A Post-Covid Hangover – Should You Worry About Your Portfolio?

Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.

Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.

The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.

Data to watch

Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.

There will be plenty more earnings next week too, including Simon Properties and Zoom on Monday; Activision Blizzard, Alibaba, Amgen, Clorox, ConocoPhillips, Eli Lilly, Fidelity, Match Group, Monster Beverage, Occidental Petroleum, and Phillips 66 on Tuesday; Allstate, CVS, Etsy, General Motors, Kraft Heinz, Marathon Petroleum, MetLife, MGM Resorts, Rocket Companies, Roku, Trane, and Uber on Wednesday; Adidas, AMC, Carvana, Cigna, Cloudflare, Corteva, Duke Energy, Kellogg, Moderna, Nintendo, Novo Nordisk, Siemens, Square, Wayfair, Zillow, and Zoetis on Thursday; and Dish Network, Dominion Energy, and DraftKings on Friday.

Insider Accumulation

ES ##-## (Daily) 2021_08_01 (19_25_02)

I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.

The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.

On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.

Earnings to Watch Next Week: Ferrari, Alibaba, Allstate and Nice Systems in Focus

Earnings Calendar For The Week Of August 2

Monday (August 2)

IN THE SPOTLIGHT: FERRARI

The luxury sports car maker Ferrari is expected to report earnings of $1.26 per share for the second quarter, representing a 3,050% increase over $0.04 per share a year earlier.

The company, known for its prancing horse logo, would post revenue growth of over 107% to around $1.3 billion. According to ZACKS Research, the company has beaten earnings per share (EPS) estimates in three of the last four quarters.

“Growth potential and strong execution. Global shipments of >11k units in 2021, growing at a 9.1% CAGR to 2030 ending at ~22k shipments. Adj. EBITDA margins rise to 35% in 2021 on improved mix and pricing after launching 5 new models in 2020 and 2 in 2021,” noted Adam Jonas, equity analyst at Morgan Stanley.

Ferrari trades at a justified premium to luxury brands, in line with luxury leader, Hermes, albeit with more opportunity to grow organically via: new customers, new segments and geographically in China & Asia-Pac, as well as exhibiting a unique moat with a world-renowned brand and a 12+ month customer order book.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 2

Ticker Company EPS Forecast
HSBA HSBC Holdings £0.13
HSBC HSBC $0.86
ON ON Semiconductor $0.49
GPN Global Payments $1.90
L Loews $0.83
CNA CNA Financial $1.12
TKR Timken $1.44
SPG Simon Property Group $1.12
SBAC SBA Communications $0.66
PXD Pioneer Natural Resources $2.56
WMB Williams Companies $0.28
AWK American Water Works $1.08
ANET Arista Networks $2.55
O Realty Ome $0.38
TTWO Take Two Interactive Software $0.90
NXPI NXP Semiconductors $2.31
ITUB Itau Unibanco $0.12
EMN Eastman Chemical $2.35
FANG Diamondback Energy $2.23
CLR Continental Resources $0.55
BRKR Bruker $0.38
TREX Trex $0.53
MOS Mosaic $1.00
OHI Omega Healthcare Investors $0.44
VNO Vornado Realty $0.14
VRNS Varonis Systems -$0.03
COLM Columbia Sportswear -$0.07
LEG Leggett & Platt $0.54
NSP Insperity $0.66
AWR American States Water $0.71
KMT Kennametal $0.40
RMBS Rambus $0.31
UCTT Ultra Clean $0.97
OTTR Otter Tail $0.54
ACHC Acadia Healthcare $0.63
BRX Brixmor Property $0.14
OGS One Gas $0.52
WWD Woodward $0.97
RIG Transocean -$0.16
RACE Ferrari $1.26
BCC Boise Cascade $4.75
RARE Ultragenyx Pharmaceutical -$1.31
SANM Sanmina $0.91
TGTX TG Therapeutics -$0.55

Tuesday (August 3)

IN THE SPOTLIGHT: ALIBABA

China’s Alibaba Group Holding, the largest online and mobile e-commerce company in the world, is expected to report its fiscal first-quarter earnings of 1.86 yuan per share, up from 1.85 yuan per share seen in the same period a year ago.

