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UBS Upgrades FinVolution Group (FINV)

On February 1, 2023, UBS upgraded their outlook for FinVolution Group (NYSE:FINV) Group from Neutral to Buy. Analyst Price Forecast Suggests 11.19% Upside As of February 2, 2023, the average one-year price target for FinVolution Group is $6.42. The forecasts range from a low of $5.74 to a high of $7.21. The average price target […] On February 1, 2023, UBS upgraded their outlook for FinVolution Group (NYSE:FINV) Group from Neutral to Buy. Analyst Price Forecast Suggests 11.19% Upside As of February 2, 2023, the average one-year price target for FinVolution Group is $6.42. The forecasts range from a low of $5.74 to a high of $7.21. The average price target represents an increase of 11.19% from its latest reported closing price of $5.77. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   The projected annual revenue for FinVolution Group is $13,065MM, an increase of 23.18%. The projected annual EPS is $9.65, an increase of 15.93%. What Are Large Shareholders Doing? Gold Dragon Worldwide Asset Management holds 16,548,051 shares representing 5.80% ownership of the company. In it's prior filing, the firm reported owning 17,673,940 shares, representing a decrease of 6.80%. The firm increased its portfolio allocation in FINV by 4.36% over the last quarter. Susquehanna International Group, Llp holds 16,488,262 shares representing 5.78% ownership of the company. No change in the last quarter. Allspring Global Investments Holdings holds 10,933,728 shares representing 3.83% ownership of the company. In it's prior filing, the firm reported owning 11,439,728 shares, representing a decrease of 4.63%. The firm decreased its portfolio allocation in FINV by 54.53% over the last quarter. EMGAX - Wells Fargo Emerging Markets Equity Fund holds 4,401,985 shares representing 1.54% ownership of the company. No change in the last quarter. VEIEX - Vanguard Emerging Markets Stock Index Fund Investor Shares holds 2,140,019 shares representing 0.75% ownership of the company. No change in the last quarter.   Fund Sentiment There are 126 funds or institutions reporting positions in FinVolution Group. This is an increase of three owners or 2.44% in the last quarter. Average portfolio weight of all funds dedicated to US:FINV is 0.4252%, a decrease of 2.9441%. Total shares owned by institutions increased in the last three months by 1.46% to 70,249K shares. FinVolution Group Background Information (This description is provided by the company.) FinVolution Group is a leading fintech platform in China, connecting underserved individual borrowers with financial institutions. Established in 2007, the Company is a pioneer in China's online consumer finance industry and has developed innovative technologies and has accumulated in-depth experience in the core areas of credit risk assessment, fraud detection, big data and artificial intelligence. The Company's platform features a highly automated loan transaction process, which enables a superior user experience. As of December 31, 2020, the Company had over 116.1 million cumulative registered users. Article by Fintel.....»»

Category: blogSource: valuewalkFeb 3rd, 2023

3 Communication Stocks Likely to Gain Despite Industry Woes

The infrastructure upgrade for digital transformation and accelerated pace of 5G deployment should help the Zacks Communication - Infrastructure industry thrive despite near-term headwinds. ATEX, BAND and WTT are well poised to benefit from the continued transition to cloud network. The Zacks Communication - Infrastructure industry appears mired in raw material price volatility due to elevated inventory levels amid a challenging macroeconomic environment, uncertain market conditions and sharp inflationary pressure. Moreover, high capital expenditure for infrastructure upgrades for 5G rollout and margin erosion due to price wars have dented the industry’s profitability.Nevertheless, Anterix Inc. ATEX, Bandwidth Inc. BAND and Wireless Telecom Group, Inc. WTT are likely to benefit in the long run from higher demand for scalable infrastructure for seamless connectivity amid the wide proliferation of IoT, transition to the cloud and related next-gen technologies and accelerated 5G rollout.Industry DescriptionThe Zacks Communication - Infrastructure industry comprises firms that provide various infrastructure solutions for the core, access and edge layers of communication networks. Leveraging proprietary modeling and simulation techniques to optimize networks, the firms offer high-speed network access solutions across Internet protocol, asynchronous transfer mode and time division multiplexed architecture in both wireline and wireless network applications. Their product portfolio encompasses optical fiber and twisted-pair structured cable solutions, infrastructure management hardware and software, network racks and cabinets, fiber-to-home equipment like hardened connector systems, wireless network backhaul planning and optimization products, couplers and splitters, indoor, small cell and distributed wireless antenna systems and hardened optical terminating enclosures.What's Shaping the Future of the Communication - Infrastructure Industry?Waning Demand: Efforts to offset substantial capital expenditure for upgrading network infrastructure by raising fees have reduced demand, as customers prefer to switch to lower-priced alternatives. Moreover, efforts to build resilient infrastructure facilities to withstand natural catastrophes such as hurricanes and floods add to operating costs. In addition, the latent tension between the United States and China relating to trade restrictions imposed on the sale of communication equipment to firms based in the communist country has dented the industry’s credibility and will likely lead to a loss of business. The industry is battling hard-to-mitigate operating risks stemming from volatility in demand, an unpredictable business environment led by the virus outbreak and challenging geopolitical scenarios.Margin Woes From Inflated Raw Material Prices: The industry is continuously facing an acute shortage of chips, which are the building blocks for various equipment used by telecom carriers. Moreover, high raw material prices due to inflation, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the operation schedule of various firms. Although various steps have been taken to address the global shortage of semiconductor chips and devise ways to increase domestic production, the demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices.Evolution of Business Model: With exponential growth in video and other bandwidth-intensive applications owing to the wide proliferation of smartphones and increased deployment of superfast 5G technology, the industry participants are making considerable investments in LTE, broadband and fiber to provide additional capacity and ramp up the Internet and wireless networks. These companies are rapidly transforming from legacy copper-based telecommunications firms to technology powerhouses with capabilities to meet the growing demand for flexible data, video, voice and IP solutions. The industry participants are also focusing on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers. All these efforts have particularly helped firms in the industry cater to the surge in data demand, with digital sustainability becoming the norm of the day.Network Convergence: The success of 5G hinges on substantial investments to upgrade infrastructure in the core fiber backhaul network to support anticipated growth in data services. With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, the industry is increasingly developing solutions to support wireline and wireless network convergence. Although these investments will eventually help minimize service delivery costs to adequately support broadband competition and expand rural coverage and wireless densification, short-term profitability has largely been compromised. Nevertheless, the industry players have enabled enterprises to rapidly scale communications functionalities to a vast range of applications and devices with easy-to-use software application programming interfaces. The firms support high user volumes without affecting deliverability and cost-effectively eliminate performance degradation.Zacks Industry Rank Indicates Bearish TrendsThe Zacks Communication - Infrastructure industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #221, which places it at the bottom 12% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate.Before we present a few communication infrastructure stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Lags S&P 500 & SectorThe Zacks Communication - Infrastructure industry has lagged the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.The industry has lost 30.6% over this period compared with the S&P 500 and the sector’s decline of 7.9% and 12.6%, respectively.One Year Price PerformanceIndustry's Current ValuationOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 7.09X compared with the S&P 500’s 12.09X. It is also below the sector’s trailing-12-month EV/EBITDA of 9.72X.Over the past five years, the industry has traded as high as 12.05X, as low as 6.21X and at the median of 8.41X, as the chart below shows.Trailing 12-Month enterprise value-to-EBITDA (EV/EBITDA) Ratio3 Communication - Infrastructure Stocks to Keep a Close Eye onAnterix Inc.: Headquartered in Woodland Park, NJ, Anterix offers spectrum assets that enable the modernization of critical infrastructure for the energy, transportation, logistics and other sectors. It is reportedly the largest holder of licensed spectrum in the 900 MHz band throughout the contiguous United States. The company has launched an integrated platform that enables greater resilience and enhanced services between the participating networks, including cybersecurity, shared infrastructure and integration of distributed energy sources. The transition to a broader suite of solutions will ensure greater collaboration, providing more than 75 Anterix Active Ecosystem members with the collective voice of their utility customers. The Zacks Consensus Estimate for current-year earnings has been revised upward by 16.9% since October 2022. The stock carries a Zacks Rank #3 (Hold). It has a VGM Score of B.Price and Consensus: ATEXBandwidth Inc.: Founded in 2000 and headquartered in Raleigh, NC, Bandwidth operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises. Continuous innovation on CPaaS offerings allows enterprise customers to have direct access to Bandwidth’s comprehensive suite of products and services that cater to the networking requirements of large-scale Internet companies and cloud service providers based in the United States. This reinforces pricing flexibility and provides a significant competitive advantage to build a capital-efficient and customized networking infrastructure. The acquisition of Voxbone complements its product portfolio and enables it to offer a unified software platform to better serve global customers. The Zacks Consensus Estimate for current-year and next-year earnings has been revised upward by 18.2% and 35.8%, respectively, over the past year. The company has a long-term earnings growth expectation of 25% and pulled off a stellar earnings surprise of 354.5%, on average, in the trailing four quarters. It has a VGM Score of A. Bandwidth carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price and Consensus: BANDWireless Telecom Group, Inc.: Headquartered in Parsippany, NJ, Wireless Telecom manufactures advanced RF and microwave components, modules, systems and instruments. The company is likely to benefit from the secular trend of 5G deployment globally with healthy traction in the fiber LAN ecosystem and a robust portfolio of products and services in the wireless connectivity space. With customized solutions targeting niche segments of large and growing end markets, WTT is likely to benefit from the wide proliferation of 5G, network densification, private networks and satellite communications. The collaboration agreement with NXP Semiconductors further expands its scale of operations and reach with several monetization opportunities for the high-margin business of software stack for private LTE/5G networks. The stock carries a Zacks Rank #3 and delivered an earnings surprise of 22.2%, on average, in the trailing four quarters.  Price and Consensus: WTT 4 Oil Stocks with Massive Upsides Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."  Zacks Investment Research has just released an urgent special report to help you bank on this trend.  In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations. Download your free report now to see them.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Anterix Inc. (ATEX): Free Stock Analysis Report Wireless Telecom Group, Inc. (WTT): Free Stock Analysis Report Bandwidth Inc. (BAND): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksMar 10th, 2023

COVID Conspiracy Theories Become Conspiracy Facts

COVID Conspiracy Theories Become Conspiracy Facts Authored by Ramesh Thakur via The Brownstone Institute, At first slowly but in recent weeks with seemingly gathering pace, two trends have emerged. On the one hand, many of the core claims behind lockdowns, masks, and vaccines are unravelling and the prevailing narrative has been in retreat on all three fronts. But there is still a long way to go, as indicated by the cussed refusal of the Biden administration to let Novak Djokovic play at Indian Wells. On the other hand, the explosive lockdown files in the UK have blown apart the official narrative. We the sceptics were right in our dark suspicions of the motives, scientific basis, and evidence behind government decisions, but even we did not fully grasp just how venal, evil, and utterly contemptuous of their citizens some of the bastards in charge of our health, lives, livelihoods, and children’s future were. “Hell is empty, And all the devils are here” (Shakespeare, The Tempest) indeed. They will have to build a new circle of hell to accommodate all the perpetrators of evil let loose upon the world since 2020. A mistake is when you spill coffee or take the wrong exit ramp off the highway. Lockdown was a policy pushed hard by politicians and health chiefs even against scientific dissent and substantial public opposition, using tools from every tyrants’ playbook of disinformation and lies whilst attacking and censoring truth. The depth of public opposition went unrecognized because the fear-peddling media colluded in not reporting on protests. Genuine mistakes were few and are forgivable. Most were deliberate distortions of reality, outright falsehoods, and a systematic campaign to terrorize people into compliance with arbitrary diktats interspersed with efforts to vilify, silence, and cancel all critics by using the full powers of the state to co-opt, bribe, and bully. All in pursuit of the most maddening public policy insanity of modern times because it ignored existing canons of pandemic planning in blind panic just when calm was most needed. To call lockdown a mistake is to trivialize the shock to society. Before coming to that, a few preliminary observations to summarize where we are at. What is Now Known and Generally but Not Universally Admitted Covid is now endemic. It will circulate throughout the world and keep returning with mutating variants. People who have been infected and/or vaccinated can contract and transmit it. Consequently we have little choice but to learn to live with it. What is important is to make sure the right policy lessons are learnt so that never again, neither for a novel coronavirus nor for any other infectious disease, do we go down the path of public policy insanity to lock up an entire city or country with the discovery of 1-10 cases and bring all social, cultural and economic activity to a shuddering halt – or give total power and control to sociopaths and psychopaths. Meanwhile what is particularly striking is just how many suspicions voiced by sceptics from early 2020 onwards and mocked as conspiracy theories have turned into plausible claims and accepted facts: The virus may have originated in the laboratory of the Wuhan Institute of Virology; Covid modeling was dodgy and dressed up outliers as reasonable case scenarios; Lockdowns don’t work; Lockdowns kill through perverse consequences and inflict other damaging harms, including interruptions to critical life-saving children’s immunization campaigns in developing countries; School closures are particularly bad policy. They did not curb transmission but they did cause long-term harm to children’s education, development and emotional well-being; Masks are ineffective. They stop neither infection nor transmission; Infection confers natural immunity at least as effective as vaccination; Covid vaccines do not stop infection, hospitalization, or even death; Covid vaccines do not stop transmission; The safety of vaccines using new technology had not been definitively established, neither for the short term nor for the long term; Vaccine harms are real and substantial but safety signals have been summarily dismissed and ignored; mRNA vaccines are not confined to the arm but spread rapidly to other parts, including reproductive organs, with potentially adverse consequences for fertility and births; The harm-benefit equation of vaccines is, like the disease burden itself, steeply age-differentiated. Healthy young people did not need either initial or booster doses; Vaccination mandates don’t increase vaccine take-up; Vaccine mandates can fuel cross-vaccine hesitancy; Suppression of sceptical and dissenting voices will lessen trust in public health officials, experts and institutions, and possibly also in scientists more generally; Estimates of “Long Covid” were inflated (CDC estimate of 20 percent of Covid infections against UK study’s estimate of 3 percent) by using generalized, non-specific symptoms like mild fatigue and weakness; Health policy interventions involve policy trade-offs just like all other policy choices. Cost-benefit analysis is therefore an essential prerequisite, not an optional add-on. The Lockdown Files The last three years have seen lives lost in the millions with tens of millions more yet to be accounted for in the coming years, civilized lifestyles destroyed, previously inviolate freedoms shredded, civil liberties turned into privileges to be granted on the whim of bureaucrats, law enforcement officers corrupted into street thugs brutalizing the very people they are sworn to serve and protect, businesses destroyed, economies wrecked, bodily integrity violated. The Lockdown Files, a treasure trove of over 100,000 WhatsApp messages in real time between all the principal policymakers on Covid in England while Matt Hancock was the Secretary of Health (2020–26 June 2021), offer an unparalleled and gripping window into the amoral and cynical arrogance circulating in the corridors of power. The daily drip-feed of revelations in the Telegraph is akin to watching with fascinated horror a slow-motion train wreck. Schadenfreude doesn’t come any more delicious.  The files are littered with flippant remarks, mocking comments and contempt for citizens. Among the revelations about the Johnson government: The government knew there was no “robust rationale” for including children in the “rule of six” (the maximum number of people who could meet at any given time), but backed the controversial policy anyway. Facemasks were introduced in secondary schools in England after Johnson was told it was “not worth an argument” with Scotland’s Nicola Sturgeon over the issue, despite England’s Chief Medical Officer (CMO) Chris Whitty saying there were “no very strong reasons” to do so. In other words, political calculations were knowingly prioritized over schoolchildren’s needs. A plan to lift restrictions were dropped after Johnson was told it would be “too far ahead of public opinion.” Consultants were paid over £1 million a day for more than a year on the totally ineffectual test and trace program, turning the scheme into the embezzlement of public funds to line private pockets. We now know just how punch drunk on tyranny the political, bureaucratic, scientific, and journalist class was during the pandemic. The ruling elites, when liberated from democratic accountability and media scrutiny, morphed seamlessly into morally cavalier and inhumane petty tyrants. Averse to alternative ways of thinking outside the echo chamber, they developed neuralgia to any idea that might challenge lockdown fanaticism. Lockdown sceptics like the authors of the Great Barrington Declaration (GBD) who argued for the elderly and frail to be protected were demonized as dangerous “Covid deniers” who wanted to “let it rip” in a callous and cruel strategy of herd immunity. But government officials whose policies had a direct, catastrophic impact on the health of the elderly and frail were treated as heroes and unimpeachable voices of moral authority. Sociopath, Psychopath, or Both? Among the revelations about Hancock: More than 40,000 residents of care homes in England died with Covid. Hancock was advised by Whitty in April 2020 to test everyone entering the care homes. He rejected the advice because testing capacity was limited and, for political (PR) reasons, he prioritized reaching his grandiose, self-imposed target of 100,000 daily tests in the lower risk general community over protecting the care home residents, despite repeated claims of having thrown a “protective ring” around the homes. Patients discharged into care homes from hospitals were tested but not those coming in from the community. That is, “focussed protection” of the GBD was the right way to go. Instead Hancock rubbished the GBD and belittled its three eminent epidemiologist authors. Social care minister Helen Whateley told Hancock that stopping visits to care homes by spouses was “inhumane” and risked the elderly residents “just giving up” after prolonged isolation, but he refused to budge. He rejected advice in November 2020 to shift from 14-day Covid quarantine for people who had been in close contact with anyone infected, to five days of testing because it would “imply we’ve been getting it wrong.” Talk of a sunk cost fallacy. Over 20 million people in total were told to self-isolate even if they had no symptoms. God I feel vindicated for refusing flatly to join Australia’s clunky test and trace program. In a discussion on how to ensure the public complied with ever-changing lockdown restrictions, Hancock suggested “We frighten the pants off everyone” and Project Fear was born. Simon Case, Britain’s most senior civil servant, said the “fear/guilt factor” was “vital” in “ramping up the messaging” during the third lockdown in January 2021. Informed of the emergence of the alpha/Kent variant in December 2020, Hancock and his aides canvassed the ideal time to “deploy” the new variant in order to sustain public fear of the virus to ensure continued compliance with directives. A member of his team asked if they could “lock up” Nigel Farage after he tweeted a video of himself at a pub in Kent, because the troublesome politician was such a thorn in the government’s side. Hancock and Case mocked people forced to isolate in quarantine hotels, joking about returning travelers being “locked up” in “shoe box” rooms. Case wished he could “see some of the faces of people coming out of first class and into a premier inn shoe box.” Informed by Hancock that 149 people had entered “Quarantine Hotels due to their own free will,” Case replied: “Hilarious.” Hancock fought furious internal battles to hog the vaccine media limelight. He preened about his pictures in the media and boasted how the pandemic could propel his career “into the next league.” He told other ministers to “get heavy with the police” to enforce lockdown restrictions and then boasted that “The plod got their marching orders.” This raises questions about the legality of interfering with the operational instructions of police. Intoxicated by his own brilliance and infallibility, Hancock attacked vaccine czar Dame Kate Bingham, the chief of the National Health Service (NHS) Lord Stevens, and CEO of the Wellcome Trust (and now top scientist at the WHO) Sir Jeremy Farrar. He schemed with his aides, with the help of a secret spreadsheet, to deny rebellious party MPs funding for pet projects in their constituencies if they did not fall in line, including a new centre for disabled children and adults. I can relate therefore to this online comment on one of these stories in the Telegraph: “Hancock was intellectually stunted pondlife before the pandemic and still is now, but with more slime and a bit of a stink to him.” Or, to put it in more technical language: Hancock comes across as an ego-driven total f…wit. The state criminalized quotidian activities like sitting on a bench in the park, walking on the beach and meeting with extended family. Public health messaging was weaponized to normalize and sacralize spirit-sapping levels of social isolation. Even East Germany’s Stasi did not stop the elderly from hugging their grandchildren. Elderly patients were forced to die alone and surviving family members were banned from saying final farewells and denied the solace of a full funeral. Hancock was able to get away with exercising his lust for power because his prime minister, Boris Johnson, proved to be lazy, weak, and vacillating. The vivid description of Johnson by fired top aide Dominic Cummings – an out of control “shopping trolley” lurching from side to side in a supermarket aisle, depending on who he last talked to – has been amply validated by the leaked files. The instinctual libertarian rapidly morphed from a lockdown sceptic into a zealot. Lessons The Lockdown Files confirm that politics informed the policymakers in most of the key decisions on how to manage the pandemic. Accordingly, while medical specialists can debate the technical details of different medical approaches, policy specialists should be among the lead assessors in evaluating the justifications for and results and effectiveness of the policy interventions. The existing frameworks, processes and institutional safeguards under which liberal democracies operated until 2020 had ensured expanding freedoms, growing prosperity, an enviable lifestyle, quality of life and educational and health outcomes without precedent in human history. Abandoning them in favour of a tightly centralized small group of decision-makers liberated from any external scrutiny, contestability, and accountability produced both a dysfunctional process and suboptimal outcomes: very modest gains for much long-lasting pain.  The sooner we return to the conviction that good process ensures better long-term outcomes and acts as a check against suboptimal outcomes alongside curbs on abuses of power and wastage of public funds, the better. Interventions rooted in panic, driven by political machinations, and using all the levers of state power to terrify citizens and muzzle critics in the end needlessly killed massive numbers of the most vulnerable while putting the vast low-risk majority under house arrest. The benefits are questionable but the harms are increasingly obvious. The Johnson government in general and Hancock in particular revalidate Lord Acton’s astute observation that power corrupts and absolute power corrupts absolutely.  They weren’t following the science but Hancock’s ego and career ambitions. He exploited Johnson’s “stonking” laziness and shallowness. The Lockdown Files reveal a government gone rogue that viewed and treated the people as enemies. The UK, US, and Australia don’t need an inquiry strung out over years, focused on small details to the neglect of the big picture, with the tame conclusion that lessons will be learnt but blame cannot be apportioned. Instead we need criminal charges, and the sooner the better. Britain’s top civil servant acted more like a partisan political hack than an apolitical, neutral and loyal-to-the-elected-government of the day civil servant. Case’s bias, immaturity, poor judgment, and unwillingness to support the PM with accurate, balanced, and impartial information were such as to warrant instant sacking. His hubris is such that he is yet to submit his resignation despite the publication of these appalling exchanges with Hancock who had effectively taken over the government.  The fact that as the “absolutely cringe-worthy” revelations came tumbling out, PM Rishi Sunak insisted Case has his confidence reflects poorly on Sunak’s judgment. Flawed process produced bad outcomes.  In a modern-day version of sacrificing virgins to appease the viral gods, the young have lost many more years of their life to buy a few more lonely, miserable months for the infirm old.  If the vast sums thrown at Covid had been redirected to the leading killer diseases and upgrades to public health infrastructure, using the standard quality-adjusted life years (QALY) metric, many million deaths would have been averted around the world over the coming decades.  If we fail to heed the lessons of the last three years, we will indeed be condemned to repeat them, not just for new pandemics of infectious diseases but also for other crises like the “climate emergency.” Tyler Durden Thu, 03/09/2023 - 22:20.....»»

