t a total disaster for US tech in our household. Oh and I’m writing this on my iPad while looking up a few things on Google. Tech led the sell-off last night that stretched to both equities and bonds. One of the noticeable features of the recent weakness in equities is that bonds have struggled to rally. This hints at technicals being nowhere near as strong as they were in the summer and also a realisation that bonds aren’t a great haven if the sell-off is partly inflation related. By the close of trade yesterday, the S&P 500 had shed another -1.30%, making it the 3rd time in the last 5 sessions that the index has lost more than 1%, with the latest move now taking it -5.21% beneath its all-time closing high back in early September. However, unlike some of the other declines of the last month, which have been quite obviously connected to a particular concern like Evergrande or the impact of higher yields, the latest selloff looks to be coming from a more generalised set of concerns, with those worries given a fresh impetus by yet another rise in energy prices yesterday as oil hit multi-year highs. In turn, that spike in energy prices has led to renewed fears about inflation accelerating even further than current forecasts are implying, with knock-on implications for central banks and the amount of monetary stimulus we can expect over the coming months. We’ll start with those moves in energy given the effects they had elsewhere. Yesterday saw Brent Crude oil prices (+2.50%) close above $81/bbl for the first time in nearly 3 years, and this morning it’s up another +0.42%. On top of that, WTI (+2.29%) oil prices hit a 6-year high of its own at $77.62/bbl, which saw its YTD gains rise above +60%. The latest advance for oil has come as the OPEC+ group agreed yesterday that they’d stick to their planned output hike of +400k barrels per day in November, in spite of some speculation that there could be a larger increase in supply. However, it wasn’t just oil moving higher, with European natural gas prices (+2.07%) taking another leg up after their recent surge, which leaves them just shy of their recent peak last Thursday. And what’s also concerning from an inflationary standpoint is that the moves in commodities were broader than simply energy, with metals including copper (+1.17%) seeing sizeable gains as well. Overall, that meant Bloomberg’s Commodity Spot Index (+1.12%) finally exceeded its 2011 high yesterday, and brings the index’s gains since the post-pandemic low in March 2020 to +94.7%. Against this backdrop, equities took another tumble as the major indices on both sides of the Atlantic moved lower, including the S&P 500 (-1.30%) and Europe’s STOXX 600 (-0.47%). Tech stocks saw the brunt of the declines, with the NASDAQ down -2.14% and the FANG+ index down -3.00%, while Europe’s STOXX Technology Index (-2.39%) fell for a 7th consecutive session. Facebook was one of the bigger laggards yesterday as it fell -4.89% - its worst day since November 2020. The company is dealing with whistleblower allegations that their internal research doesn’t match what executives have been saying about the effect the social media company has on its users. The equal weight S&P 500 was only down -0.63% so the big tech stocks definitely led the way. European equities were less affected than their US counterparts however, having missed out on Friday’s late US equity rally following the European close, with the DAX (-0.79%), the CAC 40 (-0.61%) and the FTSE 100 (-0.23%) all seeing declines of less than 1%. A lower tech weighting probably also helped. Those concerns about stagflation represented further bad news for sovereign bonds yesterday, as investors moved to upgrade their expectations of future inflation. In Europe, 10yr German breakevens were up by +2.0bps to an 8-year high of 1.72%, while their Italian counterparts hit their highest level in over a decade, at 1.63%. Meanwhile in the US, 10yr breakevens were also up +1.3bps to 2.39%. Those moves in inflation expectations supported higher yields, with those on 10yr Treasuries up +1.7bps to 1.479% by the close of trade, as yields on bunds (+1.0bps), OATs (+1.3bps) and BTPs (+1.8bps) similarly moved higher. Overnight in Asia, equities have mostly followed the US lower, with the Nikkei (-2.77%), KOSPI (-1.71%), and Australia’s ASX 200 (-0.74%) all losing ground, though the Hang Seng (+0.20%) has recovered slightly thanks to energy stocks, and S&P 500 futures (+0.13%) are also pointing to a modest recovery. Those declines for the Nikkei and the KOSPI leave them just shy of a 10% correction from their recent peaks. In terms of the latest on Evergrande, there are signs that risks are spreading to other property developers, as China’s Fantasia Holdings missed a repayment worth $205.7m on a bond that matured Monday. Unsurprisingly, the developments are continuing to affect China’s HY dollar bond prices, with a Bloomberg index now down by -14.3% since its high back in May. Elsewhere in Asia, we got confirmation shortly after we went to press yesterday from new Japanese PM Fumio Kishida that there’d be a general election on October 31. Interestingly, that will actually be the 3rd general election in a G7 economy in the space of just six weeks, following the votes in Canada and Germany in late September. Back to the US, and Treasury Secretary Yellen’s estimated deadline to raise the debt ceiling – 18 Oct – is now under 2 weeks away, and during a press conference yesterday President Biden called on Republicans to join with Democrats to raise the debt limit, arguing that over a quarter of the US debt was accumulated during the Trump administration and that it should not be tied to “any new spending being considered. It has nothing to do with my plan for infrastructure or building back better, zero.” Senate Majority Leader Schumer plans to hold a vote this week to lift the debt ceiling, though Republicans are set to block the legislation and are forcing Democrats to use the partisan budget reconciliation process that is currently the vehicle of the Biden “Build Back Better” plan. Whilst time was running out to deal with the debt ceiling, President Biden also met with progressive House Democrats yesterday to discuss the budget reconciliation package and about potentially limiting the scope of the bill that makes up much of the President’s economic agenda. Press Secretary Psaki said that there is a “recognition that this package is going to be smaller than originally proposed,” but that the President is looking to get it across the goal line. Initial estimates could see the final package closer to $2 trillion over 10 years versus the current $3.5 trillion plans. Meanwhile on trade, the Biden administration also announced yesterday that they would hold direct talks with Chinese officials in the coming week seeking to enforce prior commitments and start fresh talks to exclude some goods from US tariffs. US Trade Representative Katherine Tai will meet with Chinese Vice Premier Liu He, and is expected to focus on how to add and adjust to the Trump administration’s most recent deal with the Chinese government rather than starting from scratch. There wasn’t much in the way of data yesterday, though US factory orders in August rose by +1.2% (vs. +1.0% expected), and the previous month’s growth was revised up to +0.7% (vs. +0.4% previously). To the day ahead now, and the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Tyler Durden Tue, 10/05/2021 - 07:45.....»»