China’s biggest online commerce company’s revenue to surge more than 35% to 209.928 billion yuan. The company has beaten earnings per share (EPS) estimates in three of the last four quarters.

“All-in investments in domestic consumption, globalization and technology are likely to weigh on profitability but pave the way to reach long-term target of 2bn global AAC. Alibaba hopes to achieve growth in the user base, enhanced engagement as well as the provision of more value to merchants,” noted Gary Yu, equity analyst at Morgan Stanley.

“In cloud, Alibaba will continue to drive market share leadership and will focus on providing more AI-driven industry solutions and improving Data-as-a-Service (DaaS). We see limited near-term catalysts but F22e P/E valuation remains attractive. We also see further downside support from additional disclosure to separate losses from new investments from profitable core e-commerce businesses.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 3

Ticker Company EPS Forecast
EXPD Expeditors International Of Washington $1.62
LPX Louisiana Pacific $4.30
AKAM Akamai $1.38
YMZBY Yamazaki Baking ADR $1.06
SABR Sabre -$0.52
PSX Phillips 66 $0.64
PSXP Phillips 66 Partners $0.88
PACB Pacific Biosciences Of California -$0.21
CMI Cummins $4.07
MITSY Mitsui & Company $13.06
ATI Allegheny Technologies -$0.19
CLX Clorox $1.32
IGT International Game Technology $0.23
LSCC Lattice Semiconductor $0.22
LDOS Leidos $1.58
IX Orix $2.25
PSA Public Storage $1.92
ETRN Equitrans Midstream Corp $0.15
AMGN Amgen $4.09
ZBRA Zebra Technologies $4.12
LHX L3Harris Technologies Inc $3.18
LLY Eli Lilly $1.89
NNN National Retail Properties $0.39
BP BP $0.58
ZBH ZIMMER BIOMET HDG. $1.86
WAT Waters $2.27
UAA Under Armour Inc $0.06
XYL Xylem $0.63
UA Under Armour C share $0.06
DISCB Discovery Communications Discb $0.82
DISCK Discovery Communications Disck $0.82
DISCA Discovery Communications $0.82
MAR Marriott International $0.47
INGR Ingredion $1.59
WEC Wisconsin Energy $0.79
INCY YTE $0.58
SEE Sealed Air $0.78
ROCK Gibraltar Industries $0.87
PEG Public Service $0.71
SWI Solarwinds $0.11
RL Ralph Lauren $0.88
NE Noble Corporation -$0.31
MKL Markel $15.50
MYGN Myriad Genetics -$0.09
EC Ecopetrol $1,851.52
KAI Kadant $1.53
BEN Franklin Resources $0.78
EDU New Oriental Education Tech $0.02
HSIC Henry Schein $0.97
IT Gartner $1.73
PCRX Pacira $0.69
ETN Eaton $1.57
KKR KKR & Co LP $0.87
WLTW Willis $1.97
AY Atlantica Yield $0.40
IPGP IPG Photonics $1.40
FIS Fidelity National Information Services $1.55
COP ConocoPhillips $1.08
BABA Alibaba $14.37
RHP Ryman Hospitality Properties -$1.62
CWH Camping World Holdings $2.38
AME Ametek $1.10
DD DuPont $0.95
SUN Sunoco $0.95
J Jacobs Engineering Group Inc $1.53
ALNY Alnylam Pharmaceuticals -$1.60
WLK Westlake Chemical $3.49
LGIH LGI Homes $3.92
OMI Owens Minor $0.97
DNB Dun & Bradstreet $0.24
HEP Holly Energy Partners $0.48
JAZZ Jazz Pharmaceuticals $3.52
NBIX Neurocrine Biosciences $0.51
RDN Radian $0.70
RPAI Retail Properties Of America -$0.01
H Hyatt Hotels -$0.85
NCR NCR $0.62
OXY Occidental Petroleum -$0.01
FICO Fair Isaac $2.81
OKE ONEOK $0.74
MANT ManTech International $0.87
SATS EchoStar $0.07
LYV Live Nation Entertainment -$1.15
LYFT Lyft Inc -$0.24
KAR Kar Auction Services $0.19
PAYC Paycom Software $0.84
MTCH Match Group $0.54
TX Ternium $3.48
QTS QTS Realty $0.03
MCHP Microchip Technology $1.91
PSB PS Business Parks $0.84
SRC Spirit Realty Capital New $0.26
MRCY Mercury Systems $0.67
HPP Hudson Pacific Properties -$0.01
CZR Caesars Entertainment -$0.12
ENLC EnLink Midstream $0.01
DVA DaVita Healthcare Partners $2.17
GDOT Green Dot $0.42
HLF Herbalife $1.29
HST Host Hotels & Resorts -$0.22
BKH Black Hills $0.38
DVN Devon Energy $0.52
INFN Infinera -$0.05
FMC FMC $1.78
ATVI Activision Blizzard $0.75
XP XP Inc $1.27
OI Owens-Illinois $0.47
LPSN LivePerson -$0.13
PEAK Healthpeak Properties Inc $0.15
SHO Sunstone Hotel Investors -$0.21
LSI LIFE STORAGE $0.69
RNG RingCentral $0.28
DEI Douglas Emmett $0.06
CAR Avis Budget $1.22
CW Curtiss-Wright $1.54
AIZ Assurant $2.42
BLKB Blackbaud $0.70
TTEC TeleTech $0.97
VRSK Verisk Analytics $1.33
EVTC Evertec $0.57
IOSP Innospec $0.89
MCY Mercury General $1.17
KWR Quaker Chemical $1.44
SPWR SunPower $0.04
RGA Reinsurance Of America $1.90
UNM Unum $1.12
PRU Prudential Financial $3.11
APAM Artisan Partners Asset Management $1.25
BBD Banco Bradesco $0.13
AFG American Financial $1.67
FCNCA First Citizens Bancshares $11.98
FNF Fidelity National Financial $1.43
ARNC Arconic Inc $0.47

