M&T Bank to Acquire People’s United Financial in $7.6 Billion Deal, Shares Gain

M&T Bank Corp said on Monday that it has agreed to acquire a savings and loan holding company People’s United Financial in an all-stock transaction deal worth nearly $7.6 billion.

Following this announcement, People’s United Financial‘s shares, which slumped 23% in 2020, jumped over 13% to $17.79 on Monday. Similarly, M&T Bank’s shares, which slumped 25% last year, rose 20% so far this year. The stock traded about 2% higher at $152.83.

According to the deal, People’s United shareholders will receive 0.118 of a share of M&T common stock for each People’s United share they own. Following the completion of the transaction, former People’s United shareholders will collectively own nearly 28% of the combined company.

“The implied price would be a small premium to PBCT‘s $6.6 billion market cap., which, along with MTB‘s higher P/TBV multiple, would help the deal math. PBCT is a $62 billion asset bank with a New England and NYC tri-state area footprint. The deal would add scale to MTB‘s $145 billion asset base, bringing efficiency ratio and ROTCE benefits from cost saves and expansion into New England,” noted Ken Usdin, equity analyst at Jefferies.

The combined company will create a diversified, community-focused banking franchise with approximately $200 billion in assets and a network of more than 1,100 branches and over 2,000 ATMs that spans 12 states from Maine to Virginia and the District of Columbia, the company said in the press release.

M&T Bank Stock Price Forecast

Nine analysts who offered stock ratings for M&T Bank in the last three months forecast the average price in 12 months of $150.00 with a high forecast of $163.00 and a low forecast of $131.00.

The average price target represents a -1.64% decrease from the last price of $152.50. From those nine analysts, four rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $160 with a high of $213 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the bank’s stock.

Several other analysts have also updated their stock outlook. M&T Bank had its price objective boosted by equities research analysts at Deutsche Bank to $161 from $155. The firm currently has a “buy” rating on the financial services provider’s stock.

Moreover, the Royal Bank of Canada boosted their target price to $150 from $130 and gave the stock an “outperform” rating. Barclays boosted their target price to $163 from $159 and gave the stock an “overweight” rating.

Analyst Comments

“We view M&T Bank as one of the more conservative and higher-quality banks we cover, with better-than-peer credit losses through the cycle. In times of credit volatility, MTB tends to be favored among investors as more of a safe-haven play,” said Ken Zerbe, equity analyst at Morgan Stanley.

“It is considerably more profitable than peers, but the negative is its lack of loan growth as it continues to see run-off of its acquired Hudson City residential loan portfolio. We believe MTB deserves to trade at a modest premium to its peers.”

Check out FX Empire’s earnings calendar

German Business Sentiment Jumps in February

It’s a particularly quiet day on the economic calendar today. With no material stats from the Asian session and no major stats due out of the U.S later today.

The lack of stats left the market focus on German business sentiment figures for February this morning.

German Business Sentiment

In February, Germany’s IFO Business Climate Index rose from 90.3 to 92.4. Economists had forecast an increase to 90.5.

An improvement in both current sentiment and business expectations supported the pickup in the Business Climate Index.

The Business Expectations sub-index rose from 91.5 to 94.2, with the current assessment sub-index increasing from 89.2 to 90.6. Both came in ahead of forecasts.

According to the February survey,

  • In manufacturing, the index jumped to hits highest level since Nov-2018. The Business Climate Index rose across all major branches of industry.
  • There was also a pickup in the service sector Business Climate Index. Service sector firms were more satisfied with their current situation and less pessimistic about the future.

IFO Table

Market Impact

Ahead of the stats, it was a mixed start to the day for the EUR, which rose to an early high $1.21356 before sliding to a pre-stat low of $1.20923.

Upon the release of the IFO Business Climate survey, the EUR rose from $1.21003 to $1.21133 before easing back.

At the time of writing, the EUR was down by 0.04% to $1.21089.

EURUSD 220221 Minute Chart

While the EUR found support from the pickup in business sentiment, the DAX30 continued to struggle.

At the time of writing, the DAX30 was down by 0.96%, with rising commodity prices reigniting inflation fears.

Next Up

ECB President Lagarde is due to speak later today. Expect any chatter on the economic outlook or inflation to move the dial.

VMware Shows Signs of Recovery But Margins and Management Remain Unresolved: Morgan Stanley

Morgan Stanley in its latest research note said their channel work on the California-based tech giant VMware pointed towards sequential improvement in the fourth quarter and similar expectations for the first quarter, though macro pressure still lingers.

On Thursday, Palo Alto cloud computing and software company is widely expected to report EPS of $2.05 per share in the fourth quarter. That was in line with Morgan Stanley’s forecasts of $2.05 per share.

The investment bank forecasts a total revenue of $3.23 billion, up 5.1% year-over-year, in line with the market consensus estimates of +5% y/y growth. Morgan Stanley forecasts EBIT of $1.09 billion (33.6% margin) to round out FY21 at $3.74 billion (32% margin), in line with guidance and consensus.

“Beyond an improving top line, however, the stock performance will likely be tied to two other factors: 1) margins – preliminary guidance suggesting margin compression of 4% points YoY in FY22, therefore heavily pressuring near-term EPS growth; and 2) management – with CFO Zane Rowe as interim CEO, VMware‘s Board is currently searching for a permanent replacement after Pat Gelsinger’s departure. As such, even with shares at 20x CY22e P/E, trading at a meaningful discount to the large-cap average of 29x, we remain ‘Equal-weight’ on these uncertainties,” wrote Keith Weiss, equity analyst at Morgan Stanley.

VMware’s shares, which declined about 8% in 2020, had risen over 3% so far this year. The stock closed 1.54% higher at $144.68 on Friday.

Seventeen analysts who offered stock ratings for VMware in the last three months forecast the average price in 12 months at $167.21 with a high forecast of $199.00 and a low forecast of $145.00.

The average price target represents a 15.57% increase from the last price of $144.68. From those 17 equity analysts, nine rated “Buy”, eight rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $156 with a high of $193 under a bull scenario and $94 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the IT company’s stock.

Other equity analysts also recently updated their stock outlook. Mizuho cut their target price on shares to $147 from $152 and set a “neutral” rating. Cleveland Research lowered shares to a “neutral” rating from a “buy”. Barclays dropped their price target to $180 from $187 and set an “overweight” rating. At last, Piper Sandler increased their price objective to $179 from $170.

“Improved Positioning Largely Priced In: Over the last several years, fast-growing ‘Act 2’ product categories including vSAN, NSX and EUC have scaled to drive a better growth profile at VMware. However, the necessity of further investment to improve secular positioning weighs on op margins and EPS growth leaving the stock expensive on a PEG basis,” Morgan Stanley’s Weiss added.

“With CBLK and PVTL acquisitions closed, we wait for evidence of VMW‘s expansion strategy into security and app dev to take hold, as early partner conversations have been positive. Current trade of 20x CY22 P/E is a discount to the large-cap SW average/median of 29x/31x, justified considering VMW‘s on-premise exposure and margin pressure in FY22.”

Earnings to Watch Next Week: Palo Alto Networks, Home Depot, Nvidia and Salesforce in Focus

European Equities: German Business Confidence in Focus

Economic Calendar:

Monday, 22nd February

German Ifo Business Climate Index (Feb)

Tuesday, 23rd February

Eurozone CPI (YoY) (Jan) Final

Wednesday, 24th February

German GDP (YoY) (Q4) 2nd Estimate

German GDP (QoQ) (Q4) 2nd Estimate

Thursday, 25th February

GfK German Consumer Climate (Mar)

Friday, 26th February

French Consumer Spending (MoM) (Jan)

French GDP (QoQ) (Q4) 2nd Estimate

Spanish HICP (YoY) (Feb) Prelim

Spanish CPI (YoY) (Feb) Prelim

The Majors

It was a relatively bullish end to the week for the European majors on Friday. The CAC40 and DAX30 rose by 0.79% and by 0.77% respectively, with the EuroStoxx600 rising by 0.53%.

Prelim Manufacturing PMI for February gave the European majors a boost on Friday.

Corporate earnings added to the upside, supporting the market’s optimistic outlook towards the economic recovery.

The Stats

It was a busy day on the economic calendar on Friday. Prelim private sector PMI numbers for France, Germany, and the Eurozone were in focus.

In February, the French Manufacturing PMI jumped from 51.6 to a 3-year high 55.0. Economists had forecast a decline to 51.4.

The services PMI fell from 47.3 to a 3-month low 43.6, leading to a fall in the French Composite PMI from 47.7 to a 3-month low 45.2.

Germany’s manufacturing sector activity picked up in February, with the prelim Manufacturing PMI rising from 57.1 to a 36-month high 60.6. Economists had forecasted a fall to 56.5.

Service sector troubles continued, however, with the services PMI falling from 46.7 to a 9-month low 45,9.

As a result of the jump in manufacturing sector PMI, the composite PMI increased from 50.8 to a 2-month high 51.3.

For the Eurozone, the manufacturing PMI increased from 54.8 to 57.7, while the services PMI fell from 45.4 to 44.7.

The Eurozone’s composite PMI increased from 47.8 to 48.1, supported by the pickup in manufacturing sector activity.

From the U.S

Key stats also included prelim private sector PMI numbers for February. It was also a mixed set of numbers from the U.S.

In February, the all-important services PMI increased from 58.3 to 58.9, while the manufacturing PMI slipped from 59.2 to 58.5. Supported by the services sector, the composite PMI increased from 58.7 to 58.8 in the month.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Friday. BMW and Volkswagen rose by 0.52% and by 1.57% respectively, while and Continental and Daimler fell 1.52% and by 0.15% respectively.

It was a bullish day for the banks, however. Deutsche Bank and Commerzbank rallied by 3.78% and by 3.18% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 2.66% and by 2.63% respectively, with Soc Gen rallying by 3.78%.

It was a mixed day for the French auto sector, however. Stellantis NV rose by 0.81%, while Renault slid by 4.43%. Disappointing corporate earnings results weighed on Renault on the day.

Air France-KLM rallied by 3.91%, with Airbus SE rising by 0.53% to partially reverse Thursday’s slide.

On the VIX Index

A run of 3 consecutive days in the green came to an end for the VIX on Friday. Partially reversing a 4.60% rise from Thursday, the VIX fell by 1.96% to end the day at 22.05.

The NASDAQ rose by 0.07%, with the Dow ending the day flat. The S&P500 fell by 0.19% on the day.

VIX 220221 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the European economic calendar. February business confidence figures for Germany are due out later this morning.

Following impressive manufacturing PMI numbers from Friday, a pickup in business confidence should deliver further support to the majors.