Category: blogSource: zerohedgeOct 5th, 2021

Futures Slide On Evergrande, Stagflation, Energy Crisis Fears

Futures Slide On Evergrande, Stagflation, Energy Crisis Fears Stock futures ticked lower on Monday, hurt by weakening sentiment in Asia and Europe amid growing worries about economic stagflation, the global energy crisis and renewed fears about property developer China Evergrande whose stock was halted overnight in Hong Kong, while Tesla shares rose after reporting a record number of electric vehicle deliveries. At 715 a.m. ET, Dow e-minis were down 114 points, or 0.33%, S&P 500 e-minis were down 16.25 points, or 0.37%, and Nasdaq 100 e-minis were down 73.75 points, or 0.5%. “The global chip and energy shortage is getting worse, the inflation is rising, the recovery may be slowing, and that puts central banks between a rock and a hard place,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “The best they could do is to do nothing, or to tighten their monetary policy to avoid losing control on the economy.” The most notable overnight event was the suspension of trading in shares of debt-laden Evergrande which unsettled markets further about any fallout from its troubles even as media reports said the company would sell a stake in its property management unit for over $5 billion. Wall Street’s main indexes were battered in September, hit by worries about the U.S. debt ceiling, the fate of a massive infrastructure spending bill and the meltdown of heavily indebted China Evergrande Group. On the second trading day of October, investors took a defensive stance, with a cautious approach to riskier assets as a spreading energy crunch meets concerns over the duration of broader rising prices and the tapering of economic stimulus efforts. Investors also kept close watch on rising U.S. Treasury yields after data last week showed increased consumer spending, accelerated factory activity and elevated inflation growth, which could help push the Federal Reserve towards tightening its accommodative monetary policy sooner than expected. Among individual stocks, Merck & Co. extended its gains from Friday on the results of its experimental Covid pill. The stock climbed 2.6% premarket. 3M shares fell 1.5% after J.P. Morgan cut its rating on the industrial conglomerate’s stock to “neutral” from “overweight”.  Here are some of the other notable premarket movers today: Tesla (TSLA  US) shares climb 2.6% higher in U.S. premarket trading after the electric car maker reported record 3Q deliveries that easily beat estimates Amplify Energy (AMPY US) shares plummet 33% in premarket trading after California beaches in northern Orange County were closed and wetlands contaminated by a huge oil spill caused by a broken pipeline off the coast DHT Holdings (DHT US) shares rose as much as 3.7% in Friday extended trading after the company said it bought 1.23m of its own shares Offerpad Solutions (OPAD US) was down 3.1% Friday postmarket after registering shares for potential sale Adverum Biotechnologies (ADVM US) shares rose as much as 23% in Friday extended trading after co. reported new long-term data from the OPTIC clinical trial of ADVM-022 single, in-office intravitreal injection gene therapy Markets also awaited U.S. Joe Biden’s new plan on China trade strategy, with U.S. Trade Representative Katherine Tai set for new talks with Beijing later in the day over its failure to keep promises made in a “Phase 1” trade deal struck with former President Donald Trump. Biden's new plan follows a top-to-bottom review of import tariffs and other measures imposed by the Trump administration; reports also said that USTR will today say that China is not complying with the Phase 1 deal. Europe's Stoxx 600 Index trades flat, erasing earlier losses of as much as 0.6%, helped by gains in health care and basic resources shares. The healthcare sub index rose 0.8% after AstraZeneca’s Enhertu got a breakthrough therapy designation while basic resources sub-index up 0.3% as iron ore rallies. Euro Stoxx 50 is down 0.2% having declined as much as 1% at the open. FTSE MIB lags on the recovery; FTSE 100 trades flat. Autos, banks and travel names are the weakest sectors. Here are some of the biggest European movers today: Adler Group shares jump as much as 18%, briefly erasing the previous week’s declines, after the firm said it’s reviewing strategic options that may result in a sale of assets Wm Morrison declines as much as 3.8% after the offer terms from winning bidder CD&R disappointed investors Sainsbury rises as much as 5.9% and Tesco gains 1.7% on speculation that CD&R’s Morrison deal may drive further interest in Britain’s grocery sector at a time when cash-rich buyout funds are stalking undervalued U.K. companies; also, a report says Tesco will announce a share buyback program this week Plus500 gains as much as 6.1% after the contracts-for-difference trading firm says full-year profit will beat market expectations Bewi rises as much as 9.9% after the owner of 50% of building products company Jackon Holding accepted Bewi’s offer BT slumps as much as 7.8% to a six-month low following a Telegraph report that Sky is closing in on a broadband investment deal with Virgin Media O2, raising worries over competition Azelio falls as much as 22% after newspaper Dagens Industri raised questions about orders for the renewable energy equipment developer Aryzta tumbles as much as 13% after results, halting a four-day winning streak Frasers falls as much as 12%, the most since December. Bank of America cut the owner of the Sports Direct retail chain to underperform from buy Asia stocks also declined, with Hong Kong shares a drag, after debt-ridden China Evergrande Group’s trading was suspended while investors also sold health care-related names and appeared wary heading into the final quarter of 