Wednesday (August 4)

IN THE SPOTLIGHT: ALLSTATE

The Northfield Township, Illinois-based insurance company is expected to report its second-quarter earnings of $3.17 per share, which represents year-over-year growth of about 30% from $2.46 per share seen in the same quarter a year ago.

“Acquisition of National General marks shift towards independent agent channel. The dominant captive auto underwriter has been losing market share to direct channel. We expect this to continue, but NGHC transaction and increased focus on direct channel should mitigate its impact. Allstate also continues to diversify overall portfolio offering by growing non-traditional segments,” noted Michael W. Phillips, equity analyst at Morgan Stanley.

“Margin challenges from focus on growth. Near-term core combined ratio benefit from recession-induced decrease in driving, partially offset by restructuring charges. Auto margins worsen modestly in 2021e-2023e, reflecting competitive operating environment.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 4

Ticker Company EPS Forecast
FLT Fleetcor Technologies $2.93
WYNN Wynn Resorts -$1.51
CENTA Central Garden Pet $1.01
MTG MGIC Investment $0.43
DOX Amdocs $1.18
TRMB Trimble Navigation $0.60
ETR Entergy $1.40
SBRA Sabra Health Care Reit $0.15
TRNO Terreno Realty $0.24
RICOY Ricoh Company $0.05
TM Toyota Motor $4.48
ATRC AtriCure -$0.34
CLH Clean Harbors $0.82
CDW CDW $1.80
MPLX MPLX $0.66
HZNP Horizon Pharma $0.87
CVS CVS Health $2.06
YAMCY Yamaha DRC $0.38
MPC Marathon Petroleum $0.39
CRTO Criteo $0.46
PBR Petroleo Brasileiro Petrobras $0.72
BWA Borgwarner $0.80
EXC Exelon $0.68
SSUMY Sumitomo ADR $0.44
ITOCY Itochu ADR $2.04
IONS Ionis Pharmaceuticals -$0.54
CIM Chimera Investment $0.34
NYT New York Times $0.27
HWM Howmet Aerospace Inc $0.22
AVA Avista $0.26
SBGI Sinclair -$4.34
JLL Jones Lang LaSalle $1.73
SPR Spirit AeroSystems -$0.72
GM General Motors $1.69
BGCP BGC Partners $0.16
GGB Gerdau $0.36
ENBL Enable Midstream Partners $0.18
HFC HollyFrontier $0.61
NXST Nexstar Broadcasting $3.71
CRL Charles River Laboratories $2.37
BDC Belden $0.93
NI NiSource $0.13
EMR Emerson Electric $0.98
VMC Vulcan Materials $1.65
KHC Kraft Heinz $0.72
ABC AmerisourceBergen $2.03
APO Apollo Global Management $0.70
ODP Office Depot $0.54
SMG Scotts Miracle-Gro $3.50
MAC Macerich -$0.09
UE Urban Edge Properties $0.07
AEIS Advanced Energy Industries $1.27
DOC Physicians Realty $0.09
FUN Cedar Fair -$1.60
ALE Allete $0.60
MFC Manulife Financial USA $0.62
ETSY ETSY Inc $0.63
CPA Copa -$1.29
FOX Twenty First Century Fox $0.57
ALB Albemarle $0.84
WU Western Union $0.47
WCN Waste Connections $0.77
EA Electronic Arts EA $0.62
MRO Marathon Oil $0.17
STAA STAAR Surgical $0.07
BFAM Bright Horizons Family Solutions $0.35
FRT Federal Realty Investment $0.39
TS Tenaris $0.16
WDC Western Digital $1.51
CCU Compania Cervecerias Unidas $83.30
GMED Globus Medical $0.44
NSTG NanoString Technologies -$0.59
PDCE PDC Energy $1.24
MCK McKesson $4.14
MWA Mueller Water Products $0.16
APA Apache $0.56
TWO Two Harbors Investment $0.19
BKNG Booking Holdings Inc -$1.98
TNDM Tandem Diabetes Care -$0.08
SLF Sun Life Financial USA $1.17
ANGI Angie’s List -$0.04
FOXA Twenty-First Century Fox $0.57
TTGT TechTarget $0.48
MGM MGM Resorts International -$0.38
ATO Atmos Energy $0.73
LHCG LHC $1.55
AMED Amedisys $1.67
EGHT 8X8 $0.00
RVLV Revolve $0.21
QTWO Q2 $0.07
CDAY Ceridian HCM Holding Inc $0.03
EOG EOG Resources $1.54
QRVO Qorvo $2.45
HI Hillenbrand $0.77
UHAL Amerco $7.95
ANSS Ansys $1.56
CCMP Cabot Microelectronics $2.00
RYN Rayonier $0.10
MET MetLife $1.68
LNC Lincoln National $2.46
ACAD Acadia Pharmaceuticals -$0.30
RCII Rent-A-Center $1.36
ORA Ormat Technologies $0.27
NUS Nu Skin Enterprises $1.05
HR Healthcare Realty $0.06
UGI UGI $0.10
MED Medifast $3.31
KLIC Kulicke And Soffa Industries $1.36
REGI Renewable Energy $1.28
SJI South Jersey Industries $0.00
STN Stantec USA $0.47
CMP Compass Minerals International -$0.06
JACK Jack In The Box $1.48
WTS Watts Water Technologies $1.28
KW Kennedy Wilson -$0.09
CPK Chesapeake Utilities $0.70
PTVE Pactiv Evergreen $0.19
ICUI ICU Medical $1.64
HHC Howard Hughes -$0.41
UBER Uber -$0.54
DXC DXC Technology Co $0.75
ALL Allstate $3.17
CIB Bancolombia $0.50
BAK Braskem $2.83
ADT ADT $0.25
RCL Royal Caribbean Cruises -$4.35
HMC Honda Motor $0.54
UTHR United Therapeutics $3.02
SRPT Sarepta Therapeutics -$1.30

Thursday (August 5)

IN THE SPOTLIGHT: NICE SYSTEMS

NICE, the worldwide leading provider of software solutions, is expected to report its second-quarter earnings of $1.51 per share, which represents year-over-year growth of over 10% from $1.37 per share seen in the same quarter a year ago.