From the U.S, there are no material stats later in the day to provide the majors with direction.

The lack of stats from the U.S will leave the majors in the hands of chatter from Capitol Hill later in the day.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 7 points.

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

Earnings to Watch Next Week: Palo Alto Networks, Home Depot, Nvidia and Salesforce in Focus

Earnings Calendar For The Week Of February 22

Monday (February 22)

IN THE SPOTLIGHT: PALO ALTO NETWORKS

The Santa Clara, California-based cybersecurity company is expected to report a profit of $1.43 per share in the fiscal second quarter, which represents year-over-year growth of over 20% from $1.19 per share seen in the same quarter a year ago.

The global cybersecurity leader would post year-over-year revenue growth of over 20% to $985.681 million.

“A rapidly growing Next-Gen Security platform plus a stable core network security business remains the equation for durable 20%+ billings growth heading into the FQ2 print. More clarity into the dual growth engines should drive further multiple expansion, with our SoTP valuation yielding a $515 price target,” noted Keith Weiss, equity analyst at Morgan Stanley.

Palo Alto Networks offers a disruptive platform, well-positioned to address the evolving threat landscape. We believe Palo Alto Networks will continue to differentiate itself from its peers as it proves out a broader TAM around a NextGen Security Platform (and executing to that opportunity). With the strong billings base and the continued drive towards higher operating margins, we remain confident in the durability of our FCF estimates. Currently trading at 22x CY22e FCF vs. our model which looks for 18% FCF CAGR from CY21-26e and terminal 23x CY26e FCF, we continue to see attractive risk/reward in PANW shares.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 22

Ticker Company EPS Forecast
DPH Dechra Pharma £32.57
BNZL Bunzl £71.65
DISCB Discovery Communications Discb $0.72
DISCA Discovery Communications $0.71
GHC Graham $8.87
DISCK Discovery Communications Disck $0.72
KBR KBR $0.49
DORM Dorman Products $0.92
KFY Korn Ferry International $0.51
CTB Cooper Tire Rubber $0.92
THRM Gentherm $0.65
DISH Dish Network $0.78
BZLFY Bunzl plc $0.13
CDNS Cadence Design Systems $0.74
PANW Palo Alto Networks $1.43
SBAC SBA Communications $0.52
RSG Republic Services $0.81
WMB Williams Companies $0.30
O Realty Ome $0.35
SID Companhia Siderurgica Nacional $0.11
OKE ONEOK $0.74
IR Ingersoll Rand $0.45
EXR Extra Space Storage $0.91
TREX Trex $0.36
FIVN Five9 $0.23
NDSN Nordson $1.06
FANG Diamondback Energy $0.82
LSI LIFE STORAGE $0.54
XEC Cimarex Energy $0.68
AL Air Lease $0.75
PSB PS Business Parks $0.80
SBRA Sabra Health Care Reit $0.18
CNNE Cannae -$0.09
NHI National Health Investors $1.01
AWR American States Water $0.47
BCC Boise Cascade $0.99
HTA Healthcare Of America $0.11
RIG Transocean -$0.18
MRO Marathon Oil -$0.20
CVI CVR Energy -$0.72
GDOT Green Dot $0.18
WRI Weingarten Realty Investors $0.10
ACC American Campus Communities $0.09
OXY Occidental Petroleum -$0.58
ICAD Icade €2.33
PPERY PT Bank Mandiri Persero TBK $0.09
MGEE Mge Energy $0.51
CCU Compania Cervecerias Unidas $238.63
TPL Texas Pacific Land $4.66
SHCAY Sharp ADR $0.08
BKRKY Bank Rakyat $0.13
PKX Posco $1.52
WF Woori Bank $0.75
GPFOY Financiero Inbursa ADR $0.13
OSH Oak Street Health -$0.25
YALA Yalla $0.12
KHOLY Koc Holdings AS $0.20
DM Dominion Midstream Partners -$0.06
AU Anglogold Ashanti $1.85
CRI Carters $2.74
AVST Avast Holdings £0.12

 

Tuesday (February 23)

IN THE SPOTLIGHT: HOME DEPOT

The U.S. largest home improvement retailer is expected to report a profit of $2.61 per share in the fourth quarter, which represents year-over-year growth of over 14% from $2.28 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of 3.60%.

The Cobb County, Georgia-based company’s revenue would surge more than 18% to $30.45 billion.

Home Depot has witnessed continued strong demand for home-improvement projects as customers spent more time at home during the coronavirus pandemic. The company has been gaining from the high-demand environment, driven by investments in its business. This coupled with broad-based strength across stores and geographies has been boosting comparable sales (comps) performance,” noted analysts at Zacks Equity Research.

“Amid the pandemic, customers have been blending the physical and digital elements of the shopping experience more than ever before making the company’s interconnected One Home Depot strategy the most relevant. Its interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic in the past six months. Additionally, it has been benefiting from enhanced delivery and fulfilment options to provide a robust interconnected experience. Gains from these efforts are likely to have aided the company’s sales and earnings performance in the fiscal fourth quarter.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 23

Ticker Company EPS Forecast
UTG Unite Group £45.10
HSBA HSBC Holdings £0.01
CROX Crocs $0.82
ARNC Arconic Inc $0.35
CBRL Cracker Barrel Old Country Store $0.75
WLK Westlake Chemical $0.74
MDT Medtronic $1.15
SPR Spirit AeroSystems -$0.83
FE FirstEnergy $0.47
BCO Brinks $0.98
HD Home Depot $2.61
BNS Scotiabank $1.24
BMO Bank Of Montreal USA $1.69
CBRE CBRE Group Inc $0.94
LDOS Leidos $1.61
BLD TopBuild Corp $1.95
NXST Nexstar Broadcasting $6.99
TRI Thomson Reuters USA $0.46
M Macy’s $0.05
AWI Armstrong World Industries $0.67
RLGY Realogy $0.57
ETRN Equitrans Midstream Corp $0.34
LGIH LGI Homes $4.05
SATS EchoStar -$0.03
GMAB Genmab A/S kr7.68
XNCR Xencor -$0.38
ARNA Arena Pharmaceuticals -$1.84
EC Ecopetrol $0.22
HSBC HSBC $0.08
TX Ternium $1.02
COG Cabot Oil Gas $0.21
CBD Companhia Brasileira De Distrib $0.46
FLS Flowserve $0.53
PXD Pioneer Natural Resources $0.69
INFN Infinera $0.02
MTG MGIC Investment $0.40
XP XP Inc $1.05
SQ Square $0.24
INTU Intuit $0.99
CSGP CoStar $2.42
VRSK Verisk Analytics $1.30
PODD Insulet -$0.04
HEI Heico $0.48
MASI Masimo $0.85
EQH AXA Equitable Holdings Inc $1.21
CHE Chemed $5.13
TOL Toll Brothers $0.47
WES Western Gas Partners $0.59
HALO Halozyme Therapeutics $0.53
INSP Inspire Medical Systems Inc -$0.46
JAZZ Jazz Pharmaceuticals $4.24
Y Alleghany $5.04
RRC Range Resources $0.05
EPRT Essential Properties Realty Trust Inc $0.16
MTDR Matador Resources $0.12
CHX ChampionX Corp $0.04
MATX Matson $1.36
APLE Apple Hospitality -$0.14
ATRC AtriCure -$0.28
PEB Pebblebrook Hotel -$0.90
DAR Darling Ingredients $0.42
MRTX Mirati Therapeutics -$2.28
ALLK Allakos -$0.85
JBGS JBG SMITH Properties $0.29
IHG Intercontinental Hotels $0.94
VERX Vertex Inc. Cl A $0.07
JYSK Jyske Bank kr8.46
VIV Telefonica Brasil $0.15
CXO Concho Resources $1.18
MNTA Momenta Pharmaceuticals -$0.50
IHG Intercontinental £0.97
VJBA Vestjysk Bank kr0.08
FMS Fresenius Medical Care $0.74

 

Wednesday (February 24)

IN THE SPOTLIGHT: NVIDIA

The Santa Clara, California- based multinational technology company is expected to report a profit of $2.80 per share in the fiscal fourth quarter, which represents year-over-year growth of over 48% from $1.89 per share seen in the same quarter a year ago.

The company, which designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market, forecasts revenue of $4.8 billion.

NVIDIA‘s fiscal fourth-quarter performance is likely to have benefited from growth across all of its business segments except the Automotive and Professional Visualization units. NVIDIA is also anticipated to have benefited from strength in its data-centre business on the growing adoption of cloud-based solutions amid the coronavirus crisis-induced work-from-home wave. Increase in Hyperscale demand and growing adoption in the inference market are likely to have been tailwinds during the to-be-reported quarter,” noted analysts at Zacks Equity Research.

“Additionally, the pandemic-induced remote-working wave is likely to have bolstered sales of graphic chips utilized in desktops and laptops. This, in turn, is anticipated to have aided the quarterly performance. Nonetheless, disruptions in retail channel sales due to lockdown and social-distancing measures implemented by governments across the world to contain the spread of coronavirus might have partially offset the benefit of solid demand for the remote-working and online-learning hardware infrastructure.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 24