2021. The MSCI Asia Pacific Index slipped as much as 0.8%. Vaccine maker CanSino Biologics and Shanghai Fosun Pharmaceutical Group were the biggest decliners on the measure as Merck & Co. said its experimental Covid-19 antiviral pill cuts the risk of hospitalization and death in half. “Investors will need to take a sell-first ask-later stance given current elevated valuation levels of vaccine stocks,” said Justin Tang, head of Asian research at United First Partners. Also weighing on traders’ minds is the global energy crisis, which has spread to India and is stoking inflation concerns. Speculation about the potential restructuring of China Evergrande Group, which has suspended trading of its Hong Kong shares, is also affecting sentiment at a time liquidity is thinner. The mainland Chinese market is closed through Thursday for Golden Week holidays. Singapore’s benchmark Straits Times Index was among the top-performing gauges in Asia Pacific as the country takes steps toward further reopening. Measures across the cyclicals-heavy Southeast Asian markets also rose, while tech stocks including Alibaba and Meituan took a hit. Asian assets will be sold alongside global peers in the short term, said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. “But we think cyclical sectors, especially exporters, should also perform well for the rest of the year, especially as more Asian economies are seeing a rising level of vaccination,” he added. Japanese equities fell for a sixth-straight day, as investor concerns deepened over contagion from China’s real-estate sector woes on the suspension of trading in shares of Evergrande and its property management unit. Electronics makers were the biggest drag on the Topix, which declined 0.6%, capping its worst losing streak since February 2020. Tokyo Electron and Fanuc were the largest contributors to a 1.1% drop in the Nikkei 225. “It’s possible Evergrande news flow is impacting Japan stocks, the issues surrounding the property firm aren’t resolved,” said Mamoru Shimode, chief strategist at Resona Asset Management. “It’s also important to keep in mind markets overall have been in risk-off mood since the latter half of September.” Travel and retail stocks gained, following U.S. peers higher after promising results for Merck’s experimental Covid-19 pill and amid signs of a pick-up in Japanese department-store sales. Meanwhile, Fumio Kishida was appointed prime minister by parliament Monday, and was set to reveal a new cabinet lineup as he seeks to revive support for his ruling party ahead of a general election that could likely come this month. In rates, Treasuries are near session lows, the 10Y TSY pushing on 1.50% cheaper by ~3.5bp on the day and near middle of last week’s 1.44%-1.565% range in early U.S. session after erasing gains that pushed yields to lowest levels in a week. 5s30s curve at ~111.7bp is steeper by nearly 2bp, probing 50-DMA and approaching last week’s high. Gilts led the selloff during European morning as regional stocks recovered from a weak open. Curve steepens, with long-end yields cheaper by around 4bp vs Friday’s close.  Peripheral spreads widen with long end Italy underperforming. Semi-core spreads tighten at the margin. In FX, Bloomberg dollar index is little changed; NOK, CAD and CHF are the best performers in G-10, JPY lags but trading ranges are narrow. Crude futures hold slightly in the red in choppy trade. The Bloomberg Dollar Spot Index was steady and the greenback traded in tight ranges against its Group-of-10 peers. The euro reversed a modest decline to trade above $1.16, while the pound hovered after touching its highest level in nearly a week during the Asia session. Expected volatility is now at the highest in five months. The currency fell to a year-to-date low last week amid concerns over soaring energy prices, falling business confidence and the end of the government’s furlough scheme. The Aussie dollar was flat and option markets aren’t expecting the RBA’s policy decision Tuesday to be an eventful one for spot. The yen inched lower after earlier touching a one-week high when concern over potential contagion from indebted Chinese developer Evergrande weighed on Japanese stocks. In commodities, WTI is down 0.25% near $75.70, Brent just 0.1% lower near $79.20 ahead of today’s OPEC+ virtual gathering. Spot gold drops ~$10 to test Friday’s low near $1,750/oz. Base metals trade well with LME aluminum and zinc rising over 1% to outperform peers. Bitcoin and cryptos dropped after a burst higher late on Sunday, following the China Evergrande suspension even though i) the news appears to be positive and is in relation to the latest asset sale and ii) China has banned trading in cryptos, so it wasn't exactly clear why any mainlanders would be selling to meet margin calls. On today's calendar, we get August factory orders, and the final August durable goods orders, core capital goods orders. We also get more central bank speakers including Fed's Bullard, BoE’s Ramsden, ECB Vice President de Guindos and ECB’s Makhlouf. Market Snapshot S&P 500 futures down 0.4% to 4,324.25 STOXX Europe 600 little changed at 453.24 MXAP down 0.5% to 194.02 MXAPJ down 0.3% to 629.26 Nikkei down 1.1% to 28,444.89 Topix down 0.6% to 1,973.92 Hang Seng Index down 2.2% to 24,036.37 Shanghai Composite up 0.9% to 3,568.17 Sensex up 1.1% to 59,391.71 Australia S&P/ASX 200 up 1.3% to 7,278.54 Kospi down 1.6% to 3,019.18 Brent Futures little changed at $79.22/bbl Gold spot down 0.5% to $1,752.29 U.S. Dollar Index little changed at 93.96 German 10Y yield rose 1.4 bps to -0.210% Euro up 0.1% to $1.1613 Top Overnight News from Bloomberg China Evergrande Group and its property-services arm were halted in Hong Kong stock trading amid a report that the developer agreed to sell a controlling stake in the unit to