Category: dealsSource: nytMar 9th, 2023

Six NYC Market Factors to consider for Out-of-Town Owners

-Noah Kossoff, Associate Director, Tri-State Investment Sales, Avison Young Owning and operating properties in New York City presents its own set of unique challenges, especially for owners who live out of state. With a dynamic set of rules, regulations, and market conditions, it’s a challenge for even the most active... The post Six NYC Market Factors to consider for Out-of-Town Owners appeared first on Real Estate Weekly. -Noah Kossoff, Associate Director, Tri-State Investment Sales, Avison Young Owning and operating properties in New York City presents its own set of unique challenges, especially for owners who live out of state. With a dynamic set of rules, regulations, and market conditions, it’s a challenge for even the most active or largest owners to keep up. To help navigate our complex market, I’ve listed Six Market Factors that out-of-state building property owners should know: 1. Premium Pricing is Still Available Despite Rising Rates and Lower Sales Velocity It’s no secret that the drastic rise in interest rates over the past year has created a noticeable slowdown in the sales market. Avison Young’s Q4 2022 Manhattan Sales Report shows there were three consecutive quarters of lower sales velocity and activity in Q4 2022 was at a 12% discount from the trailing four-quarter average. Average cap rates for multifamily/mixed-use transactions were up 0.46% and price per square foot is down 11% from the trailing four-quarter average. We often see that when pricing is negatively impacted, transaction velocity follows suit. That said, we are still finding that there is significant demand for free-market, well-located buildings, especially if there is a value-add component. For example, in the past two weeks, Avison Young has put eight buildings into contract, six of which were 100% free market properties. With a larger, yet more diverse, buyer pool, the team achieved above-market pricing for the free-market buildings due to spirited bidding wars amongst the prospective buyers. The buyer profiles include: one institutional group, two 1031-exchange buyers, two foreign high net-worth individuals, and two first-time NYC buyers. 2. More Stringent Rent Laws are Coming The Housing Stability and Tenant Protections Act of 2019 (HSTPA) had a drastic impact on the NYC multifamily market. It significantly impacted the values of rent-regulated properties and created an additional set of laws multifamily owners must follow. By removing the ability to meaningfully increase rents with IAI/MCI programs and the elimination of the luxury decontrol threshold, HSTPA left owners with two primary methods to improve the values of their rent- stabilized properties: · Creation of New Units – By creating a new unit (either through the combination of multiple apartments into one or by separating one larger unit into multiple), owners were legally allowed to establish and charge a first rent. Although the unit would still be rent-stabilized, an owner could charge a new first rent at market. As a result, owners throughout NYC have been combining two (or more) adjacent apartments with low legal rents into a single unit with a new, much higher rent. · Substantial Rehabilitation – A “substantial rehabilitation” is a process by which an owner can take the entire building out of rent regulation and into fair market status by renovating 75% of the building systems (listed by the Division of Housing and Community Renewal [DHCR]). To qualify, a building must be in a “seriously deteriorated condition” and in need of the renovation. Today, if a building is at least 80% vacant, it is presumed that the building would be eligible to undergo a sub-rehab. However, both strategies are targeted under newly proposed legislation. The new legislation aims to remove the incentive for creating new units by limiting the new legal rent to a percentage increase or decrease based upon the change in square footage and the current legal regulated rent for the combined (or separated) apartment. For substantial rehabilitations, the proposed bill aims to remove the presumption that a property qualifies for a substantial rehabilitation solely on the basis that the property is 80% vacant. Instead, the bill proposes that a landlord will ultimately need to get approval from the DHCR to justify utilizing the strategy. 3. Good Cause Eviction is Still Being Considered Good Cause Eviction (GCE) is a proposed policy aimed at protecting tenants from arbitrary evictions by landlords in free-market apartments. If implemented, it would require landlords to provide a “good cause” for not renewing a tenant’s lease, such as failure to pay rent or violation of lease terms. More importantly, the proposal is designed to establish a maximum threshold that landlords can increase rents upon a renewal. By virtually forcing owners to renew leases, and dictating how much they can charge, GCE, if passed, would effectively end up regulating the remaining free-market rental housing stock throughout NYC. 4. Rents in NYC are Still Going Up Demand for rental housing in New York City heavily outweighs supply. While rents are cooling across the country, NYC’s rental market has not shown any signs of weakness. Miller Samuel reported that January’s median rent reached $4,097/month, a record number for the month of January and 14% higher than pre-pandemic levels. Recently, New York City Mayor Eric Adams, announced his plan to create 500,000 new units of housing must be created within the next decade in order to address affordability concerns throughout NYC. To put this ambitious number into perspective, NYC added only ~200,000 units of housing over the previous decade, and that was before the 421a program expired, which according to the Real Estate Board of New York (REBNY), was responsible for nearly 70% of NYC’s housing production since its inception. Until there is a new incentive program for developers to build rental housing, landowners will choose to either build condominium projects or not do anything at all. Yet, lawmakers today are still more focused on creating new regulations for the existing housing stock rather than the creating new supply. Therefore, demand will continue to outpace supply and rents will continue to rise. 5. Environmental Regulations May Require Major Building Upgrades To reduce carbon emissions, NYC is laws Local Law 97 that will force building owners to upgrade their properties to make them more energy efficient. The scope of required upgrades will vary, depending on building size and class. However, owners would be wise to invest in new, more eco-friendly building systems such as insulations, HVAC upgrades, solar panels, boilers (or removal thereof), etc. While these costs may be at a major expense to the owners, not complying may be an even greater one as most of the new policies will begin to fine owners of properties not in compliance with new regulation. 6. Strategies to Improve Existing Cash-Flow & Property Value from Afar Even if you live out-of-state, or if you are just not a hands-on property owner, there are still multiple ways to improve your property’s net cash-flow, and value, from afar. Finally, here are some ideas to consider: · Antennas – Some telecom companies are willing to pay for the ability to use your roof for their satellite antennas. In return for providing an easement to your property, these companies are willing to offer a lump sum payment that may be worth over $1M. · Tax Certiorari – Lowering your property taxes will have a direct, positive impact on your property’s value. An easy first step is consulting with a Tax Certiorari Attorney to see if a building has a case for getting its taxes reduced. · Cost Segregation Analysis – Through a cost-segregation analysis, you may be able to earn accelerated depreciation deductions for components of your building, adding a significant boost of depreciation benefits owning real estate can provide. The post Six NYC Market Factors to consider for Out-of-Town Owners appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweeklyMar 9th, 2023

3 Communication Stocks Set to Ride on Healthy Demand Trends

The accelerated pace of 5G deployment and demand for scalable infrastructure should help the Zacks Diversified Communication Services industry thrive despite short-term woes. SCMWY, DTEGY and TELNY are well-positioned to make the most of the infrastructure upgrade for seamless connectivity. The Zacks Diversified Communication Services industry appears well poised to gain from fading supply chain adversities, increased fiber densification and a faster pace of 5G rollout. However, high capital expenditures for 5G infrastructure upgrades, unpredictable raw material prices, high inflationary pressures and elevated inventory levels amid a challenging macroeconomic environment and uncertain market conditions have dented the industry’s profitability.Nevertheless, Swisscom AG SCMWY, Deutsche Telekom AG DTEGY and Telenor ASA TELNY should benefit in the long run from higher demand for scalable infrastructure for seamless connectivity amid the wide proliferation of IoT driven by an accelerated 5G deployment.Industry DescriptionThe Zacks Diversified Communication Services industry comprises firms that provide a wide array of communication services, including wireless, wireline and Internet, to business enterprises and consumers. These companies offer mobile and wireline telephone services, high-speed Internet, direct-to-home satellite television and other value-added services. In addition to providing integrated information and communications technology services to businesses and governments, some of these companies operate as local exchange carriers or full-service providers of data center colocation and related managed services in state-of-the-art data center facilities. Some industry participants also provide IP networks, private lines, network management and hosting services, along with sales, installation and maintenance of major branded IT and telephony equipment.What's Shaping the Future of the Diversified Communication Services Industry?Evolution of Business Model to Cater to Higher Demand: Video and other bandwidth-intensive applications have witnessed exponential growth owing to the wide proliferation of smartphones and increased deployment of the superfast 5G technology. This has forced the industry participants to invest considerably in LTE, broadband and fiber to provide additional capacity and ramp up the Internet and wireless networks. These companies are rapidly transforming themselves from legacy copper-based telecommunications firms to technology powerhouses with capabilities to meet the growing demand for flexible data, video, voice and IP solutions. At the same time, the industry participants continue to focus on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers. Also, these firms offer the flexibility to better manage data traffic by leveraging indigenous software-defined networks to enable low-latency, high-bandwidth applications for faster access to data processing. Although these infrastructure investments are likely to be beneficial in the long run, short-term profitability has largely been compromised.Waning Demand for Legacy Services: Efforts to offset substantial capital expenditure for upgrading network infrastructure by raising fees have resulted in reduced demand, as customers prefer to switch to lower-priced alternatives. Moreover, local-line access for traditional telephony services continues to decline among large customers due to higher wireless substitution and migration to IP-based services. This is reflected in the persistent erosion in overall network access services on a year-over-year basis, hurting revenues of local and long-distance operations. With Digital Subscriber Line and cable modems gaining widespread acceptance, customers are deactivating extra phone lines that were earlier used to access the Internet via dial-up modems. In addition, a shift toward wireless services and the aggressive rollout of VoIP and long-distance services by Tier-1 competitors have resulted in access line erosion. These adverse impacts have become more pronounced with fresh lockdown restrictions in China and the prolonged Russia-Ukraine war.Integrated Customized Offering: To improve profitability, the companies are increasingly focusing on providing support services to various small and mid-sized businesses (SMBs) with an integrated portfolio of voice, data and technology services. The firms are tailoring their services to suit individual business needs and are facilitating SMBs to better adapt themselves to necessary technology advancements. At the same time, the industry is battling hard-to-mitigate operating risks stemming from volatility in demand, an unpredictable business environment led by the virus outbreak and challenging geopolitical scenarios by offering free services to low-income families and seamless wireless connectivity to the masses.Unstable Raw Material Prices: Although the supply chain woes have declined progressively, the industry continues to face a dearth of chips, which are the building blocks for various equipment used by telecom carriers. Moreover, high raw material prices due to inflation and economic sanctions against the Putin regime have affected the operation schedule of various firms. Extended lead times for basic components are also likely to hurt the delivery schedule and escalate production costs. The demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices.Zacks Industry Rank Indicates Bullish TrendsThe Zacks Diversified Communication Services industry is housed within the broader Zacks Utilities sector. It carries a Zacks Industry Rank #13, which places it in the top 5% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.Before we present a few diversified communication stocks that are well-positioned to outperform the market based on a relatively modest earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Lags S&P 500, Sector The Zacks Diversified Communication Services industry has lagged the S&P 500 composite and the broader Zacks Utilities sector over the past year largely due to macroeconomic headwinds.The industry has lost 16.5% over this period compared with the S&P 500’s and the sector’s decline of 11.1% and 9.4%, respectively.One Year Price PerformanceIndustry's Current ValuationOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 15.29X compared with the S&P 500’s 11.82X. It is trading below the sector’s trailing 12-month EV/EBITDA of 20.29X.Over the past five years, the industry has traded as high as 16.49X and as low as 7.28X and at the median of 12.57X, as the chart below shows.Trailing 12-Month enterprise value-to EBITDA (EV/EBITDA) Ratio3 Diversified Communication Services Stocks to Keep an Eye onSwisscom AG: Headquartered in Bern, Switzerland, Swisscom offers mobile and fixed-network telecommunications services across the country and Italy. A wealthy domestic market with stable economic conditions, a relatively lax regulatory environment compared to the EU, its dominant market position and a strong leadership team are some of the key growth drivers of the company. With a complete spectrum of state-of-the-art data services, from leased lines to integrated solutions for corporate and residential customers, Swisscom’s healthy growth momentum is likely to continue. The Zacks Consensus Estimate for current-year and next-year earnings has been revised upward by 11.1% and 9.2%, respectively, since October 2022. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Price and Consensus: SCMWYDeutsche Telekom AG: Headquartered in Bonn, Germany, Deutsche Telecom is one of the largest telecommunications service providers in Europe. In addition to its strong position in the domestic market, the company is likely to benefit from the accretive post-merger integration of T-Mobile US Inc. and Sprite in the United States, in which it owns about 43% stake. The removal of forced cable TV access in multiple dwelling units in Germany through telecom legislation is likely to help the company expand its broadband market. Moreover, an aggressive fiber rollout strategy across the country is expected to augment its domestic market hold. The Zacks Consensus Estimate for current-year earnings has been revised 21.8% upward over the past year. It has a VGM Score of A and a long-term earnings growth expectation of 14.3%. The stock has gained 33.9% in the past year. Deutsche Telecom carries a Zacks Rank #2 (Buy).Price and Consensus: DTEGYTelenor ASA: Headquartered in Fornebu, Norway, Telenor offers mobile communication, fixed-line communication and broadcasting services worldwide. The company has completed a $15-billion merger to emerge as a leading telecom services provider in Malaysia that is likely to contribute significantly toward the growth of the country’s digital ecosystem and economy. The Zacks Consensus Estimate for current-year and next-year earnings has been revised upward by 6.3% and 17.9%, respectively, since October 2022. The stock sports a Zacks Rank #1 and has a VGM Score of B.Price and Consensus: TELNY 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.8% per year. So be sure to give these hand-picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Swisscom AG (SCMWY): Free Stock Analysis Report Deutsche Telekom AG (DTEGY): Free Stock Analysis Report Telenor ASA (TELNY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksMar 3rd, 2023

Living With Climate Change: Gas stoves: Safety group pushes health testing, appliance upgrades over outright ban

The Consumer Product Safety Commission, which sparked a gas-stove outrage earlier, says it has no regulations or bans in the works. It does want more testing......»»

Category: topSource: marketwatchMar 2nd, 2023

Futures Rebound After Worst Week Of 2023

Futures Rebound After Worst Week Of 2023 US index futures jumped after suffering their worst weekly drop of 2023, as traders looked for fresh opportunities to buy stocks while assessing the outlook for growth. S&P 500 futures rose 0.5%, rising just shy of 4,000 by 7:45 a.m. ET after the underlying benchmark fell 1.1% in the last trading session. Nasdaq 100 futures rose by about 0.6% after the tech-heavy gauge tumbled 1.7% at the end of last week. European and Asian stocks also rose; the Bloomberg Dollar Spot Index turned red after retreating from the day’s highs, lifting most Group-of-10 currencies. Treasuries edged lower, mirroring moves in global bond markets. Gold was little changed, oil fell and bitcoin resumed losses after gains overnight In premarket trading, cancer drugmaker Seagen soared after the Wall Street Journal reported that Pfizer is in early-stage talks to acquire the cancer therapy developer worth around $30BN. Pfizer shares slipped. Here are some other notable premarket movers: Best Buy (BBY) shares drop 1.8% after Telsey downgraded the electronics retailer, saying the company’s business is likely to experience a further decline in the near term. Fisker (FSR) climbs 7.8% after the carmaker  posted 4Q results and forecast 8% to 12% annual gross margin and potentially positive Ebitda for 2023. FuboTV (FUBO) rises 8.2% after posting 4Q revenue that beat the average analyst estimate. Focus Financial Partners (FOCS) shares are halted after the company agreed to be acquired by affiliates of CD&R for $53 per share. Enphase Energy Inc. (ENPH) shares are up 1.9% after Janney Montgomery upgraded the company to buy, citing attractive valuation. Li-Cycle shares (LICY) rise 8% after the firm announced that one of its US subsidiaries had been granted a $375 million loan offer from the Biden administration. Lucira Health (LHDX) shares surge 240% after the FDA issued an emergency use authorization for the company’s Covid-19 and flu test. Payoneer Global (PAYO) gains 5% after Jefferies initiated coverage with a buy recommendation, saying the payments firm suffered from a “complexity discount.” Pulmonx Corp. (LUNG) rises 3.8% as Wells Fargo upgrades to overweight, saying the company’s fourth-quarter results “represent a turning point for the company.” Range Resources (RRC) shares slump 7.5% after Pioneer Natural Resources said it was not “contemplating a significant business combination or other acquisition transaction” in a statement Friday evening. Seagen (SGEN) shares soar 14% after the Wall Street Journal reported that Pfizer is in early-stage talks to acquire the cancer therapy developer. Tegna (TGNA) shares slump 22% after the Federal Communications Commission shelved Standard General’s proposed $5.4 billion buyout of the broadcaster. Union Pacific (UNP) shares climb 10% after the rail freight company said it was looking for a new CEO following pressure from a hedge fund. Universal Insurance Holdings (UVE) rises 1.8% after Piper Sandler upgraded the insurer to overweight, anticipating strong earnings in 2023 on higher prices and potential tort reform via a bill that seeks to reduce unnecessary litigation XPeng (XPEV) shares gain 5% after the Chinese electric-vehicle maker is included in the Hang Seng China Enterprises Index The S&P 500 has fallen over the past three weeks amid concerns that renewed price pressures will prompt more (and bigger) rate hikes from the US central bank. An unexpected acceleration in the personal consumption expenditures price index boosted expectations for policy tightening, while solid income and spending growth data further allayed fears of an imminent recession. Traders await durable goods data due later on Monday. Monday’s advance may signal traders are looking “towards the end of the potential bearish correction brought by last week’s decreased appetite for riskier assets, after investors digested the prospect of longer hawkish monetary stances from central banks,” said Pierre Veyret, a technical analyst at ActivTrades. Others - such as MS permabear Mike Wilson - remained bearish: Wilson said March will see stronger bear-market headwinds for stocks in a note on Monday. Fresh earnings downgrades will weigh on markets, with the S&P 500 potentially sliding as much as 24% to 3,000 points. Wilson also said that those treading into this market risk falling into a “bull trap”, a view echoed by Torsten Slok, chief economist at Apollo Global Management. “A generation of investors has since 2008 been taught that they should buy on dips, but today is different because of high inflation, and credit markets and equity markets are underestimating the Fed’s commitment to getting inflation down to 2%,” Slok wrote in a note. Stock markets that had mostly shrugged off forecasts for higher interest rates are finally giving way to a swift repricing of yields. Traders are now pricing US rates to peak at 5.4% this year, compared with about 5% just a month ago, as an acceleration in the Federal Reserve’s preferred inflation gauge dashes hopes for an imminent pause in policy tightening. Meanwhile, JPMorgan strategists led by Mislav Matejka said last year’s strong outperformance in cheaper, so-called value stocks over growth peers is likely to reverse soon as the economic recovery slows. The next move for investors in the following month or two might be to go “outright underweight value versus growth,” they wrote in a note. Ironically, that comes as JPM initiated coverage of two big US online real estate firms, Zillow Group at overweight and Redfin at neutral, as it forecasts a recovery in the property market. European stocks also rose as investors are tempted by lower prices following the largest weekly selloff since December. The Stoxx 600 is up 1.2% with tech, retail and consumer products the best-performing sectors. The bounce ignores the surge in German benchmark yields which hit 2.58%, the highest since 2011, on bets the European Central Bank will extend its tightening cycle beyond this year. Here are some of the biggest movers on Monday: Shell rises as much as 2.4% after Goldman Sachs upgrades the oil and gas company to buy from neutral, following a strong earnings season for oil majors Associated British Foods shares rise as much as 2.7% after the food processing and retailing company said it sees total sales for the first half more than 20% ahead of last year Michelin gains as much as 3.1% after Goldman Sachs upgraded the French tiremaker to buy from neutral, noting “underappreciated tailwinds” including lower raw material and logistics costs Hennes & Mauritz shares jump as much as 4.2% after Bank of America upgraded the clothing retailer to buy from underperform, citing prospects for a profit recovery this year Bunzl shares gain as much as 4.2%, hitting the highest intraday since August, after the distribution group’s results were marginally better than expected across the board, showing business model resilience Haleon shares rise as much as 1% after Bloomberg News reported the consumer health business, spun out of GSK last year, is exploring a divestiture of its ChapStick lip balm brand PostNL shares tumble as much as 12%, the most since October, after the Dutch delivery firm’s new FY23 Ebit guidance came in 43% below consensus Dechra Pharmaceuticals tumbles as much as 18% after the British animal health-care company posted a profit decline in the first half and forecast FY guidance that disappointed Earlier in the session, Asian stocks declined as traders worry about the prospect of further interest rate increases by the Federal Reserve after an unexpected acceleration of US inflation. Investors were also cautious ahead of a key political meeting in China.  The MSCI Asia Pacific Index dropped as much as 0.8%, led by technology and materials shares. Australia and South Korea were among the worst-performing markets, while Japan bucked the region’s trend following a pledge from the Bank of Japan governor nominee to maintain ultra-loose monetary policy. Chinese and Hong Kong benchmarks edged lower as investors eyed the National People’s Congress meeting starting this weekend. They are showing a preference for onshore stocks over Hong Kong peers amid expectations that more pro-growth policies will be announced. A strong rally in Asian stocks has hit a wall this month amid renewed worries of US policy tightening and a lack of positive catalysts for Chinese shares. A hotter-than-expected set of data in the Fed’s preferred inflation gauge Friday spurred a hawkish recalibration of expectations for rate hikes, pressuring risk assets. Asian emerging markets will “certainly not be immune” from “spillover risks” of the rebound in US inflation, said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank. Prospects of tighter policy for a longer period “will hold feet to fire for valuations.” Japanese equities closed mixed, as investors mulled the unexpected acceleration of US inflation data that suggested potential further interest rate hikes by the Federal Reserve. The Topix rose 0.2% to close at 1,992.78, while the Nikkei declined 0.1% to 27,423.96. The yen strengthened about 0.1% after tumbling 1.3% Friday to 136.48 per dollar. Fanuc contributed the most to the Topix gain, increasing 2.9% after it was upgraded at Nomura. Out of 2,160 stocks in the index, 1,478 rose and 591 fell, while 91 were unchanged. “Japanese equities were mainly influenced by the higher than expected US PCE data, and the rising US interest rates would make the environment tougher for growth stocks,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities. “However, compared to US stocks, Japanese stocks are still supported by a weaker yen and this is likely to continue for some time.” Australian stocks declined; the S&P/ASX 200 index fell 1.1% to close at 7,224.80, dragged by losses in mining shares. The materials sub-gauge dropped the most since Oct. 28, continuing a four-day losing streak, after iron ore slumped.  In New Zealand, the S&P/NZX 50 index fell 0.9% to 11,793.33 In FX, the Bloomberg Dollar Spot Index was steady and the greenback traded mixed against its Group-of-10 peers. Sweden’s krona and the pound were the best performers while the New Zealand and Australian dollars were the worst. The euro was steady at $1.0550. Bund yields followed Treasury yields higher after an early drop. the 10-year yield rose to the highest since 2011 as traders are betting the ECB will extend its tightening cycle beyond this year, pushing back expectations for a peak in interest rates into 2024 for the first time. Focus is on speeches by policymakers The pound rose 0.2% against the dollar, snapping a three-day decline, to trade around 1.1966 amid speculation of an imminent deal on the Northern Ireland protocol. Gilts yields rose as bets on BOE rates pricing turned higher. The yen steadied near a two-month low as currency traders weighed remarks from BOJ governor nominee Kazuo Ueda at his second parliamentary hearing. Ueda said monetary easing should continue in support of the economy’s recovery, a comment that suggests he won’t seek an immediate change in policy if he is approved to helm the central bank The New Zealand dollar underperformed its G-10 peers. RBNZ chief economist Paul Conway said inflation is “far too high,” labor market is “incredibly tight”. The Australian dollar also tacked lower. RBA chief Philip Lowe’s expectation of further interest-rate rises prompted economists and money markets to narrow the odds of a recession In rates, Treasury yields reversed a drop to inch up, led by the front end following a wider drop across German bonds, as traders wagered that the European Central Bank will extend its rate-hiking cycle further into 2024. US yields were cheaper by up to 1.7bp in front-end of the curve with 2s10s flatter by almost 1bp; 10-year yields around 3.95%, less than 1bp cheaper vs. Friday session close with Germany 10-year lagging by 3bp vs. Treasuries.  Bund futures are lower as traders push back bets on when ECB rates will peak until 2024 for the first time. German 10-year yields are up 4bps. In commodities, oil fell as concerns that the Fed will keep on raising rates eclipsed the latest disruption to supplies in Europe and optimism over a demand recovery in China; WTI hovered around $76.30. Spot gold is flat at around $1,810. Bitcoin is modestly firmer on the session, +1.0%, but off initial best levels and well below 24k. RBI Governor Das said at the G20 that there is now wide recognition of major risk with crypto. Looking at today's calendar, we get the February Dallas Fed manufacturing activity, January durable goods orders, and pending home sales; elsewhere we also get Japan January retail sales, industrial production, Italy February manufacturing confidence, economic sentiment and consumer confidence index, Eurozone February services, industrial and economic confidence, January M3, Canada Q4 current account balance. Fed speaker slate includes Jefferson at 10:30am; Goolsbee, Kashkari, Waller, Logan, Bostic and Bowman are scheduled later this week. On the earnings front, Occidental Petroleum, Workday, and Zoom report. Market Snapshot S&P 500 futures up 0.5% to 3,994.25 STOXX Europe 600 up 1.0% to 462.49 MXAP down 0.5% to 157.92 MXAPJ down 0.8% to 511.47 Nikkei down 0.1% to 27,423.96 Topix up 0.2% to 1,992.78 Hang Seng Index down 0.3% to 19,943.51 Shanghai Composite down 0.3% to 3,258.03 Sensex down 0.4% to 59,220.58 Australia S&P/ASX 200 down 1.1% to 7,224.81 Kospi down 0.9% to 2,402.64 German 10Y yield little changed at 2.56% Euro little changed at $1.0555 Brent Futures up 0.4% to $83.48/bbl Gold spot down 0.1% to $1,809.86 U.S. Dollar Index little changed at 105.15 Top Overnight News from Bloomberg Three quarters of the 1,500 UK business leaders polled by BCG’s Centre for Growth believe the economy will shrink in 2023 but only 20% plan to shed staff, fewer than the 29% who plan to increase headcount: BBG Rishi Sunak and Ursula von der Leyen will meet in the UK in the early afternoon on Monday for final talks ahead of an expected announcement of a post-Brexit settlement for Northern Ireland: BBG The ECB is very likely to go ahead with its intention to raise interest rates by a half-point when it meets next month, President Christine Lagarde told India’s Economic Times: BBG Bloomberg’s aggregate index of eight early indicators suggests China’s economy rebounded in February after the long holiday, although it points to an uneven recovery with strong consumption following the scrapping of Covid rules but lagging industrial activity: BBG Macron announced he will visit China in April and hopes to encourage Beijing to pressure Moscow into reaching a settlement of the Ukraine war. SCMP New home sales by floor area in 16 selected Chinese cities rose 31.9% month-on-month in February, compared with a fall of 34.3% in January, according to China Index Academy, one of the country’s largest independent real estate research firms. RTRS    American companies, including McDonald’s, Starbucks, Ralph Lauren, Tapestry, and others, are expanding in China in anticipation of a consumer-led rebound in the economy as the post-reopening recovery continues. WSJ China Renaissance confirmed Chairman Bao Fan has been assisting in a Chinese probe since he disappeared abruptly earlier this month. The investigation is being run by authorities, and Renaissance will "cooperate and assist with any lawful request." It was reported last week that Cong Lin, the firm's former president, has been involved in a probe since September. BBG BOJ policy – incoming governor Kazuo Ueda says it’s premature to discuss normalization as “big improvements” must be achieved in the country’s inflation trajectory before changes can happen (Ueda says the benefits of monetary easing exceed the costs). RTRS Russia has halted supplies of oil to Poland via the Druzhba pipeline, a move that comes one day after Poland sent its first Leopard tanks to Ukraine. RTRS US insurance regulators on Monday will meet to consider boosting capital charges on complex corporate loan instruments that some in the industry warn are creating excessive risk. The issue pits insurers backed by large private equity firms such as Blackstone, Apollo Global and KKR — who are increasingly investing in the loans — against traditional life insurers such as MetLife and Prudential Financial, who warn of growing risks. FT Pfizer is in early-stage talks to acquire biotech Seagen, valued at about $30 billion, and its pioneering targeted cancer therapies. WSJ Hedge fund Soroban Capital Partners is pushing Union Pacific Corp.  to replace Chief Executive Lance Fritz, arguing the railroad has underperformed on his watch, according to people familiar with the matter. WSJ A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded cautiously heading into month-end and a slew of upcoming releases including Chinese PMI data, with headwinds also from the US where firmer-than-expected Core PCE data spurred hawkish terminal rate bets. ASX 200 was negative as participants digested a deluge of earnings and with the mining industry leading the retreat seen across nearly all sectors aside from energy which benefitted from a jump in Woodside Energy’s profits. Nikkei 225 price action was contained by a lack of pertinent macro drivers and with BoJ Governor nominee Ueda’s largely reiterated prior comments at the upper house confirmation hearing. Hang Seng and Shanghai Comp. were choppy with initial pressure amid geopolitical frictions after the G20 finance ministers meeting failed to agree on a communique due to opposition from Russia and China, while National Security Adviser Sullivan also warned there will be a real cost if China provides military assistance to Russia for the Ukraine war. However, Chinese stocks gradually recovered from the early weakness and briefly turned positive with sentiment helped by a continued liquidity injection and after China drafted guidelines to regulate financial support in the housing rental market, although the gains proved to be short-lived. Top Asian News China drafted guidelines to regulate financial support in the housing rental market and began to solicit public opinion, according to China.org.cn. Macau dropped COVID-19 mask mandates for most locations aside from public transportation, hospitals and some other areas, according to Reuters. BoJ Governor Kuroda commented that he is resolved to keep ultra-loose policy and that the BoJ expects core consumer inflation to slow beyond 2% in both fiscal 2023 and 2024, according to Reuters. BoJ Governor nominee Ueda says CPI growth will slow below 2% in fiscal 2023 and that it takes time for CPI to meet the 2% target stably and sustainably, while he added that the BoJ's current monetary easing is appropriate and that it is appropriate to continue monetary easing from now on as well. Adds, changing the 2% inflation target into a 1% target would strengthen the JPY in the short-term, weaken it long-term. Overshooting commitment is aimed at exerting powerful announcement effects on policy, need to be mindful of risk of inflation overshooting too much. Targeting shorter-dated JGBs than current 10yr yield is one idea if BoJ were to tweak YCC in the future, but there are many other options. Does not think Japan has reached the reversal rate, in which financial transmission channels are hurt so much that the demerits of easing exceed benefits. European bourses are firmer across the board, Euro Stoxx 50 +1.8%, after a cautious APAC handover following Friday's selling pressure. Sectors are all in the green with Energy names at the top of the pile, given benchmark pricing and Shell's upgrade at GS. Stateside, futures are currently posting more modest upside of around 0.5% with Fed's Jefferson (voter) the session's main event. Tesla's (TSLA) German plant has hit a production level of 4,000 per week, three weeks ahead of schedule, according to Reuters. Top European News UK PM Sunak and European Commission President von der Leyen will meet at 12:00GMT/07:00EST in Windsor, according to BBC; if there is a deal, a press conference could be around 15:30GMT. Earlier, UK PM Sunak's office said UK PM Sunak will meet with EU's von der Leyen for talks on Northern Ireland Brexit deal late lunchtime on Monday and will hold a Cabinet meeting later on Monday. Furthermore, PM Sunak and von der Leyen will hold a news conference if a deal is reached, while Sunak will also address parliament if there is a deal. UK ministers are unlikely to quit re. the Brexit deal, with the likes of Steve Baker and others liking what they are hearing but waiting to see the full text, according to Times' Swinford; ERG say they would love to back the deal but if the DUP does not back the deal it cannot and won't support it. UK PM Sunak said they are giving it everything they’ve got regarding talks for a post-Brexit deal for Northern Ireland and he will try to resolve the concerns the DUP Party have regarding a new Brexit deal for Northern Ireland. It was later reported that PM Sunak said he won big concessions from the EU, according to The Sunday Times and The Times. UK Deputy PM Raab said there is real progress on a trade deal and he is hopeful for good news on the Brexit deal within days, not weeks, and also noted that Northern Ireland’s DUP does not have a de-facto veto over the Brexit deal. In other news, Raab said he will resign if an allegation of bullying against him is upheld, according to Reuters. ECB’s Lagarde said headline inflation is still unacceptably high and core CPI is at a record level, while she added that they want to bring inflation back to the 2% target and noted that rate decisions are to be data dependent. Magnitude 5.7 earthquake that struck the Eastern Turkey region has been revised to 5.2, according to the EMSC. FX DXY retained a bid between Fib and psychological level within 105.360-070 range; though has erred towards the lower-end of these parameters going into the US session. Sterling 'outperforms' after a dip through 200 DMA vs Buck on UK-EU NI trade deal optimism, with EUR/GBP within 10 pips of 0.8800 at worst. Kiwi flags as NZ Q4 retail sales fall and Aussie feels more contagion from Yuan weakness; antipodeans near 0.6150 and 0.6710 respectively. Euro pivots 1.0550 vs the Dollar and Yen pares back from sub-136.50 amidst Fib support nearby. PBoC set USD/CNY mid-point at 6.9572 vs exp. 6.9586 (prev. 6.8942) Commodities WTI and Brent are a touch softer though have lifted off overnight USD 75.58/bbl and USD 82.38/bbl lows given the improvement in risk sentiment throughout the European morning. Though, the benchmarks are shy of USD 76.82/bbl and USD 83.60/bbl peaks with numerous geopolitical updates factoring into the overall indecisive price action. Russia halted supplies of oil to Poland via the Druzhba pipeline, according to PKN Orlen's CEO. Subsequently, Russia's Transneft says payment orders for oil shipments to Poland were not issued in the second half of February, no oil flows to Poland currently, via Tass; paperwork for oil supplies to Poland has not been completed. Crude oil deliveries via the Druzhba pipeline to the Czech Republic are running as planned, according to Mero. Spot gold is little changed with the yellow metal in a tight sub-10/oz range above the USD 1800/oz handle, taking its cue from the similarly cagey USD. Base metals are, broadly speaking, firmer following overnight weakness but remain in proximity to the troughs from Friday's session. Fixed Income Bonds remain in bear clutches after another failed recovery rally. Bunds probe new cycle low at 133.61 (session high 134.36) have fallen just shy of key resistance area, associated 10yr at a YTD peak of 2.57%. Gilts wane just two ticks below 101.00 and test bids/support into 100.00 and T-note hugs base of 111-07/16 range ahead of US data, Central Bank speakers and crunch UK-EU Brexit talks. Geopolitics Russia's Kremlin, on China's peace plan, says no conditions for peace 'at the moment' in Ukraine, according to AFP. G20 Finance Ministers meeting concluded without a joint communique as China and Russia opposed the draft with the two countries said to be upset by the use of a G20 platform to discuss political matters, according to sources cited by Reuters. India’s chair statement noted that there was a discussion about the war in Ukraine and it reiterated the G20 position on deploring in the strongest terms aggression by Russia, as well as reiterated the G20 position demanding Russia’s complete and unconditional withdrawal from Ukrainian territory. Russian President Putin said Russia has taken into account NATO’s nuclear potential and claimed that the west wants to liquidate Russia, according to TASS. Russian Wagner Group boss Prigozhin said his fighters captured the village of Yahinde which is north of Bakhmut, according to Reuters. US President Biden said on Friday that he is ruling out Ukraine’s request for F-16 aircraft for now but added they have to put Ukrainians in a position where they can make advances this spring and summer. Biden also said he doesn’t anticipate a major initiative on the part of China to provide weapons to Russia and that he hasn’t seen anything in the Chinese peace plan that would be beneficial for anyone but Russia, while he also suggested it is possible that Chinese President Xi did not know about the Chinese spy balloon, according to an ABC News interview. US National Security Adviser Sullivan said China has made the final decision regarding providing aid to Russia and has not taken the possibility of providing lethal aid to Russia off the table, while he noted the consequences have been made clear to China and warned there will be a real cost if China provides military assistance to Russia for the Ukraine war, according to an interview with ABC News. There were also comments from Republican lawmaker McCaul that China is thinking of sending drones and other lethal weapons. Belarus President Lukashenko will pay a state visit to China from February 28 to March 2. "The visit will serve as an opportunity for the two sides to further promote comprehensive cooperation", according to Global Times. Germany, France, and the UK are considering making concrete security guarantees to Ukraine as an incentive for Ukrainian President Zelensky to engage in peace talks with Russia, according to the WSJ. German Defence Minister Pistorius commented regarding the Chinese peace plan and stated that they will judge China by its actions, not its words, according to Reuters. US Event Calendar 08:30: Jan. Durable Goods Orders, est. -4.0%, prior 5.6% Jan. -Less Transportation, est. 0.1%, prior -0.2% Jan. Cap Goods Ship Nondef Ex Air, est. 0%, prior -0.6% Jan. Cap Goods Orders Nondef Ex Air, est. -0.1%, prior -0.1% 10:00: Jan. Pending Home Sales (MoM), est. 1.0%, prior 2.5% Jan. Pending Home Sales YoY, prior -34.3% 10:30: Feb. Dallas Fed Manf. Activity, est. -9.2, prior -8.4 Central Bank Speakers 10:30: Fed’s Jefferson Discusses Inflation and the Dual Mandate DB's Jim Reid concludes the overnight wrap As we close out a tougher second month of the year than the first tomorrow night, Henry pointed out an interesting stat to me on Friday. January was the best January for the Global Bond Ag index this century whereas February so far is on course to be the worst February over the same period. The very strong financial market performance between mid-October and end-January was in our opinion based mostly around US terminal pricing being remarkably stable between 4.75-5.1%. In the previous 9-10 months it was constantly being repriced from around 1% to 5% causing chaos in the financial world. On Friday, US terminal closed at 5.4%, catching up to DB's street leading 5.6% forecast. Clearly this has been bubbling up since payrolls (Feb 3), the CPI revisions (Feb 10), CPI beat (Feb 14), retail sales beat (Feb 15), and even things like Manheim used prices spiking higher again in January and February. Last Friday's core PCE was another important piece of evidence with the 0.6% mom print above expectations of 0.4%. Even though the concern was that it would beat, this added fuel to the fire and markets still struggled to deal with the ramifications with 2yr, 10yr and terminal up +11.6bps, +6.8bps and +5.3bps to 4.814%, 3.943% and 5.40% respectively. 2yr yields are the highest since July 2007 and terminal the highest this cycle. For core US PCE, the 3m, 6m and 12m annualised numbers are now 4.8%, 5.1% and 4.7% and thus strongly hint at inflation stickiness. With this data it’s tough to rule out a return to 50bps hikes even if that’s not yet the base case. While that uncertainty is there, markets will stay on edge. In credit we downgraded our tactical bullishness in our "Credit: Rally ends soon" (Jan 30) note (link here) and suggested reducing exposure to dollar credit immediately. The biggest challenge though is when to officially run for the preverbal hills given we've had a long standing YE 23 target for HY of +860bps linked into our US recession call by year end. In the near-term we’re a little more relaxed on European credit. Indeed our credit team published a €HY update this morning looking at tight spreads in the face of growing fundamental vulnerabilities and the highest share of bonds rated B or worse in the last 10 years. However with supply unlikely to pick up materially, favourable technicals should keep spreads supported for now. Still, we think concerns about deteriorating credit metrics will eventually prevail and see €HY selling off in H2’23 alongside the US market when signs of a growth slowdown become even more tangible (see here for the full text). Linked into this view, the recent US data probably makes us more confident of a hard landing given the boom-and-bust nature of this cycle that has been increasingly clear step-by-step over the last 2-3 years. This trend first emerged with the extraordinarily excessive covid stimulus, which in turn led to an enormous spike in the money supply, which brought structural inflation, and was always going to require an immense amount of tightening to control. An immaculate disinflation and soft landing from here would defy all historical precedent. Time will tell if we're wrong and history needs to be rewritten but this feels a fairly straight forward US cycle to predict. For this week, with the current sensitivities over prices, all eyes will be on the flash February European CPI releases (France Tues, Germany Weds, Italy and EA Thurs) and labour market data released throughout the week. The CPI numbers follow Friday's upward revisions for the January report in the Euro Area, where core inflation was revised up a tenth to a new record of +5.3%. We also have the global PMIs (and US ISMs) with manufacturing on the first day of the month (Wednesday) and services (Friday). ECB speakers will have plenty of opportunity to reflect on the data with at least 8 appearances already scheduled for next week. For a more backward-looking assessment, markets will also have the ECB's account of the February meeting due Thursday to read through. Our own European economists upgraded their ECB call last week and now see two +50bps hikes in March/May followed by a final +25bps hike in June, which would imply a terminal of 3.75%, up from 3.25% previously (see full note here). Fed speakers are also prevalent as you'll see in the day-by-day week ahead. There are six FOMC voters and there is a lot for them to chew over at the moment, especially after Friday's PCE data. Outside of the ISMs, US data will revolve around consumer and manufacturing activity. That will include the Conference Board's consumer confidence index tomorrow, Chicago PMI (also tomorrow) and a host of regional central bank indices. Other notable indicators due include durable goods orders today and the advance goods trade balance tomorrow. Asian equity markets are trading lower this morning with the KOSPI (-1.19%) leading losses across the region while the Hang Seng (-0.75%), the CSI, (-0.21%) the Shanghai Composite (-0.12%) and the Nikkei (-0.19%) all trading in the red. In overnight trading, US stock futures are fairly flat alongside US yields. Earlier this morning, the government’s nominee for the Bank of Japan (BOJ) Governor, Kazuo Ueda in his speech to the parliament stressed the need to maintain the central bank’s ultra-loose policy to support the Japanese economy despite various market side-effects. Meanwhile, candidates for the BoJ deputy governor (Uchida and Himino) will appear for hearings in the Upper House tomorrow, following this week's Lower House hearings. Looking back on last week now, both equities and fixed income retreated as markets priced in further central bank hikes following mounting evidence that inflation was continuing to prove persistent. The selloff gathered pace on Friday, following the aforementioned US PCE inflation data surprising firmly to the upside, with headline PCE at +0.6% (vs +0.5% expected) month-on-month, and +4.7% (vs +4.3% expected) year-on-year. Further adding to the view that inflation is durable, core PCE inflation also came in above consensus, with the month-on-month print at +0.6% (vs +0.4% expected) whilst year-on-year came in at +4.7% (vs +4.3% expected). This data led markets to swiftly priced in a more aggressive price of rate hikes from the Fed. In particular, there was growing speculation that the Fed might step up their hikes to 50bps again, with a +30.3bps move priced into the next meeting in March, up from +27.5bps at the start of the week. US terminal rate timing is starting to be evenly balanced between July (5.400%) and September (5.401%), rather than the July peak we've had for several weeks. It's also at the highest level of the cycle. The pricing for the July meeting climbed up +11.8bps last week (+5.3bps on Friday), while the September meeting pricing rose +14.6bps last week (+6.9bps on Friday). Expectations also increased for rates remaining higher for longer, with the December meeting now implying a 5.28% rate. This was up +11.0bps on Friday and +21.6bps on the week – marking a fifth consecutive weekly increase. Renewed expectations of additional hikes by central banks triggered a sell-off in both US and European equities on Friday. The S&P 500 fell back -1.05% on Friday, finishing off the week down -2.67% and marking its worst weekly performance so far this year. The Nasdaq similarly retreated, down -3.33% last week (-1.69% on Friday), its largest weekly down move since mid-December. European equities fell back too, with the STOXX 600 retreating -1.42% last week (-1.04% on Friday). This sell-off was echoed across fixed income markets, with 10yr Treasury yields up +6.6bps on Friday and +12.8bps over the course of last week. 2yr Treasuries significantly underperformed, as yields rose +11.6bps on Friday and +19.7bps over the week, reaching their highest level since July 2007. It was a similar story in Europe, with the 2yr German yield up +11.7bps on Friday in their largest up move since December and hitting their highest level since October 2008. Over the course of the week, that left them up +15.3bps at 3.03%. In the meantime, 10yr bund yields rose +9.7bps last week (+5.9bps on Friday) to 2.54%, and the German 2s10s curve inverted to -50bps after it fell -5.6bps on Friday, which made up nearly the entirety of the -5.8bps flattening last week. Finally, commodity markets fell back most of last week before a rally in oil on Friday (WTI +1.23% & Brent +1.16% Friday) left WTI crude down just -0.03% on the week at $76.32/bbl and Brent crude up +0.19% at $82.16/bbl. On the other hand, metals saw continued selling on Friday, with copper futures falling back -3.81% overall (-2.64% on Friday), and nickel down -4.93% last week (-3.33% on Friday). Looking at the market more broadly, the Bloomberg Industrial Metals Index fell back -3.17% over the course of last week (-2.44% on Friday). All this likely down to some concerns that the Chinese reopening isn't quite as smooth and bouyant as hoped. Tyler Durden Mon, 02/27/2023 - 08:05.....»»