Ticker Company EPS Forecast
RY Royal Bank Of Canada $1.78
TCP TC Pipelines $0.99
RGEN Repligen $0.31
ENBL Enable Midstream Partners $0.11
LOW Lowe’s Companies $1.20
LIVN LivaNova PLC $0.66
HZNP Horizon Pharma $1.05
IONS Ionis Pharmaceuticals $0.26
CLH Clean Harbors $0.39
VER VEREIT $0.19
IRM Iron Mountain $0.31
WEX WEX $1.46
AVA Avista $0.79
SBGI Sinclair $5.07
ITRI Itron $0.34
SIX Swiss Exchange -$0.89
WYND Wyndham Destinations Inc $0.49
PNW Pinnacle West Capital $0.04
VRT Veritas Pharma $0.33
HFC HollyFrontier -$0.71
ODP Office Depot $0.95
TJX TJX Companies $0.61
OSTK Overstock $0.17
EXC Exelon $0.69
ETR Entergy $0.67
TRN Trinity Industries $0.15
IBP Installed Building Products $1.23
EV Eaton Vance $0.89
UTHR United Therapeutics $2.95
ORA Ormat Technologies $0.37
WTRG Essential Utilities Inc $0.45
VAC Marriottacations Worldwide $0.03
SJI South Jersey Industries $0.54
STN Stantec USA $0.33
STAA STAAR Surgical $0.08
ACAD Acadia Pharmaceuticals -$0.47
PDCE PDC Energy $0.85
APA Apache -$0.10
ANSS Ansys $2.54
PSA Public Storage $1.93
KW Kennedy Wilson $0.07
EPR EPR Properties -$0.32
UNVR Univar Solutions Inc $0.24
DDD 3D Systems $0.09
ADPT Adeptus Health -$0.29
RVLV Revolve $0.11
LB L Brands $2.90
GEF Greif $0.54
FTI FMC Technologies $0.15
ESI Itt Educational Services $0.28
MMSI Merit Medical Systems $0.43
NOVA Nova Mentis Life Science Corp -$0.36
CHDN Churchill Downs -$0.39
AGI Alamos Gold $0.13
CW Curtiss-Wright $2.33
RCII Rent-A-Center $1.00
DOOR Masonite International $1.14
RDN Radian $0.63
FNF Fidelity National Financial $1.32
AMED Amedisys $1.46
AWK American Water Works $0.80
NVDA Nvidia $2.80
NTAP NetApp $1.01
PTVE Pactiv Evergreen $0.25
UFPI Universal Forest Products $0.71
TNDM Tandem Diabetes Care $0.12
BKNG Booking Holdings Inc -$3.85
GBT BMTC Group -$0.95
PAC Grupo Aeroportuario Del Pacifico $0.67
CIB Bancolombia $0.17
PBR Petroleo Brasileiro Petrobras $0.15
GGB Gerdau $0.07
ASR Grupo Aeroportuario Del Sureste $14.83
UGP Ultrapar Participacoes $0.05
TS Tenaris $0.00
LYG Lloyds Banking $0.02
DY Dycom Industries $0.05
WB Weibo $0.72
SRPT Sarepta Therapeutics -$1.99
SSYS Stratasys -$0.10
KOF Coca Cola Femsa Sab De Cv $0.60
MIDD Middleby $1.40
CLGX CoreLogic $1.06

 

Thursday (February 25)

IN THE SPOTLIGHT: SALESFORCE.COM

The San Francisco, California-based global cloud computing company is expected to report a profit of $0.75 in the fourth quarter, which represents year-over-year growth of about 14% from $0.66 per share seen in the same quarter a year ago.

The company, which develops CRM solutions and provides business software on a subscription basis, would post revenue growth of 17% to nearly $5.7 billion.

“While Salesforce remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation, we see current valuation reflective of long-term share gains and achieving management’s target for $50 billion revenue in CY25,” said Keith Weiss, equity analyst at Morgan Stanley.

“At CRM‘s current scale and market cap, an increasing focus on FCF and earnings is necessary for further price appreciation, in our view. However, the recent large ($27 billion) and dilutive acquisition of Slack makes margin expansion in the near to medium term less likely. We look for greater clarity and confidence into revenue growth and margin framework at CRM in order to get more constructive.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 25

Ticker Company EPS Forecast
AMRN Amarin -$0.02
SHEN Shenandoah Telecommunications $0.85
NTLA Intellia Therapeutics Inc -$0.61
ITCI Intra Cellular Therapies -$0.86
SHOO Steven Madden $0.21
PLUG Plug Power -$0.07
AGIO Agios Pharmaceuticals -$1.31
DPZ Dominos Pizza $3.88
INSM Insmed -$0.67
MRNA Moderna Inc -$0.34
PCG PG&E $0.21
EME EMCOR $1.44
NLSN Nielsen $0.46
NRG NRG Energy $0.45
BCRX BioCryst Pharmaceuticals -$0.24
TREE LendingTree -$1.00
AES AES $0.43
DCI Donaldson $0.51
TD Toronto-Dominion Bank $1.16
WWW Wolverine World Wide $0.17
AMT American Tower $1.25
CCOI Cogent Communications $0.21
OGE OGE Energy $0.29
SRE Sempra Energy $1.58
SJM J.M. Smucker $2.17
SAFM Sanderson Farms -$0.66
ROCK Gibraltar Industries $0.63
CWT California Water Service $0.26
W Wayfair Inc. $0.82
SEAS SeaWorld Entertainment -$0.71
CNP CenterPoint Energy $0.19
PZZA Papa John’s International $0.48
STWD Starwood Property $0.49
EVOP EVO Payments Inc $0.21
DOC Physicians Realty $0.08
CLNY Colony Financial -$0.58
LI Li Auto -$0.24
NTES NetEase $2.82
PLAN Progressive Planet -$0.10
CLF Cliffs Natural Resources $0.20
EXLS ExlService $1.07
KDP Keurig Dr Pepper $0.40
PWR Quanta Services $1.00
FSS Federal Signal $0.41
FCN FTI Consulting $1.17
GIL Gildan Activewear USA $0.21
CWH Camping World Holdings $0.18
PCRX Pacira $0.81
NCLH Norwegian Cruise Line -$2.17
TFX Teleflex $3.05
FLIR FLIR Systems $0.62
VIPS Vipshop $3.13
IOVA Iovance Biotherapeutics -$0.44
IRTC iRhythm Tech -$0.29
MNST Monster Beverage $0.55
REGI Renewable Energy $0.68
XLRN Acceleron Pharma -$0.59
AAON AAON $0.29
DRNA Dicerna Pharmaceuticals -$0.08
PVG Pretium Resources $0.25
LPSN LivePerson $0.01
SWI Solarwinds $0.25
EIX Edison International $1.20
VGR Vector $0.18
BMRN BioMarin Pharmaceutical -$0.17
EOG EOG Resources $0.37
RKT Rocket Cos. Inc. $0.88
VICR Vicor $0.19
SFM Sprouts Farmers Market $0.39
ETSY ETSY Inc $0.57
PTCT PTC Therapeutics -$0.92
SEM Select Medical $0.36
EGO Eldorado Gold USA $0.33
SWN Southwestern Energy $0.14
ACHC Acadia Healthcare $0.68
UHS Universal Health Services $2.79
MTZ MasTec $1.67
ERIE Erie Indemnity $1.09
BVN Compania De Minas Buenaventura $0.22
FTCH Farfetch -$0.13
WDAY Workday $0.55
VMW VMware $2.05
HPQ HP $0.66
CRM Salesforce.com $0.75
MED Medifast $2.38
OUT Outfront Media -$0.04
PRAH PRA Health Sciences Inc $1.47
LHCG LHC $1.39
RLJ RLJ Lodging -$0.64
STOR STORE Capital Corp $0.21
ICUI ICU Medical $1.51
CUBE CubeSmart $0.20
ENDP Endo International Ordinary Shares $0.46
LYV Live Nation Entertainment -$2.25
ALTR ALTAIR ENGINEERING $0.00
AMH American Homes 4 Rent $0.06
CABO Cable One Inc $11.60
ADT ADT $0.30
RUN Sunrun Inc $0.07
CZR Caesars Entertainment -$1.94
HHC Howard Hughes -$0.70
PK Park Hotels & Resorts Inc -$0.90
FOXF Fox Factory $0.78
ADSK Autodesk $1.07
CWK Cushman & Wakefield plc $0.35
FSLR First Solar $1.25
NUVA NuVasive $0.56
ENV Envestnet $0.65
INT World Fuel Services $0.23
FIX Comfort Systems USA $0.84
NKTR Nektar Therapeutics -$0.67
BIG Big Lots $2.50
AY Atlantica Yield $0.16
PDCO Patterson Companies $0.51
KWR Quaker Chemical $1.52
AEBZY Anadolu Efes ADR $0.01
SWX Southwest Gas $1.57
AEP American Electric Power $0.78
ARRY Array Technologies Inc $0.05
ALXO Alx Oncology Holdings Inc. -$0.36
ACIW ACI Worldwide $0.49
VIST Vista Oil Gas -$0.08
BUD Anheuser-Busch $0.89
BAYRY Bayer AG PK $0.38
CM Canadian Imperial Bank Of Commerce USA $2.19
SRCL Stericycle $0.63
BBY Best Buy $3.45
ABEV Ambev $0.05
NNI Nelnet $5.78
AGO Assured Guaranty $0.57
BRFS BRF $0.08
TEF Telefonica $0.23
VALE Vale $0.91
NGLOY Anglo American ADR $0.62

 

Friday (February 26)

Ticker Company EPS Forecast
CNK Cinemark -$1.46
IEP Icahn Enterprises -$0.47
EVRG Evergy Inc $0.22
LSXMK Liberty Media SiriusXM C $0.15
PNM PNM Resources $0.15
AMCX AMC Networks $0.49
VST Victory Square Tech $0.64
BLDR Builders Firstsource $0.90
FL Foot Locker $1.29
FLR Fluor New $0.22
RHP Ryman Hospitality Properties -$1.90
STRA Strayer Education $1.48
LAMR Lamar Advertising $0.78
MGLN Magellan Health -$0.30
GRFS Grifolsbarcelona $0.22
PEG Public Service $0.65
For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Week in Review – 19/02/21

The Majors

It was another mixed week for the European majors in the week ending 19th February.

The CAC40 and the EuroStoxx600 rose by 1.23% and by 0.21% respectively to mark a 2nd consecutively weekly gain.

Bucking the trend, however, was the DAX30 that fell by 0.40% to mark a 2nd consecutive weekly loss.

Positive economic data and optimism towards the economic outlook continued to provide the majors with support.

Market concerns over a pickup in inflationary pressures and the possible impact on monetary policy and consumption tested the majors, however.

With the EU rolling out vaccines at a slower pace and restrictions still in effect, rising prices would peg further back consumption across the Euro bloc.

The Stats

It was a busy week on the economic calendar.

Through the 1st half of the week, economic data for Germany and the Eurozone were in focus.

For the Eurozone, the trade surplus widened from €25.8bn to €29.2bn reflecting improving trade terms.

Economic sentiment figures for February also delivered support. Germany’s ZEW Economic Sentiment index rose from 61.8 to 71.2, with the Eurozone’s rising from 58.3 to 69.8.

2nd estimate GDP figures for the Eurozone were also market positive following upward revisions from 1st estimates.

The only blemish early on in the week was a larger than expected fall in industrial production. Production fell by 1.6%, partially reversing a 2.5% rise from November.

In the 2nd half of the week, Eurozone consumer confidence waned in February, with the index falling from -13.8 to -14.8.

Vaccine woes and extended containment measures likely contributed to the demise.

At the end of the week, private sector PMI numbers for February were in focus.

According to the prelim survey, the French Manufacturing PMI jumped from 51.6 to a 3-year high 55.0 in February. The services PMI fell from 47.3 to a 3-month low 43.6, however.

In Germany, manufacturing sector activity picked up in February, with the prelim Manufacturing PMI rising from 57.1 to a 36-month high 60.6. Economists had forecasted a fall to 56.5.

Service sector troubles continued, however, with the services PMI falling from 46.7 to a 9-month low 45.9.