raise much- needed cash U.K. Prime Minister Boris Johnson said he won’t fall back on immigration to solve the U.K.’s truck driver shortage, as he presented supply chain troubles that have left supermarket shelves bare and gas stations dry as a “period of adjustment” in the wake of Brexit and the pandemic House Speaker Nancy Pelosi reset the clock on Saturday, giving lawmakers until Halloween to strike a deal on both the bipartisan $550 billion infrastructure deal and a broader, signature package of social spending, health care and tax measures they must pass with only Democratic votes Germany’s Social Democrats under chancellor-in-waiting Olaf Scholz signaled progress in talks with the Greens on forming a coalition government with the Free Democrats, while Angela Merkel’s bloc kept the door ajar for a conservative-led alliance Japan’s Fumio Kishida was appointed prime minister by parliament Monday, and is set to reveal a new cabinet lineup as he seeks to revive support for his ruling party ahead of a general election that could likely come this month. A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed as ongoing Evergrande default concerns clouded over the initial optimism following Friday’s rebound on Wall St where all major indices found some reprieve from last week’s downturn, although the S&P 500 still suffered its worst weekly performance since February and US equity futures also failed to hold on to opening gains with this week’s upcoming risk events adding to the cautiousness including the OPEC+ meeting later today, a bout of Asia-Pac central bank policy decisions from Tuesday and Friday’s NFP job data. The ASX 200 (+1.3%) outperformed, with the index unfazed by the absence of key market participants with mainland China away for Golden Week, South Korea closed due to National Foundation Day, and amid the quasi-holiday conditions in Australia as New South Wales observed Labour Day. Nonetheless, the local benchmark was propped up by the top-weighted financials sector with shares in Australia’s largest bank CBA boosted following a AUD 6.0bln off-market buyback and with reopening stocks, especially those in the travel industry, among the biggest gainers. The Nikkei 225 (-1.1%) wiped out its opening advances despite the lack of significant news catalyst for the reversal which was spearheaded by exporter names, while the focus in Japan turned to PM Kishida’s confirmation in parliament and for details of the new Cabinet members. The Hang Seng (-2.2%) was heavily pressured by losses in health and biotech stocks, while property names also suffered amid the current Evergrande fears after a USD 260mln note from Jumbo Fortune Enterprises matured on Sunday which was guaranteed by China Evergrande Group and its unit Tianji Holding Ltd, while there is no grace period for the payment but five days will be allowed for administrative or technical errors. Furthermore, shares of Evergrande, its property services unit and structured products have all been halted which reports circulating that Hopson Development is to acquire a 51% stake in Evergrande Property Services for HKD 40bln. Finally, 10yr JGBs tracked recent upside in T-notes and with support also from the negative mood in Japanese stocks, as well as the BoJ’s presence in the market for over JPY 1tln of JGBs mostly concentrated in 1yr-5yr maturities. Top Asian News Singapore Eyes More Vaccinated Travel Lanes in Cautious Reopen India Farm Protests Gather Momentum After 4 Demonstrators Killed U.S. Natural Gas Jumps Amid Strong Overseas Demand for Fuel Suzuki Takes Japan Finance Reins as Election, Stimulus Loom Major bourses in Europe have adopted somewhat of a mixed picture (Euro Stoxx 50 Unch; Stoxx 600 -0.2%), following on from the broad-based downbeat cash open seen as Europe picked up the baton from APAC. US equity futures see modest losses across the board but have again drifted off worst levels. Nonetheless, the NQ (-0.5%) remains the slight laggard vs its RTY (-0.1%), ES (-0.2%) and YM (-0.4%) counterparts. Sectors are now mixed with a slight defensive tilt, with Healthcare and Food & Beverages among the top gainers, whilst financials bear the brunt of the yield decline on Friday, with Banks at the foot of the bunch. In terms of individual movers, Morrisons (-3.8%) has accepted CD&R’s takeover offer, which has left Fortress empty-handed but has fanned speculation that the group may look towards Sainsbury’s (+5.9%), Tesco (+1.7%) or Marks & Spencer (+1.5%) as potential targets, with the former being the best suitor, according to reports. Elsewhere BT (-7%) plumbed the depths with some citing reports that Sky is to partner with Virgin Media-O2 in a move set to intensify the challenge to BT’s infrastructure builder Openreach. Top European News U.K.’s Fuel Crisis Has at Least a Week to Run as Army Steps In Adler Group Weighs Asset Sales to Cut Debt After Multiple Bids Amazon Rival Noon to Raise $2 Billion From Backers Including PIF Romanian Billionaire Petrescu Dies in Plane Crash Near Milan In FX, the broader Dollar and index remain caged to a tight range, with the latter within a narrow 93.900-94.104 band after last week printing a new YTD peak at 94.504. The Dollar remains on standby as risk events are abundant this coming week, including deliberations on Capitol Hill and Friday’s NFP. In terms of the developments in Washington, congressional leaders set a new unofficial month-end deadline to pass the infrastructure bill, and USD 3.5tln spending package, and House progressives were reported to offer to reduce spending to save the bill and are willing to compromise on the USD 3.5tln amount with limits but rejected moderate Democrat Senator Manchin’s USD 1.5tln offer. Over to the Fed and a story to keep on the radar - Fed’s Clarida (seen as the nucleus of the Fed) reportedly shifted out of