Category: blogSource: zerohedgeFeb 27th, 2023

Futures Slide With All Eyes On PCE Inflation

Futures Slide With All Eyes On PCE Inflation US index futures reversed Thursday's rebound, and dropped as investors braced for data that may show accelerating inflation in the world’s largest economy. European stocks erased an earlier gain, while Asian equities fell on a quiet day for global markets. Contracts on the S&P 500 slipped 0.6% while those on the Nasdaq 100 fell 0.7% by 7:45a.m. ET. Friday sees the release of the personal consumption expenditures index, the Fed’s preferred price gauge, which is expected to show acceleration amid robust income and spending growth. The dollar rose amid concern over disappointing earnings and geopolitical tensions, and as the Yen tumbled after the confirmation hearing of Ueda's proved to be far less hawkish than some expected. In premarket trading, Beyond Meat jumped after its fourth-quarter net revenue topped analyst expectations, Boeing slipped after the planemaker paused deliveries of its 787 Dreamliner due to a documentation issue although analysts said they expect this to be a short-term issue, noting that it was due to non-compliance with paperwork. Warner Bros Discovery shares fell 5% in premarket trading on Friday after the parent of TNT, CNN and other TV networks reported quarterly sales that came in below analysts’ estimates. While the advertising market remains challenging, the worst of the merger integration period is behind them, analysts say. Warner Bros Discovery fell after reporting quarterly sales that missed analysts’ estimates. Alibaba and NetEase lead a decline in US-listed Chinese stocks, with both internet companies’ results failing to offer a fresh boost as the rally spurred by China’s reopening wears off. Here are the other notable premarket movers: Block rose as much as 8.2% in premarket trading on Friday after the digital payments company formerly known as Square reported fourth-quarter profit that beat estimates. Analysts noted that the company’s pledge to better manage its operating cost growth will be welcomed by investors. Farfetch shares gain 8% in US premarket trading after the specialty online retailer reported fourth-quarter revenue that beat expectations. Analysts were broadly positive on the reiterated guidance for 2023, noting that partnerships with Ferragamo, Reebok and Neiman Marcus offered tailwinds for the financial year. Opendoor Technologies fell 5% in premarket trading on Friday after KeyBanc Capital Markets said the data-driven home-flipper faces limits on how fast it can buy and sell homes. Floor & Decor gained 5% in extended trading after reporting adjusted earnings per share for the fourth quarter that topped the average analyst estimate. The flooring retailer’s annual forecasts for sales and profit trailed analysts’ expectations. Nektar Therapeutics plummeted 29% in extended trading after saying the Phase 2 study of rezpegaldesleukin in patients with active systemic lupus erythematosus did not meet the primary endpoint. After hot prints on consumer and producer prices, a high reading in today’s PCE report could weigh on markets. The S&P 500 is headed for a third week of declines, with traders taming their optimism about the outlook for the economy as Fed officials promise further rate hikes to subdue soaring inflation. “In the context of an inflation shock, a global energy crisis and the fastest rate-hike cycle in history, we have to assume that with a time lag there will be an economic consequence,” Sonja Laud, chief investment officer at Legal & General Investment Management, said on Bloomberg Television. But central banks’ determination to take rates for higher for longer is not their only worry: decelerating growth, sluggish corporate performance, geopolitical tensions from Russia to North Korea, and centralization of power in China all complicate the investment landscape. “Investors worry that this unexpected strength in the US economy, coupled with a steady reopening of the Chinese economy, will fuel further inflation which would lead the Fed to pursue a more aggressive tightening cycle,” said Geir Lode, the head of global equities at Federated Hermes. “Looking ahead, we see mixed signals: leading economic indicators continue to point to a recession, but lagging economic indicators show no signs of weakness, yet.” European equity indexes faded earlier gains, with outperformance in the construction, utility and energy sectors while chemicals and travel lagged. The Stoxx 600 was down 0.1% after gaining 0.3%, but the DAX falls 0.6% after data showed the German economy contracted more than previously thought in the fourth quarter.  BASF shares slide as much as 6% after the global chemicals giant halted share buybacks and gave an outlook that analysts deemed as muted. Here are the biggest European movers: Saint-Gobain shares rise as much as 6.3%, the most since March 2022 with analysts saying the French building materials group’s results and margin guidance should provide some confidence Embracer gains as much as 4.1% after the video-game maker said it plans to collaborate with New Line Cinema and Warner Bros. Pictures on feature films based on The Lord of the Rings Jupiter Fund Management shares jump as much as 15%, the most since March 2020 after the UK investment manager’s results provided a rare batch of good news Endesa gains 1.9% after the Spanish utility increased its 2022 dividend and reported full- year net income that beat the average analyst estimate Elekta shares surge as much as 11% after the Swedish medical technology firm reported third-quarter earnings that strongly beat expectations Accor shares jump as much as 4.5%, reaching the highest since May 5, after Stifel upgrades the French hospitality company to hold from sell, seeing a more attractive risk/reward Sopra Steria shares rise as much as 4.7%, hitting levels unseen since 2018, in a second day of gains after the French IT services company reported profit for the full year that beat estimates IAG falls as much as 4.1% after the parent of British Airways gave an outlook that failed to cheer investors after the stock’s 33% jump ahead of earnings Valeo shares fell as much as 6.6% after the manufacturer of car parts published a free cash flow guidance which fell below analysts’ expectations Earlier in the session, Asia’s stock benchmark dropped, heading for a fourth-straight weekly loss, as disappointing tech results dragged down China’s equity market and investors remained vigilant before the release of key US economic data.  The MSCI Asia Pacific Index slipped as much as 0.7%, reversing earlier gains. Stocks in Hong Kong continued to drop after entering a technical correction Thursday; a gauge of Chinese technology stocks listed in Hong Kong tumbled 3.3%. NetEase Inc. slumped after a profit miss, while Alibaba Group Holding Ltd. fell as analysts remained cautious about its sales growth prospect. Meanwhile, Chinese President Xi Jinping was set to bring decision-making of the financial system further under his control with the revival of a powerful committee. “A lot of the momentum in China has come in so it’s important to be discerning and look for the quality stocks that are more reasonably valued,” Julie Ho, an Asia ex-Japan equities portfolio manager at JPMorgan Asset Management, told Bloomberg Television.  Japanese stocks advanced as Bank of Japan Governor nominee Kazuo Ueda said current policy easing was appropriate. He spoke at a parliamentary hearing in the approval process for his appointment. South Korean stocks slid as foreign investors turned net sellers for the first week this year amid concerns over the impact of tighter global monetary policy on the nation’s tech-heavy equity market. Malaysian stocks pared losses ahead of the annual budget presentation. Traders in Asia are awaiting US inflation numbers due today, after mixed data Thursday muddied the outlook for Federal Reserve policy. Gains in Asian stocks have stalled this month amid renewed worries of US policy tightening and a lack of positive catalysts for heavyweight Chinese shares. The MSCI Asia gauge is down almost 2% this week. Japanese stocks rose as Bank of Japan governor nominee Kazuo Ueda backed continued easing in his confirmation hearing in parliament. Ueda said it will still take time to hit the central bank’s target for stable 2% inflation, adding that continuing with stimulus is appropriate for now. “Comments by Ueda came as no surprise — since he didn’t signal policy would change abruptly, the market is relieved,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “Ueda is taking taking a very cautious stance, which is very positive for the stock market.” The Topix rose 0.7% to close at 1,988.40, while the Nikkei advanced 1.3% to 27,453.48. Banks dropped while real estate stocks rose. Tokyo Electron contributed the most to the Topix gain, gaining 7.1%. Out of 2,161 stocks in the index, 1,571 rose and 507 fell, while 83 were unchanged. Australia's S&P/ASX 200 index rose 0.3% to close at 7,307.00, as all sectors aside from mining advanced.  Banks and industrials boosted the benchmark most. Still, the benchmark caped its third straight weekly loss, dropping 0.5%.  In New Zealand, the S&P/NZX 50 index rose 0.2% to 11,905. Key stock gauges in India posted their biggest weekly drop in eight months as investors continue to avoid riskier assets globally on the prospect of higher interest rates. Most stocks related to the Adani Group declined on Friday as the monthlong selloff in the conglomerate’s shares neared $150 billion. Selling in shares of the ports-to-power conglomerate has continued despite its efforts to reassure investors about its strategy and debt reduction plans. The S&P BSE Sensex fell 2.5% for the week, its biggest retreat since June 19, while the NSE Nifty 50 Index declined 2.7%. On Friday, the benchmark Sensex fell 0.2% to 59,463.93 in Mumbai, while the Nifty declined 0.3%. In FX, the Dollar Index is up 0.1%, advancing for the third time in four days. The Australian dollar and Japanese yen are the weakest among the G-10’s. Sweden’s krona was the only currency to advance against the dollar Friday and this week, as hawkish commentary from the central bank added to bets on further policy tightening. The euro steadied below $1.06 and the bund curve twist-flattened very modestly. A surprisingly weak final reading of German GDP prompted traders to trim bets for ECB interest- rate rises in the coming months. The pound was steady but was also among the best-performing major currencies this week after data showed UK household confidence rebounded by the most in almost two years. Gilts eased in early trade before Tenreyro, the BOE’s most dovish policy maker, speaks later in the day. The yen fell and the volatility skew kept shifting lower after BOJ Governor nominee Kazuo Ueda warned against any magical solution to produce stable inflation and normalize policy as he largely stuck to the existing central bank script in the first parliamentary hearing to approve his appointment In rates, treasuries are under pressure as US trading day begins, with yields inside Thursday’s rally ranges but near YTD highs reached this week. Yields are higher by 2bp-4bp, 10-year by 3bp at 3.91%; the 10-year yield is ~10bp higher on week and ~40bp higher over past five weeks. Thursday’s ranges included YTD highs for 5- and 10-year. The market is headed for its fifth straight weekly loss, having all but erased January’s gains amid hawkish repricing of Fed policy outlook. UK and German 10-year yields are little changed. Fed swaps nearly fully price in a third 25bp rate increase in June, following expected moves in March and May. Next week brings a large quarterly month-end index rebalancing with the potential to drive buying, and Treasury coupon auctions resume March 7. In commodities, oil extended Thursday’s advance amid strength in commodity currencies and optimism over China’s reopening. Crude futures advance with WTI rising 1.2% to trade near $76.30. Spot gold is little changed around $1,822. Bitcoin was on pace for its second monthly advance, breaking with stocks and other riskier assets Looking at the day ahead now, there’s a heavy data calendar in the US with personal income and spending data, along with the Federal Reserve’s preferred inflation measure, coming at 8:30 a.m. Later, there are reports on new home sales and sentiment as well as a number of Fed comments, including from Loretta Mester and James Bullard. Market Snapshot S&P 500 futures down 0.3% to 4,008.25 MXAP down 0.7% to 159.42 MXAPJ down 1.2% to 516.92 Nikkei up 1.3% to 27,453.48 Topix up 0.7% to 1,988.40 Hang Seng Index down 1.7% to 20,010.04 Shanghai Composite down 0.6% to 3,267.16 Sensex down 0.3% to 59,449.83 Australia S&P/ASX 200 up 0.3% to 7,307.03 Kospi down 0.6% to 2,423.61 STOXX Europe 600 up 0.3% to 463.97 German 10Y yield little changed at 2.47% Euro little changed at $1.0588 Brent Futures up 0.9% to $82.91/bbl Gold spot up 0.0% to $1,822.40 U.S. Dollar Index up 0.11% to 104.71 Top Overnight News from Bloomberg China told the United Nations on Thursday that one year into the Ukraine war "brutal facts offer an ample proof that sending weapons will not bring peace," just days after the United States and NATO warned Beijing against giving Russia military support. RTRS Japan’s Jan CPI rose M/M, although not by as much as feared – the ex-food number was +4.2% (vs. +4% in Dec and below the St’s +4.3% forecast) while ex-food/energy came in at +3.2% (vs. +3% in Dec and below the St’s +3.3% forecast). BBG   BOJ governor nominee Kazuo Ueda said it was “appropriate” to continue easing and called Kuroda’s policies “unavoidable” while the joint statement w/the government didn’t require revision, but suggested YCC had negative side effects and warned normalization could occur once the 2% inflation target was in sight. Nikkei China’s property market: in another sign the downturn is easing/ending, China Garden Holdings, one of the country’s largest developers, plans to buy land in local gov’t auctions for the first time in more than a year. WSJ Chinese President Xi Jinping is set to bring decision-making of the financial system further under his control with the likely revival of a powerful committee to coordinate financial policy and the possible appointment of a key ally in a top position at the central bank. BBG China’s overnight repurchase rate, a gauge of interbank funding costs, fell more than 80 basis points from Tuesday when it approached the highest level since 2021. That’s because the PBOC’s string of short-term cash injections that started last week, which included its biggest single-day boost on record, replenished the financial system with liquidity. BBG The Adani Group will hold a fixed-income investor roadshow in Asia next week as the embattled Indian conglomerate seeks to repair the damage caused by a shock short-seller report. BBG Credit Suisse cut payouts on a $3.5 billion real estate fund, as clients sought to pull their cash after rising interest rates hurt valuations. The fund's net asset value is expected to drop as much as 10%. BBG Inflation measured by the Fed's favored gauges probably stayed robust last month, upending optimism that the peak has been passed. The headline PCE deflator probably rose 0.5% month on month, with the annual rate staying at 5%. More worrying, both core and supercore gauges may have accelerated too. The sources of the pickup – income and spending growth — probably remained healthy last month. BBG Amazon founder Jeff Bezos hired an investment firm to evaluate a possible bid for the Washington Commanders, according to two people familiar with the situation. Wa Po The DOJ wants to block Adobe's $20 billion purchase of startup Figma, people familiar said. An antitrust lawsuit may be filed next month. The deal also faces antitrust reviews in the EU and UK. Adobe shares fell postmarket. BBG A sharp rotation toward cyclical stocks has aided mutual fund performance this year. In contrast with 3Q, mutual funds rotated sharply toward cyclical stocks in 4Q, suggesting optimism around the economic outlook. Autos, Tech Hardware, and Banks were among the most added to industries. At a sector level, funds are overweight Financials, Industrials, Materials, and Consumer Discretionary. Mutual fund and ETF fund flow data have also flipped in favor of cyclical sectors in recent weeks. In contrast to increased cyclical exposure, mutual fund exposure to growth stocks is higher than at any point since 3Q14. (GIR) The market is no longer fighting the Fed’s higher-for-longer narrative as it used to. After back in January pricing in more than a half percentage point of easing by year-end, money markets now see around 18 basis points of cuts by December. BBG The ECB may need to deliver significant interest-rate increases also in the second quarter, according to Bundesbank President Joachim Nagel. BBG Europe should be closer to agreeing on a new set of fiscal rules in March, according to Economy Commissioner Paolo Gentiloni who expects diverging views on debt flexibility to be resolved shortly. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly rangebound after the choppy but positive performance on Wall St where markets spent most of the session recovering from the initial data-induced selling. ASX 200 was positive with the index led by outperformance in tech although gains are limited amid another batch of earnings releases and continued weakness in the mining industry. Nikkei 225 outperformed as the focus centred on comments from BoJ Governor nominee Ueda at the lower house confirmation hearing in which he noted that current monetary policy is appropriate and that Japan still needs more time for inflation to sustainably hit the 2% target. Hang Seng and Shanghai Comp. were lower after a substantial liquidity drain by the PBoC and as the US looks to include Chinese companies in a fresh round of Russian sanctions, while Hong Kong underperformed amid heavy losses in tech owing to weaker earnings from NetEase. Top Asian News BoJ Governor nominee Ueda said current monetary policy is appropriate and that Japan still needs more time for inflation to sustainably hit the 2% target, while he added it is appropriate to continue monetary easing from now on. Ueda stated that if trend inflation improves significantly, the BoJ needs to move toward monetary policy normalisation but if it does not improve, the BoJ must consider ways to maintain YCC while being mindful of market distortions. He also stated that the BoJ won't conduct bond-selling operations and if it were to normalise policy, it would likely do so by raising interest paid to reserves parked with the central bank. Furthermore, he said must think about what to do with ETF holdings if the BoJ were to exit easy policy but now is not the time to do so and said the BoJ will stop massive bond buying if the 2% target is met. BoJ Deputy Governor nominee Uchida said uncertainty regarding Japan's economy is very high and BoJ must support Japan's economy by maintaining ultra-easy policy, while he added it is wrong to tweak monetary policy just to address side effects and the right approach is to come up with ways to mitigate side-effects and effectively maintain current policy. BoJ Deputy Governor nominee Himino said it is important to conduct economic policy flexibly and that current monetary policy is appropriate, while he added that they must aim for structural rises in wages. Furthermore, Himino said uncertainty over the global economy is very large and that they need to continue monetary easing for now. European bourses are contained/slightly firmer, Euro Stoxx 50 +0.1%, with fresh drivers limited as the focus is on geopolitics and upcoming US data. Sectors are predominantly in the green, with Construction names bolstered post-Saint Gobain while Basic Resources lag slightly given recent commodity action. Stateside, futures are softer but with the ES still above 4k, the NQ -0.7% is the laggard following some recent pressure in the fixed income complex. Top European News Former UK PM Johnson has refused to support PM Sunak's Brexit deal, which poses a major blow to Downing Street's hopes of avoiding a Eurosceptic Conservative rebellion, according to The Telegraph. ECB's Nagel says the latest data shows core inflation is still too high, stopping tightening soon would be a cardinal sin. Cannot exclude more and significant hikes beyond March. Cannot rule out that headline inflation has plateaued, too speculative to say. FX The DXY remains firmer on the session though the upside has peaked at a 104.74 session high with Thursday's high at 104.78 just above. Action which comes to the modest detriment of peers, with the JPY lagging as nominee Ueda said the BoJ's current policy is appropriate, with USD/JPY above 135.00 from a 134.07 base. In close proximity to the JPY are the antipodeans, with the AUD affected by Yuan action and has slipped below 0.68 vs USD while the NZD remains just above 0.62, aided by RBNZ commentary. EUR and GBP are the relative outperformers with catalysts light thus far and the EUR unreactive to German data or ECB's Nagel while Sterling awaits BoE's dove Tenreyro late-doors; holding around/above 1.06 and 1.20 respectively. PBoC set USD/CNY mid-point at 6.8942 vs exp. 6.8948 (prev. 6.9028) Fixed Income Core benchmarks are little changed on the session, having seemingly faded after being unable to test Monday's peak or Friday's high, with some pre-PCE action perhaps factoring. USTs are in-fitting directionally but are modestly negative on the session with yields elevated across the curve ahead of a busy afternoon agenda with the potential for month-end demand later also worth bearing in mind. Specifically, Bunds, Gilts and USTs have peaked at 135.20, 102.67 and 111.19 respectively. Commodities WTI and Brent are firmer on the session with the April contracts residing around/just above Thursday’s peaks of USD 75.99/bbl and USD 82.77/bbl respectively. Both TTF and Henry Hub gas contracts are firmer thus far, following a settlement in excess of 6% for Henry Hub on Thursday. Spot gold is essentially unchanged on the session as while the USD remains firmer it is yet to advance significantly from early European morning levels; circa. USD 10/oz shy of Thursday’s USD 1833/oz peak which itself is just below the 10-DMA of USD 1836/oz. Geopolitics Ukrainian President Zelensky said the military situation in the south is quite dangerous in some places and is very difficult in the east, according to Reuters. White House said the US will announce sanctions against Russian individuals and entities on Friday which will affect the banking, defence and tech sectors, while National Security Adviser Sullivan said G7 sanctions being announced on Friday will include countries that are trying to backfill products being denied to Russia.. Subsequently, US is to increase tariffs on 100 Russian metals, minerals and chemical products worth circa. USD 2.8bln; announces USD 2bn in security aid to Ukraine; announces export control measures against 90 Cos that support Russia's defence sector.. China's Foreign Ministry released a paper regarding China's position on the political solution to the Ukraine crisis which noted respect for the sovereignty of all countries and that regional security cannot be guaranteed by strengthening or expanding military blocs, while it also called for a cease-fire (which would see Russian troops remaining in in Ukraine territory) to prevent Ukraine crisis from further aggravating or getting out of control. Furthermore, it stated that dialogue and negotiation are the only viable ways to resolve the crisis and that nuclear weapons should not be used in the Ukraine war. The proposal was quickly rebuffed by US National Security Advisor Jake Sullivan EU delegation head in China said China should fulfil its responsibility to defend the UN Charter in the face of Russian aggression and that China's position paper on Ukraine is not a peace proposal, while Ukraine's Charge D'affaires said that they have a peace plan which they hope China supports and would like to see China do more to end the war. French Finance Minister Le Maire said the G20 must condemn Russia's aggression against Ukraine and must condemn Russia at the finance level, while he added Europe is thinking and working on new sanctions on Russia. US Event Calendar 08:30: Jan. Personal Income, est. 1.0%, prior 0.2% Personal Spending, est. 1.4%, prior -0.2% Real Personal Spending, est. 1.1%, prior -0.3% PCE Deflator MoM, est. 0.5%, prior 0.1% PCE Deflator YoY, est. 5.0%, prior 5.0% PCE Core Deflator MoM, est. 0.4%, prior 0.3% PCE Core Deflator YoY, est. 4.3%, prior 4.4% 10:00: Jan. New Home Sales MoM, est. 0.7%, prior 2.3% Jan. New Home Sales, est. 620,000, prior 616,000 10:00: Feb. U. of Mich. Sentiment, est. 66.4, prior 66.4 Feb. U. of Mich. Current Conditions, est. 72.7, prior 72.6 Feb. U. of Mich. Expectations, est. 62.5, prior 62.3 Feb. U. of Mich. 1 Yr Inflation, est. 4.2%, prior 4.2% Feb. U. of Mich. 5-10 Yr Inflation, est. 2.9%, prior 2.9% 11:00: Feb. Kansas City Fed Services Activ, prior -11 Fed speakers 10:15: Fed’s Jefferson, Mester discuss paper on managing disinflation 10:15: Fed’s Mester Speaks on Panel at New York Conference 11:30: Fed’s Bullard Discusses Inflation 13:30: Fed’s Collins gives recorded remarks at US Monetary Policy For 13:30: Fed’s Waller discusses inflation DB's Jim Reid concludes the overnight wrap It’s a sobering double anniversary today as it marks 1 year to the day that Russia invaded Ukraine and 3 years to the day that we saw the first big covid related sell-off after Italian cases spiked over the prior weekend. The world has been forever changed by those events with the full implications likely to reverberate for many years to come. Indeed the aftershocks are still being felt every day in markets (good and bad). This has continued this week, with intraday volatility remaining high. Risk assets whipsawed yesterday, with the S&P 500 up nearly +1.0% in early trading before selling off -1.5% in the late US morning following further upward revisions to inflation data in the US and Europe. However that marked the high in yields for the day and a fixed income rally back lifted tech stocks, and in the end the S&P broke a 4-day losing streak to close up +0.53% with the NASDAQ at +0.72% ahead of today’s important PCE print. There was some speculation that a portion of the post US midday rally was due to delta hedging effects as the S&P 500 traded through the 4000 level, with 0DTE (zero days to expiry) options being partially blamed. There is increasingly higher trading volumes of options on their expiry days than in the past. These options may have been listed at any point but trading activity has increased in options that are set to expire on the day recently. The uptick in interest of these contracts seems to be able to move markets considerably in both directions. The rally also came as the terminal fed funds rate fell -2.0bps off its cycle highs to finish at 5.347 and US yields continued to fall lower after trading above 3.97% on an intraday basis for the first time since November. They then reversed course to end the day -3.9bps lower at 3.877%. And it was a similar story in Europe, with yields on 10yr bunds (-4.2bps), OATs (-4.5bps) and BTPs (-7.8bps) all moving lower. Back to equities and Nvidia (+14.02%) was the strongest performer in the entire S&P 500 following their revenue forecast the previous day that beat estimates. On the back of Nvidia’s results, Semiconductors (+5.13%) were the best performing S&P industry followed by cyclicals such as Transports (+1.46%) and Energy (+1.27%). In the meantime, European equities managed to post a small gain for the day, with the STOXX 600 up +0.06%. In terms of the various data releases yesterday, the first was in the Euro Area, where the core inflation print for January was revised up to +5.3% (vs. +5.2% previously). That’s a new record since the Euro Area’s formation back in 1999, and offers further support for the ECB’s hawks as they look to take rates higher. Indeed, it also leans into our economists’ new ECB call from earlier in the week (link here), where they now see the terminal deposit rate going up to 3.75% at the June meeting. Just as European inflation was being revised higher, there were also positive upward revisions to the Q4 numbers from the US. For instance, the PCE inflation measure targeted by the Fed rose by an annualised +3.7% in Q4, up from +3.2% previously. So just as with the CPI revisions, this is confirming that the inflation slowdown in Q4 was much smaller than previously thought. Likewise with the core PCE print, the Q4 number was revised up to an annualised +4.3% (vs. +3.9% before). The more important release on this front is today’s US core PCE deflator with DB and consensus at +0.5% m/m compared to a +0.3% reading last month. The accompanying personal income data sees a very a strong +1.0% m/m consensus expectation, while our economists are expecting growth of +0.6% m/m vs. +0.2% previously. DB’s economists expect a +1.3% monthly increase in consumption compared to a 1.4% consensus estimate and -0.2% reading last month. Also yesterday we received the latest US initial jobless claims data with the week ending February 18 coming in at 192k (vs. 200k expected), while continuing claims was at 1654k (vs. 1700k expected). The rolling 3-month level of continuing claims is now back to rather benign levels, which puts further pressure on the Fed as the labour market continues to look robust through various lenses. Gilts were a bit of an underperformer yesterday, with the 10yr yield ‘only’ down -1.3bps on the day after spending nearly the entire session in positive territory. That was after comments from the BoE’s Mann, one of the biggest hawks on the MPC, who said “I believe that more tightening is needed, and caution that a pivot is not imminent”. In addition, she said that “I don’t think we are in a restrictive stance particularly”. That led investors to almost fully price in a 25bp move at the next meeting in March, which would take the Bank Rate up to 4.25% if realised. Asian equity markets are mostly struggling this morning even with the rally back in the US. As I type, the Hang Seng (-1.41%) is the biggest underperformer, dragged lower by declines in Chinese listed tech stocks while the CSI (-1.01%), the Shanghai Composite (-0.70%) and the KOSPI (-0.55%) are also edging lower. Elsewhere, the Nikkei (+1.10%) is bucking the regional negative trend after the incoming Bank of Japan (BOJ) head Kazuo Ueda, in his statement to lawmakers, lent his support for the current monetary policy stance while indicating that inflation is likely to rise gradually. Outside of Asia, US stock futures are indicating a slightly negative bias with those on the S&P 500 (-0.11%) and NASDAQ 100 (-0.24%) edging lower. Meanwhile, yields on the 10yr USTs (-1.16bps) are slightly lower, trading at 3.87%. Coming back to Japan, data this morning showed that the core consumer inflation excluding food hit a 41-year high of +4.2% y/y in Japan (v/s +4.3% expected), rising from a +4.0% annual gain seen in December. It was the 9th consecutive month that core consumer inflation stayed above the BOJ’s 2% target. Headline came in as expected at 4.3%. So no surprises and an on message Kazuo Ueda probably reduces the near-term risk of an imminent surprise BoJ YCC move. In other news yesterday, Bloomberg reported that the search for the Fed’s next Vice Chair was narrowing as the Biden administration looks to replace Lael Brainard, who’s now director of the National Economic Council. According to Bloomberg, the “top tier” candidates were Harvard professor Karen Dynan and Northwestern professor Janice Eberly, with an announcement “possible in the coming weeks.” Both have previous experience in government too, with each having served as Assistant Secretary of the Treasury for Economic Policy under President Obama. However, the article also mentioned that others were in “serious contention”, including the new Chicago Fed President, Austan Goolsbee, who previously served as Chair of the Council of Economic Advisers under President Obama. On that theme of appointments, it was separately announced that the United States would be nominating Ajay Banga to be the next President of the World Bank. Banga previously served as CEO of Mastercard for a decade. The US has usually chosen the World Bank President and is the largest shareholder of the World Bank, but in practice they require support from other countries, so it could be some months before we officially know the next president. To the day ahead now, and data releases from the US include January numbers on personal income, personal spending for January, the core PCE deflator and new home sales. We’ll also get the University of Michigan’s final consumer sentiment index for February. Otherwise from central banks, we’ll hear from the Fed’s Jefferson, Mester, Bullard, Collins and Waller, along with the BoE’s Tenreyro. Tyler Durden Fri, 02/24/2023 - 08:04.....»»

Category: blogSource: zerohedgeFeb 24th, 2023

5G, Fiber Likely to Help 3 Wireless Stocks Tide Over the Storm

The accelerated pace of 5G deployment should help the Zacks Wireless National industry thrive despite chip shortages and raw material price volatility. TMUS, T and CMBM are well poised to make the most of the current scenario. The Zacks Wireless National industry appears to be mired in a challenging macroeconomic environment and uncertain business conditions despite a gradual revival in post-pandemic market conditions. In addition, high capital expenditures for infrastructure upgrades, margin erosion, high inflationary pressures and supply-chain disruptions owing to chip shortage and tense geopolitical conditions have dented the industry’s profitability.Nevertheless, T-Mobile US Inc. TMUS, AT&T Inc. T and Cambium Networks Corporation CMBM are likely to benefit in the long run from higher demand for scalable infrastructure for seamless connectivity with a wide proliferation of IoT and a faster pace of 5G rollout.Industry DescriptionThe Zacks Wireless National industry primarily comprises firms that provide a comprehensive range of communication services and business solutions. These include wireless, wireline, local exchange, long-distance calls, data/broadband and Internet, video, managed networking, messaging, wholesale and cloud-based services to retail consumers. The firms within the industry also offer IP-based voice and data services, targeted advertising, television, streaming content, cable networks and publishing operations, multiprotocol label switching networking, fiber optic long-haul networks, and hosting and communications systems to businesses and government agencies. In addition, the firms provide edge computing services that allow businesses to route application-specific traffic to where it is required and is most effective — whether in the cloud, the network, or on their premises.What's Shaping the Future of the Wireless National Industry?Demand Supply Imbalance: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Unless the high investments generate healthy ROI in the long run, it is likely to weigh on the bottom line. In addition, the industry is continuously facing a shortage of chips, which are the building blocks for various equipment used by telecom carriers. Uncertainty regarding chip shortage and supply-chain disruptions leading to a dearth of essential fiber materials, shipping delays and shortages of other raw materials are likely to affect the expansion and rollout of new broadband networks. Extended lead times for basic components are also likely to adversely impact the delivery schedule and escalate production costs. Moreover, high raw material prices due to the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the operation schedule of various firms. Although various steps have been taken to address the global shortage of semiconductor chips and devise ways to increase domestic production, the demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices.Fast-Tracked 5G & Fiber Optic Rollout: Most industry participants are deploying the latest 4G LTE Advanced technologies to deliver higher peak data speeds and capacity, driven by customer-focused planning, disciplined engineering and investments for infrastructure upgrades. The companies are also expanding their fiber optic networks to support 4G LTE and 5G wireless standards as well as wireline connections. The fiber-optic cable network is vital for backhaul and the last mile local loop, which are required by wireless service providers for 5G deployment. Fiber networks are also essential for the growing deployment of small cells that bring the network closer to the user and supplement macro networks to provide extensive coverage. Further, leading firms within the industry have been deploying the C-Band spectrum to gain additional coverage. These mid-band airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in rural and urban areas compared with mmWave. As the 5G ecosystem evolves, customers are expected to experience significant enhancements in coverage and speed.Profitability Woes: Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers amid a challenging macroeconomic environment are eroding profits. A steady decline in linear TV subscribers and legacy services due to a challenging macroeconomic environment and high inflation adds to the margin woes. Consequently, the firms within the industry are increasingly seeking diversification from legacy telecom services to more business, enterprise and wholesale opportunities. The companies are making significant investments to upgrade their network and product portfolio, including considerable advances in software-defined, wide-area network capabilities and a new Cloud Core architecture. This has realigned the companies’ wireless network toward a software-centric model to cater to increasing business demands and customer needs through remote facilities. The industry players are focused on bringing improved operational efficiencies through network simplification and rationalization, thereby boosting end-to-end provisioning time and driving standardization.New Dimension to Business Model: The industry participants are taking a holistic approach to content delivery to help providers anticipate demand for more personalized, relevant and on-the-go experiences. Moreover, the firms are offering a variety of pathways for delivering services through a combination of network-based video transcoding, packaging, storage and compression technologies to offer new IP video formats, live TV, streaming services and home gateways to connected devices inside and outside the home. In addition, some sector firms are reinventing online advertising by pooling a unique set of assets — valuable consumer data and insights, advanced advertising capabilities and engaged, passionate fanbases. This has led to a faster turnaround of advertising campaigns, enabling marketers to access and understand the efficacy of these messages in weeks instead of months. These, in turn, are giving a new dimension to the business models.Zacks Industry Rank Indicates Bleak ProspectsThe Zacks Wireless National industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #204, which places it at the bottom 19% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few wireless national stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Lags S&P 500, Outperforms SectorThe Zacks Wireless National industry has lagged the S&P 500 composite but outperformed the broader Zacks Computer and Technology sector over the past year.The industry has lost 8.8% over this period compared with the S&P 500 and the sector’s decline of 5% and 12.6%, respectively.One Year Price PerformanceIndustry's Current ValuationOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 7.85X compared with the S&P 500’s 11.99X. It is also below the sector’s trailing 12-month EV/EBITDA of 9.5X.Over the past five years, the industry has traded as high as 12.02X and as low as 4.96X and at the median of 6.68X, as the chart below shows.Trailing 12-Month enterprise value-to-EBITDA (EV/EBITDA) Ratio3 Wireless National Stocks Likely to Move Ahead of the PackT-Mobile: Headquartered in Bellevue, WA, T-Mobile is a national wireless service provider. The company offers services under the T-Mobile, Metro by T-Mobile and Sprint brands. T-Mobile, through its subsidiaries, provides wireless services for branded postpaid and prepaid, and wholesale customers. The Zacks Consensus Estimate for current-year earnings has been revised 12.7% upward since February 2022, while that for the next year is up 5.5% over the same time frame. T-Mobile continues to deploy 5G with the mid-band 2.5 GHz spectrum from Sprint and is expected to provide 5G to 99% of the U.S. population. The combined company’s network has 14 times more capacity than on a standalone basis, which enables it to leapfrog the competition in network capability and customer experience. It has a long-term earnings growth expectation of 31.5% and delivered an earnings surprise of 67.6%, on average, in the trailing four quarters. The stock has a VGM Score of B. T-Mobile carries a Zacks Rank #2 (Buy).Price and Consensus: TMUS (Chart 3)AT&T: Based in Dallas, TX, AT&T is the second-largest wireless service provider in North America and one of the world’s leading communications service carriers. The company offers a wide range of communication and business solutions that include wireless, local exchange, long-distance, data/broadband and Internet, video, managed networking, wholesale and cloud-based services. AT&T has spun off its media assets and merged them with the complementary assets of Discovery to focus on core businesses. With a customer-centric business model, AT&T is witnessing healthy momentum in its postpaid wireless business with a lower churn rate and increased adoption of higher-tier unlimited plans. It has a long-term earnings growth expectation of 3.4% and delivered an earnings surprise of 5.5%, on average, in the trailing four quarters. The stock has a VGM Score of B. AT&T carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price and Consensus: T (Chart 4)Cambium: Headquartered in Rolling Meadows, IL, Cambium operates as a wireless solutions provider, connecting people with a flexible network infrastructure with a broad portfolio of fixed wireless broadband and Wi-Fi networking solutions. The innovative offerings enable the creation of a unified wireless fabric that spans multiple frequencies of Wi-Fi, managed centrally via the cloud. Cambium is well-positioned to benefit from proprietary software and product ramp-up, likely facilitating it to deliver a compelling combination of price, performance and spectrum efficiency. One of its major advantages is its fixed wireless broadband networking infrastructure solutions, distinguished by embedded intelligence and scalability. It delivered an earnings surprise of 118.6%, on average, in the trailing four quarters and has a long-term earnings growth expectation of 16%. Cambium carries a Zacks Rank #3.Price and Consensus: CMBM (Chart 5) 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report T-Mobile US, Inc. (TMUS): Free Stock Analysis Report AT&T Inc. (T): Free Stock Analysis Report Cambium Networks Corporation (CMBM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 22nd, 2023

Applied Materials Is In The Semiconductor Sweet Spot

Applied Materials reported better than expected results and guidance, shares steady. The company is in the sweet spot regarding trends in the semiconductor industry. Capital returns help make this stock an attractive buy for 2023. 5 stocks we like better than Applied Materials There are 2 narratives within the semiconductor industry and Applied Materials (NASDAQ:AMAT) […] Applied Materials reported better than expected results and guidance, shares steady. The company is in the sweet spot regarding trends in the semiconductor industry. Capital returns help make this stock an attractive buy for 2023. 5 stocks we like better than Applied Materials There are 2 narratives within the semiconductor industry and Applied Materials (NASDAQ:AMAT) is in the sweet spot regarding 2023. Those narratives are 1) spotty activity within the industry driven by oversupply and sluggish demand in end-markets like gaming and consumer products and 2) a shift toward next-generation technology. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. While companies like Advanced Microdevices (NASDAQ:AMD) report mixed results, their internals show demand is still strong for industrial applications and next-generation technology. That is where Applied Materials come into the picture. Applied Materials is part of the infrastructure of the semiconductor industry (NYSEARCA:SOXX) and produces the equipment and services semiconductor foundries need to make that next-gen tech. And the results show it. “While the economy and semiconductor industry are facing challenges in 2023, Applied Materials delivered strong first quarter results, and we believe Applied is well positioned to outperform our markets this year,” said Gary Dickerson, President and CEO. “Our resilience is underpinned by our strong positions with leading customers at key technology inflections, large backlog of differentiated products and growing service business.” Applied Materials Beats And Raises, Shares Steady Applied Materials had a good quarter and produced results that outpaced the group and the broader S&P 500 by growing and outperforming the Marketbeat.com consensus estimate. The company reported $6.74 billion in net revenue for a gain of 7% over last year. The revenue beat by $0.080 or about 120 bps, which is slim, but the company outperforms in a world where most companies aren’t. Coincidentally, even Applied Materials' internal results prove the dual narrative within the industry. The segment results have Semiconductor Systems sales up 13% to lead the company and is driven by strength in the foundry and related sub-segment. The Applied Global Services segment grew by a smaller 3.74%, but the consumer-oriented Display segment shrank versus last year. The salient point is that display is a small contribution to total revenue, and the company’s position and diversification are helping it outperform. The company’s margins contracted slightly versus last year, but the contraction was less than expected and aided by share repurchases. The gross margin contracted by 230 and 220 bps GAAP and adjusted, while the operating margin also contracted by a small amount, but earnings grew in both comparisons versus last year. The GAAP earnings set a company record, and the adjusted grew by 7% to outpace the analyst's estimates by a dime. The company also issued favorable guidance concerning the estimates and already spurred a round of positive analyst commentary. The Analysts Drive Applied Materials Into A Reversal The price action in Applied Materials hit bottom in 2022 and is on the verge of a full reversal. The results, outlook and subsequent analyst activity, are the reason why. The analysts, specifically, have issued at least 6 price target upgrades since the Q1 release and they have the price target moving higher after hitting bottom over the last quarter. The new consensus is about 7% above the price action, which isn’t much but it is above key resistance. The neckline of a Hear & Shoulders Pattern is at the $120 level and should be considered a trigger point for the market. A move above that level could quickly get the stock up to the $140 level and a move above there would open the door to $160.   If not, AMAT shares may remain rangebound with the top at $120 until there is some other catalyst to drive it. Should you invest $1,000 in Applied Materials right now? Before you consider Applied Materials, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Applied Materials wasn't on the list. While Applied Materials currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by Thomas Hughes, MarketBeat.....»»