For the Eurozone, the Manufacturing PMI increased from 54.8 to 57.7, while the services PMI fell from 45.4 to 44.7.

In spite of the fall in the services PMI, the composite PMI rose from 47.9 to 48.1, supported by the manufacturing sector.

On the monetary policy front, the ECB meeting minutes had a cautiously optimistic tone. Members did note, however, that risks remained titled to the downside, with EUR strength a possible concern.

From the U.S

Economic data was also on the busier side.

In the 1st half of the week, retail sales and industrial production figures impressed.

Core retail sales jumped by 5.9%, with retail sales rising by 5.3% in January, reversing declines from December. Industrial production rose by a further 0.9%, following a 1.3% increase in December.

On Thursday, jobless claims and Philly FED Manufacturing numbers disappointed, however.

In the week ending 12th February, initial jobless claims rose from 848k to 861k, while economists had forecasted a fall to 765k.

For February, the Philly FED Manufacturing Index slipped from 26.5 to 23.1.

On Friday, the numbers were mixed.

The all-important services PMI increased from 58.3 to 58.9 in February. Manufacturing sector activity saw marginally slower growth, however. The PMI fell from 59.2 to 58.5, according to prelim figures.

From the FED, the FOMC meeting minutes from Wednesday were aligned with recent assurances from FED Chair Powell. While the members agreed that policy should remain unchanged for the foreseeable future, members also acknowledged that the economic recovery had moderated.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen and Daimler rallied by 5.88% and by 3.76% respectively, with BMW gaining 1.64%. Continental bucked the trend, however, sliding by 4.90%.

It was a bullish week for the banking sector. Deutsche Bank rallied by 6.68%, with Commerzbank gaining 4.10% to partially reverse the previous week’s 9.06% slide.

From the CAC, it was another particularly bullish week for the banks. Soc Gen surged by 11.48%, with BNP Paribas and Credit Agricole gaining 3.98% and 4.04% respectively.

It was a mixed week for the French auto sector, however. Renault slid by 3.33%, while Stellantis NV ended the week up by 0.92%.

Air France-KLM rose by 1.77% off the back of a 3.28% rally on Friday, while Airbus fell by 0.48%.

On the VIX Index

It was back into the green for the VIX. In the week ending 19th February, the VIX rose by 10.42%. Reversing a 4.31% fall from the previous week, the VIX ended the week at 22.05.

For the week, the NASDAQ and the S&P500 fell by 1.57% and by 0.71% respectively, while the Dow ended the week up by 0.11%.

VIX 200221 Weekly Chart

The Week Ahead

It’s another busy week ahead on the economic calendar.

In the 1st half of the week, the German business sentiment figures and finalized inflation figures for the Eurozone are due out.

Barring any revision from prelim figures, expect Germany’s IFO Business Climate Index to be the key driver.

Mid-week, the focus shifts to 2nd estimate GDP numbers for Germany. Following upward revisions to the Eurozone’s 4th quarter numbers, expect any revisions to influence.

On Thursday, German consumer confidence figures will draw attention ahead of French consumer spending and 2nd estimate GDP numbers on Friday.

From the U.S, the economic calendar is also on the busier side.

It’s a quiet start to the week, however, with February consumer confidence figures in focus.

In the 2nd half of the week, the focus will shift to the weekly jobless claims and core durable goods orders on Thursday. 2nd estimate GDP numbers for the 4th quarter will also draw attention ahead of a busy end to the week.

On Friday, personal spending and the FED’s preferred core PCE price index figures will provide direction.

While personal spending is key, market jitters over a pickup in inflationary pressures influenced last week. Expect January’s numbers to therefore garner plenty of interest.

Deere Starts 2021 on Strong Note, Shares Gain Over 7% on Upbeat Earnings

Deere & Company, the world’s largest maker of farm equipment, reported better-than-expected earnings in the first quarter on improved demand for farm and construction machines, sending its shares up over 7% in pre-market trading on Friday.

Agricultural, construction and forestry equipment manufacturer reported net income of $1.224 billion for the first quarter ended January 31, 2021, or $3.87 per share, compared with net income of $517 million, or $1.63 per share, for the quarter ended February 2, 2020. That was nearly doubled than the Wall Street consensus estimates of $2.12 per share.

The Moline, Illinois-based company said its worldwide net sales and revenues increased 19%to $9.112 billion. Equipment operations net sales were $8.051 billion for the quarter, compared with $6.530 billion in 2020.

Deere forecasts net income attributable for fiscal 2021 in a range of $4.6 billion to $5.0 billion, an upgraded from the previous forecast of $3.6 billion-$4.0 billion.

“With 1Q Equip Ops margins of 17.1% coming in ~6ppts+ above Street & well above DE‘s 15% target during the seasonally weakest Q of the year, we continue to see an upside to DE‘s mid-cycle targets. We expect a strong reaction to both the 1Q print and DE‘s 25%+ raise to FY21 net income guidance,” said Courtney Yakavonis, equity analyst at Morgan Stanley.

Following this upbeat result, Deere‘s shares, which surged over 55% last year, rose over 7% to $321.79 in pre-market trading on Friday.

Deere Stock Price Forecast

Seventeen analysts who offered stock ratings for Deere in the last three months forecast the average price in 12 months of $309.63 with a high forecast of $400.00 and a low forecast of $220.00.

The average price target represents a 3.12% increase from the last price of $300.25. From those 17 analysts, 12 rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $341 with a high of $467 under a bull scenario and $146 under the worst-case scenario. The firm gave an “Overweight” rating on the agricultural equipment manufacturer’s stock.

Analyst Comments

Deere (DE) is one of the highest quality, most defensive names within the broader Machinery universe, given an historically lower cyclicality of Ag Equipment and history of strong management execution. FY21 should mark a tangible acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment,” Morgan Stanley’s Yakavonis added.

“With management continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in DE‘s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group.”

Upside and Downside Risks

Risks to Upside: 1) Recovery in commodity prices and US cash receipts. 2) Better than expected margin improvement efforts. 3) US infrastructure bills pass, driving outsized C&F growth – highlighted by Morgan Stanley.

Risks to Downside: 1) Commodity prices truncate the ongoing replacement cycle. 2) Excess Used inventories limit pricing power and demand pull-through. 3) Mis-execution around 15% operating margin target. 4) Supply chain woes and price/material headwinds persist.

Check out FX Empire’s earnings calendar

Roku Tops Q4 Earnings Estimates; Provides Upbeat Guidance

Roku, an American publicly-traded company that manufactures a variety of digital media players for video streaming, reported better-than-expected earnings in the holiday quarter with total active accounts rising 14.3 million in the year to 51.2 million.

San Jose, California-based video-streaming device maker said its total net revenue surged about 60% to $649.9 million, above the market expectations of $617.25 million. Adjusted profit came in at $0.49 per share, beating the Wall Street consensus estimates of $0.05 per share.

“There is often a degree of noise in ROKU‘s results mainly due to the revenue structure complexity in the Platform segment, which, in some quarters, masks strong core business results. We don’t see any noise this quarter and think the stock should react positively. Video advertising Y/Y growth accelerated to >100%; the commentary on the growth in SVOD subscription revenue stands out as an incremental positive,” said Vasily Karasyov, equity analyst at Cannonball Research.

However, Roku‘s shares, which surged nearly 150% last year, dipped about 1% to $452.99 on Thursday. The shares rose as high as 3% in extended trading.

The digital media hardware company forecasts total revenue in the range of $478 million and $493 million for the first quarter. That was higher than the market expectations of nearly $462 million.

Roku Stock Price Forecast

Sixteen analysts who offered stock ratings for Roku in the last three months forecast the average price in 12 months of $413.60 with a high forecast of $500.00 and a low forecast of $250.00.

The average price target represents a -8.70% decrease from the last price of $452.99. From those 16 analysts, ten rated “Buy”, five rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $275 with a high of $450 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Underweight” rating on the video-streaming device maker’s stock.

Roku‘s Platform segment revenue growth benefited from both secular and COVID-19-related tailwinds. Gross margins a notable standout. Looking ahead, 1Q guidance is in-line and the company noted 2H deceleration likely. Remain ‘Underweight’ as valuation reflects success in our view,” said Benjamin Swinburne, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Truist Securities raised the target price to $390 from $220. Deutsche Bank upped their price objective to $400 from $260 and gave the stock a buy rating.

Moreover, JP Morgan set an overweight rating and a $475 price objective. Zacks Investment Research gave a buy rating and set a $352 price target. Citigroup increased their price target to $460 from $375 and gave the company a buy rating.

Analyst Comments

“We believe the market is underestimating the competition on Platform active accounts in the U.S., as well as the time it takes for international expansion to scale. Active account growth has benefited strongly in the U.S. from share gains at TCL, and sustained growth will require additional share gains or major new smart TV partners,” Morgan Stanley’s Swinburne added.

“We believe the market may be underestimating the ability to monetize strong streaming hours growth long term. Not all hours are equally valuable to Roku, and impressive hours growth reported by Roku is at least in part driven by ‘cable’ TV viewing benefit from MVPDs that are likely structurally less valuable to Roku than hours of long-tail publishers.”

Upside and Downside Risks

Risks to Upside: Strong user adoption increases scale and leverage against content partners to secure greater advertising-supported content; international expansion can drive incremental advertising – highlighted by Morgan Stanley.

Risks to Downside: New product/feature launches by competitors could pressure Roku‘s account growth and time spent. Competitors could announce competing software licensing deals with smart TV manufacturers.

Check out FX Empire’s earnings calendar

European Equities: Prelim Private Sector PMIs for February in Focus

Economic Calendar:

Friday, 19th February

French CPI (MoM) (Jan) Final

French HICP (MoM) (Jan) Final

French Manufacturing PMI (Feb) Prelim

French Services PMI (Feb) Prelim

German Manufacturing PMI (Feb) Prelim

German Services PMI (Feb) Prelim

Italian CPI (MoM) (Jan) Final

Eurozone Manufacturing PMI (Feb) Prelim

Eurozone Markit Composite PMI (Feb) Prelim

Eurozone Services PMI (Feb) Prelim

The Majors

It was a bearish day for the European majors on Thursday. The CAC40 and the EuroStoxx600 fell by 0.65% and by 0.82% respectively, with the DAX30 ending the day down by 0.16%.

Concerns over the possible effects of a return of inflationary pressures continued to weigh on the majors.

Corporate earnings results and economic data added to the downside, as did the ECB monetary policy meeting minutes, in spite of some cautious optimism.

The Stats

It was a relatively quiet day on the economic calendar on Thursday. Consumer confidence figures for the Eurozone were in focus late in the session.