The company which provides enterprise software solutions worldwide in the previous quarter lifted its fiscal year 2021 EPS forecasts in the range of $6.19 and $6.39 per share, higher than the previous guidance of $6.12 to $6.32 per share. Full-year 2021 Non-GAAP total revenues are expected to be in a range of $1,800 million to $1,820 million, up from the previous guidance range of $1,790 million to $1,810 million.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 5

Ticker Company EPS Forecast
HL Hecla Mining $0.06
NTLA Intellia Therapeutics Inc -$0.63
VSAT Viasat $0.22
MNST Monster Beverage $0.68
RVNC Revance Therapeutics -$0.96
PFSI Pennymac Financial Services $3.42
CVCO Cavco Industries $2.14
CYRX Cryoport Inc -$0.13
VGR Vector $0.26
ARNA Arena Pharmaceuticals -$2.20
STMP Stamps $1.84
PRTA Prothena $1.00
ZTS Zoetis $1.08
CNP CenterPoint Energy $0.25
TRI Thomson Reuters USA $0.43
VER VEREIT $0.31
MFA MFA Financial $0.10
NICE Nice Systems $1.51
NFG National Fuel Gas $0.87
HIMX Himax Technologies $0.57
IRWD Ironwood Pharmaceuticals $0.22
HBI Hanesbrands $0.39
HII Huntington Ingalls Industries $2.52
MAURY Marui ADR $0.27
NWSA News Corp $0.04
ABMD Abiomed $1.05
MRNA Moderna Inc $5.96
EPAM EPAM Systems $1.93
NWS News $0.04
ARWR Arrowhead Research -$0.14
VST Victory Square Tech $0.54
TECH Bio Techne $1.70
APTV Aptiv PLC $0.67
AL Air Lease $0.83
NRG NRG Energy $1.07
TYOYY Taiyo Yuden ADR $2.65
PPL PPL $0.33
GTN Gray Television $0.30
BCRX BioCryst Pharmaceuticals -$0.23
AES AES $0.29
WCC Wesco International $1.91
FOCS Focus Financial Partners Inc $0.95
AU Anglogold Ashanti $0.90
IHRT Iheartmedia -$0.10
ADNT Adient PLC $0.16
TOELY Tokyo Electron Ltd PK $1.22
ACIW ACI Worldwide $0.07
XRAY Dentsply International $0.67
BAYRY Bayer AG PK $0.46
BCE BCE (USA) $0.63
WPP WPP ADR $1.95
NJR New Jersey Resources -$0.13
ARW Arrow Electronics $2.96
MDU MDU Resources $0.53
NVO Novo Nordisk A Fs $0.78
SHCAY Sharp ADR $0.04
RMD ResMed $1.27
LXP Lexington Realty $0.03
BDX Becton, Dickinson and Co. $2.45
IRM Iron Mountain $0.35
CI Cigna $4.96
MMS Maximus $1.09
OGE OGE Energy $0.52
SRE Sempra Energy $1.59
DUK Duke Energy $1.10
BIP Brookfield Infrastructure $0.06
PENN Penn National Gaming $0.92
BLDR Builders Firstsource $1.63
CCOI Cogent Communications $0.21
PH Parker-Hannifin $4.33
K Kellogg $1.03
ITRI Itron $0.48
WRK WESTROCK $0.97
UFS Domtar USA $1.28
IDCC InterDigital -$0.09
BERY Berry Plastics $1.50