a bond fund into a stock fund last year, which occurred a day prior to Fed Chair Powell issuing a statement of potential policy action due to the pandemic. A spokesperson passed this off as “pre-planned” balancing, but a similar situation led to the early resignation of Kaplan and Rosengren. Elsewhere, USTR Tai is to today unveil the China trade policy following a top-to-bottom review of the Trump admin’s tariffs and other measures. The pre-release noted that the US would begin a process to exempt certain products from tariffs on Chinese imports, with the US also seeking a meeting on Phase 1. That being said, officials noted that all tools remain on the table when asked about further tariffs. Net-net, the release was constructive and, as such, provided tailwinds to the CNH, whereby USD/CNH dipped from 6.4560 to a low of 6.4385. AUD, NZD, CAD - The non-US Dollars somewhat vary with the Loonie attached to price action in the oil complex heading into the OPEC+ meeting later today. The NZD outperforms in the G10 bunch, with the AUD on the other side of the spectrum in what is a busy central bank week for the antipodeans. The AUD/NZD cross will likely take some focus as the RBNZ is poised to hike its OCR, whilst the RBA is seen holding policy steady. AUD/NZD has made its way back towards 1.4050 from its 1.0485 overnight high. NZD/USD meanders around 0.6950 (0.6927-53 range) whilst AUD/USD hovers around the 0.7250 mark (where AUD 1bln of OpEx resides), with the 21 DMA at 0.7295 and the 50 at 0.7311. EUR, GBP - Both European majors trade relatively flat in the European morning, but Brexit rhetoric has ramped up with UK Brexit Minister Frost warning the EU that the UK is prepared to trigger Article 16 unless the EU agrees to replace the Northern Ireland Protocol. There were separate reports that ministers will be given a deadline of the end of next month to decide on whether to suspend the Northern Ireland Brexit deal unilaterally, and senior sources warned that unless the EU was prepared to engage in a “serious negotiation” during the coming weeks, the government would have no choice but to suspend the deal by December. EUR/GBP topped its 100 and 21 DMAs (both at 0.8566) after finding a floor at its 100 DMA (0.8546). EUR/USD is back above 1.1600 (vs 1.1588 base) with EUR 1bln options expiring at the figure. GBP/USD hovers mid-range between 1.3534-77. In commodities, WTI and Brent front-month futures have clambered off worst levels but remain tentative ahead of the OPEC+ confab later today (full preview in the Newsquawk Research Suite). In terms of the long and short of it, markets expect OPEC+ to stick to its plan of raising monthly oil output by +400k BPD; albeit, some look for a larger-than-planned hike. Oil journalists have said this morning that despite the noise surrounding a greater-than-planned hike, ministers expect the current plan to be maintained, although drama in the meeting cannot be omitted. Upside during the European session coincided with headlines suggesting “OPEC+ is seen keeping output policy unchanged”, citing sources, although this was poorly phrased as it incorrectly intimates production being unchanged as opposed to plans for the 400k BPD hike being unchanged. Other things to be aware of aside from OPEC, BioNTech CEO expects the virus to likely mutate and that a new vaccine formulation could be required by the middle of next year, according to the FT, whilst the Gulf of Oman has seen cyclone Shaheen hit the area, although exports are not expected to be impacted yet aside from a delay in loadings. WTI Nov resides just under 76/bbl (75.30-76.20 range) whilst Brent Dec hovers sub USD 79.50/bbl (78.75-79.50/bbl range.) Elsewhere, spot gold and silver have been drifting lower in tandem with the rise in yields seen throughout the morning, with the former briefly dipping under USD 1,750/oz whilst spot silver fell under USD 22.40/oz. Turning to base metals, LME copper posts modest gains and remains north of USD 9,000/t, with some dip-buying being cited. US Event Calendar 10am: Aug. Cap Goods Ship Nondef Ex Air, prior 0.7% 10am: Aug. Cap Goods Orders Nondef Ex Air, prior 0.5% 10am: Aug. -Less Transportation, prior 0.2% 10am: Aug. Factory Orders Ex Trans, est. 0.4%, prior 0.8% 10am: Aug. Factory Orders, est. 1.0%, prior 0.4% 10am: Aug. Durable Goods Orders, est. 1.8%, prior 1.8% 10am: Fed’s Bullard Takes Part in Panel Discussion on the Economy DB's Jim Reid concludes the overnight wrap It’s certainly an odd financial world at the moment. The negatives are obvious and revolve mostly around delta, weaker than expected growth, the energy crisis, ever higher inflation and tighter central bank policy. The positives are that the base effects with numerous lockdowns imposed in Q4 2020 to at least the start of Q3 2021 mean that it won’t be that difficult for growth to still be numerically healthy for a few more quarters. So once the disappointment of growth not being as high as was hoped at this stage fades we should still be left with decent growth. Famous last words but covid should play less and less part in our lives over the year ahead as vaccines and better treatments (eg Merck antiviral pill news on Friday) become more and more widespread. In addition, stimulus and excess savings remain high and financial conditions are still very loose. While regular readers will know I’ve long been beating the drum on higher inflation and will continue to do so, I’m not convinced that growth is rolling over enough for stagflation to be the best description of the outlook for the next 12 months. However I suppose much depends on how you define it. Whilst on the topic of the energy crisis, the world is full of pictures of the UK population queuing for petrol because of a perceived shortage of HGV drivers. We’ll never know if there was actually a shortage