Ahead of the numbers, the ECB Monetary Policy Meeting Minutes also drew attention.

In February, the consumer confidence indicator fell from -13.8 to -14.8.

From the ECB, salient points from the minutes included:

  • Activity in the 4th quarter was likely to have seen a less pronounced decline than had been envisaged in Q4 of 2020.
  • The recent intensification of the pandemic, however, was expected to weigh more heavily on activity in the Q1 of 2020 than had been foreseen earlier.
  • Net-net, developments remained broadly in line with the December baseline projection overall.
  • Members also noted that an extension of the containment measures beyond Q4 of 202 had been incorporated into the December projections.
  • On the downside, however, it was argued that the forecasted fast rebound in growth might be too optimistic.
  • Vaccination roll-outs were proving to be slow. There were also concerns over the spread of new, more virulent, mutations of the virus.
  • It was noted, however, that the economic costs of containment measures were lower than in Spring 2020.
  • While containment measures were stricter, more fiscal support and better adjustments by firms to cope with restrictions softened the blow.
  • Looking ahead, the euro area economic recovery should be supported by favorable financial conditions, an expansionary fiscal stance, and a recovery in demand as restriction measures ease.
  • Members assessed that risks remained tilted to the downside by had become less pronounced.

From the U.S

Key stats included the weekly jobless claims and Philly FED manufacturing PMI numbers.

In the week ending 12th February, initial jobless claims rose from a previous week 848k to 861k, Economists had forecasted a fall to 765k.

The Philly FED Manufacturing PMI fell from 26.5 to 23.1 in February. Economists had forecast a decline to 20.0.

Other stats included housing sector figures that had a muted impact on the majors.

The Market Movers

For the DAX: It was mixed day for the auto sector on Thursday. Daimler and Volkswagen rallied by 2.55% and by 3.99% respectively, while BMW and Continental fell 0.30% and by 0.50% respectively.

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank fell by 1.37% and by 1.53% respectively.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole fell by 1.21% and by 1.34% respectively, while Soc Gen rose by 0.13%.

It was a bullish day for the French auto sector, however. Stellantis NV and Renault ended the day with gains of 0.76% and 0.79% respectively.

Air France-KLM struggled, falling by 0.29%, while Airbus SE slid by 2.78%, with a fall in operating profit and the withholding of dividends weighing. On the delivery front, Airbus expects deliveries for 2021 to remain at 2020 levels. In 2020, Airbus delivered 566 commercial aircraft, which was down from 863 aircraft from the previous year. For full year 2020 results, please see here.

On the VIX Index

It was a 3rd consecutive day in the green for the VIX on Thursday. Following on from a 0.19% gain on Wednesday, the VIX rose by 4.60% to end the day at 22.49.

The NASDAQ and the S&P500 fell by 0.72% and by 0.44% respectively, with the Dow declining by 0.38%.

VIX 190221 Daily Chart

The Day Ahead

It’s a particularly busy day ahead on the European economic calendar. Prelim February private sector PMI figures are due out for France, Germany, and for the Eurozone

With containment measures extending into February, the services sector will likely continue to struggle. That means that the manufacturing sector will need to continue to deliver to support the EUR and riskier assets.

From the U.S, February’s prelim private sector PMI numbers will also provide direction later in the day. Expect the service sector PMI numbers to be the key driver late on.

Away from the economic calendar, chatter from Capitol Hill will need continued monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 32 points.

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

Walmart Shares Slump as Full-Year Sales Forecasts, Q4 Profit Disappoints

Bentonville, Arkansas-based retailer Walmart reported better-than-expected revenue in the fourth quarter but surprised traders with a rare profit miss and said it expects full-year sales and earnings to decline primarily due to the impact of anticipated divestitures.

Following this disappointing result, Walmart‘s shares, which surged more than 20% last year, slumped over 6% to $138.03 on Thursday.

The multinational retail corporation that operates a chain of hypermarkets said total revenue jumped 7.3% to record $152.1 billion in the quarter ended January 31, 2021 and during the fiscal 2021 year it surged 6.7% to $559.2 billion.

The closely watched same-store sales rose 8.6% in the U.S., beating the Wall Street consensus estimates of 5.6%. That was largely driven by online sales, which grew 69% due to the COVID-19 pandemic.

Walmart’s (WMT) comps were better than expected including an 8.6% increase in the WMT U.S. business, ahead of consensus of 5.6% and an acceleration from 6.4% last quarter. Gross margins were up 29bp, in line with estimates and off just a bit from 50bp last quarter,” said Michael Baker, MD and senior research analyst at D.A. Davison & Company.

“But this strength is being overshadowed by higher expenses, including deleverage in the international and Sam’s businesses. This led to EPS of $1.39 or $1.46 adding back a $0.07 tax issue. This is in line with our estimate of $1.45 but below consensus of $1.51. We would buy the associated pressure in the stock today.”

The retail giant said its operating income surged more than 3% to $5.49 billion. On the other hand, adjusted earnings came in at $1.39 per share, missing analysts’ expectations of $1.51 per share.

The world’s largest retailer forecast adjusted net sales to grow low single-digits with operating income and EPS expected to be flat to up slightly.

“Guidance was muted, locking in gains from FY21 but stalling profit expansion in favour of critical investments in people (avg wage to >$15) and platform (capex +33% vs. prior levels). We’re specifically looking to test the degree of conservatism in guidance as new streams of value take hold and COVID-19 costs should moderate,” noted Stephanie Wissink, equity analyst at Jefferies.

Walmart Stock Price Forecast

Eleven analysts who offered stock ratings for Walmart in the last three months forecast the average price in 12 months of $161.33 with a high forecast of $177.00 and a low forecast of $131.00.

The average price target represents a 16.22% increase from the last price of $138.82. From those 11 analysts, nine rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $156 with a high of $240 under a bull scenario and $95 under the worst-case scenario. The firm gave an “Overweight” rating on the multinational retail corporation’s stock.

Several other analysts have also updated their stock outlook. Oppenheimer lowered the price target to $162 from $165. JP Morgan cut the price target to $157 from $160. Deutsche Bank raised the target price to $170 from $168. Credit Suisse Group gave a target price of $161 and rated “buy”.

Moreover, Royal Bank of Canada set a $170.00 price objective and gave the company a “buy” rating. DA Davidson lifted their price objective to $177 from $154 and gave the company a “buy” rating. Smith Barney Citigroup lifted their price objective to $172 from $155. Jefferies Financial Group lifted their price objective to $170 from $165 and gave the company a “buy” rating.

Analyst Comments

“Q4’21 EPS light. F’22 underlying growth guidance seems fine, but absolute F’22 EPS lower than expected. Investments picking back up mean the stock could tread water in the N-T,” said Simeon Gutman, equity analyst at Morgan Stanley.

“We expect WMT to sustain recent momentum in its core business in F’21/F’22 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $156 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers in the current COVID-19 environment.”

Upside and Downside Risks

Risks to Upside: 1) Comps accelerate to +MSD-HSD led by continued Grocery strength. 2) Sustainable US e-comm growth of 50-60%+ behind Click & Collect momentum. 3) PhonePe gains wider market appreciation, driving incremental multiple expansion. 4) Walmart+ gains more traction than expected – highlighted by Morgan Stanley.

Risks to Downside: 1) E-commerce loses begin to rise again after briefly moderating. 2) US e-comm growth slows to <30% (comps <2%). 3) Greater than expected Flipkart losses.

Check out FX Empire’s earnings calendar

Chinese Tech Giant Baidu Ends 2020 on Solid Note, Shares Gain

Baidu, a leader in the Chinese search industry in terms of user market share, reported better-than-expected earnings in the fourth quarter, largely driven by pent-up demand for its cloud and other services, sending its shares up over 3% in extended trading on Wednesday.

The most used search engine in China said its total revenue jumped 5% to CNY 30.26 billion or $4.69 billion in the fourth quarter ended December 31, 2020, beating the Wall Street consensus estimates of CNY 30.06 billion.

Baidu’s non-GAAP EPS came in at CNY 20.08 or $3.08, well above the market expectations of CNY 16.89 or $2.51 per share.

Baidu reported 4Q results with revenue in-line with market expectations and non-GAAP earnings ahead of consensus. For Baidu core, revenue and non-GAAP earnings beat our estimates, with non-GAAP op margin at 35%. For IQ, revenue came in-line and earnings beat on lower-than-expected costs. Mid-point of 1Q revenue guidance for Baidu beat consensus while IQ was inline,” wrote Thomas Chong, equity analyst at Jefferies.

The company, which generates the bulk of its revenue from pay-for-performance advertising and tailor-made advertising services, forecasts revenue in the range of CNY 26 billion to 28.5 billion in the first quarter of 2020.

The U.S.-listed Baidu‘s shares, which surged more than 70% last year, rose 3.5% to $319.5 in extended trading on Wednesday.

Executive Comments

Baidu ended 2020 on a solid note with our business benefiting from improving macroeconomic environment and the digitalization of industrial Internet. Our focus on innovation through technology is paying off with Baidu Core non-marketing revenue growing 52% year over year in the fourth quarter,” said Robin Li, Co-founder and CEO of Baidu.

“As we enter 2021, Baidu is well-positioned as a leading AI company with strong Internet foundation to seize the huge market opportunities in cloud services, autonomous driving, smart transportation, and other AI opportunities. We also hope to capitalize on our huge Internet reach with more non-marketing services.”

Baidu Stock Price Forecast

Thirteen analysts who offered stock ratings for Baidu in the last three months forecast the average price in 12 months of $271.42 with a high forecast of $376.00 and a low forecast of $180.00.

The average price target represents a -12.07% decrease from the last price of $308.68. From those 13 analysts, 11 rated “Buy”, two rated “Hold”, none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $190 with a high of $250 under a bull scenario and $130 under the worst-case scenario. The firm gave an “Equal-weigh” rating on the Chinese tech giant’s stock.

Several other analysts have also updated their stock outlook. Mizuho raised the target price to $325 from $250. Baidu had its price objective hoisted by Oppenheimer to $305 from $165. The firm currently has an outperform rating on the information services provider’s stock. KeyCorp raised their target price to $290 from $190 and gave the stock an overweight rating. Citigroup raised their target price to $292 from $183 and gave the stock a buy rating.

Analyst Comments

“Following a sharp recent rally, we maintain our EW rating on an industry-relative basis. Baidu has provided better disclosure and has struck a constructive tone on its AI initiatives. We find it well-positioned in certain industrial applications. We also like its rich cash position and strategic investments,” said Gary Yu, equity analyst at Morgan Stanley.