CHH Choice Hotels International $0.90
WD Walker & Dunlop $1.97
STWD Starwood Property $0.51
STFC State Auto Financial $0.00
EPC Edgewell Personal Care $0.83
GIL Gildan Activewear USA $0.51
TAL TAL International -$0.14
THS TreeHouse Foods $0.26
FLS Flowserve $0.42
EXPE Expedia -$0.60
INSM Insmed -$0.89
PZZA Papa John’s International $0.72
NKTR Nektar Therapeutics -$0.73
CNNE Cannae $0.01
XLRN Acceleron Pharma -$0.87
PHI Philippine Long Distance Telephone $0.69
VG Vonage $0.04
ROLL Rbc Bearings $1.00
ED Consolidated Edison $0.62
HTA Healthcare Of America $0.10
ENV Envestnet $0.54
OLED Universal Display $0.87
MTZ MasTec $1.23
CSOD Cornerstone OnDemand $0.52
POST Post $0.97
IOVA Iovance Biotherapeutics -$0.51
PCTY Paylocity $0.29
DIOD Diodes $1.11
ZNGA Zynga $0.09
BCH Banco De Chile $0.41
JCOM J2 Global $2.02
RBA Ritchie Bros. Auctioneers USA $0.61
ILMN Illumina $1.36
CGNX Cognex $0.42
ALTR ALTAIR ENGINEERING $0.01
Z Zillow $0.24
TRIP TripAdvisor -$0.10
FOXF Fox Factory $1.02
QDEL Quidel $1.25
IFF International Flavors Fragrances $1.48
VOYA Voya Financial $1.48
YELP Yelp -$0.09
TDC Teradata $0.46
MSI Motorola Solutions Msi $1.92
SQ Square $0.31
LOPE Grand Canyon Education $1.09
MUR Murphy Oil $0.31
CAH Cardinal Health $1.20
AMRS Amyris -$0.13
SEAS SeaWorld Entertainment $0.31
BLL Ball $0.83
BKI Black Iron Inc. $0.54
PRI Primerica $2.92
HASI Hannon Armstrong Sustnbl Infrstr Cap $0.38
SYNA Synaptics $2.00
FEYE FireEye $0.09
NNI Nelnet $1.64
MDRX Allscripts Healthcare Solutions $0.17
OUT Outfront Media -$0.11
SEM Select Medical $0.56
SFM Sprouts Farmers Market $0.45
RLJ RLJ Lodging -$0.32
AEL American Equity Investment Life $0.50
CYTK Cytokinetics -$0.66
NVAX Novavax -$3.63
BECN Beacon Roofing Supply $1.25
AAON AAON $0.32
TPL Texas Pacific Land $7.37
EXEL Exelixis $0.06
AIG AIG $1.20
LNT Alliant Energy $0.56
ITT ITT $0.90
AMH American Homes 4 Rent $0.05
PODD Insulet $0.13
REG Regency Centers $0.31
Y Alleghany $14.72
BRKS Brooks Automation USA $0.69
G Genpact $0.54
APLE Apple Hospitality -$0.01
AGO Assured Guaranty $0.76
PNW Pinnacle West Capital $1.63
PBH Prestige Brands $0.87
REGN Regeneron Pharmaceuticals $17.91
NSIT Insights $1.85
PWR Quanta Services $1.03
W Wayfair Inc. $1.17
XEC Cimarex Energy $1.89
EVRG Evergy Inc $0.74
COMM CommScope $0.43
TRGP Targa Resources $0.29
LAMR Lamar Advertising $0.86
CNQ Canadian Natural Resource USA $0.76
IBP Installed Building Products $1.47