Category: blogSource: valuewalkFeb 21st, 2023

2 Auto Replacement Parts Stocks Still Worth a Watch in a Slow-Moving Industry

The Zacks Industry Rank for the Auto Replacement Parts industry paints a dull picture. Braving the industry headwinds are two stocks-GPC and LKQ- that you might consider adding to your watchlist. A shift toward electric and self-driving vehicles has made it necessary for the Zacks Automotive- Replacement Parts industry participants to reorient their business model. Companies should develop a detailed roadmap to make the most out of the opportunities in a changing market scenario. As high operating costs play spoilsport, industry players should work on developing parts and components in a cost-effective way that helps them maintain market share. Additionally, the increasing cost of raw materials, adverse foreign exchange translations and logistical challenges are clipping margins. Despite the challenges surrounding the industry, Genuine Parts Corporation GPC and LKQ Corp LKQ are worth considering if you wish to stay invested in this space.Industry OverviewThe Zacks Automotive - Replacement Parts industry comprises companies that engage in the production, marketing and distribution of replacement components for the automotive aftermarket. The industry players offer replacement systems, components, equipment, and parts to repair as well as accessorize vehicles. A few of the important auto replacement components include engine, steering, drive axle, suspension, brakes and gearbox parts. The auto replacement market is somewhat less exposed to business downturns as consumers are more inclined to spend on replacement parts to maintain their vehicles rather than splurge on new ones. Consumers can either opt for repairing vehicles on their own or can avail professional services for the same. The industry is undergoing a radical change, with evolving customer expectations and technological innovation acting as game changers.Factors Deciding the Industry's OutlookAging Vehicles a Boon: Per IHS Markit, the current combined average age of passenger cars and light trucks has hit a record of 12.2 years. The increasing longevity of vehicles is serving as a key catalyst for auto replacement and repair companies. In a bid to ensure long-term functioning of the aging vehicle population, customers are making investments to replace faulty vehicle parts and components. This has boosted demand for auto replacement parts. Also, amid growing concerns of economic slowdown, customers are expected to opt for repairing old vehicles rather than splurging on highly priced new vehicles.Rising Operational Costs: The industry is bearing high costs for developing technologically advanced auto components amid the soaring popularity of electric vehicles, which is likely to weigh on profits further. With the technology shift in full swing, industry players must develop and upgrade their offerings to remain on par with the evolving trends in the automotive market. The new features and upgrades call for high capex and research and development expenses, which are likely to limit operating margins and cash flows.Commodity and Forex Woes: Costs of raw materials like steel and non-ferrous metals are on the rise, impacting the gross margins of auto replacement firms. Commodity inflation is not likely to abate anytime soon and will act as a major speed bump for quite some time.Further, most industry participants have a global presence, which makes them more vulnerable to forex woes. Adverse foreign currency translations are also likely to impact earnings and margins. Additionally, logistical challenges and disruptions in the supply chain systems are clouding the prospects of the industry.Zacks Industry Rank Signals Glum ProspectsThe Zacks Automotive – Replacements Parts industry is a seven-stock group within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #214, which places it in the bottom 15% of around 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since October, the industry’s earnings estimates for 2023 have moved 3% south.Despite the industry’s dim near-term outlook, we will present two stocks worth considering for your portfolio. But before that, let's take a look at the industry’s stock market performance and current valuation.Industry Outperforms Sector and S&P 500The Zacks Automotive – Replacement Parts industry has outpaced the Auto, Tires and Truck sector and the Zacks S&P 500 composite over the past year. The industry has risen 11.8% against the sector and the S&P 500’s decline of 31.5% and 7.7%, respectively.One-Year Price PerformanceIndustry's Current ValuationSince automotive companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. On the basis of trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 9.43X compared with the S&P 500’s 11.99X and the sector’s trailing-12-month EV/EBITDA of 13.74X. Over the past five years, the industry has traded as high as 15.08X, as low as 6.76X and at a median of 9.64X, as the chart below shows.EV/EBITDA Ratio (Past Five Years) 2 Stocks Worth Considering Genuine Parts: Atlanta-based Genuine Parts distributes auto and industrial replacement parts across the United States, Canada, Mexico, Australia, New Zealand, Singapore, Indonesia, France, the United Kingdom, Germany and Poland. The acquisitions of PartsPoint and Alliance Automotive Group and the possession of full ownership in Inenco have bolstered the company’s growth. The KDG acquisition has strengthened Genuine Parts’ market-leading position on the North American industrial platform. The company's dividend aristocrat status boosts investors’ confidence. Genuine Parts approved a $3.58 per share annual dividend for 2022, representing its 66th consecutive annual increase in the dividend.The Zacks Consensus Estimate for GPC’s 2022 and 2023 sales implies year-over-year growth of 16.2% and 4%, respectively. The consensus mark for 2022 and 2023 earnings signals a year-over-year improvement of 18.6% and 7%, respectively. Genuine Parts— currently carrying a Zacks Rank #2 (Buy) and having a Value Score of A — topped earnings estimates in the trailing four quarters, with the average surprise being 9.8%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price & Consensus: GPCLKQ: Headquartered in Illinois, LKQ is one of the leading providers of replacement parts, components and systems. The buyouts of Elite Electronics, Green Bean Battery, SeaWide Marine Distribution, Greenlight and Fabtech Industries have bolstered the firm’s product offerings as well as sales. LKQ’s focus on cost discipline and simplification of its operating model are likely to result in sustained margin expansion. Low leverage and high liquidity of the firm increase its financial flexibility and lower default risk. We like the company’s commitment to increasing shareholder value. In its last earnings release, LKQ hiked its dividend by 10% and boosted buyback by $1 billion, raising the aggregate authorization under the program to $3.5 billion.The Zacks Consensus Estimate for LKQ’s 2023 earnings is pegged at $4.11 per share. The estimate implies year-over-year growth of 5.3%. LKQ — currently carrying a Zacks Rank #3 (Hold) and has a Value Score of A —topped earnings estimates in the trailing four quarters, with the average surprise being 8%.Price & Consensus: LKQ Just Released: Zacks Top 10 Stocks for 2023 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for 2023? From inception in 2012 through November, the Zacks Top 10 Stocks portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%. Our Director of Research has now combed through 4,000 companies covered by the Zacks Rank and handpicked the best 10 tickers to buy and hold in 2023. Don’t miss your chance to still be among the first to get in on these just-released stocks.See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Genuine Parts Company (GPC): Free Stock Analysis Report LKQ Corporation (LKQ): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 21st, 2023

2 Buy-Ranked Stocks From the Struggling Auto Equipment Industry

The auto equipment industry continues to be stuck in the slow lane amid multiple challenges. WNC and INVZ are two outperformers poised to fend off industry challenges relatively better. Prospects of the Zacks  Automotive - Original Equipment industry look muted now amid commodity cost inflation, supply chain disruptions and economic concerns. Rising operating costs amid the changing dynamics of the auto industry are also acting as speed bumps. Most auto equipment manufacturers are likely to have a tough time balancing their revenue generation, given broader challenges and escalating expenses. The performance of the companies will largely depend on smart cost management efforts. Despite multiple odds, two industry players standing tall in an otherwise gloomy industry are Wabash National Corporation WNC and Innoviz Technologies Ltd. INVZ.About the IndustryThe Zacks Automotive - Original Equipment industry includes companies that engage in the designing, manufacture and distribution of automotive equipment components used for manufacturing vehicles. A few of the components manufactured by the participants include the drive axle, engine, gearbox parts, steering, and suspension, as well as brakes. Demand for original equipment depends directly on the sale of vehicles, which, in turn, is heavily reliant on economic growth and consumer confidence. Importantly, the rapidly globalizing world is opening up newer avenues for auto-equipment manufacturers who need to adapt to the changing dynamics through systematic research and development. From a future competitive standpoint, the industry players need to focus on technologies that offer the best value in a short span of time to the market.Key Themes Shaping the IndustryCost Pressures Playing Spoilsport: The industry players are likely to suffer from escalating prices of raw materials. Soaring costs of commodities like resin, steel, copper and aluminum have increased the manufacturing costs of the companies. Commodity cost inflation is expected to linger through 2023. Rising freight costs, logistical challenges and manufacturing inefficiencies are likely to further weigh on the gross margins of the auto equipment firms. Further, most industry participants have a global presence, which makes them more vulnerable to forex woes. Adverse foreign currency translations are also likely to impact profits. Electrification Elevating Capex Needs: Although advanced technologies and the soaring popularity of electric and connected vehicles are providing new opportunities to the industry, these are anticipated to strain the near-term financials of companies. With the technology shift in full swing, original equipment manufacturers must develop and upgrade their offerings to remain on par with the evolving trends in the automotive market. The new features, upgrades and component designs call for abundant capital, which is likely to clip near-term cash flows.Concerns of Economic Slowdown: Demand for original equipment depends directly on the sale of vehicles, which, in turn, is heavily reliant on economic growth and consumer confidence. The latest CPI and PPI data reflect that inflation is cooling off at a slower-than-expected pace. There's still a long way to go to get to the Fed's 2% inflation target. To rein in the sticky inflation, the Fed indicated that it plans to keep cranking up the borrowing rates for longer through 2023 before halting further hikes next year. Higher interest rates shoot up the cost of borrowing, escalating the chances of an economic slowdown. The cost of vehicle financing is getting expensive, making it difficult for not-so-affluent shoppers to delay these high-ticket purchases. The risk of slowing vehicle demand may adversely impact the industry participants.Zacks Industry Rank Indicates Gloomy OutlookThe Zacks Automotive – Original Equipment industry is a 60-stock group within the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #181, which places it in the bottom 28% of around 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates tepid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since October, the industry’s earnings estimates for 2023 have declined 16.4%.Despite the murky scenario, we will present a few stocks that you may invest in, given their growth endeavors. But before that, it’s worth taking a look at the industry’s performance and current valuation.Industry Tops Sector But Lags S&P 500Over the past year, the Zacks Original Equipment industry has outperformed the broader Auto sector but lagged the Zacks S&P 500 composite. The industry has lost 12.3% compared with the sector and S&P 500’s decline of 31.2% and 7.7%, respectively.One-Year Price PerformanceIndustry's Current ValuationSince automotive companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio.On the basis of the trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 19.63X compared with the S&P 500’s 12X and the sector’s 13.92X.Over the past five years, the industry has traded as high as 21.88X, as low as 3.85X and at a median of 7.69X, as the chart below shows.EV/EBITDA Ratio (Past Five Years)2 Stocks to Bet onWabash: Wabash is one of the leading manufacturers of semi-trailers in North America. The company's customer-centric strategy, enhanced distribution capabilities and e-commerce ramp-up seem to be bearing fruit. A solid backlog supported by a long-term customer agreement, including its partnership with J.B. Hunt, augurs well. The company exited 2022 with a record backlog of $3.4 billion, providing significant visibility into 2024 as well. The company generated record sales and profits in 2022. Encouragingly, it expects 2023 revenues to rise 16% year over year and earnings to grow 27%. Balance sheet strength with strong liquidity and no near-term debt maturities are the other positives.Wabash currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2023 top and bottom line implies year-over-year growth of 24% and 13%, respectively. For the next year, the consensus mark for revenues and EPS indicates an increase of 1.3% and 11.4%, respectively, from the projected 2022 levels. Over the past year, shares of WNC have increased 66.4% against the industry’s decline of 12.3%.You can see the complete list of today’s Zacks #1 Rank stocks here. Price & Consensus: WNCInnoviz:Innoviz provides LiDAR technology solutions. The company is riding on its solid product offerings, including InnovizOne, InnovizTwo, Innoviz360 and Perception Software. Frequent business wins for its LIDAR sensors are fueling the stock. In January, Innoviz clinched contracts with Swiss-based LOXO and France-based Exwayz. The contract with LOXO is for LIDAR sensors to enable driverless capabilities in a fleet of all-electric delivery vehicles. Exwayz intends to integrate the InnovizOne LiDAR system into a variety of non-automotive applications. The company’s forward-looking order book of $6.9 billion offers enough growth visibility.Innoviz currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 top and bottom line implies year-over-year growth of 42% and 22%, respectively. For the next year, the consensus mark for revenues indicates a whopping surge of 355% from the projected 2022 levels. Over the past year, shares of INVZ have increased 8.3%, in contrast to the industry’s decline of 12.3%.Price & Consensus: INVZ This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.>>Yes, I Want to Help Protect My Portfolio During the RecessionWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Wabash National Corporation (WNC): Free Stock Analysis Report Innoviz Technologies Ltd. (INVZ): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 21st, 2023

3 Wireless Non-US Stocks Set to Ride on 5G, IoT Proliferation

The accelerated pace of 5G deployment should help the Zacks Wireless Non-US industry thrive despite short-term headwinds. AMX, ORAN and PHI are well-positioned to make the most of the demand for seamless connectivity solutions. The Zacks Wireless Non-US industry appears poised to benefit from a gradual revival in post-pandemic market conditions and a faster pace of 5G deployment despite supply chain disruptions and chip shortages. However, large-scale investments for infrastructure upgrades to support the transition to 5G, high inflationary pressures and a challenging macroeconomic environment have eroded the sector's profitability.Nevertheless, América Móvil, S.A.B. de C.V. AMX, Orange S.A. ORAN and PLDT Inc. PHI might benefit in the long run from significant long-term growth opportunities and rising demand for scalable infrastructure for seamless connectivity with the wide proliferation of IoT.Industry DescriptionThe Zacks Wireless Non-US industry comprises mobile telecommunications and broadband service providers based on foreign shores. These companies primarily offer voice services, including local, domestic and international calls, roaming services and prepaid and postpaid. The firms provide value-added services, such as the IoT, comprising logistics and fleet management and automotive and health solutions. They also offer content streaming, interactive applications, wireless security services and mobile payment solutions. Some industry players sell mobile handsets and accessories through dealer networks and offer co-billing services to other telecommunications service providers. The firms provide IT solutions, cable and satellite pay television subscriptions, as well as data services and hosting services to residential and corporate clients.What's Shaping the Future of Wireless Non-US IndustryHolistic Growth Model: In addition to delivering mission-critical communication services, the companies are taking steps to accelerate subscriber additions and improve churn management. They aim to offer an exceptional wireless experience to consumers and business customers by providing superior network connectivity. The wireless carriers are expanding their footprint while adopting unlimited plans to enhance average revenue per user. They are progressing on strategic objectives, growing their customer base by increasing handset connections and customer loyalty to boost revenues and profitability. Furthermore, the industry participants are taking a holistic approach to content delivery. They are offering various pathways for delivering services through a combination of network-based video transcoding and compression technologies to provide IP video formats, live TV and streaming services.Focus on Network Upgrade: With the exponential growth of mobile broadband traffic and home Internet solutions owing to the increasing work-from-home trend, user demand for coverage speed and quality has increased manifold. This has resulted in a massive demand for advanced networking architecture, forcing service providers to upgrade their networks to support the surge in home data traffic. Further, there is a continuous need for network tuning and optimization to maintain superior performance standards, creating demand for state-of-the-art wireless products and services. Moreover, telecom services show a weak correlation to macroeconomic factors as these are considered necessities. This, in turn, has led the carriers to focus more on network upgrades to cater to evolving customer needs. The convergence of network technologies requires considerable investments from traditional carriers (telecom and cable) and cloud service providers. Although these investments will eventually help minimize service delivery costs to support broadband competition and wireless densification, short-term profitability has largely been compromised.Profitability Woes Persist: Uncertainty regarding the chip shortage and supply-chain disruptions extending beyond semiconductors have crippled the manufacturing operations of most firms, leading to curtailed production schedules. This has led to a demand-supply imbalance, as the industry faces a dearth of essential fiber materials, shipping delays and shortages of containers and other raw materials, affecting the expansion and rollout of new broadband networks. Extended lead times for basic components have negatively impacted the delivery schedules and escalated costs. Moreover, raw material prices have risen significantly owing to economic uncertainty driven by the Russia-Ukraine war, soft market conditions in China and coronavirus-led adversities, affecting the short-term profitability of most firms. Wireless operators have been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition could limit their ability to attract and retain customers and affect operating and financial results.Zacks Industry Rank Indicates Bullish TrendsThe Zacks Wireless Non-US industry, which has 13 constituent companies, is housed within the broader Zacks Computer and Technology sector. It currently has a Zacks Industry Rank #21, which places it in the top 8% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few non-US wireless stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Outperforms Sector, Lags S&P 500The Zacks Wireless Non-US industry has outperformed the broader Zacks Computer and Technology sector but lagged the S&P 500 composite in the past year.The industry has lost 13.5% over this period compared with the S&P 500’s and sector’s decline of 9.2% and 17.8%, respectively.One-Year Price PerformanceIndustry's Current ValuationThe Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing wireless stocks. The industry currently has a trailing 12-month EV/EBITDA of 5.12X compared with the S&P 500’s 12.17X. It is also trading below the sector’s trailing 12-month EV/EBITDA of 9.72X.Over the past five years, the industry has traded as high as 22.54X, as low as 1.43X, with a median of 6.72X, as the chart below shows.Enterprise Value-to-EBITDA Ratio (Past Five Years)3 Non-US Wireless Stocks to Keep a Close Eye onAmérica Móvil: Based in Mexico City, America Movil is the leading provider of integrated telecommunications services in Latin America. It offers enhanced communications solutions in 25 countries in Latin America, the United States and Central and Eastern Europe. The company has launched a 5G network in Austria. America Movil has also launched 4.5G networks in Brazil, Mexico and Dominican Republic that can deliver speeds up to 10 times faster than 4G to allow subscribers to experience voice and video in high definition. The Zacks Consensus Estimate for its current-year earnings has been revised 7.8% upward since July 2022. The stock has gained 8.8% in the past year and has a long-term earnings growth expectation of 8.5%. It has a VGM Score of B. America Movil currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price and Consensus: AMXOrange: Headquartered in Paris, Orange is one of the world’s leading telecommunications carriers with a presence in 26 countries. The company is also a leading provider of global IT and telecommunication services to multinational firms under the brand Orange Business Services. It has partnered with Move Capital to invest in the ‘Move Capital I’ venture capital fund that will empower Orange Business Services to become an integral stakeholder with a recognized panel of European technology companies. The combined synergies created from this partnership will allow European tech companies to reinforce their competitiveness and fortify Orange’s leadership in the region. The stock has a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has been revised 6.2% upward since October 2022. It carries a Zacks Rank #2.Price and Consensus: ORANPLDT Inc.: Headquartered in Makati City, the Philippines, PLDT is the leading telecommunications provider in the Southeast Asian country. It has a strategic partnership with Rocket Internet SE, a European Internet company, to develop online and mobile payment solutions. PLDT operates the country's most extensive international submarine cable network and has activated the US-Transpacific Jupiter cable system to strengthen its extensive fiber network. The company is set to expand further with the completion of two more major international cable systems, namely Asia Direct Cable and the APRICOT cable system, set to be completed in the next two years. The consensus estimate for its current-year earnings has been revised 5.1% upward since September 2022. The stock has a long-term earnings growth expectation of 8.8%. PLDT sports a Zacks Rank #1.Price and Consensus: PHI Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report America Movil, S.A.B. de C.V. (AMX): Free Stock Analysis Report Orange (ORAN): Free Stock Analysis Report PLDT Inc. (PHI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 16th, 2023

5 Stocks to Watch From the Prospering Securities and Exchanges Industry

Product innovation, increased market volatility and a strategic economic market model are expected to aid Securities and Exchanges stocks like CME, CBOE, NDAQ, MKTX and COIN. However, compliance with regulations remains a challenge. A compelling and diversified product portfolio helps drive revenues of Zacks Securities and Exchanges industry players. An increase in trading volumes, product expansion through prudent acquisitions and the increased adoption of a greater number of crypto assets are expected to benefit CME Group CME, Cboe Global Markets CBOE, Nasdaq NDAQ, MarketAxess Holdings MKTX and Coinbase Global Inc. COIN. Increasing focus on accelerating their non-trading revenue base, which includes market technology, listing and information revenues, infuses dynamism in the business profile of the industry players. However, alterations in investment patterns, and priorities and compliance with regulations pose challenges.About the IndustryThe Zacks Securities and Exchanges industry comprises companies that operate electronic marketplaces, which facilitate the buying and selling of stocks, stock options, and bonds or commodity contracts. They facilitate trading across a diverse range of products in multiple asset classes and geographies. They generate revenues from fees received from the listed companies on their exchanges. They also provide a range of data and listing services to global financial and commodity markets, including pricing and reference data, exchange data, analytics, feeds, index services, investments, risk management, desktops, and connectivity solutions, as well as corporate and ETF listing services, on the cash equity exchanges of the industry players. The industry is witnessing increased adoption of crypto assets. Yet, industry players have to comply with a number of regulations.3 Trends Shaping the Future of the Securities and Exchanges IndustryVolatility Fueling Trading Volume: The players in the industry are largely dependent on product and service portfolios for revenues. Major services include trade execution, clearing, settlement services for securities and commodity contracts, listing services plus trading, and clearing systems services. Other revenue sources include data products and financial indexes along with information and public company services. The maximization of transaction and clearing fees and the lowering of transaction-based expenses drive profits. Sustainable trading volume growth, driven by trading volatility, fuels transaction and clearing fees (a major component of the top line of industry players). Increasing focus on accelerating the non-trading revenue base, which includes market technology, listing and information revenues, infuses dynamism in the business profiles of the industry participants.Mergers and acquisitions:  The industry continues to witness mergers and acquisitions, with companies evaluating opportunities to supplement their internal growth story by forging strategic alliances or acquiring businesses or technologies. These enable them to penetrate untapped markets, offer new products or services and enhance the value of their platforms and existing trade-related operations. Additionally, strategic buyouts lead to a diversified product portfolio (the primary growth catalyst) and help industry participants maintain their domestic market share, as well as fortify their global footprint.Continuous Investment in Technology: Industry players continue to invest heavily in technological development. Focus on building a strategic economic market model via technological advancements and upgrades of products and services will help all exchanges to stay afloat amid changing industry dynamics. In recent years, the players have launched a number of innovative technologies that rely on machine learning, automation and algorithms designed to improve trading decisions, while reducing trading inefficiencies, cyber threats and human errors, thus accelerating trading frequency. Players are also investing in automating non-trading operations that play an important part in revenue generation for the companies. Zacks Industry Rank Indicates Bright ProspectsThe Zacks Securities and Exchanges industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #86, which places it in the top 34% of the 253 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, reflects encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have been losing confidence in this group’s earnings growth potential.Before we present a few securities and exchanges stocks worth considering for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.Industry Underperforms Sector and S&P 500The Zacks Securities and Exchanges industry has underperformed the broader Zacks Finance sector as well as the Zacks S&P 500 composite over the past year. The industry has declined 25.2% compared with the broader sector and the Zacks S&P 500 composite’s decline of 8.2% and 9%, respectively, in the said time frame.One-Year Price PerformanceIndustry's Current ValuationOn the basis of trailing 12-month price-to-book (P/B), which is commonly used for valuing finance stocks, the industry is currently trading at 2.73X compared with the S&P 500’s 5.1X and the sector’s 3.64X.Over the last five years, the industry has traded as high as 4.77X, as low as 2.38X and at the median of 3.24X, as the chart below shows.Price-to-Book (P/B) Ratio (TTM)Price-to-Book (P/B) Ratio (TTM) 5 Securities and Exchanges Stocks to Keep an Eye onWe are presenting one Zacks Rank #2 (Buy) company and four Zacks Rank #3 (Hold) stocks from the Securities and Exchanges industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. MarketAxess Holdings: New York-based MarketAxess Holdings is a leading multi-dealer trading platform that offers institutional investors access to global liquidity. Increasing commissions received on trading volumes, continuous product upgrades and introduction leading to higher bond trading volumes, and strategic alliances and buyouts or technologies that enable it to enter new markets and provide new products or services bode well for this Zacks Rank #2 company.The Zacks Consensus Estimate for the company’s 2023 and 2024 EPS indicates a year-over-year rise of 16.8% and 15.6%, respectively. It came up with a four-quarter average earnings surprise of 3.79%. The consensus estimate for the company’s 2022 and 2023 EPS has moved 2.2% and 1.8% north in the past 30 days.Price and Consensus: MKTXCboe Global Markets: Based in Chicago, IL, Cboe Global, currently sporting Zacks Rank #3, is one of the largest stock exchange operators by volume in the United States and globally for ETP trading. The company is poised for growth, given an expanding product line across asset classes, broadening geographic reach, a diversifying business mix with recurring revenues, and leveraging technology.The Zacks Consensus Estimate for the company’s 2023 and 2024 EPS indicates year-over-year increases of 1.4% and 2.7%, respectively. It came up with a four-quarter average surprise of 2.57%. It has a Growth Score of A.Price and Consensus: CBOE Nasdaq: Headquartered in New York, Nasdaq is a leading provider of trading, clearing, marketplace technology, regulatory, securities listing, information, and public and private company services. Its strategy of accelerating its non-trading revenue base, successfully maximizing opportunities as a technology and analytics provider, and growing core marketplace businesses, as well as intensifying its focus on Market Technology and Information Services businesses, should continue to drive growth. NDAQ currently carries a Zacks Rank #3.The Zacks Consensus Estimate for the company’s 2023 EPS indicates a rise of 1.5% from the year-ago reported figure, while that for 2024 suggests a 7.8% year-over-year increase. It came up with a four-quarter average earnings surprise of 3.38%. The expected long-term earnings growth rate is pegged at 4.6%.Price and Consensus: NDAQ    Coinbase Global: Wilmington, DE-based Coinbase, carrying a Zacks Rank #3, provides financial infrastructure and technology for the cryptoeconomy in the United States and internationally. Coinbase Global is likely to gain from increased adoption of a greater number of crypto assets, higher volatility and a rise in interest across the entire crypto economy. An increase in both the average crypto asset prices and total crypto spot market volumes will drive the overall trading volume of COIN.The Zacks Consensus Estimate for the company’s 2023 EPS indicates a rise of 51.7% from the year-ago reported figure.Price and Consensus: COIN CME Group: Headquartered in Chicago, IL, CME Group boasts the largest futures exchange in the world in terms of trading volume as well as notional value traded. Efforts to expand futures products in emerging markets, non-transaction-related opportunities, OTC offerings, cross-sell through alliances, strong global presence and solid liquidity should drive this Zacks Rank #3 company’s growth.The Zacks Consensus Estimate for the company’s 2023 and 2024 EPS indicates year-over-year increases of 5.1% and 3.4%, respectively. It came up with a four-quarter average earnings surprise of 2.94%. The expected long-term earnings growth rate is pegged at 6.1%. The consensus estimate for the company’s 2023 and 2024 earnings has moved 1.7% and 1.9% north, respectively, in the past seven days.Price and Consensus: CME  Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in?  If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.>>Send me my free report on the top 5 EV stocksWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CME Group Inc. (CME): Free Stock Analysis Report Nasdaq, Inc. (NDAQ): Free Stock Analysis Report Cboe Global Markets, Inc. (CBOE): Free Stock Analysis Report MarketAxess Holdings Inc. (MKTX): Free Stock Analysis Report Coinbase Global, Inc. (COIN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 15th, 2023