“Our price target reflects the materialization of AI investments, but we highlight milder near-term growth vs. peers amid risks from the competition. The company is well-positioned to ride the next Internet wave, but patience is needed. Our price target implies 18x consensus 2021e non-GAAP P/E the vs. historical 11-24x trading band since 2019.”

Check out FX Empire’s earnings calendar

European Equities: Futures Point Northwards with Economic Data and Monetary Policy in Focus

Economic Calendar:

Thursday, 18th February

ECB Monetary Policy Meeting Minutes

Eurozone Consumer Confidence (Flash)

Friday, 19th February

French CPI (MoM) (Jan) Final

French HICP (MoM) (Jan) Final

French Manufacturing PMI (Feb) Prelim

French Services PMI (Feb) Prelim

German Manufacturing PMI (Feb) Prelim

German Services PMI (Feb) Prelim

Italian CPI (MoM) (Jan) Final

Eurozone Manufacturing PMI (Feb) Prelim

Eurozone Markit Composite PMI (Feb) Prelim

Eurozone Services PMI (Feb) Prelim

The Majors

It was a bearish day for the European majors on Wednesday, with the DAX30 sliding by 1.10% to lead the way down. The CAC40 and the EuroStoxx600 saw more modest losses of 0.36% and 0.74% respectively.

While market optimism towards an economic recovery continued to provide a cushion, concerns over inflation weighed mid-week.

January inflation figures affirmed a pickup in inflationary pressures, raising concerns of a possible tapering to monetary policy.

With economic data on the lighter side and the FOMC meeting minutes out after the European close, there was little else to provide the markets with direction.

The Stats

It was a particularly quiet day on the economic calendar on Wednesday. There were no material stats from the Eurozone to provide the majors with direction on the day.

For the auto sector, however, car registration numbers from France, Germany, and Italy did provide direction early in the session.

German car registrations tumbled by 45.5% in January, month-on-month, reversing a modest 7.3% rise from December.

The slide in January left car registrations down by 31.1% year-on-year. In December, car registrations had risen by 9.9% year-on-year.

Things were marginally better out of France, where car registrations slid by 32.2% in January. In December, car registrations had jumped by 47.8% month-on-month.

Year-on-year, car registrations were down by just 5.8% in January. This was an improvement on December, where registrations had fallen by 11.8%.

While the domestic auto sector struggled in both France and Germany, Italy did buck the trend.

Car registrations rose by 12.2%, month-on-month, reversing most of a 13.7% slide from December.

Year-on-year, registrations were down by 14.0%. In December, registrations had been down by 14.9%.

While the numbers were dire, the auto sector had a pretty bullish outlook for the year ahead, limiting the damage from the stats.

From the U.S

Key stats included industrial production and retail sales figures.

In January, core retail sales jumped by 5.9%, month-on-month, with retail sales rising by 5.3%. Both came in well ahead of forecasts. In December, core retail sales had fallen by 1.8% and retail sales by 1.0%.

Industrial production figures were also positive, with production rising by 0.9% in January, following a 1.3% increase in December. Economists had forecast a 0.5% rise.

Other stats included business inventory numbers for December that had a muted impact on the majors.

The Market Movers

For the DAX: It was mixed day for the auto sector on Wednesday. Continental and Volkswagen fell by 1.82% and by 0.43% respectively, while BMW and Daimler saw rose 0.57% and by 1.05% respectively.

It was also a mixed day for the banks. Deutsche Bank rose by a modest 0.16%, while Commerzbank fell by 0.30%.

From the CAC, it was a relatively bullish day for the banks. BNP Paribas rose by 0.08%, with Credit Agricole and Soc Gen gaining 0.27% and 0.71% respectively.

It was a bearish day for the French auto sector, however. Stellantis NV slid by 2.44%, with Renault falling by 1.06%.

Air France-KLM also struggled, falling by 2.48%, while Airbus SE eked out a 0.11% gain.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Wednesday. Following on from a 7.46% gain on Tuesday, the VIX rose by 0.19% to end the day at 21.50.

The NASDAQ and the S&P500 fell by 0.58% and by 0.03% respectively, while the Dow gained 0.29%.

VIX 180221 Daily Chart

The Day Ahead

It’s a quiet day ahead on the European economic calendar. Eurozone consumer confidence figures for February are due out later today.

Ahead of the numbers, the ECB monetary policy meeting minutes will also influence. Any gloomy sentiment towards the economic outlook will test support for the majors.

From the U.S, the weekly jobless claims and February Philly FED Manufacturing numbers will also draw interest.

Away from the economic calendar, chatter from Capitol Hill will also need monitoring as the China markets reopen following the Lunar New Year.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 62 points, with the DAX up by 45 points.

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

U.S. Hotel Operator Hilton Posts Surprise Q4 Loss, Shares Fall

Hilton Worldwide Holdings, one of the largest and fastest-growing hospitality companies in the world, reported a loss for the third consecutive time during the December quarter as a fresh spike in COVID-19 cases and tightening travel restrictions hurt bookings, sending its shares down over 2% in pre-market trading on Wednesday.

The company, which has more than 4,000 hotels, resorts and timeshare properties comprising more than 650,000 rooms in 90 countries and territories, reported a net loss of $225 million for the fourth quarter and $720 million for the full year. Adjusted EBITDA was $204 million for the fourth quarter and $842 million for the full year.

Hilton said its system-wide comparable RevPAR slumped 59.2% and 56.7% on a currency-neutral basis for the fourth quarter and full year, respectively, from the same periods a year ago.

The hotel company said its revenue slumped more than 60% to $890 million, well below the Wall Street consensus estimates of $1.03 billion.  Adjusted for special items, the company reported earnings per share of -$0.10 per share, well below the market expectations for a profit of $0.03 per share.

“We expect shares to react modestly lower on the lower than expected results, ahead of management’s commentary on the call later this morning. Within the results, we focus on the commentary for the continued generation of mid-single-digit system growth in 2021, which is a primary driver of long-term earnings and margin expansion as well as the valuation,” said David Katz, equity analyst at Jefferies.

“Our confidence remains high in recovery, the trajectory of which is still taking shape.”

Following this disappointing result, Hilton Worldwide Holdings‘ shares, which has risen over 2% so far this year, fell 2.3% to $111 in pre-market trading on Wednesday.

Hilton Stock Price Forecast

Six analysts who offered stock ratings for Hilton in the last three months forecast the average price in 12 months of $112.00 with a high forecast of $130.00 and a low forecast of $85.00.

The average price target represents a -1.42% decrease from the last price of $113.61. From those six analysts, three rated “Buy”, three rated “Hold”, none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $101 with a high of $141 under a bull scenario and $56 under the worst-case scenario. The firm gave an “Equal-weigh” rating on the hospitality company’s stock.

Several other analysts have also updated their stock outlook. BMO raised the target price to $110 from $92. UBS upped the target price to $124 from $114. Berenberg increased the target price to $100 from $77. Baird raises target price to $106 from $105. BMO Capital Markets raised their target price to $92 from $89 and gave the stock a “market perform” rating.

Moreover, Gordon Haskett raised their target price to $114 from $97 and gave the stock a “hold” rating. Wells Fargo & Company raised their target price to $105 from $95 and gave the stock an “equal weight” rating. Argus raised shares to a “buy” rating from a “hold” and set a $120 price target.

Analyst Comments

“The spread of coronavirus will pressure RevPAR growth, unit growth, and non-room fee growth. Strong management team with a track record of creating value for owners. We see a wide risk-reward that will depend on the severity and speed of recovery from COVID-19,” said Thomas Allen, equity analyst at Morgan Stanley.

“We think HLT is well placed from a liquidity standpoint, but its ability to repurchase stock medium- term may be impaired.”

Check out FX Empire’s earnings calendar

The European Auto Sector Struggles as Car Registrations Sink

It’s a particularly quiet day on the Eurozone economic calendar today. There were no material stats for the European markets to consider ahead of the U.S session.

The lack of material stats did give EU car registration figures more airtime than usual.

Car Registrations Sink as Lockdown Measures Bite

German car registrations tumbled by 45.5% in January, month-on-month, reversing a modest 7.3% rise from December.

The slide in January left car registrations down by 31.1% year-on-year. In December, car registrations had risen by 9.9% year-on-year.

Things were marginally better out of France, where car registrations slid by 32.2% in January. In December, car registrations had jumped by 47.8% month-on-month.

Year-on-year, car registrations were down by just 5.8% in January. This was an improvement on December, where registrations had fallen by 11.8%.

While the domestic auto sector struggled in both France and Germany, Italy did buck the trend.

Car registrations rose by 12.2%, month-on-month, reversing most of a 13.7% slide from December.

Year-on-year, registrations were down by 14.0%, however. In December, registrations had been down by 14.9%.

While the numbers were dire, the auto sector has hopes of a strong recovery.

Market Impact

The European majors had a mixed morning as did the auto sector.

At the time of writing, Daimler was up by 0.96% to buck the trend.

It’s been bearish for the rest, however.

Continental was down by 1.69%, with BMW and Volkswagen down by 0.04% and by 0.41% respectively.

From France, Stellantis was worst hit, sliding by 2.07%, with Renault declining by 0.64%.

For the European majors, the DAX30 and the EuroStoxx600 were down by 0.58% and 0.32% respectively. The CAC was down by just 0.02%.

The EUR also took a hit in response to the numbers, falling from $1.208 levels to bring sub-$1.20 levels into play.

Market optimism of a speedy economic recovery and rebound in the sector cushioned the blow on all fronts, however.

At the time of writing, the EUR was down by 0.38% to $1.20598.

EURUSD 170221 Hourly Chart

 

U.S. Oil Firm Continental Resources Posts Wider Q4 Loss, Shares Drop

Oklahoma City-based shale producer Continental Resources reported a loss for the fourth consecutive time during the December quarter with losses exceeding analysts’ expectations as the COVID-19 pandemic disrupted energy demand, sending its shares down over 2% in extended trading on Tuesday.

However, the U.S. crude oil and natural gas company upgraded their capital expenditures budget and expect oil and gas output to increase in 2021, largely due to recent recovery in commodity prices.

The largest oil producer in North Dakota said it is now projecting a $1.4 billion capital expenditures budget, higher than the previous forecast of 1.2 billion. The 2021 capital budget is projected to generate approximately $2.4 billion of cash flow from operations and $1.0 billion of free cash flow (non-GAAP) for full-year 2021 at $52 per barrel WTI and $2.75 per Mcf Henry Hub.

A $5 increase per barrel WTI is estimated to increase cash flow by approximately $250 million, the company said.