Friday (August 6)

Ticker Company EPS Forecast
AEE Ameren $0.79
SGAMY Sega Sammy ADR -$0.01
MGA Magna International USA $1.42
D Dominion Resources $0.77
CHBAY Chiba Bank ADR $0.74
ING Ing Groep $0.35
NCLH Norwegian Cruise Line -$1.97
SRCL Stericycle $0.69
SPB Spectrum Brands $1.58
NUAN Nuance Communications $0.17
ESNT Essent $1.26
AMCX AMC Networks $1.80
LBRDA Liberty Broadband $1.03
LBRDK Liberty Broadband Lbrdk $1.03
MD Mednax $0.32
LEA Lear $2.40
FLR Fluor New $0.05
LSXMK Liberty Media SiriusXM C $0.36
LSXMA Liberty Media SiriusXM A $0.48
GT Goodyear Tire & Rubber $0.18
VTR Ventas -$0.08
IEP Icahn Enterprises -$0.05

 

Will Earnings Season Bring Volatility To The Stock Market?

The Commerce Department last week reported that the U.S. economy grew at a +6.4% annual rate in the first quarter, slightly below estimates but still strong. If it would have come in real hot and much higher bears would have pointed to fanning the inflation flames even further.

This mindset of “bad-news-could-be-good-news” is helping to keep the stock market at or near all-time highs. If economic data somewhat disappoints it means the Fed stay dovish and accommodative for longer.

Fundamental analysis

That might be important to keep in mind as April data starting this week is expected to be extremely good. The April Employment Report is due next Friday and with upper-end of Wall Street estimates look for upwards of +1 million new jobs being added. Other key April data next week includes the ISM Manufacturing Index on Monday, and the ISM Non-Manufacturing Index on Wednesday.

employment

If the data comes in better than expected the bears will win the nearby battle and have the upper hand when talking higher inflation and the Fed perhaps tightening sooner than anticipated. So this week could be a bit tricky whereas “disappointing-data” could actually be digested as a win for the bulls and “strong data” a win for the bears.