Kia and Hyundai are rolling out software upgrades for models targeted by a viral challenge that taught people how to steal them

Kia and Hyundai are providing free anti-theft software upgrades after a social media challenge challenge taught people how to easily steal the cars. The 2021 Hyundai Elantra is one of the models eligible for the free anti-theft software update in June.Hyundai Kia and Hyundai are rolling out a free anti-theft software upgrade for models targeted by thieves. A group called the "Kia Boyz" started a viral TikTok challenge showing how to start the cars using a USB cord. The trend led to State Farm and Progressive no longer insuring some models in certain cities. Kia and Hyundai are starting to roll out free anti-theft software upgrades for car models that have been targeted by a viral social media challenge that teaches people how to steal them.Some Kia models from 2011 to 2021 and some Hyundai models from 2016 to 2021 use traditional keys, which means they don't have electronic immobilizers in them to prevent the cars from starting if there's no key present.A group of teens from Milwaukee, Wisconsin called the "Kia Boyz" started a TikTok challenge teaching people how to start the cars using just a screwdriver and a USB charging cable, the St. Louis Post-Dispatch reported. Police started noticing the car-stealing trend in late 2020, Milwaukee Police Chief Jeffrey Norman told The Wall Street Journal.Eligible car owners are being notified by Kia and Hyundai about how to get the free upgrades. The upgrade takes less than an hour to install, both vehicle manufacturers said. In a press release from Hyundai, the car manufacturer said the upgrade "modifies certain vehicle control modules on Hyundai vehicles equipped with standard 'turn-key-to-start' ignition systems.""As a result, locking the doors with the key fob will set the factory alarm and activate an 'ignition kill' feature so the vehicles cannot be started when subjected to the popularized theft mode," Hyundai said.Car owners can deactivate the "ignition kill" feature by unlocking their car with the key fob. Some Kia car owners have already received a software upgrade, and other owners will be able to get the upgrade in the next few months, Kia said in a statement shared with Insider. The car manufacturer added that steering wheel locks are also available at no cost through some local law enforcement agencies."The company remains concerned about incidents of car theft targeting certain Kia models, encouraged in some cases by social media content promoting criminal conduct, and is committed to supporting law enforcement andowners in addressing these crimes," Kia said in the statement.Hyundai said in its press release that the upgrade will go out to almost 4 million vehicles beginning February 14. The 2017 to 2020 Elantra, 2015 to 2019 Sonata, and 2020 to 2021 Venue vehicles will get the upgrade first."We have prioritized the upgrade's availability for owners and lessees of our highest selling vehicles and those most targeted by thieves in order for dealers to service them first," Randy Parker, CEO of Hyundai Motor America, said in the press release. Cars that receive the software upgrade will also get a window decal "to alert would-be thieves that the vehicle is equipped with enhanced anti-theft technology," Hyundai said. Other vehicles will be eligible for the upgrade beginning in June, including different models of the Elantra, Sonata, and Santa Fe.Since 2021, thefts of Kia and Hyundai vehicles have been climbing throughout the country, according to a report from the Highway Loss Data Institute.Car thefts in Denver have risen by 160% since 2018, and most of the thefts are Kia and Hyundai cars, Denver7 reported. Claims of stolen cars were almost twice as common for Kia and Hyundai models from 2015 to 2019 compared to all other car makes, according to the HLDI report.Theft rates for some Kia and Hyundai models are so high that State Farm and Progressive temporarily stopped writing insurance policies for some of the models in some cities last month."Given that we price our policies based on the level of risk they represent, this explosive increase in thefts in many cases makes these vehicles extremely challenging for us to insure," Jeff Sibel, a spokesperson for Progressive, told CNN last month. "In response, in some geographic areas we have increased our rates and limited our sale of new insurance policies on some of these models." The insurance companies did not reply to requests for comment from Insider.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderFeb 15th, 2023