Continental Resources said annual crude oil production is projected to range between 160,000 to 165,000 Bopd and annual natural gas production is projected to range between 880,000 to 920,000 Mcfpd.

CLR is sticking to low growth, high FCF yield model by looking to spend $1.1 billion D&C (60% Bakken, 35% Oklahoma, 5% PRB) and another $300m on workovers, leasehold, facilities and mineral acquisitions. We had modelled $1.3 billion and consensus had expected $1.29 billion that we expect is largely varied vs. guidance due to non-D&C spend. The budget is expected to deliver production growth of 3% at the midpoint with oil vols of 160-165 MBD (2% below Cowen estimate) and gas vols of 880-920 MMcf/d (17% above our estimate),” noted David Deckelbaum, equity analyst at Cowen and Company.

“Importantly, the implied reinvestment rate at $52/bbl is 58%. CLR expects to TIL 210 gross op wells and end the year with roughly 135 DUCs. Overall, the guided implies $1 billion of FCF at $52/bbl/$2.75/Mcf that is effectively in line with our prior model. The update contains few surprises and the commitment to shareholders returns is likely favoured by the market.”

The oil firm reported an adjusted net loss for the quarter ended December 31, 2020 of $81.9 million, or $0.23 per diluted share, largely missing the Wall Street estimates for a loss of $0.08 per share. The company’s revenue declined about 30% to $837.6 million; however, that beats analysts’ expectations of $62.81 million.

Continental Resources‘ shares, which slumped over 52% in 2020, had risen 49% so far this year. However, the stock declined over 2% to $23.74 in extended trading on Tuesday.

Continental Resources Stock Price Forecast

Thirteen analysts who offered stock ratings for Continental Resources in the last three months forecast the average price in 12 months of $19.71 with a high forecast of $26.00 and a low forecast of $11.00.

The average price target represents a -18.86% decrease from the last price of $24.29. From those 13 analysts, three rated “Buy”, eight rated “Hold”, two rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $14 with a high of $28 under a bull scenario and 3 under the worst-case scenario. The firm gave an “Underweight” rating on the crude oil and natural gas company’s stock.

Several other analysts have also upgraded the stock outlook. Continental Resources had its price objective raised by KeyCorp to $23 from $22. The firm currently has an overweight rating on the oil and natural gas company’s stock. TD Securities increased their price objective to $15 from $14 and gave the stock a hold rating.

Moreover, Truist increased their price objective to $26 from $22. Citigroup increased their price objective to $19 from $16. Barclays increased their price objective to $21 from $19 and gave the stock an equal weight rating.

Analyst Comments

“Lack of downside protection to lower oil prices. Lack of hedges offers outsized exposure should oil prices recover, though weighs on the cash flow profile in our base case. Low oil prices weigh on net asset valuation. On our commodity price deck of $45 WTI, Continental Resources’ (CLR) net asset value suggests intrinsic downside from current trading levels,” said Devin McDermott, equity and commodities Strategist at Morgan Stanley.

“Elevated leverage. CLR‘s elevated leverage remains a concern at 1.7x YE-21 vs 1.2x for Permian peers.”

Check out FX Empire’s earnings calendar

European Equities: A Light Economic Calendar Leaves U.S Stats to Test Investor Sentiment

Economic Calendar:

Thursday, 18th February

Eurozone Consumer Confidence (Flash)

Friday, 19th February

French CPI (MoM) (Jan) Final

French HICP (MoM) (Jan) Final

French Manufacturing PMI (Feb) Prelim

French Services PMI (Feb) Prelim

German Manufacturing PMI (Feb) Prelim

German Services PMI (Feb) Prelim

Italian CPI (MoM) (Jan) Final

Eurozone Manufacturing PMI (Feb) Prelim

Eurozone Markit Composite PMI (Feb) Prelim

Eurozone Services PMI (Feb) Prelim

The Majors

It was a mixed day for the European majors on Tuesday. While the DAX30 and EuroStoxx600 fell by 0.32% and by 0.06% respectively, the CAC40 ended the day flat.

Economic data from early in the European session had provided support to the majors before a pullback later in the day.

While optimism towards the economic outlook continues to support the European majors and the broader markets, a degree of uncertainty also lingers.

Containment measures remain in place as the EU progresses on the vaccination front. Until restrictions are removed the economic uncertainty will likely remain.

The Stats

It was a relatively busy day on the economic calendar. Economic data included 2nd estimate GDP numbers for the Eurozone and ZEW economic sentiment figures for Germany and the Eurozone.

According to 2nd estimates, the Eurozone economy contracted by 0.6% in the 4th quarter. This was an upward revision from a 1st estimate 0.7% contraction.

Year-on-year, the economy contracted by 5.0%, which was also an upward revision from a 1st estimate 5.1% contraction.

According to Eurostat,

  • The number of employed persons increased by 0.3% in 4th quarter, compared with the 3rd
  • In the 3rd quarter of 2020, employment had increased by 1.0%.
  • Year-on-year, however, employment was down by 2.0%.

Germany’s ZEW Economic Sentiment Index rose from 61.8 to 71.2 for February. Economists had forecast a fall to 59.6.

The upside came in spite of sentiment towards current conditions fell deeper into the red. For February, the ZEW Current Conditions Index fell from -66.4 to -67.2. Economists had forecast a decline to -67.0.

For the Eurozone, the Economic Sentiment Index jumped from 58.3 to 69.8.

From the U.S

Key stats included NY Empire State Manufacturing Index figures.

In February, the NY Empire State Manufacturing Index increased from 3.5 to 12.1. Economists had forecast a rise to 6.0.

The Market Movers

For the DAX: It was mixed day for the auto sector on Wednesday. BMW and Volkswagen saw modest gains of 0.08% and 0.02% respectively. Continental and Daimler, however, ended the day down by 1.06% and by 0.20% respectively.

It was another bullish day for the banks. Deutsche Bank rallied by 2.03%, with Commerzbank rising by 0.69%.

From the CAC, it was a relatively bullish day for the banks. BNP Paribas and Soc Gen rose by 0.13% and by 0.03% respectively, with Credit Agricole gaining 0.54%.

It was also a bullish day for the French auto sector, however. Stellantis NV rose by 0.94%, with Renault gaining 1.18%.

Air France-KLM slipped by 0.18%, while Airbus SE rose by 0.14%.

On the VIX Index

It was back into the green for the VIX on Tuesday. Reversing a 6.02% fall from Friday, the VIX rose by 7.46% to end the day at 21.46.

The NASDAQ and the S&P500 fell by 0.06% and by 0.34% respectively, while the Dow gained 0.20%.

VIX 170221 Daily Chart

The Day Ahead

It’s a quiet day ahead on the European economic calendar. There are no material stats from the Eurozone to provide the majors with direction.

The lack of stats will leave the majors in the hands of U.S stats and chatter from Capitol Hill.

From the U.S, wholesale inflation and retail sales figures are due out. Expect January’s retail sales figures to have an impact on the majors late in the session.

Chatter from Capitol Hill will also need continued monitoring.

Overnight, the FOMC meeting minutes are also due out. There could be some caution ahead of the minutes. FED Chair Powell has continued to assure the markets that accommodative measures will remain for an extended period of time. The minutes will need to be aligned…

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 9 points.

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

The S&P500 Reached its Symmetry Target of 3950: What is Next?

From late-August to early-November last year, the S&P500 index (SPX) traded between SPX3590 and 3230. A 360p range. See Figure 1 below. By mid-November, it finally managed to break out, hold the breakout, and rally with a few pullbacks along the way. Notably, the most recent ~160p correction, which ended late-January.

Markets love symmetry because we humans love it, e.g., we are most attracted to people with symmetrical faces. Since the markets are driven by human sentiment, it is no surprise markets try to achieve symmetry.

Thus, if we add the 360p range to the breakout level of SPX3590, we get 3590 + 360 = 3950. See blue arrows in Figure 1 below. In November, I told my premium major market members this level would be reached. The exact path was, of course, impossible to know beforehand and frustrating at times, but today it was finally achieved: bingo. So what is next?

Figure 1. S&P500 Daily chart with technical indicators and horizontal support/resistance levels.

Using Elliott Wave Principle to Answer the “What is next? question.

Before answering the question, let us review the daily chart once is more. Price is in an uptrend channel: Bullish. Price is above its rising 10-day Simple Moving Average (SMA), which in turn is above the rising 20d, 50d, and 200d SMAs. A 100% Bullish setup. All the technical indicators are on a buy: Bullish. Thus, before we all get too excited, there is no reason to look down if the charts remain Bullishly setup. A first warning will be on a close below last week’s low.

Namely, my detailed Elliott Wave Principle (EWP) count has the index complete a 3rd wave, and a move below last week’s low means the last smaller 5th wave of this 3rd wave up has completed and a wave-4 will be underway. See Figure 2 below.

Figure 2. S&P500 hourly chart with detailed Elliott wave Principle count.

Graphical user interface Description automatically generated with low confidence

This wave-4 will then ideally target SPX3770, but it can also move as low as SPX3670. A typical 5-8% correction, in other words. The lower price target would fit with the red dotted arrows in Figure 1. A symmetrical correction equal to the October 2020 correction would move my EWP count to a one-degree higher wave. Thus, the daily chart and EWP count in the hourly chart align with my recent article, where I show the current low volatility would most likely be followed by a period of high volatility.

Regardless of which wave-degree is operable, both EWP counts tell us to expect higher prices once the pending correction to SPX3770-3670 is over. Based on the “80/20 rule,” we should expect SPX4200s before the next larger correction, possibly a much larger top of the Super Cycle degree will commence.

 

Southwest Airlines Expects Slower Cash Burn as Leisure Bookings and Demand Improves, Shares Gain

Southwest Airlines, the world’s largest low-cost carrier, forecasts cash burn to be less than previously thought, primarily driven by an improvement in leisure passenger demand and bookings, sending its shares up about 2% in pre-market trading on Tuesday.

The U.S. low-cost carrier said its average core cash burn was about $15 million per day in January 2021 and forecasts average core cash burn to be nearly $15 million per day in the first quarter of 2021, down from previous guidance of about $17 million per day.

Following this, Southwest Airlines‘ shares, which slumped about 14% in 2020, had risen over 10% so far this year. The stock rose 1.29% to $52 in pre-market trading on Tuesday.

However, the company remains cautious in this uncertain demand environment and continues to plan for multiple scenarios for its fleet and capacity plans. Southwest Airlines continues to experience significant year-over-year negative impacts to passenger demand and bookings due to the COVID-19 pandemic.

Southwest Airlines Stock Price Forecast

Twelve analysts who offered stock ratings for Southwest Airlines in the last three months forecast the average price in 12 months of $56.73 with a high forecast of $65.00 and a low forecast of $50.00.