The earnings calendar is packed again next week with big names including Activision Blizzard, Adidas, AllState, Cerner, Cigna, CVS, Dominion Energy, Enbridge, Etsy, Hilton Worldwide, Moderna, Monster Beverage, Nintendo, PayPal, Peloton, Pfizer, Rocket Companies, Square, TMobile, Wayfair, and Zoetis.

COVID-19

Checking in on U.S. progress against Covid-19, the number of adults that have received at least one dose is around 60%-65%, depending on the source. Global cases continue to rise led by India, where new infections have been hitting new record highs every day for weeks now. The country reported a staggering 380k new infections and 3,645 new deaths on Thursday while less than 10% of the population has been vaccinated.

Bottom line, the global restart will not be synchronized like many bulls had hoped would be the case and global growth may continue to struggle. At the moment the U.S. market doesn’t seem to care. It will be interesting to see if increasing inflation and continued global headwinds will eventually come home to roost.

SP500 technical analysis

SP500 earnings season

Earnings season can bring volatility to the stock market. At the beginning of May, cycles turn to the downside. Note, this is only a timing tool and it never shows the amplitude or strength of the move. When cycles are topping, it means we can expect a move down or choppy trading. This is it.

But relying on cycles only is not a good idea. Insider Accumulation Index shows bearish divergence on a daily chart. At the same time, Advanced Decline Line is still strong. The key resistance is around 4250 at the moment. I believe earning season can bring a profit booking to the stock market. If that happens, watch 4000 – 39500. It was a massive resistance and now it might turn into support. Intermarket Forecast is neutral. But if it turns to the downside, we will finally see a pullback in SP500.

For a look at all of today’s economic events, check out our economic calendar.

Underlying Growth Expectations For Allstate Are Low For 2021: Morgan Stanley

Morgan Stanley said the underlying growth expectations for Allstate Corporation are low for 2021 as the company balances its top-line goals with a softening personal auto rate environment, a declining Encompass business, and building out its Independent Agent channel with the integration of National General.

Northfield Township, Illinois-based insurance company reported better-than-expected earnings in the fourth quarter of 2020 with profit soaring 87.5% to $5.87 per share from $3.13 per share in the same period a year ago.

The company’s net investment income surged more than 70% to $1.19 billion as performance-based investment income offset a decline in market-based investment income.

However, all is not well for one of the largest publicly held insurance providers in the United States as it posted its worst customer retention in nearly two decades in auto insurance with renewals rate dropping to 87.5% in 2020 from 88% in 2019.

ALL reported very strong 4Q20 results but declining auto premium growth pressured the stock. The Transformational Growth Plan remains a work-in-progress, with management noting the strategic actions taken in 2020 have impacted short term growth but are crucial for building a foundation for sustainable growth over the long-term,” wrote Michael W. Phillips, equity analyst at Morgan Stanley.

“Positives from the quarter include guidance for higher-than-expected share repurchases ($1.45b in 2021), increased demand for its telematics offerings (Milewise sales +35%), and commentary on accelerating growth in the direct channel.”

Allstate’s shares, which declined over 2% in 2020, slumped about 3% so far this year. Morgan Stanley gave a base target price of $126 with a high of $158 under a bull scenario and $80 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the insurance company’s stock.

“We update our 2021e/2022e op EPS to $12.99/$12.07 from $12.71/$12.73 and introduce 2023e op EPS of $12.72. Our updated estimates reflect the exclusion of ALIC from adjusted operating earnings for 2021e/2022e, which we previously had modelled $0.70/$0.80 per share, respectively. Our 2021e reflects higher 1H21 benefits in auto from continued lower driving activity (FY2021e Brand Auto core LR to 64.3% from 67.0%) as well as higher share repurchases, more than offsetting the impact from the ALIC sale,” Morgan Stanley’s W. Phillips added.

“Our 2022e decline is primarily attributed to lost ALIC earnings. We see the competitive rate environment ensuing for at least the bulk of this year, which, combined with a likely return to normal driving levels by 2022, will pressure margins for the year.”

Eight analysts who offered stock ratings for Allstate in the last three months forecast the average price in 12 months at $128.71 with a high forecast of $141.00 and a low forecast of $115.00.