that would have threatened fuel supplies as when the story broke 10 days ago panic set in and we had a fuel run (not as shocking as a bank run but formed from the same cloth) as the population desperately tried to refuel. My wife decided to hold out thinking the situation would resolve itself. However by Saturday night we had 10 miles left in the tank and during the day she had passed 6-7 petrol stations with either no fuel or huge queues. As we were putting the kids to bed she announced that she was getting desperate and stressed about it and was going to go out now as she was worried she wouldn’t be able to take the kids to school this week if she didn’t go out to the local area to try to find petrol. I said she was crazy to go at peak time (partly as I didn’t want to put the kids to bed alone - tough on crutches) and urged her to go very early Sunday morning instead. She ignored me and ventured out on what I thought was a suicide mission. 20 minutes later she was back with a full tank! I’ve no idea how and I won’t ask! I apologised! Outside of all the ongoing energy and stagflation chatter, all roads this week point to payrolls Friday as unless there is a marked deterioration across the whole sweep of labour market indicators within the report, this will likely be the catalyst to cement the November taper barring an exogenous or market shock. Investors will also be increasingly focused on the US debt ceiling deadline, whilst Congress simultaneously grapples with the infrastructure bill and the reconciliation package. Elsewhere on the political scene, coalition negotiations in Germany will be important to look out for, as the parties seek to form a government after the election. Before we look ahead, markets have started the week with a risk-off tone, with Asian equities including the Hang Seng (-2.17%), Kospi (-1.62%), the Nikkei (-0.95%) all moving lower while markets in China remain closed. Stocks pared gains on the news that Evergrande’s trading had been suspended in Hong Kong, with a filing from the Hong Kong Stock Exchange saying that this was “pending the release by the Company of an announcement containing inside information about a major transaction.” Meanwhile Bloomberg reported earlier that Evergrande had guaranteed a dollar note worth $260m with an official due date of Oct 3 by Jumbo Fortune Enterprises, making the effective due date today since maturity was on a Sunday. Elsewhere in Asia, NHK reported that Japan’s incoming Prime Minister, Fumio Kishida, planned to hold a general election on October 31, and looking forward, US equity futures are also pointing lower, with those on the S&P 500 down -0.32%. Looking ahead, the US jobs report will be one of the main macro highlights this week, and follows last month’s release that strongly underwhelmed expectations, with nonfarm payrolls growth of just +235k in August being the slowest since January. So another poor release would not be welcome news even if it did reflect labour shortages. In terms of what to expect this time around, our US economists are forecasting a pickup in September, with nonfarm payrolls growing by +400k, and the unemployment rate ticking down to a post-pandemic low of 5.1%. Remember in the weak report last month, yields rose on the day as markets focused on the wage increases rather than the poor headline number. As we said at the time the bond reaction to last month’s report probably helped signal the end of the extreme positive technicals and short positioning in treasuries. Over the summer strong inflation and decent data couldn’t help treasuries sell off, indicating bullet proof technicals but the period around last month’s release seemed to turn the tide the other way a bit. The other important data release this week will be the global services and composite PMIs out tomorrow, which will give an indication of how the economy has fared into the end of Q3. That said, the flash readings we’ve already had have indicated slowing growth momentum across the major economies, so it will be interesting to see where things progress from here. Turning to the US, negotiations in Congress will be in focus as legislators face the debt ceiling deadline this month (expected to be breached around October 18th according to Treasury Secretary Yellen last week), just as the Democrats are also seeking to pass a $550bn bipartisan infrastructure bill and a reconciliation package. On Saturday, Speaker Pelosi seemed to suggest that the new deadline was October 31st for the bipartisan bill which highlights how much difference there still is between the progressives and moderates on the reconciliation package. Will they eventually find a compromise for a lower amount than the original $3.5tn (maybe around $2tn) that makes nether side happy but gets the legislation through? Staying on the political scene, there’ll also be a focus on coalition negotiations in Germany, where exploratory talks have now begun between the parties. The Greens and the liberal FDP will be key to forming a majority in the new Bundestag, with 210 seats between them, as both the centre-left SPD and the conservative CDU/CSU bloc still hope to lead the next coalition. Initial exploratory talks began with the SPD yesterday, and the FDP have also spoken to the CDU/CSU, with the Greens set to follow tomorrow. On the central bank side it’s a quieter week ahead, with the two G20 policy decisions expected from the Reserve Bank of Australia (tomorrow) and the Reserve Bank of India (Friday). In Australia, our economist is expecting no change in policy and a reaffirmation of their dovish policy outlook. And in India, our economist also expects the MPC to keep all key policy rates unchanged, with our base case remaining for a reverse repo rate liftoff starting from December. The day-by-day calendar is at the end as