The average price target represents a 10.50% increase from the last price of $51.34. From those 12 analysts, eight rated “Buy”, three rated “Hold”, one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $59 with a high of $90 under a bull scenario and 29 under the worst-case scenario. The firm gave an “Overweight” rating on the passenger airline company’s stock.

Several other analysts have also upgraded the stock outlook. Citigroup raised the price target to $51 from $50. Southwest Airlines had its price objective lifted by Credit Suisse Group to $62 from $51. They currently have an outperform rating on the airline’s stock. Cowen lifted their price target to $55 from $46 and gave the stock an outperform rating.

In addition, Sanford C. Bernstein upgraded to an outperform rating from a market perform and set a $59.00 price objective. BNP Paribas issued an outperform rating and a $55.00 target price.

Analyst Comments

“Why Overweight? Southwest Airlines (LUV) is arguably the highest quality airline in the US with a good balance sheet and high margins. As a largely US domestic medium-haul airline, we believe its network is in a sweet spot for a COVID-19 rebound and it has one of the attractive loyalty programs with a loyal customer base,” said Ravi Shanker, equity analyst at Morgan Stanley.

“All of these make LUV the most resilient at the bottom and well-positioned for a recovery, especially being able to capitalize on share gain or M&A opportunities as other Airlines falter/lag.”

Check out FX Empire’s earnings calendar

BHP Shares Gain on Strong Profit and Record Dividend; Target Price GBX 2,560

BHP Group, one of the largest diversified natural resource companies in the world, delivered a strong profit in the first half of the 2021 financial year and declared record half-year dividend of $1.01 per share and ROCE up to 24%, helping its shares soar over 5% on Monday.

The Anglo-Australian multinational mining, metals and petroleum dual-listed public company said its profit from operations rose 17% to $9.8 billion, up. Attributable profit came in at $3.9 billion, which included an exceptional loss of $2.2 billion predominantly related to the impairments of New South Wales Energy Coal and associated deferred tax assets, and Cerrejón.

The world’s largest listed miner said its underlying attributable profit rose 16% to $6.0 billion.

The London-listed BHP‘s shares, which surged over 8% in 2020, had risen about 16% so far this year. The stock closed 5.22% higher at GBX 2,228 on Monday.

“Our analysis shows that the fair value estimate for BHP is between a bear case of GBX 1,200 per share and a bull case of GBX 2,950 per share, leading to our high fair value uncertainty rating,” said Mathew Hodge, director at Morningstar.

“The bulk of our BHP Billiton fair value estimate derives from just three commodities: iron ore, copper, and petroleum, in broadly equal contributions of approximately one third apiece. Coking coal is a minor contributor.  As commodity prices tend to move in unison, our valuation scenario uses high, low, and baseline prices. We don’t split individual commodities out.  Our price scenarios also factor in currency, operating, and capital cost adjustments.”

The dual-listed company forecasts to make an investment decision soon on its $5.3-$5.7 billion Jansen potash project in Canada and the Scarborough natural gas project off Western Australia, in which BHP will invest $1.4-1.9 billion, Reuters reported.

BHP Stock Price Forecast

Fourteen analysts who offered stock ratings for BHP in the last three months forecast the average price in 12 months of GBX 2,146.43 with a high forecast of GBX 2,560 and a low forecast of GBX 1,610.

The average price target represents a -3.66% decrease from the last price of GBX 2,228. From those 14 analysts, seven rated “Buy”, six rated “Hold”, one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of GBX1,950 with a high of GBX4,380 under a bull scenario and GBX680 under the worst-case scenario. The firm gave an “Overweight” rating on the natural resource company’s stock.

“We value BHP based on a simple average of our EV/EBITDA and P/NAV methodologies. This allows us to reflect both the shorter-term earnings power and longer-term value of the company. We apply an EV/EBITDA multiple of 6.7x, in line with its historical average. We apply a 1.0x multiple to our NPV estimate, which is based on a blended WACC of 9% and terminal growth rate of 2.0% from 2035,” said Alain Gabriel, equity analyst at Morgan Stanley.

Several other analysts have also upgraded the stock outlook. Citigroup raised the price target to GBX 2,100 from GBX 2,000. Berenberg initiated the coverage with hold rating and GBX 2,000 price target. Credit Suisse cuts to neutral from outperform; raises target price to GBX 2,100 from GBX 1,900.

In addition, UBS upped the target price to GBX 2,200 from GBX 2100. Independent Research increased the target price to GBX 2,100 from GBX 1,660 and rated hold. RBC cuts target price to GBX 2,500 from GBX 2,600. Liberum cuts price target to GBX 1,880 from GBX 2,400.

Analyst Comments

BHP declared a solid dividend of USc101/sh, exceeding our and cons. estimates of USc84-85/sh. Underlying EBITDA was in-line with cons. and within 1% of MSe but EPS missed by 2-5% on higher depreciation. Net Debt was broadly in-line and opex guidance was unchanged but is still based on favourable FX,” Morgan Stanley’s Gabriel added.

BHP‘s portfolio mix and quality stand out among peers. The low-cost position of its assets enables the company to generate FCF yield even in a stress scenario. It maintains a strong B/S, giving flexibility to pursue growth and/or increase cash shareholder returns, in particular given the company’s net debt target of US$12-17bn (post IFRS16 adjustment) vs FY20 levels of US$12.5bn. Spot FCF yields are comparable to peers, even without contributions from the Petroleum division, thus implying long-term optionality to a potential oil price recovery. We prefer BHP on a relative basis, given its attractive commodity mix ex-Iron Ore and free optionality on a potential oil price recovery.”

Upside and Downside Risks

Risks to Upside: Growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam) successfully executed. Better operating performance, lower costs and capital expenditure. Higher commodity prices – highlighted by Morgan Stanley.

Risks to Downside: Execution issues at growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam). Weak operating performance, higher costs and capital expenditure. Lower commodity prices.

Check out FX Empire’s earnings calendar

European Equities: GDP and Economic Sentiment Figures in Focus

Economic Calendar:

Tuesday, 16th February

German ZEW Current Conditions (Feb)

German ZEW Economic Sentiment (Feb)

Eurozone GDP (QoQ) (Q4) 2nd Estimate

Eurozone GDP (YoY) (Q4) 2nd Estimate

Eurozone ZEW Economic Sentiment (Feb)

Thursday, 18th February

Eurozone Consumer Confidence (Flash)

ECB Monetary Policy Meeting Minutes

Friday, 19th February

French CPI (MoM) (Jan) Final

French HICP (MoM) (Jan) Final

French Manufacturing PMI (Feb) Prelim

French Services PMI (Feb) Prelim

German Manufacturing PMI (Feb) Prelim

German Services PMI (Feb) Prelim

Italian CPI (MoM) (Jan) Final

Eurozone Manufacturing PMI (Feb) Prelim

Eurozone Markit Composite PMI (Feb) Prelim

Eurozone Services PMI (Feb) Prelim

The Majors

It was a relatively bullish start to the week for the European majors on Monday. The CAC40 and EuroStoxx600 rallied by 1.45% and by 1.32% respectively, while the DAX30 saw a more modest 0.42% gain.

Economic data from the Eurozone delivered mixed results, which left market optimism towards a speedy economic recovery to drive the majors.

The bullish sentiment towards what lies ahead supported the banking sector and commodities in particular.

The Stats

It was a relatively busy day on the economic calendar. Economic data included industrial production and trade data for the Eurozone.

In December, industrial production fell by 1.6%, partially reversing a 2.6% increase from November. Economists had forecast a 1.0% decline.

Year-on-year, production was down by 0.8%, which was worse than a forecasted 0.3% decline and November’s 0.6% fall.

According to Eurostat,

  • The production of capital goods fell by 3.1% and non-durable consumer goods by 0.6%.
  • Providing some support, however, was a 0.8% increase in the production of durable consumer goods, and 1% rise in the production of intermediate goods.
  • Energy production was also on the rise, increasing by 1.4% in the month.
  • Industrial production in Belgium fell by 1.9% to lead the way down.
  • Portugal (+1.8%), and Estonia and Luxembourg (both +1.6%) reported the largest increases.
  • In December 2020, compared with December 2019, industrial production was down by 0.8%.

While industrial production figures disappointed, trade data provided support to the European majors.

In December, the trade surplus widened from €25.7bn to €29.2bn. Economists had forecast a narrowing to €25.3bn.

According to Eurostat.

  • Euro area exports to the rest of the world increased by 2.3% to €190.7bn compared with Dec-19.
  • This was the first increase in exports since Feb-20.
  • Imports from the rest of the world fell by 1.3% to €161.5bn, however.
  • Intra-euro area trade increased by 0.9% to €148.7bn compared with Dec-19.
  • In January to December 2020, euro area exports to the rest of the world slid by 9.2% to €2,131.4bn when compared with Jan-Dec 2019.
  • Imports from the rest of the world tumbled by 10.8% over the same period when compared with Jan-Dec 2019.
  • Intra-euro area trade fell by 8.9% to €1,797.0bn in Jan-Dec 2020 when compared with Jan-Dec 2019.

From the U.S

There were no material stats to provide the majors with direction later in the session with the U.S markets closed.

The Market Movers

For the DAX: It was mixed day for the auto sector on Monday. BMW and Volkswagen rose by 0.76% and by 0.66% respectively, with Daimler gaining 0.46%. Continental bucked the trend, however, with a 0.08% loss.

It was another bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 2.02% and by 2.03% respectively.

From the CAC, it was a particularly bullish day for the banks. BNP Paribas and Credit Agricole rose by 2.30% and by 2.02% respectively. Soc Gen led the way, however, surging by 6.46%.

It was also a bullish day for the French auto sector. Stellantis NV and Renault saw gains of 0.89% and 0.28% respectively.

Air France-KLM and Airbus SE found further support, rising by 1.52% and by 1.58% respectively.

The stock of the day, however, was Vivendi SE, which surged by 19.62%. News of the group planning to list Universal Music Group and share 60% of the company’s share capital to shareholders delivered the upside on the day.

On the VIX Index

The U.S markets were closed for President’s Day

The Day Ahead

It’s a busier day ahead on the European economic calendar. Key stats include ZEW Economic Sentiment figures for Germany and the Eurozone.

2nd estimate GDP numbers for the 4th quarter are also due out for the Eurozone.

Expect both sets of numbers to draw interest later this morning.

From the U.S, NY Empire State Manufacturing Index figures will also draw interest late in the European session.

Away from the economic calendar, chatter from Capitol Hill and news updates on vaccinations and COVID-19 will also need monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 186 points.

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