Coherent Corp. (NASDAQ:COHR) Q2 2023 Earnings Call Transcript

Coherent Corp. (NASDAQ:COHR) Q2 2023 Earnings Call Transcript February 10, 2023 Operator: Good day, and thank you for standing by. Welcome to the Coherent Corp. FY2023 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like […] Coherent Corp. (NASDAQ:COHR) Q2 2023 Earnings Call Transcript February 10, 2023 Operator: Good day, and thank you for standing by. Welcome to the Coherent Corp. FY2023 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Mary Jane Raymond, Chief Financial Officer. Please go ahead. Mary Jane Raymond: Thank you, Kevin, and good morning. I’m Mary Jane Raymond, the Chief Financial Officer here at Coherent Corp. Welcome to our earnings call today for the second quarter of fiscal year 2023. This call is being recorded on Wednesday, February 8, 2023. With me today on the call is Dr. Chuck Mattera, our Chair and Chief Executive Officer. After our prepared remarks, both Dr. Giovanni Barbarossa, our Chief Strategy Officer and the President of the Materials Segment; and Dr. Mark Sobey, the President of the Laser Segment, will join us during the Q&A to discuss the unique benefits of our strategy, our results, and the exciting prospects across several broad markets. For today’s call, the press release and the investor presentation are available in the Investor Relations section of our website, coherent.com. Today’s results include certain non-GAAP measures. Non-GAAP financials are not a substitute for, nor are they superior to financials prepared in accordance with GAAP. A detailed reconciliation of these non-GAAP measures to our GAAP results is included in today’s documents. I remind you that during this call, we’ll make certain forward-looking statements. These include, but are not limited to, statements regarding geopolitical and macroeconomic trends, expectations for our revenue, our market trends, and our expected financial performance, including our guidance. In addition, we’ll discuss our progress on integration, including our delivery of the projected synergies. All forward-looking statements are based on today’s expectations, forecasts, and assumptions. They involve risks and uncertainties that could cause actual results to differ materially from our comments today. Our comments should be viewed in the context of the risk factors detailed in our most recent Form 10-K for the fiscal year ended June 30, 2022. Coherent assumes no obligation to update the information discussed during this call, except as required by law. With that, let me turn it over to Dr. Chuck Mattera. Chuck? Chuck Mattera: Thanks, Mary Jane. Thank you all for joining us today. Coherent Corp. posted a record revenue quarter of $1.37 billion, consistent with the midpoint of our guidance and grew 70% year-over-year and 2% sequentially. Looking close up at legacy II-VI. Impressively, organic growth was 23% year-over-year and 4% sequentially, while the consolidated pro forma growth was 15% year-over-year. Regarding the composition of our sales by the four major markets: industrial accounted for 33%, communications 44%, 15% from electronics, and 9% from instrumentation. Turning to the distribution of our revenues by region. The second quarter was similar to the first quarter. North America accounted for 55%; Europe, 18%; Korea and Japan combined were 13%; China was 11%; and 3% to the rest of the world. Our non-GAAP EPS was $0.95. We continued our disciplined approach to capital allocation during the quarter. We generated $220 million in cash from operations and invested $106 million in capital equipment for $114 million in free cash flow. We also paid off $133 million of the debt. Our investments in our silicon carbide platform were nearly half of our total capital investment as we execute our multiyear road map for the electrification of transportation and renewable energy infrastructure among our commitments to sustainability. Last week, during Photonics West, we had a strong showing of our broad portfolio of new products and technology innovations that are enabling a wide range of applications across our four end markets. Our thought leaders presented at various events, workshops, and technical sessions, and we had several significant new product announcements. These included the introduction of Python, our next-generation OLED-annealing solid-state laser targeted at new Gen 8 OLED fabs. This is the culmination of four years of innovation and development that retained Coherent’s position as the annealing process of record while improving performance and significantly reducing cost per panel. We believe our innovations in this system will drive adoption into more price-sensitive displays, such as tablets, laptops, and high-end monitors. To further secure our position as an industry leader in ultrafast cutting of OLED panels, we introduced two new ultrafast lasers. We also introduced our next-generation pump laser diodes for fiber lasers with the first semiconductor chip in the industry, to our knowledge, to achieve 50 watts of output power. And we showcased our fully automated contactless laser system for texturing and marketing implantable medical devices. Turning now to our performance by market. Our revenue in electronics grew 131% year-over-year and 11% sequentially, setting another record by hitting the $200 million quarterly mark. Growth was driven primarily from sensing and the seasonal tailwinds of a new product cycle, which we described on our last call. This is the second of the seasonally high two quarters, and in the second half of the fiscal year, we will enter the seasonally low period, during which we expect to have considerably lower revenue when compared to the first half. Our customer intimacy in this market gives us optimism that the future opportunity in consumer electronics is still much broader than just VCSELs for 3D sensing. We believe that sensing will become ubiquitous in metaverse hardware and wearables and LiDAR and other emerging applications. Our strategic engagements are growing across them all. For our silicon carbide power electronics and wireless semiconductor business, we continue to invest in silicon carbide substrate and epitaxial capacity to accelerate the pace of our shipments as demand continues to exceed our ability to supply. In the electric vehicle market, EVs represented 10% of all vehicles sold globally in calendar year 2022. As EVs continue to grow, industry estimates expect the adoption of silicon carbide electronics will also grow but at twice the rate of the overall EV market. We are steadily gaining share in what we believe will be an underserved market for many years to come, perhaps even through the end of this decade. Communications revenue grew 18% year-over-year and 3% sequentially, led by both telecom and datacom, each of which achieved record revenue. Telecom growth was led by broadband initiatives, which in turn drove demand in the metro edge to access networks. We are encouraged by the opportunity that we expect to result from the U.S.’ planned $65 billion investment in broadband access from the Infrastructure Investment and Jobs Act. We expect that it will be a major catalyst for optical communications and specifically our telecom business at all levels of the value chain. As access networks grow, they drive upgrades in the metro, long-haul and submarine networks, all requiring our Coherent transceivers and ROADM integrated product solutions. Our datacom business also hit a quarterly record. Our industry-leading position in 200G and above remains strong at 51% of our datacom transceiver business, compared to 33% a year ago. Our leadership in this area stems in part from our vertical integration of our high-speed lasers, optics, and electronics in our transceiver modules. In addition to our growth of 200G, 400G datacom transceivers, we continue to see accelerated deployments of 800G transceivers, enabling open AI and machine learning applications. We are ramping our full capacity to meet the growing customer demand over the next few quarters. Our optical communications business was honored yesterday ahead of the Optical Fiber Conference in March with awards for three of our products that the 2023 Lightwave Innovation Review singled out. First, our 100G ZR QSFP28, which will enable service providers to upgrade millions of 10G Ethernet links to 100G at the optical network edge; second, our 200G indium phosphide electroabsorption-modulated laser, which is critical for next-generation data center interconnects; and third, our Wavemaker 4000 programmable optical spectrum synthesizer. These awards showcase our innovation leadership across our broad optical communications portfolio. Revenue into the industrial market was mixed. EUV grew 38% year-over-year. Also, we achieved record revenues from products related to precision manufacturing of electric vehicle batteries. In flat panel displays, one less large Excimer line beam system shipment accounted for almost all of the quarterly change in the Laser Segment revenues. We saw sequential declines in the advanced packaging and interconnect markets, such as printed circuit board via hole drilling and back-end semiconductor applications such as marking. This was offset, however, by strength in the semiconductor front end where we set another quarterly record for shipments of lasers for wafer inspection, as well as wafer annealing for logic devices. We also delivered the first full laser and optics subsystem to an industry leader for an exciting new memory application, which had previously been a non-laser-based solution. We had a record quarter for our advanced materials and metal matrix composites into the front end of the semi-cap equipment market. These novel materials allow customers to push the performance limits of their wafer fab equipment, including for immersion and EUV lithography and for wafer stages and wafer chucks. We’ve worked hard throughout the last few years to scale our capacity and our output to allow our customers to mitigate the semiconductor shortages by increasing tool capacity. So, we were delighted to be recognized by Applied Materials, the world’s leader in wafer fab equipment, with their Supplier Excellence Award for a collaboration. We also had record Excimer laser revenues for a pulse laser deposition equipment, a rapidly growing product line serving the semi-cap equipment market. Customers are leveraging this new enabling technology for diverse applications from high-temperature superconducting tape for next-generation fusion reactors to 5G filters in mobile phones. We are a market leader and a pioneer in pulse laser deposition. This technology has the promise of enabling the production of novel semiconductor materials through the engineering of atoms and photons, a great example of the synergistic power of our combinations. Our instrumentation business sustained record levels, growing 2% sequentially. While PCR-based COVID testing is tapering off, our growth in bioinstrumentation from other applications allowed this market to maintain the higher level of revenue achieved during the growth for PCR testing. We also had strong revenue for our products in advanced imaging applications for neuroscience and disease studies. These applications require ultra-short pulsed lasers, part of our portfolio where we excel. Before I turn it over to Mary Jane, I imagine that you all have now seen our other exciting news today: our move to list our stock on the New York Stock Exchange on February 23rd. NASDAQ has served us well since our IPO on October 2, 1987, and we are very appreciative of that support. With our recent growth, our continuing aspirations to be the best at what we do and our global platform, we believe that the New York Stock Exchange complements our new Coherent brand and is the right place for us to be at this time alongside many of the world’s most prestigious companies. With that, I’ll turn it over to Mary Jane. Mary Jane? Mary Jane Raymond: Thank you, Chuck. Our revenue of $1.37 billion was negatively affected by $6 million from currency compared to Q1 FY €˜23 with immaterial effects on the EPS. Our backlog was $2.9 billion at 12/31 and remains solid as customers return to more normal patterns of ordering and inventory management. Our Q2 non-GAAP gross margin was 39.8%, and the non-GAAP operating margin was 20.3%, both negatively affected by $3 million in currency or 20 basis points compared to Q1. Supply chain costs were $10 million and are not excluded to arrive at the non-GAAP results. At the segment level, the non-GAAP operating margins were 19.4% for networking and 26.2% for materials and 15.7% for lasers. GAAP operating expenses, SG&A plus R&D, were $403 million in Q2. Excluding $90 million of amortization, $29 million of stock comp, and $16 million of transaction and integration costs, non-GAAP OpEx was $268 million, or 19.6% of revenue. Our total stock comp is expected to be $30 million to $32 million per quarter for each of Q3 and Q4. Synergies have now reached $30 million on an annualized basis, and we are making good progress in all categories. Quarterly GAAP EPS was a loss of $0.58 and non-GAAP EPS was $0.95, with after tax non-GAAP adjustments of $217 million in total. The diluted share count for the GAAP results was 139 million shares. And for the non-GAAP results, the share count was 150 million shares. The GAAP and non-GAAP EPS calculations are on Tables 6 and 7 of our press release. Interest expense in the quarter was $71 million. And for the six months ended December 31, interest expense was $132 million. Our original outlook for interest cost in August was $274 million on the basis of the one-month LIBOR reaching 4.2%. It is now forecast on the yield curve to achieve 5.1%. Should that happen on the schedule expected, our goal, along with our debt repayments, will be to limit the change in our initial estimate to $5 million to $7 million for a total of $279 million to $281 million. Our December 31st balance of cash items was $913 million, an increase from the prior quarter of $15 million. After paying down $133 million of debt in Q2, our total debt position on December 31 was $4.6 billion. Using the trailing 12 months of adjusted EBITDA on a pro forma basis for the combined company at December 31, the gross leverage was 3.6 times, and the net leverage was 2.9 times without the synergy credit. Including the synergy credit of $235 million that is allowed by our credit facility definition, the gross leverage is 3 times and the net leverage is 2.4 times. Note that 15 million of synergies are already in the results. The effective tax rate in the quarter was 32%. The non-GAAP tax rate is 19%. We expect the tax rate for the remainder of fiscal year €˜23 to be between 18% and 22%, assuming the current mix of earnings and no adoption of new or additional tax rulings. Returning to €“ turning to the outlook for Q3 fiscal year €˜23. Our outlook for revenue for the third fiscal quarter ended March 31, 2023, is expected to be $1.32 billion to $1.37 billion and earnings per share on a non-GAAP basis to be $0.75 to $0.90 per share. With respect to our expectations on full-year revenue, we expect revenue to range from $5.35 billion to $5.55 billion. Our non-GAAP EPS estimate assumes the effects of purchase accounting, which are all still preliminary, will be added back to GAAP EPS other than the depreciation that is about $5 million in Q3. The share count is 152 million shares for the entire guidance range. The EPS calculation, including the dividend treatment, is detailed on Table 8 of the press release for the guidance range. This table also shows the earnings at which the Series B preferred stock is dilutive. All of the foregoing is at today’s exchange rates at an estimated tax rate of 19%. For the non-GAAP earnings per share, we add back to the GAAP earnings pre-tax amounts of $140 million to $145 million, consisting of $95 million in amortization, $30 million in stock compensation, and $15 million to $20 million for transaction integration and restructuring. The actual dollar amount of non-GAAP items, the tax rate, the exchange rates, the purchase price accounting, and the share counts are all subject to change. As a reminder, our answers today during the Q&A may contain forecasts from which our actual results may differ for a variety of factors. These include changes in the mix, customer requirements, supply chain availability, competition, and economic conditions. With that, Kevin, you may open the line for questions. Q&A Session Follow Coherent Inc (NASDAQ:COHR) Follow Coherent Inc (NASDAQ:COHR) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: First question comes from Ananda Baruah with Loop Capital. Your line is open. Ananda Baruah: Yeah. Good morning, guys. Yeah. Congrats on solid results and ongoing strong execution. Thanks for taking the questions. Two quick ones if I could. Chuck, are you seeing any, I guess, what you would consider to be meaningful softening in any of the businesses €“ in any of the meaningful businesses? And then could you give us an update on supply constraints? And then I have a quick follow-up. Thanks. Chuck Mattera: OK. Well, Ananda, thanks for your question. Let’s take the supply chain first. In the second quarter, the supply chain constraints affected us to a level of $67 million. And so, that will give you some sense. It’s considerably lower than it was a couple of quarters ago. It’s definitely getting better, but it did have an impact on us. That’s first. Second, I tried to give you the color €“ all the color we could about the markets, about the regions, about the products in our prepared comments. And I would say from the last 90 days, if you look at our revenue guidance, the only thing that you can see which is different is that we have a greater confidence on picking up the bottom end of that revenue guidance, and we shaved just a little bit off the top end. And all of that takes into account our best judgments today. And wherever there are small pockets or pockets of slowdown, we have the versatility, the resiliency, the backlog, and the determination to blow past them. Okay? Ananda Baruah: That’s very helpful. And as a follow-up, would just love to get a sense where you guys believe legacy Coherent is in the display business cycle? And that’s it for me. Thanks. Chuck Mattera: Okay. I’ll ask Mark to take that one. Mark Sobey: Hi. Thanks for the question. I think as we discussed in our prior call in November, the Excimer annealing business, represents between 20% and 25% of our quarterly revenue, and we’re still very much in that phase. So, I think the forward-looking growth opportunity that we see in IT displays, specifically tablets and laptops, is in front of us, probably one to two years out. But we’re in a pretty steady phase. Ananda Baruah: Very helpful. Thanks a lot, guys. Operator: One moment for our next question. Next question comes from Simon Leopold of Raymond James. Your line is open. Simon Leopold: Thank you very much for taking the question. I appreciate the details today. I wanted to see if we could dig into your updates on your exposure to the hyperscalers or webscalers. I’m estimating that they’re probably close to 10% of total revenue, maybe a little bit below that, following the integration with the old Coherent. But given some of the capital spending trends, I’m wondering if you can update us on your thoughts of how much of your business is coming from there and what your expectations are for the balance of calendar €˜23. Thank you. Chuck Mattera: Thanks, Simon. I’m going to ask Giovanni to address your question. Thanks for your question. Giovanni Barbarossa: Thanks, Chuck, and thanks, Simon, for the question. So the €“ of course, it does change the percentage of the exposure to hyperscalers quarter-by-quarter. But roughly right, it’s about 30% of the total. We said this in the past, it’s about, let’s say, 30% hyperscalers, 30% what we call cloud, about maybe a group of 30 customers. And then a long tail does the rest, the rest of the 30%. So, we have not really seen any slowdown whatsoever in the €“ at least for the second half of the year. We don’t really see any slowdown in demand. That could be explained by a number of factors. I probably €“ one is the fact that the higher-speed products, let’s say, 200G and above, now almost they represents 50% of our total, okay? So, that’s where most of the investments are growing. Particularly, of course, with the hyperscalers, we tend to innovate and introduce higher data rates and obviously the general cloud or even the long-term of the customers. So, that’s one reason. The other one, as I said earlier in previous quarters, we see still an opportunity to regain share that we think the €“ we lost over the past, let’s say, three years between the transition from Finisar to II-VI and now Coherent. So, we €“ there’s still pockets of markets we think we can to continue to grow our share. So, the two combined explains why we don’t see any slowdown. If anything, we’re very €“ we’re quite bullish about the near-term future. Simon Leopold: And just a quick clarification, that 30% value you referenced is 30% of your networking segment? Giovanni Barbarossa: No. 30% of the datacom. Simon Leopold: 30% of datacom. And what’s that as a percent of networking? Giovanni Barbarossa: Okay. So, that’s 30% of 50%. So, it will be like 15%. Simon Leopold: Thank you very much. Appreciate it. Operator: Our next question comes from James Ricchiuti with Needham. Your line is open. James Ricchiuti: Just wanted to talk a little bit more about the laser business in that we saw a step down in laser operating margins. I was hoping you can give a little bit more color around what’s contributed to that. Chuck Mattera: Mary Jane, do you want to take it first? Mary Jane Raymond: Sure. Generally speaking, what affects any of our segments on the margin is that €“ we €“ I would say that that is probably a little bit more pronounced in the laser segment, but it’s generally true across all the segments. James Ricchiuti: And the line being that you alluded to that contributed to some of the mixed results in industrial, is that a case where that ELA tool is slipping a quarter, or is that potentially going out a little further? And maybe what contributed to that? Is that just customer site not being ready, or is there some change in potentially seeing some signs of changing demand in the display market near term? Mark Sobey: Jim, this is Mark. That’s a good question. It wasn’t actually €“ it wasn’t a pushout. We knew we were anticipating to ship one large landing system less during the quarter. So, there was no €“ it was really based on customer demand, and so no change there. We had anticipated being able to offset with some other upside business, but as you heard, we still had some supply chain balances that affected some of our other business. James Ricchiuti: Got it. Thank you. Operator: Our next question comes from Dave Kang with B. Riley. Your line is open. Dave Kang: Thank you. Good morning. Just wanted to clarify about your comment €“ Giovanni, your comments about telecom versus datacom. So, it’s 50-50 between telecom and datacom, is that what you said about Simon’s question? Giovanni Barbarossa: Yes. I’d say it’s about €“ to be accurate, it’s 54-46. So, 54% datacom, 46% telecom. Dave Kang: Okay. Got it. And then my question is on the backlog. So, it was down a little bit from $3.05 billion to $2.9 billion. Just wondering if sort of backlog apparently peaked already. If you can talk about the expected decay rate, when does it normalize? And also, can you provide the composition of the backlog? Mary Jane Raymond: So, we don’t normally give the composition of the backlog, number one. But two, Dave, you may remember on the last call as well as in various conferences, one of the things that I noted was that investors should not be worried if the backlog starts to go down, we don’t necessarily consider it a decay because the goal was to start to ship what’s in that backlog. So, we are seeing customers returning to more normal patterns of ordering, and that’s exactly the behavior we saw in the second quarter was exactly what we expected. Chuck Mattera: And I would add, Mary Jane €“ I would add, Dave, I think that asset to normal ordering patterns will take place over the next few quarters. Dave Kang: Got it. And my follow-up is, Chuck, your commentary about deceleration in some of the €“ your end markets. Just wondering if you can specify which end markets are decelerating or expected to decelerate. Chuck Mattera: Thanks, Dave. I would point to the industrial section in my comments about the back end of the line for the semiconductor equipment. Like that gave you some sense for a little bit of a slowdown as it relates to lasers for via-hole drilling and for marking. And I also balance that with the really substantial growth that we’ve seen both in EUV, on the industrial side and battery welding on the industrial side. And then, also, in our materials for front end of the line equipment in semi-cap. So, it’s a mix, and I said so, that’s probably the best example. Dave Kang: So, just to be clear, you’re not throwing in the Sensing segment as part of the segment that is slowing? Chuck Mattera: I also €“ in my commentary, Dave, I also pointed to the fact that in the first two quarters of our fiscal year, we have seasonal tailwinds. And I also made a clear remark about the second half of the year that we expect to be considerably lower than the first half. Okay? Dave Kang: But just because of the seasonality, not necessarily the weaker demand, right? Chuck Mattera: Giovanni, do you want to elaborate on that? Giovanni Barbarossa: Yes. Sure, Chuck. Dave, of course, the demand is not something that we have seen slowing down. There’s €“ that’s why we talk about seasonality. Seasonality, it’s all about introduction of new products from our customers and we follow the pattern. So, it’s completely unrelated to demand. Dave Kang: Got it. Thank you. Operator: Our next question comes from Samik Chatterjee with JPMorgan. Your line is open. Samik Chatterjee: Hi. Thanks for taking my questions. I have a couple. Maybe if I can start with a question on backlog. And totally understand your sort of view in terms of the backlog will start to moderate a bit as supply improves and order patterns normalize. How are you thinking about backlog related to sort of exiting the year? Does this remain elevated? And just trying to match that up against sort of the decision to take some of the high end of the revenue guide a touch lower. I mean, how does that sort of match up with the backlog still remaining quite high at this point? And I have a follow-up. Mary Jane Raymond: First of all, I’d say Chuck Mattera: Mary Jane? Mary Jane Raymond: Yes. Sure, Chuck. Thanks. I would say that, on the one hand, while not necessarily, I know we only have a half to go here forecasting the backlog. Last quarter, I had indicated if we saw a resting backlog over time, not necessarily by 6/30, but over time coming down more toward 2.5, 2.6, I wouldn’t be surprised. But I don’t necessarily think it will be at that level by 6/30. So, that’s the first thing. I would say they’re probably, really in some ways, unrelated to each other. We just €“ the backlog does remain very high. But do keep in mind that, that backlog is over 12 months. And as we’ve indicated in the past, typically, the individual items that are in the backlog are timed. They may not necessarily all be times to being shipped by 6/30. So, we have some customers who routinely will give us relatively long-dated orders going across the entire 12 months. So, it really has nothing so much to do with the backlog coming down a little bit, the change in the top end. It’s just more truing up the forecast as we’ve gone along here. Samik Chatterjee: Got it. And for my follow-up, I think, Chuck and Mary Jane, you both talked about sort of the mix in €“ mixed sort of end-market outlook that you’re seeing with certain markets remaining very strong, certain sort of pockets of weakness. If we aggregate all that together, like how is the book-to-bill looking, particularly as you sort of go through the last few months of the quarter? Like are we continuing to see sort of a step down in the aggregate book-to-bill? Or is that because of the diversification that you have remaining quite robust? Mary Jane Raymond: Well, again, the book-to-bill is not nearly as relevant really right now as the backlog itself. I mean, customers are changing their ordering patterns. But, generally, I would say there are variations certainly in bookings in particular areas where customers have had given much, much longer-dated orders in now, say, 12 months when their historical ordering pattern is more like six, so they’re returning to six. But generally speaking, I would say that we’re very, very positive about the outlook for the company given the strength of that backlog. Chuck, would you like to add anything to that? Chuck Mattera: No. I think what we said stands. Over the next few quarters, we can expect it to €“ the book-to-bill ratio as we see it to get to more normal patterns that we would have seen before the last couple of years’ events, including where the supply chain shortages started. Samik Chatterjee: Okay. Thank you. Thanks for taking the questions. Operator: Our next question comes from Mark Miller with The Benchmark Company. Your line is open. Mark Miller: Thank you for the question. I just wanted to talk about €“ you said that the supply constraints again impacted sales by $67 million. I’m