The average price target represents a 20.38% increase from the last price of $106.92. From those eight equity analysts, six rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Other equity analysts also recently updated their stock outlook. The Allstate had its price objective upped by Barclays to $125 from $115. Raymond James lifted their price target to $125 from $120 and gave the stock a strong-buy rating. Bank of America lifted their price target to $149 from $147and gave the stock a buy rating.

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U.S. Insurer Allstate to Acquire National General for $4 Billion in Cash

Allstate Corporation, the largest publicly held personal lines property and casualty insurer in America, has announced the acquisition of National General Holdings Corp for approximately $4 billion in cash, or $34.50 per share, expanding its auto insurance business amid the COVID-19 pandemic.

Allstate, which is also one of the largest U.S. auto insurers, said the National General shareholders will receive $32.00 per share in cash, including dividends anticipated to be $2.50 per share, providing $34.50 in total value per share. The auto insurer will also fund the share purchase by deploying $2.2 billion in combined cash resources and, subject to market conditions, issuing $1.5 billion of new senior debt.

National General’s board of directors has approved the transaction, which includes customary terms and conditions, including a breakup fee of $132.5 million. A voting agreement has also been signed with entities controlling 40% of National General’s common shares to vote for the transaction, the company added.

The above-mentioned offering is expected to close in 2021.

Ardea Partners LP was the exclusive financial adviser to Allstate, and Willkie Farr & Gallagher LLP was the company’s legal adviser. J.P. Morgan Securities LLC was the exclusive financial adviser to National General, and Paul, Weiss, Rifkind, Wharton & Garrison LLP was National General’s legal counsel.

Executives’ comments

“Acquiring National General accelerates Allstate’s strategy to increase market share in personal property-liability and significantly expands our independent agent distribution,” Tom Wilson, Chair, President and CEO of the Allstate Corporation said in a press release.

“The acquisition increases personal lines premiums by $4.0 billion and market share by over 1 percentage point to 10%. National General’s business and technology platforms will be utilized to further strengthen Allstate’s existing independent agent businesses. The transaction will be accretive to adjusted net income earnings per share and return on equity beginning in the first year.”

“National General’s operating expertise has enabled us to serve customers and independent agents well as we have grown both organically and through acquisition,” Barry Karfunkel, Co-Chairman and CEO of National General said in a press release.

“We are excited about combining our team’s expertise and commitment with Allstate to become a top-five personal lines carrier for independent agents while offering a broader array of products. National General’s shareholders are also benefiting by unlocking the value created over the last decade.”

Allstate price target and outlook

Eight analysts forecast the average price in 12 months at $118.86 with a high forecast of $138.00 and a low forecast of $101.00. The average price target represents a 28.29% increase from the last price of $92.65, according to Tipranks. From those eight, four analysts rated ‘Buy’, four rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley lifted their target price on shares of Allstate from $111.00 to $115.00 with a high of $136 under a bull scenario and $67 under the worst-case scenario and gave the company an “equal weight” rating. Deutsche Bank lifted their target price on shares of Allstate from $115.00 to $120.00 and gave the company a “hold” rating.

Credit Suisse Group upgraded shares of Allstate from an “underperform” rating to a “neutral” rating and lifted their target price for the company from $94.00 to $101.00 in a report on Thursday, June 25th. Piper Sandler raised the target price to $112 from $108.

Morgan Stanley’s view on the acquisition

“The acquisition of National General, given its focus on nonstandard auto coverage in the independent agency channel, is likely a surprise to investors. Recent acquisitions have focused away from the traditional personal lines space to diversify Allstate’s offerings, rendering this transaction all the more surprising. In recent years, the direct channel has taken greater share from captive agencies in personal auto than independent agencies,” Michael W. Phillips, equity analyst at Morgan Stanley noted in April.

“As such, National General provides Allstate with another method of combatting the challenge to the captive agency model, given its market share declines in recent years. Likewise, National General has presence in lender-placed homeowners insurance, which benefits during recessions. As such, entering LPI could further insulate Allstate during a downturn, making the deal incrementally more attractive given current challenges in the macro environment,” the analyst added.

Upside and Downside risks

Upside:

Auto loss trends improve further, unit growth drives top-line acceleration, continued strong share repurchase, benign cats, and interest rates rise.

Downside:

Personal auto loss costs turn higher, lack of unit growth, performance volatility, unpredictable losses from catastrophes and investments.