usual. Back to last week, and global equity markets slid for the third week out of the last four as the S&P 500 fell -2.21%, with a +1.15% increase on Friday not stopping the index from having its worst week since the end of February. The losses were primarily led by growth and technology stocks as the NASDAQ declined -3.20% on the week, while cyclicals such as banks (+1.92%) and energy (+5.78%) stocks outperformed. European equities similarly fell back, as the STOXX 600 ended the week -2.24% lower after Friday’s -0.42% loss came prior to a late US rally. Global sovereign bonds sold off for a sixth straight week, though most of that selling came in the first two days as the global risk-off tone caused investors to search for havens. US 10yr Treasury yields still ended the week up +1.1bps, despite Friday’s -2.6bp decline. Bond yields in Europe moved higher as well, with those on 10yr bunds increasing +0.4bps, to trade at their highest levels since early-July. And 10yr yields on French OATs (+1.2bps) and Italians BTPs (+3.1bps) also rose further. UK gilts underperformed them all with yields increasing +7.7bps. The major driver of the move in global yields was rising inflation expectations with US 10yr breakevens increasing +4.5bps, while 10yr bund and breakevens rose +9.3bps to reach their highest level since 2013 and gilt breakevens (+3.5bps) rose to their highest level since 2008 even though they were much higher mid-week. The US September ISM manufacturing survey rose to 61.1 from 59.9 in the prior month even as supply bottlenecks intensified. This along with strong demand readings from businesses and consumers have led to higher prices which are mostly being passed onto consumers. This was seen in the PCE deflator data from Friday which showed prices rose 4.3% (4.2% expected) y/y with the core reading increasing 3.6% (3.5% expected) y/y. The University of Michigan survey showed respondents’ inflation expectations in a year dropped slightly from the initial reading 4.6% (4.7% initial , 4.8% exp), which was in-line with last month. 5-10yr expectations remain elevated at 3.0%. Overall the sentiment reading of 72.8 (71.0 prior) was better than the initial survey but still was the fifth worst reading in a decade, with only last month and the early months of the pandemic having been lower. Separately, Euro-area inflation reached its highest level since September 2008 on Friday as the headline September CPI print registered at 3.4% y/y (3.3% expected) in September, fuelled by the cost of energy and travel. Meanwhile, in Europe the manufacturing PMI readings were largely in-line with the preliminary readings with the Euro Area print sitting at 58.6 (58.7 prior) with Germany (58.4) and France (55.0) both just under their prior readings. Tyler Durden Mon, 10/04/2021 - 07:55.....»»

Category: dealsSource: nytOct 4th, 2021

These Are The Four Main Risks In The Upcoming Q3 Earnings Season

These Are The Four Main Risks In The Upcoming Q3 Earnings Season One of the major challenges facing the bull case, in addition to numerous previously discussed factors such as the Fed's imminent tightening (save us the semantics, and just read Morgan Stanley on "Tapering is Tightening"), rapidly shrinking margins, rising interest rates and stagflation fears, China's real estate slowdown, the global energy crisis, snarled supply chains, a potential US debt default, and the first failure of dip buying to push the S&P back to its rising trendline, is that after several quarters of record corporate earnings, equity valuations are increasingly coming under scrutiny and, as Goldman's David Kostin writes in his latest Weekly Kickstart note, "investor focus will increasingly assess whether earnings growth can continue to lead the market higher." 3Q earnings season kicks off when the largest Banks report during the week of Oct. 11th, 47% of S&P 500 market capitalization will report during the week of October 25th and 86% will report by November 6th. Consensus expects S&P 500 EPS growth of +27% year/year in 3Q, a sharp deceleration from the 2Q growth rate of +88%, even if EPS growth for the median stock is forecast to slow more modestly, from +38% to +12%. Bottom-up estimates imply a roughly equal contribution to EPS growth from sales and margin expansion. Excluding Financials and Utilities, S&P 500 sales are expected to rise 15% yr/yr and net profit margins are forecast to equal 11.6% (+146 bp yr/yr). However, this would bring 3Q margins below the realized level of net profit margins from 1H 2021 (12.2%). All 11 sectors are expected to report positive EPS growth in 3Q, led by Energy (from negative to positive EPS), Materials (+90%) and Industrials (+71%). And while a generally optimistic Goldman, which recently upped its S&P price target to 4,700 believes there is upside to consensus estimates (as a reminder, the share of companies beating EPS by more than a standard deviation averaged 71%, a record high, and the average EPS beat equaled 21%, well above the long-term average of 6%), the bank does warn that the frequency and magnitude of EPS  beats will moderate from 1H 2021 - as economic and earnings growth are decelerating and base comparables have become more challenging - and warns that there are four key risks to watch: (1) Supply chains, (2) oil, (3) labor costs, and (4) China growth. We delve deeper into these four earnings season themes below, but first we note that arguably the biggest challenge for stocks - especially high growth, ultra-high duration tech names, namely the rapid recent rise in rates which have led to a contraction in tech name valuations (the FAAMG sector is about 7% below its all time high). As Goldman recently warned (again) S&P 500 returns "have typically been below-average when rates rise by 1 standard deviation in a month and negative when rates