wondering how that broke out between networking and lasers. Chuck Mattera: It was mostly networking €“ thanks for your question, by the way. Good Morning, Mark. It was €“ yes, it was nearly all networking, but there was an impact to the lasers segment. Mark Miller: I just was wondering in terms of other expense, it’s jumped around the last couple of quarters. Do we expect other expense in the March quarter to be similar to what you saw in December? Mary Jane Raymond: I would say that it’s probably going to be somewhat lower, probably closer to plus or minus $1 million. It does move around for an awful lot of things, some of which are still related to purchase accounting. But it’s probably for Q3, plus or minus $1 million. Mark Miller: Thank you. Operator: Our next question comes from Jed Dorsheimer with William Blair. Your line is open. Jed Dorsheimer: Hi. Thanks, and thanks for taking my questions. I just have one and a follow-up. I guess, Mary Jane or Chuck, did I hear correctly from a CapEx split, the 50% was going to silicon carbide? Could you just clarify that for me? Mary Jane Raymond: Probably in the neighborhood of 35% to 50% is going into silicon carbide. It’s a significant part of our CapEx for the year. Jed Dorsheimer: Got it. And then I didn’t hear you talk much €“ and maybe I’ve missed this, but it seems like you have a truly differentiated position with high-quality 200-millimeter, whereas rest of the market is struggling with 150 other than one other competitors. So, I’m just curious if you could elaborate on sort of what you have that may be different or the €“ without getting into process, et cetera., that I’m sure you wouldn’t be entering. But just what would you like to say about sort of the strategy around 200. And I think in your recent presentation, you even talked about getting to 300-millimeter. Chuck Mattera: Okay. Good morning, Jed. Thanks for your question. Jed, just quickly, and at a very high level that’s all that’s required, we have designed a process technology for growing substrates €“ silicon carbide substrates around a set of materials and equipment, which we design in-house. Our equipment, crystal growth equipment, allows us to scale such that we can grow 200-millimeter substrates in the same equipment that we grow 150. We announced in 2015 the first high-quality 200-millimeter silicon carbide substrates introduced to the marketplace, that’s eight years ago. So, I would say the one thing that we have is proprietary advantage, second is a scalable platform, third is nearly 10 years of experience. And we are dedicating some part of our capacity today, which is overwhelmingly in demand for 150-millimeter substrates. We are still dedicating capacity to improve and scale and position us for the 200-millimeter market. So, it’s not a question of technology. It’s really a question of capacity. And our investments in even more capital, again, another tranche later this year and then again next year, we’ll have both the market opportunity and the market demand in front of us both for 150 and 200, okay? Jed Dorsheimer: That’s great. Thank you. Operator: Next question comes from Richard Shannon with Craig-Hallum. Your line is open. Richard Shannon: Hey, guys. Thanks for taking my question. Maybe kind of a two-parter here in your broader sensing category. I guess, the first part of this is, Chuck or Giovanni, how do you see the share position with the kind of 3D sensing when you get into the next generation? Do you see an upward or downward bias to that? And then maybe can you paint us a bigger picture on the broader sensing category outside of 3D sensing? How do you see this ramping applications and kind of the thought process and timeframe when that becomes a lot bigger than it is today? Giovanni Barbarossa: Hi, Richard. Thanks for your question. So, I think it’s hard to exactly measure the share. We think that we’ve been growing our share, generally speaking. And due to €“ thanks to the level of integration, which we think is still unique, let alone the scale that we have, so this has been very, very favorable to our ability to be very competitive, scale-wise, cost-wise, and most importantly, quality-wise. And we think that we have reached a point where we believe we are the share leader in many ways. And so we have a number of opportunities in front of us for new designs, new applications, new markets, new €“ also new technologies that should be able to let us continue to enjoy this share leadership, not only in 3D but also, as I said, in optical sensing, particularly optical sensing enabled by semiconductor lasers. So, there’s a number of new applications emerging, which we are working on. All of them, they are all obviously applied in many ways. And we can’t really talk about all the details. But we think we are very well-positioned to continue to enjoy a very close partnership and with our key customers, generally speaking. Richard Shannon: Okay. Fair enough. Thanks for all the details, Giovanni. A follow-up on a specific topic within datacom. You’ve talked about in the last few conference calls about 800 gig here. I guess it’s probably my assumption, I think most people would assume that’s a very small piece of your datacom business. Maybe you can just verify that’s still the case or kind of give us a sense of where it’s at. But I think the bigger question here is thinking about share in that category. I think you’ve had to battle back from a disappointing start in the 100, 200 to 400-gig generation. But where do you sit in 800-gig? And when does that become a more noticeable part of your business? Is that €“ will that happen this calendar year, or is it more of a €˜24 story? Thanks. Giovanni Barbarossa: Yes. Thanks, Richard. Well, 800G is very early, as you know. It’s still small compared to lower data rates. But we are shipping 800G today. We think we are very competitive solution. Thanks to €“ as you know, the integration of our electronics, photonics, and all the assembly and automation that we have, we have €“ we think we have the most competitive platform out there. And it’s definitely not going to €“ something that’s going to be material this fiscal year. But next year, we’ll ramp up very rapidly. And I think we’re well positioned, as we’ve been in the past, to support the demand primarily €“ as we said earlier, primarily for hyperscalers. So, we have €“ I think we are very well positioned to get the larger share of the market there. Richard Shannon: Great. Thanks, guys. That’s all for me. Operator: Our next question comes from Tim Savageaux with Northland Capital Markets. Your line is open. Tim Savageaux: Hi, good morning. Wanted to talk about kind of overall growth expectations heading forward and specifically, in fiscal €˜24 and moving forward. I think you’ve talked in the past about expectations for a double-digit growth rate for Coherent. I wonder, given some of the macro stuff that you’re seeing, whether that remains the case or if you can give us any color on that. And then along with that, as you look at your major segments across networking materials and lasers, how do you expect those three to contribute to the baseline of growth that you’re expecting? Thanks. Chuck Mattera: Hey, Tim. Good morning. Thanks for your question. Tim, we are determined to continue this leadership position in the market. We have another few months to play out as it relates to collecting up the new orders working on the backlog, positioning the portfolio. So, we’re not going to give an FY €˜24 guidance today, but we are determined to outpace the growth of the market. And even with some of these pockets of softness, we have to determine whether or not we’re looking at a one-quarter or a two-quarter effect. And we’re intensely engaged with customers now. So, I would say we’re enthusiastic. We’re making all the right bets in all the right places. We’re taking full steps and making good progress even with new customers as we try to stitch together the advantages of, for example, the materials in the lasers portfolio and it’s coming along. So, I would just leave it at, yes, it’s true that our aspiration is to grow double-digit into €˜24, but it’s going to take us another few months to sort through that. And we’ll provide an update over the course of the next 90 days, probably as we head into May and then possibly into August, okay? Tim Savageaux: Great. Sorry, if I can follow-up real quick, and I appreciate that answer. On the telecom side, you seem to put up some pretty good sequential growth there. I imagine a lot of that is driven by supply improvement. But are there any particular product categories within telecom where you saw either strong demand or improved supply to drive that sequential growth? Thanks. Chuck Mattera: Tim, thanks. I’ll take that one, too. I think you hit on all of them. It really was a nice mix we have had and have a good backlog, that’s true. Parts of the supply chain constraints were broken, that’s true. And we do have demand across the entire telecom portfolio, Coherent transceivers, wavelength selective switches and the ROADMs, all three. So, it’s just a question of timing €“ order timing and then execution of the €“ through the operations, taking into account improvements, and in some cases, not so much improvement in the supply chain situation. That did hold us back somewhat on telecom again this quarter. Tim Savageaux: Thanks very much. Operator: Our next question comes from Paul Silverstein with Cowen. Your line is open. Paul Silverstein: Good morning, guys. I apologize to you and others on the call if these were already asked and answered. My line dropped. First off, I assume your previously stated 38% to 42% range but goal maintaining over 40% gross margin hasn’t changed. And, Mary Jane, any color you can provide us as to the various positive and negative levers? And I think last quarter, you cited an $8 million FX impact on gross margin. I may have that wrong, but did you mention any appreciable FX impact this quarter? Mary Jane Raymond: So, a couple of things. One, our range on the gross margin has not changed. The effects on the margin last quarter, I think, was $6 million positive. This quarter, it was $3 million negative. So, the currency is €“ there’s a little havoc being played with the currencies, which is a little bit challenging. And, secondly, our cost to obtain short supply parts also increased a little bit. But having said that, it is still absolutely the company’s goal to continue to push this gross margin. And, absolutely, every operating leader in our company both knows that and is behaving as a very great partner in helping to make that happen. Paul Silverstein: Mary Jane, I think virtually every company in this earnings cycle has cited ongoing supply chain challenges, but visibility as to improvement with quite a number indicating that the tougher before resolution calendar €˜23. Any thoughts you can share on that? And then I’ve got one quick follow-up. Mary Jane Raymond: I think, based on what our guy is saying, too, that it’s actually a fairly decent chance that by the time we get to what would be our fiscal year €˜24, which is the back half of €˜23, that we may start to see most of the issues behind us. So, I think we still have a quarter or so to go here on it. But I do think probably by the end of the year, if not the 9/30 quarter, we should see that starting to get behind us. Paul Silverstein: Okay. And I appreciate the more challenging macro environment. I know it’s still precisely early with respect to the Coherent acquisition. But are there any early data points as revenue synergies with Coherent? And perhaps, Chuck, Giovanni, Mary Jane, you all could compare it to our progress with Finisar. If I recall, I think it was within three quarters of the close of that deal that you got that Sherman facility qualified and up and shipping on the VCSELs. I think at the time, Finisar had little, if any, presence with hyperscalers. And I think you now have three of the big four, and you just said it’s 30% of your datacom, 15% of comms revenue. Any early signs of that nature that would speak to enhancement of Coherent’s competitive position and wallet share with customers? Chuck Mattera: Thanks, Paul, for your question. I’ll go first and if Mary Jane or Giovanni like to €“ or Mark would like to add, they can. I think as it relates to your question regarding revenue synergies, it’s clear that, of course, there are revenue synergies that don’t exist in the networking business. But across industrial, life sciences, semi-cap equipment, and our aerospace and defense business, there are those opportunities. And between the key account managers, between the strategic marketing team and the product managers, especially in the businesses that Giovanni and Mark lead, there are lots of engagements that are happening, including driven by our customers themselves who are desiring to pull us together to understand how the combined portfolio can help them enable yet another disruption. So, those conversations are happening and the markets that I just described to the markets that we’re focused on. And, Giovanni, would you like to add anything or Mark? Giovanni Barbarossa: No. Chuck, I think you summarized it well. There is no doubt, it’s a very synergistic deal combination to begin with, which we really used to explain the rationale of the combination since the beginning across those four verticals that Chuck mentioned. So, I think it’s €“ every day is a learning opportunity for us to really figure out substantially more synergies than we ever thought during due diligence just because we were somehow limited by our relative antitrust lawyers to really talk too much about it. And so, now, we are discovering the incredible set of combinations that we can leverage to grow the business even more. Mark Sobey: Chuck, I would just add €“ it’s a great question, actually. I’d just add, just specifically in our instrumentation space to use that as a really easy example, our two leading customers that we typically engage with both companies separately prior to the acquisition. We might get an audience, maybe 10 or 15 people and maybe some vice presidents. And we recently at Photonics West show had meetings with two of our leading instrumentation customers with over 40 participants from each of the customers. And we essentially got executive suite attendees there that we would previously have not done. And I think several of our customers have commented that they like the fact that they see as much more as a strategic partner rather than just maybe a leading vendor. So, I think we’ve got early indications in multiple markets and in multiple spaces. But that’s just an easy example based Photonics West in the last few weeks. Paul Silverstein: I appreciate the responses. Thank you. Operator: Our next question comes from Vivek Arya with Bank of America. Your line is open. Vivek Arya: Thanks for taking my question. I wanted to revisit your silicon carbide opportunity. First, with €“ how much did silicon carbide contribute by way of sales for the December quarter? How much did it grow year-on-year? And how do you think about the growth outlook this year? Mary Jane Raymond: Chuck, if you want to take the growth question, I’ll find the other ones. Chuck Mattera: Okay. The revenues €“ Vivek, good morning. Revenues grew about 10% or so sequentially. And Mary Jane can at least range the revenues maybe with the best view for the full year. They are growing. We expect them to continue to grow. They’re capped at the kind of band of revenue that we have today on the basis of the capacity that we have €“ installed capacity that we have in place. That capacity is being added tranche by tranche, large numbers of furnaces at a time. And we’ve given some guidance over the last couple of calls as to how we expect that to evolve. Mary Jane, do you want to give a range for revenues in the Mary Jane Raymond: So, the revenue is about 3% to 4% of the total company. And if you think about that having been 5% of the previous company, which was a smaller size, it showed some very, very nice growth with, as Chuck said, 10% growth year-over-year. The addition of capacity is very, very essential, as Chuck just described. And we’re looking forward to that coming online, so that we can continue to deliver on the demand that we’re right now capacity-wise for. Vivek Arya: And is there an opportunity to appeal for whether it’s CHIPS Act funding or other state or federal funding? Because when I look at a number of your competitors, they are building out a lot of capacity as well. So, as much as I know you are spending a lot in your CapEx, half of your CapEx or at least a third of it is going toward this opportunity, but there is a window right now to be investing in this, assuming that this is a market that you want to be a big player in. Then why not try to spend more or try to get more funding from these government agencies, so you can really take advantage of what could be a meaningful growth area for Coherent? Chuck Mattera: Look, Vivek, this is a meaningful growth opportunity for us, and we couldn’t be more excited about it. So, we’re focused on that. That’s for sure. And to your point, we are in discussions with both elected officials and with government agencies, both at the federal government level in the U.S. and at the state level. And these discussions are ongoing and growing more intense here most recently. Vivek Arya: Thank you. Operator: Our next question comes from Meta Marshall with Morgan Stanley. Your line is open. Meta Marshall: Great. Thanks for squeezing me in. Just in terms of the China reopening, just any impact or kind of step back in what you saw in terms of supply chain challenges or just production capability, demand? Just anything to kind of note there and whether you’ve seen kind of getting through that past any maybe COVID waves that I’ve passed through there. And then as a second question just for Mary Jane, any changes to kind of minimum cash that you would want to keep on hand just given macro? Or should we still consider use of cash primarily debt pay down and CapEx in the near term? That’s it for me. Thanks. Chuck Mattera: Mary Jane, I’d like €“ Mary Jane, if you would, I’ll go first just on the environment in China and then if you would address the financial question. Meta, I would say as it relates to this last €“ let’s call it, the last 60 to 90 days or so, for us, for all intents and purposes, it’s pretty much the same as it’s been for the last two or three years. It’s been one story: resilient, flexible, agile, enthusiastic, and able to confront whatever headwinds come and let them just blow right by. The operational team and the team in China have really just done a fantastic job despite the challenges. And they’re already on to €“ looking forward to the opportunity over the next few quarters or so to position our company there as best as we possibly can. Mary Jane Raymond: With respect to the cash question, I’m pretty sure you’ve never met a CFO that didn’t want more cash. But generally speaking, there’s really no change in the minimum cash we have. And as we indicated last quarter, and you just summarized very well, we have changed our thinking a little bit to include debt paydown during fiscal year €˜23, as well as CapEx priorities. That does not slow down the speed with which we’re starting the synergies, and we’re going to continue along that path. Meta Marshall: Great. Thanks. Operator: Next question comes from Tom O’Malley with Barclays. Your line is open. Tom O’Malley: Hey, guys. Thanks for taking my question. I just wanted to dive into the electronics segment here. Could you break down, within electronics, how much of that segment is 3D sensing in the December quarter? Thank you. Mary Jane Raymond: As a general matter, sensing overall, the consumer side overall is the majority of it. Tom O’Malley: Okay. And then I think Giovanni made some comments, and I think Chuck echoed them as well that on the consumer side, the second half of the year tends to be a lot weaker than the first half of the year. There’s just obviously a large cyclical customer there. But when you look at your fiscal year guide, you have an acceleration in revenue to get to your full year. Could you just talk about what other end markets are accelerating that can offset the seasonality of the electronics segment? Thank you. Mary Jane Raymond: Well, it’s pretty much the same thing we’ve seen for the last couple of years, at least on the legacy II-VI side, which is that the fourth quarter tends to be the strongest quarter in general. It is perhaps less enormously strong than it had been prior to 3D sensing being €“ or the sensing market being in the numbers. But, generally, I’d say we would expect to see kind of typical seasonality and some strengthening in the other end markets. Giovanni Barbarossa: Tom, this is Giovanni. Just want to add, new features, new functions, new technology gets in and out of products all the time. What we have seen is that, generally speaking, consumer automotive, general, anywhere, there is a need for interactivity with the machine. Lasers and photodiodes imaging, generally speaking, a very powerful way to sense the world and provide an AI engine inside the machine to respond and make decisions. So, that’s a trend, which will continue and will also increase in terms of the actual ability to, again, sense in broader terms, not only physically, but also from a €“ for example, from a target perspective, they need different type of sources. Depending on the application, there’s a different level of power, et cetera. So, we have seen and you guys have seen, as the number of lasers, a number of photodiodes, the number of solution that get added to consumer electronics products and then automotive, inside or outside the cat, it just will keep increasing. So, it’s not whether or not €“ of course, there’s going to be more phones, more cars sold eventually and maybe more phones. But it’s even assuming that more phones have saturated as a number, we think that the adoption of this technology will continue to grow. And so, you can expect future products to be adopted to enhance the functionality of these products. Mary Jane Raymond: Also, let me just clarify something. I should have helped Chuck here more. On our silicon carbide growth, the answer is that it’s 10% €“ the growth is 10% year-over-year. And it’s pretty flat sequentially for exactly the same reason Chuck gave, which is the capacity constraint. Operator: Our next question comes from Ruben Roy with Stifel. Your line is open. Ruben Roy: Thank you. Chuck, a lot of detail so far. But if we could spend a minute on €“ there’s a comment in the press release around the pricing and thoughtfully increasing pricing in some areas. Obviously, the €“ with the business becoming more diversified, wondering if you could just kind of maybe give us a little bit of detail around how you’re seeing the pricing environment evolve, especially in the context of input costs and supply constraints improving. And then I guess you talked about positioning the portfolio of the diversified company and how that’s playing into how you’re thinking about longer-term pricing strategy, that would be helpful. Thanks. Chuck Mattera: Okay. I’ll start €“ thanks for your question. I’ll start, and then, I’ll ask Giovanni to add on to it and provide even more color. In these last six months, we put the entire product management team of the whole combined company through a fairly rigorous training cycle. And those product managers in conjunction with the global sales and service organization have had a strategic imperative to improve the operating margins and to position us for competitive pricing that reflect the true value that we bring to the marketplace. Those conversations have been going on even long before we combined with legacy Coherent, but we really stepped it up in the last six months. And whereas you’d like to do it across the Board, it’s not practical. And so, you have to be focused on it. You have to have a strategy for it and an intimacy with the customers with regard to a long-range value proposition and a long-range partnership, which we always focus on developing. And, Giovanni, do you want to point out one or two examples of success in the last six to 12 months? Giovanni Barbarossa: Sure, Chuck. Yes, we had €“ we’ve been quite successful in a very cooperative environment with our customers, understanding that some of our costs, particularly in those products that require transformation, so we talk about material processing, material transformation, where there is a significant amount of energy needed, we have been able to increase price in a reasonable way. And I think that the customers have been very pleased. In some cases, we have been offered price increases to €“ by the customer to secure share in this kind of environment, where they realize that there could have been a risk of supply. So, it’s been a combination of us €“ asking us to increase prices, which we’ve been quite successful with. And then, customers, in some cases, offering price increases to again continue and secure €“ they continue to supply for some of these products, which, again, have been affected by a number of inflationary effects that we all know, particularly around energy supply. Ruben Roy: I appreciate all that detail. That’s all I had. Thank you very much. Giovanni Barbarossa: Thank you. Operator: Our next question comes from Mike Genovese with Rosenblatt. Your line is open. Mike Genovese: Thanks so much. Thanks for squeezing me in. First question, now that we’re in the good part of the 400G data center transceiver cycle, can you talk a bit 400G versus 100G, if it’s meaningfully different? And then, importantly, is there are any technology moats that you can build in 400G versus 100G because of the greater investment needed in the technology? Thank you. Giovanni Barbarossa: So, first of all, just for the sake of clarity, as you know, we say 200, 400, 800, 1.6G. As far as we know, it’s all about 100 gigabits per second. And then you’re talking about data rates. So, we have to distinguish between €“ speed and data rates are not exactly the same. So, even at 400G may actually be four times 100. And 200, maybe two times 100. 200G, we have wireline 200G. We just announced an EML at the European Conference last September. It’s best in the world, we think, and eventually will be a significant shift in bits per second, not necessarily as a data rate, but as a speed. So, all of those complications of combining 100G optical lanes into 200, 400, 800, they have several solutions, several standards. It’s €“ we have potentially the ability to support all of those form factors, all of those data rates. And we, obviously, own a substantial vertical level €“ sorry, vertical level of integration in terms of the lasers, in terms of the ICs, in terms of the optics that go into those products. So, I wouldn’t necessarily claim €“ and nobody could claim that there is a strength in 400G, but there is no strength in 200G or vice versa because the strength is at the bit rate level €“ sorry, the strength is at the speed level, not necessarily at a bit rate level. So, I think we are well positioned at 100G. We are already well positioned for 200G speed. And so, all of the data rates from 200G and above, I think, we’re very well positioned to, again, as I said earlier, to continue to gain share in the marketplace. We are seeing €“ just to give you an €“ just last year, we were at about maybe 15%, and it went to 30%. And now, we’re about 50% of the total datacom sales are actually at 200G and above, which is a sign that we are really focused on the high end of the market, thanks to the €“ again, the combination of the portfolio, component level that we own and we are better integrated with. Mike Genovese: Great. Very helpful. If I could follow up, just another question on the R&D path. Your name is Coherent, but I’m not aware of any DSP products or for 400 ZR or any DSP products at the company. Do you have R&D in DSPs? And what are your thoughts on adding DSPs going forward? Giovanni Barbarossa: Yeah. We should probably take it off-line because we did announce in the past of our own DSPs, and we have €“ of course, we have several Coherent products. We have an entire division around it. And we’ll walk you through all of the offerings. We are very well positioned. We have started with our own €“ we have our own DSP design team based in Germany. And we have started with, I would call it, a simple product. And we’ll eventually migrate to more complex products over time and be as basically integrated as we can be with our own DSP. That’s our plan. We have to €“ we started. We are on a good path. The most significant of the products, of course, the 100G ZR, which adds its own DSP in it, and we announced couple of quarters ago. And so, that’s an example. But we’ll walk you through when we are one-on-one with more details if you like. Mike Genovese: Thank you. Operator: And I’m not showing any further questions at this time. I’ll turn the call back over to Mary Jane for any closing comments. Mary Jane Raymond: We want to thank all of you for joining us today. Thank you for being patient with the time. Thanks to Chuck, Giovanni, and Mark. And we’ll talk to you soon. Have a good day. Operator: Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day. Follow Coherent Inc (NASDAQ:COHR) Follow Coherent Inc (NASDAQ:COHR) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Category: topSource: insidermonkeyFeb 13th, 2023