rise by 2 standard deviations. The recent move in nominal rates was a 1.5 standard deviation event on a monthly basis, but reached the 2 standard deviation threshold on a 10-day basis." So going back to Goldman's key risk factors we start with... 1. Supply chains.The ISM Suppliers Deliveries Index averaged 74 during the past six months (>50 indicates slower deliveries), the highest level since 1974. Of the 26 S&P 500 firms that reported results since the start of September, 18 mentioned supply chains on their earnings calls, primarily within Consumer and Industrial sectors. The average consensus revision to 4Q 2021 EPS for these firms has equaled -4%. Goldman economists estimate that strong goods demand accounts for two-thirds of global manufacturing delays. Ironically, Goldman then writes that the strong demand backdrop and expectations that disruptions will ease is likely one reason that 2022 EPS estimates for these firms have been roughly unchanged. This is completely wrong as even the CEO of Mersk said that global demand has to ease so that supply can catch up and supply-chains can normalize; absent this we will remain in an indefinite state of stagflation. Where Goldman does get it right is that the largest firms have highlighted mechanisms including price hikes, cost controls, leveraging scale,and switching suppliers to mitigate the impact of supply chain disruptions, which however means sharply higher prices for a much longer length of time than the "transitory" argument suggests. As such, Goldman warns that "a key risk is that supply chain normalization takes longer than expected and that unmet demand today is not fully recouped in later quarters. Services industries such as Financials and Software have less EPS risk than goods-producing industries such as Industrials." 2.Oil. Brent oil prices have risen by 51% YTD and Goldman's commodities team recently hiked its year-end forecast to $90/bbl, above their previous forecast of $80. However, contrary to expectations that these will be rapidly passed on to consumers leading to sharp gains for energy companies, Kostin says that "based on our top-down earnings model, oil prices have a roughly neutral impact on aggregate S&P 500 EPS" and calculates that every 10% increase in Brent prices boosts S&P500 EPS by just 0.3%. Furthermore, while higher oil prices are a tailwind to Energy EPS they are also a headwind to most non-Energy sectors that rely on oil as an input or are sensitive to consumer spending (higher gas prices act as yet another tax on the US consumer). Also, it is worth noting that the boost from Energy to index EPS is likely smaller today, as it represents just 4% of S&P 500 2021E EPS. 3. Labor costs. Ongoing commentary from corporations shows an acute focus on rising wages and the lack of labor supply. Goldman's adjusted Wage Tracker sits at the highest level since 2007. Here, however, Kostin is again quick to defuse fears that labor costs will hit margins, calculating the these represent only 13% of the median S&P 500 stock’s revenues, and historical correlations show that the large-cap index is relatively insulated from wage pressures. Furthermore, as noted last month, Goldman's analysis suggests a 100 bp acceleration in wage growth would reduce S&P 500 EPSby just 0.7%, all else equal. Small-caps and the Industrials and Consumer sectors are most vulnerable to rising wages due to their high labor costs and low profit margins. 4. China growth. Goldman's China Economics team recently lowered their Q3 growth forecasts to 0% (QoQ) amid sharp cuts to production in a range of high energy intensity industries and the property market slowdown. And while the indirect impact on supply chains is likely a greater EPS risk than the direct effect from reduced end demand in China, Kostin says that in aggregate, the S&P 500 generates just 2% of its sales explicitly from Greater China. Indeed, the S&P 500 derives 72% of its sales in the US and US GDP growth is the most important driver of EPS, however some very high growth sectors such as semis (43% of sales in China), tech Hardware(11%), and stocks with the highest sales to China are more exposed. The good news - according to the traditionally cheerful Goldman - is that downside risk from these four factors appears relatively contained in aggregate today, but certain stocks face more risks than others. Indeed, several early reporters beat on 3Q EPS but offered weak guidance (MKC, MU, NKE). Consistent with recent quarters, and as we predicted recently, guidance will be a clearer differentiator of stock price reactions than 3Q results during the season. As Kostin - correctly - cautions, earnings revisions typically carry a particularly strong signal for stock returns in the current backdrop of decelerating economic growth, underscoring the importance of identifying the “winners” and “losers” around these key macro risks. Readers should monitor management commentary to assess the implications of these macro factors on the S&P 500 earnings outlook. Finally, in addition to these four themes, Biden's corporate tax hikes remain a broad-based, imminent risk to the 2022 EPS outlook. As Goldman warned previously, a change in the corporate tax code would have a direct impact on nearly all S&P 500 companies. The bank's baseline assumption for a 25% statutory corporate tax rate and an increase in the foreign income tax rate would represent a 5% hit to 2022 S&P 500 EPS. However, thanks to growing bickering between progressive and centrist Democrats, uncertainty about whether tax reform will actually become law is high, as the House delayed a vote on the bipartisan infrastructure bill. Prediction market odds of an increase in the corporate tax currently stand at 66%. Tyler Durden Sun, 10/03/2021 - 20:15.....»»

Category: blogSource: zerohedgeOct 3rd, 2021