O’Reilly Automotive, Inc. (NASDAQ:ORLY) Q4 2022 Earnings Call Transcript

O’Reilly Automotive, Inc. (NASDAQ:ORLY) Q4 2022 Earnings Call Transcript February 9, 2023 Operator: Welcome to the O’Reilly Automotive, Inc. Fourth Quarter and Full Year 2022 Earnings Call. My name is Paul and I will be your operator for today’s call. I will now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin. […] O’Reilly Automotive, Inc. (NASDAQ:ORLY) Q4 2022 Earnings Call Transcript February 9, 2023 Operator: Welcome to the O’Reilly Automotive, Inc. Fourth Quarter and Full Year 2022 Earnings Call. My name is Paul and I will be your operator for today’s call. I will now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin. Jeremy Fletcher: Thank you, Paul. Good morning, everyone and thank you for joining us. During today’s conference call, we will discuss our fourth quarter and full year 2022 results and our outlook for 2023. After our prepared comments, we will host a question-and-answer period. Before we begin this morning, I would like to remind everyone that our comments today contain forward-looking statements and we intend to be covered by and we claim the protection under, the Safe Harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995. You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would, consider, should, anticipate, project, plan, intend or similar words. The company’s actual results could differ materially from any forward-looking statements due to several important factors described in the company’s latest annual report on Form 10-K for the year ended December 31, 2021 and other recent SEC filings. The company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Greg Johnson. Greg Johnson: Thanks, Jeremy. Good morning, everyone and welcome to the O’Reilly Auto Parts fourth quarter conference call. Before we begin our discussion on our results and our plans for 2023, I’d like to take a few moments to discuss the announcement we made in January regarding the promotion of Brad Beckham and Brent Kirby to Co-Presidents. Our company is extremely focused on identifying and developing leaders who in turn are relentless in building the very best team in our industry. Our long-term commitment to succession planning is a critical component of our human capital strategy. In line with that strategy, we are extremely pleased to have Brent and Brad assume the elevated positions of Co-Presidents. Brad and Brent are exceptional leaders and are both driven by their passion for perpetuating our O’Reilly culture and providing excellent service to our customers. Brad and Brent bring diverse and broad experience to their roles of Co-President. Brad’s career with O’Reilly began 26 years ago when he joined the company as a parts specialist in Wagoner, Oklahoma. He has progressed through every leadership role in our store operations group, from Store Manager through Executive Vice President of Store Operations and Sales, before assuming the role of EVP and Chief Operating Officer and now Co-President. Brad’s leadership has been instrumental in the growth and expansion of our company and his impact is evident throughout the leadership ranks of our operational teams, many of whom have been mentored and promoted directly by Brad. As Co-President, Brad is responsible for the company’s domestic and international store operations and sales, real estate and expansion, human resources, training, legal, risk management, loss prevention and finance. Like Brad, Brent brings decades of retail leadership experience to his role as Co-President. Brent began his 35-year retail career with Lowe’s Companies and progressed through their ranks, ultimately serving in the roles of Senior Vice President of Store Operations, Chief Omnichannel Officer, and Chief Supply Chain Officer. Brent joined Team O’Reilly in 2018 as our Senior Vice President of omnichannel and made an immediate impact in that role before assuming leadership of our supply chain and distribution efforts. His extensive experience and significant DIY and professional retail industry knowledge is critical to our efforts to enhance our industry-leading inventory position, leverage technology investments to deliver powerful tools for our team, and drive deep connections with our DIY and professional customers. As Co-President, Brent is responsible for the company’s distribution operations, logistics, merchandising, inventory management, pricing, advertising, omnichannel, customer satisfaction, program management, electronic catalog, and information technology. Again, I am very pleased to have Brad and Brent step into these new roles and I am excited about the leadership they will provide to Team O’Reilly as Co-Presidents. Brad and Brent are participating on the call with me this morning, along with Jeremy Fletcher, our Chief Financial Officer. Greg Henslee, our Executive Chairman; and David O’Reilly, our Executive Vice Chairman, are also present on the call. I am once again pleased to begin our call today by congratulating Team O’Reilly on another record-breaking year in 2022. We finished the year with incredible momentum, posting a comparable store sales increase of 9% in the fourth quarter, representing an increase of almost 35% on a 3-year stack basis. For the full year of 2022, our team generated a robust 6.4% comparable store sales growth, which came in above the revised guidance range of 4.5% to 5.5% we provided last quarter and above the midpoint of our original comp range of 5% to 7% we said at the beginning of 2022. Even more impressive, our 6.4% comparable store sales growth in 2022 followed record-setting sales growth in 2021 and 2020 when we delivered comps of 13.3% and 10.9% respectively, resulting in 3-year stacked comps exceeding 30%. These strong top line results drove another year of record earnings per share as diluted EPS increased 8% to $33.44, representing a 3-year compounded annual growth rate of 23%. Our ability to continue to grow our business and capture market share year-in and year-out is a testament to our team’s commitment to providing excellent customer service and we couldn’t be more pleased with how our team finished 2022. Entering 2023, we remain bullish on the opportunities we see ahead of us and are anticipating another strong year of sales and earnings growth. For earnings per share, we have established the guidance for 2023 at $35.75 to $36.25, representing an increase of 8% versus 2022 at the midpoint. Achievement of our 2023 guidance would result in us doubling our EPS over the last 4 years, representing a compounded annual growth rate over 19%. This impressive performance and challenging target is a testament to the quality of our team and their commitment to our customers. Brad, Brent and Jeremy will walk through the rest of our detailed outlook in their prepared comments. But for now, I will just say that we are excited about the aggressive plans we have to invest in our business and continue to take market share and drive industry-leading results. Before I turn the call over to Brad, I want to share a little bit about the incredible culture building experience our team just had in January at our Annual Leadership Conference in Dallas. Each year, we bring all of our store managers, field leadership as well as our sales and DC management team members together in one place at one time to build leadership skills, enhance product knowledge, share best practices across our company, and celebrate our award-winning performance. The theme of this year’s conference was: One Team, Reunited. And it was definitely an appropriate rallying cry for our first in-person leadership conference in 3 years. The passion and energy displayed by our company leaders was infectious and it gives us even more confidence in the Team O’Reilly’s ability to drive future success through their unwavering commitment to our customers and fellow team members. To wrap up my prepared comments, I want to thank each of our team members for their dedication to our company’s long-term success and their outstanding performance in 2022. I am extremely proud of all of you and I am confident 2023 will be another record-setting year for Team O’Reilly. I will now turn the call over to Brad. Brad Beckham: Thanks, Greg and good morning everyone. I would also like to begin my comments this morning by congratulating Team O’Reilly on another great year in 2022. Our team’s focus on providing consistent, excellent customer service allowed us to generate the outstanding results we reported yesterday and we were excited about the opportunities we see to continue to grow our business. Now I’d like to provide some additional color on our fourth quarter comparable store sales results and outline our guidance for 2023. As we discussed on our third quarter conference call, we started the fourth quarter with strong sales volumes in line with trends we saw as we exited the third quarter. Those robust sales volumes continued through the end of the year, delivering results solidly above our expectations on both the professional and DIY sides of our business each month of the quarter. From a cadence perspective, the monthly comp was steady throughout the quarter with December being the strongest month of the quarter on a 2 and 3-year stack basis. As we finished the year, we saw broad-based strength across all of our markets in weather-related categories, such as batteries, cooling and antifreeze as well as our other core non-weather-related categories. We saw strength in both our DIY and professional businesses, with professional again leading the way with double-digit comparable store sales growth on robust increases in both ticket counts and average ticket size. As we finished 2022, we were very pleased with our professional performance and we believe the momentum we have created is the direct result of our team executing our proven business model at a high level and providing industry-leading customer service. We were also pleased to see the improved performance in our DIY business, which accelerated on a 1, 2 and 3-year comparable store sales growth basis, driven by our strong average ticket growth. As anticipated, DIY ticket counts were a partial offset to our comp growth due to difficult comparisons from strong traffic growth in the previous 2 years, but improved sequentially in quarter, continuing the trend we saw in the third quarter and exceeding our expectations. As we saw throughout 2022, growth in average ticket values drove our total comparable store sales growth in the fourth quarter. Average ticket size grew in the high single-digits on both sides of our business, supported primarily by the mid single-digit growth in same SKU inflation and augmented by a benefit from increasing clean improved quality and design of new parts. On a year-over-year basis, we saw a moderation in the same SKU benefit after peaking in the second and third quarters as we lap the acceleration of higher inflation in 2021 and saw modest increases in selling prices as we finished out 2022. The moderation in selling price increases correlate with what we are seeing in product acquisition costs as industry pricing has remained rational on both sides of the business and we have been successful in passing through cost increases. Now, I want to transition to a discussion of our 2023 sales guidance and our outlook for this year. As we disclosed in our earnings release yesterday, we are establishing our annual comparable store sales guidance for 2023 at a range of 4% to 6%. And we want to provide some color on the factors that are driving our expectations as it relates to both our outlook for our industry as well as the specific opportunities we see for our company. I will begin with our view of the prospects for our industry, which we believe are still very favorable. The health of the automotive aftermarket continues to be supported by strength in the core fundamental drivers of demand and the last few years have further reinforced the compelling value proposition that motivates consumers to invest in their vehicles. Since the onset of the pandemic, the scarcity of vehicles has forced many consumers to keep their vehicles longer. These investments consumers have made to keep their vehicles well maintained have paid off and we expect to see a continued willingness by consumers to invest in their high-quality vehicles at higher and higher mileages. We also have a positive outlook on the strength of the consumer in our industry and their ongoing willingness to prioritize their transportation needs. We continue to view the health of our customers as strong, supported by extremely low unemployment and robust growth in wages over the past 2 years. We think these factors provide a solid backdrop for growth in miles driven in our industry and solid demand over the next year. While miles driven still remain below pre-pandemic levels, we have seen growth in this key fundamental for our industry over the past 18 months. We believe we will see a continuation of the long-term industry trend of steady growth in miles driven resulting from population growth and an increase in the size of the U.S. car park. As we think about the broader macro factors that could impact the U.S. economy in the coming year, we remain cautious in our outlook for €“ outlook concerning ongoing headwinds from inflation and the potential for deterioration in economic conditions. Negative trends in the broader economy can €“ it can influence demand in our industry in the short-term, but we have consistently seen over time that consumers adjust quickly in challenging environments. In fact, in 2022, it was a good illustration of how this can play out. The pressure we saw from elevated gas prices, broad-based inflation and global economic shocks weighed on our results versus our expectations in the first half of the year. However, our customers adjusted as conditions stabilized and our business rebounded to meet our full year sales growth expectations. Our experience through multiple economic cycles in our company’s history is that consumers will prioritize the maintenance and the repair of their existing vehicles as a means to avoid a car payment and save money in the face of economic pressures. Ultimately, due to the non-discretionary and value-driven nature of our business, we have confidence our industry will perform well in 2023, even if we end up facing challenges in the broader economy. As confident as we are in the strength of our industry, the most important driver for our outlook for 2023 is the opportunity we see to outperform our competition and gain market share by out-executing €“ or excuse me, by executing our business model and providing the best customer service in the industry. To this end, I would like to spend a few minutes discussing our outlook on both sides of our business. We expect both our DIY and professional businesses to be positive contributors to our comparable store sales growth in 2023, with professional again expected to outperform. We are excited about the strength we built in 2022 in our professional business and we believe this will continue to accelerate our growth on this side of the business. We remain highly committed to being the industry leader in the quality of service and inventory availability we provide to the professional customer and our focus moving into 2023 is to aggressively lever these strengths to further consolidate this side of the market. We also see significant opportunity to grow our DIY business, but are more cautious in how we view our ability to increase ticket counts on a year-over-year basis. Our DIY ticket counts in 2022 were pressured in comparison to 2021 as we were still calendaring the impact of government stimulus and faced headwinds from gas price shocks and inflation. We feel like we have now completely lapped the artificial spikes in demand and are pleased with the steady DIY traffic we saw in the back half of the year. While there has been a lot of volatility in our comparisons over the past 3 years, our overall growth in DIY ticket counts has been solidly positive in total during that timeframe. We have clearly taken market share since the onset of the pandemic through consistent execution and excellent service even as we face the long-term industry trend of pressure to DIY ticket counts. For 2023, we will continue to face this industry dynamic where increased complexity and quality of parts extend service and repair intervals. As a result, we anticipate DIY traffic down will be down slightly in 2023 with an expectation that we will continue to gain market share to partially offset the normal industry drag on ticket counts. We expect the pressure to DIY traffic to be more than offset by increased average ticket. We anticipate average ticket on both sides of our business to benefit from low single-digit inflation arising from the carryover benefit on a year-over-year basis as we compare against price levels that ramp throughout 2022. Consistent with our historical practice, we are including only modest increases in price levels from this point forward in 2023. We do not expect to see growth in average ticket values above and beyond same-SKU inflation, resulting from increased product complexity and our ability to trade customers up to a higher quality product on the good-better-best spectrum. As we move through 2023, we anticipate comps in the first half of the year to be stronger than the back half as a result of the year-over-year same-SKU inflation benefit as well as easier comparisons in professional ticket counts, which ramped throughout 2022, and to a lesser degree, DIY ticket counts which faced more pronounced pressure in the first half of last year. We are off to a strong start thus far in 2023 and we are pleased to see continued momentum on both sides of our business. Now I want to spend some time covering our SG&A and operating profit performance in 2022 and our outlook for 2023 before turning the call over to Brent who will provide color on our gross margin. Fourth quarter SG&A expense as a percentage of sales was 32.2%, in line with the fourth quarter of 2021. As we noted in our press release yesterday, this number includes a $28 million charge associated with our transition to an enhanced paid time-off program for our team members. Average per store SG&A for 2022 was just €“ was up just over 4.8%, driven by incremental variable operating expenses on better-than-expected sales volumes and cost inflation in fuel, wage rates and team member benefits. Over the last several years, our teams have demonstrated an ability to drive an enhanced level of profitability and productivity on our SG&A spend as we are pleased with the finish to 2022. As we look forward to 2023, we are planning to grow average SG&A per store by approximately 4.5%. This level of spend is a step change higher than we would normally forecast in our initial SG&A guidance. While we anticipate facing some pressures to costs from ongoing inflation, the majority of our incremental spend anticipated in 2023 reflects deliberate decisions we are making to invest in our business. We are targeting initiatives we believe will enhance the value proposition we offer to both our team members and customers by investing in our professional parts people and our customer service levels, in turn, driving both long-term sales and operating profit dollar growth. We plan to deploy these resources to enhance our long-term operational strength with specific emphasis on strengthening our team member experience and benefits, upgrading our store vehicle fleet, refreshing and improving our store image and appearance, and deploying incremental technology projects as well as investments in infrastructure. We believe we have an opportunity to capitalize on our strong competitive position in our industry and further separate ourselves as we consolidate the market. We are highly confident our investment in these initiatives will provide strong long-term returns, but anticipate we will face initial pressure to our SG&A as a percentage of sales in 2023. Based on these expectations, coupled with the normal drag from new store expansion and our anticipated gross margin rate, which Brent will discuss in a minute, we are setting our operating profit guidance range at 19.8% to 20.3% of sales. At the midpoint of our guidance, we are expecting operating profit to increase over 4%. Ultimately, our leadership team is focused on enhancing the excellent customer service and overall value that creates strong relationships with our customers on both sides of the business that, in turn, drive long-term growth in operating profits. To finish up my prepared comments, I want to add to what Greg has already said about the incredible experience we had as a leadership team in Dallas and the enthusiasm our team showed for our business and the O’Reilly culture. This was my 26th Leadership Conference, my first being in 1998 when I first became a Store Manager and there is no doubt in my mind, it was our best one yet. Since there was €“ since this was our first in-person conference since 2020, the last two being virtual, there was certainly a lot for us to celebrate, but I was blown away by the commitment I saw from our team to not rest on our laurels or be satisfied with our past success. Instead, our team was passionate about the opportunities we have in front of us. As we look forward to 2023 and set an ambitious plan to outperform the competition and gain market share, we will be aggressive in supporting our teams and equipping them with the tools and resources to drive our company to an even higher level of performance. I want to once again thank Team O’Reilly for their continued dedication to our company. Now I will turn the call over to Brent. See also 25 Largest Apparel Companies in the world and 30 Best Stocks for Retirement. Brent Kirby: Thanks, Brad, and good morning, everyone. I would like to begin my remarks today by congratulating Team O’Reilly on yet another strong year. Once again, your commitment to consistent, excellent customer service drove outstanding results in 2022. As Greg and Brad have already shared, it was a privilege to be able to get together with our industry-leading team professional parts people at our leadership conference in January, and we are all incredibly excited about the strength of our business moving forward in 2023. Today, I’m going to discuss our fourth quarter and full year gross margin and supply chain results and our outlook for 2023 and provide color on our capital investments. Starting with gross margin. Our fourth quarter gross margin of 50.9% was 183 basis point decrease from the fourth quarter of 2021, but in line with our guidance expectations. For the full year, gross margin came in at 51.2%, which was 145 basis point decrease from last year. Our year-over-year margin results were primarily impacted by the rollout of our professional pricing initiative, combined with anticipated comparison headwinds to the LIFO benefits that we realized in 2021. We are pleased to generate a full year gross margin rate in the upper end of our guidance range. However, we’re even more excited to drive strong gross profit dollar growth. Our price investments and superior execution of our business model paid off in a solid 5% increase in gross profit dollars in 2022, which represents a 3-year compounded annual growth rate of 11%. I want to thank our supply chain store operations and sales teams for their hard work in driving these results in a dynamic and very challenging market environment. For 2023, we expect gross margin to be in the range of 50.8% to 51.3%, which is consistent with how we viewed our margin guide throughout 2022. Even though we aren’t anticipating a significant year-over-year change, there are a few puts and takes that I want to call out that we expect to impact our gross margin in 2023. To begin, we will face some remaining incremental pressure in the first quarter from our professional pricing initiative as we lap a higher gross margin run rate at the beginning of 2022 before we fully rolled out the initiative in the middle of the first quarter. We also will face headwinds from a number of other factors, including comparisons to temporary benefits in the first half of 2022 from the timing of selling price increases, a higher planned mix of professional business in 2023 as that side of the business continues to grow faster, the calendaring of the remaining LIFO benefit that we realized in 2022, and pressure on distribution costs as we continue to stabilize our network after the disruptive periods we have seen during the pandemic, and face headwinds in the fixed cost we capitalized in inventory driven by a significantly smaller planned inventory build in 2023. Offsetting these headwinds, our gross margin outlook also includes an anticipated benefit from modest acquisition cost improvements. On balance, we still expect to see inflationary pressure in acquisition cost in 2023, driven by rising labor and raw material costs in the supply chain. These are specific areas that we have seen some relief in from cost pressure that were passed along to us over the course of the last 2 years, specifically in freight and transportation costs. Beyond what we have built into our outlook for next year, we remain very cautious regarding the prospect for incremental reductions in acquisition costs as most of our supply chain partners continue to face broad inflationary pressures. On an individual basis, none of the discrete factors I just outlined represent a significant impact to our gross margin. And candidly, we normally don’t dig in at this level of detail in discussing the puts and takes that impact our margin. However, we think it’s important to provide additional color since there are so many moving pieces. Over the last several years, we have seen variability in our quarterly margin results that are not typical of the normal cadence for our business, driven by significant cost inflation, the reversal of our LIFO debit balance and the implementation of our professional pricing initiative. In 2023, we anticipate quarter-to-quarter gross margins to be more consistent, with only first quarter being slightly below our full year guidance, driven by product mix. However, since some of our comparisons are more challenging, in the first half of the year, we do expect to see some pressure on gross margin rate on a year-over-year basis in the first two quarters. Inventory per store at the end of 2022 was $730,000, which was up 15% from the end of last year, which is significantly above the target that we set for inventory growth at the beginning of 2022. Over the course of much of the last 3 years, it has been our intent to aggressively add incremental inventory dollars, and we have been constrained by supply chain challenges and the necessity to keep up with the strong sales volumes and replenishment needs of our stores. As we move through the back half of 2022, our supply chain distribution and store operations teams made tremendous progress in deploying additional inventory. We also proactively took advantage of opportunities to incrementally add inventory to our network as we saw upside in capitalizing on strong sales demand as supply constraints begin to ease. For 2023, we are planning per store inventory to increase approximately 2%, which is below our historical run rates. This is primarily because of the inventory additions that we accelerated at the end of 2022. Our ongoing inventory management is geared to deploy the right inventory at the optimal position within our tiered distribution network. While our expected incremental additions in 2023 are modest, our plans include continued adjustments to push out and pull back inventory to ensure that we’re offering the best possible local inventory assortments. A key part of our inventory deployment strategy is our ongoing evaluation and modification of all aspects of our hub store network, including the number of hub stores, sizing of inventory assortments and market positioning. A substantial amount of increased inventory that we deployed in 2022 and the dollars we plan to roll out in 2023 are targeted in our hub stores to further enhance our industry-leading inventory position. Our AP to inventory ratio at the end of the fourth quarter was 135%, which sets an all-time high for our company, and was heavily influenced by extremely strong sales volumes and inventory turns along with the impact from increased inflation and product acquisition costs. While we deployed significant incremental inventory into our distribution centers and stores in 2022, we actually saw a decrease in net inventory investment of $513 million. We anticipate our AP to inventory ratio to moderate slightly as we move through 2023 and currently expect to finish the year with a ratio of approximately 133%. Our capital expenditures in 2022 were $563 million, which fell short of our original plan by approximately $140 million. The lower CapEx was driven by a few different factors, including a heavier weighing of leased versus owned stores, the delay of certain store DC and headquarter projects and planned maintenance, and the timing of expenditures related to distribution expansion projects. Included in our expectations for 2023, our plan to deploy capital for the initiatives that were delayed in 2022 as well as support new store and DC development to support our long-term growth strategies in the U.S. and Mexico. For 2023, we are setting our capital expenditure guidance at $750 million to $800 million. We have also established a target of 180 to 190 net new store openings with a planned heavier mix of owned versus leased locations. Our CapEx outlook also includes significant investments in our distribution network as we will complete and open our newest distribute center in Guadalajara, Mexico and expect initial expenditures for future projects. We have identified several exciting projects and initiatives in 2023 to enhance our service levels and provide customers an improved efficiency and product availability. Our CapEx guidance includes planned investments in significant DC and store fleet upgrades, store projects to enhance the image, appearance and convenience of our stores, and strategic investments in information technology projects. Before I turn the call over to Jeremy, I want to again thank Team O’Reilly for their unwavering commitment to our customers and dedication to going the extra mile to deliver outstanding business results in 2022. Now I’d like to turn the call over to Jeremy. Jeremy Fletcher: Thanks, Brent. I would also like to congratulate Team O’Reilly on another outstanding year. Now we will fill in some additional details on our fourth quarter results and guidance for 2023. For the fourth quarter, sales increased $353 million, comprised of a $288 million increase in comp store sales, a $65 million increase in non-comp store sales, a $2 million increase in non-comp non-store sales, and a $2 million decrease from closed stores. For 2023, we expect our total revenues to be between $15.2 billion and $15.5 billion. Brent covered our gross margin performance and guidance earlier, but I want to provide a quick reminder on how we view the application of LIFO in our gross margin results. We view our reported gross margin as the best measurement of our performance. Since the GAAP cost of goods sold under the LIFO method most closely matches our current acquisition costs, as a result, we don’t view the normal application of LIFO as a discrete charge in our evaluation of gross margin. In the first quarter of 2022, we did receive a limited benefit of just under $10 million, resulting from the reversal of our historic LIFO debit balance and the final sell-through of inventory purchased prior to acquisition cost increases. This comparison headwind is a component of our gross margin expectations that Brent outlined earlier. Our fourth quarter effective tax rate was 18.2% of pretax income, comprised of a base rate of 19.9%, reduced by a 1.7% benefit for share-based compensation. This compares to the fourth quarter of 2021 rate of 19.4% of pretax income which was comprised of a base tax rate of 20.4% reduced by a 1% benefit for share-based compensation. The fourth quarter of 2022 base rate as compared to 2021 was lower as a result of an increase in certain state tax credits. For the full year, our effective tax rate was 22.4% of pretax income, comprised of a base rate of 23.3%, reduced by a 0.9% benefit for share-based compensation. For the full year of 2023, we expect an effective tax rate of 22.9%, comprised of a base rate of 23.4%, reduced by a benefit of 0.5% for share-based compensation. We expect the fourth quarter rate to be lower than the other three quarters due to the tolling of certain tax periods. Also, variations in the tax benefit from share-based compensation can create fluctuations in our quarterly tax rate. Now we will move on to free cash flow and the components that drove our results and our expectations for 2023. Free cash flow for 2022 was $2.4 billion versus $2.5 billion in 2021. The decrease of $178 million was driven by higher capital expenditures in 2022 versus 2021, and differences in accrued compensation. For 2023, we expect free cash flow to be in the range of $1.8 billion to $2.1 billion. As Brent discussed earlier, the expected year-over-year decrease is due to a planned increase in net inventory in 2023 versus the benefit we realized in 2022 as well as the planned increase in CapEx. These headwinds are expected to be partially offset by a benefit of $300 million in 2023, resulting from favorable timing of tax payments and disbursements for renewable energy tax credits. Moving on to debt, we finished the fourth quarter with an adjusted debt to EBITDA ratio of 1.84x as compared to our end of 2021 ratio of 1.69x, with the increase driven by our successful issuance of $850 million of 10-year senior notes in June, offset by the September retirement of $300 million of maturing notes. We continue to be below our leverage target of 2.5x, and plan to prudently approach that number over time. We continue to execute our share repurchase program. And for 2022, based on the strength of our business, we were able to purchase 5 million shares at an average share price of $661.66 for total investment of $3.3 billion. Since the inception of our share repurchase program in 2011, we have repurchased 91 million shares at an average share price of $224.8 for a total investment of $20.4 billion. We remain very confident that the average repurchase price is supported by the expected future discounted cash flows of our and we continue to view our buyback program as an effective means of returning excess capital to our shareholders. As a reminder, our EPS guidance includes the impact of shares repurchased through this call, but does not include additional share repurchases. Before I open up our call to your questions, I would like to thank our team for your hard work and dedication to our company and our customers. This concludes our prepared comments. At this time, I would like to ask Paul, the operator, to return to the line, and we will be happy to answer your questions. Q&A Session Follow O Reilly Automotive Inc (NASDAQ:ORLY) Follow O Reilly Automotive Inc (NASDAQ:ORLY) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. And the first question today is coming from Michael Lasser from UBS. Michael, your line is live. Michael Lasser: Good morning. Thanks a lot for taking my question. So prior to the pandemic , O’Reilly would consistently guide its comp in the 3% to 5% range. This year, that outlook calls for 4% to 6% increase. Are you backing into that based on the investments that you’re making in SG&A such that you need this sales level in order to drive leverage to cover the buildup of cost? And if so, does that create some downside comp risk kind of similar to how last year played out? Greg Johnson: Yes, Michael, this is Greg. I mean, the answer to your question is absolutely not. Brad and €“ talked a lot about our bullish thesis on both the industry and what we expected from our company in 2023. And the fact that miles driven has improved, not to the point of pre-pandemic levels, fuel prices have stabilized, new car sales and used car sale prices have been elevated, and overall sales have been softer over the past few years, I think there’ll be some recovery there in 2023, but we still see a tremendous opportunity just because new car sales may improve, that doesn’t mean that the millions of cars that are on the road today will just simply vanish. Cars are built better, they are lasting longer. And for all those reasons that Brad laid out. We’re very, very optimistic about the future. But as always, we’re cautious. First and fourth quarters are more volatile. And I don’t know what’s going to happen with the economy. The onset of spring impacts our volumes. But overall, on an annual basis, we remain very bullish for our future. Jeremy Fletcher: Michael, maybe the only thing I would add there is we continue to expect to an average ticket benefit that’s greater than normal years as we roll over some of the pricing changes that happened within our business and our industry last year. But even as we step behind or beyond some of those macro factors, we feel very positive about how we think about the opportunities we have from a share perspective as we move through next year. And those are things that we have confidence in because of the trends that we’ve seen for the last couple of quarters as we’ve seen the €“ I think our customer base be really resilient and respond, and we’ve seen traction and momentum on both sides of our business. Michael Lasser: That makes sense. My follow-up question, and you’ve gotten this a lot recently, is that costs have come down quite a bit, whether it’s supply chain costs in the form of lower containers, petroleum prices. Can you quantify the savings that O’Reilly is experiencing from these lower input costs? And are you passing along the savings in the form of lower prices or is that helping the profitability in offsetting some of the other pressures that you had identified? Jeremy Fletcher: Yes, Michael, maybe let me answer your question backwards and the second part first. Yes, we’re absolutely €“ whenever we see any potential benefits, we’re €“ we’ve been able to take that to the bottom line. We have not seen to date any market movements to roll back some of the increases that we’ve seen and if there is been any relief on pressures. And Brent talked about that as a positive within his prepared comments. We do expect some benefits there this year. I think to the first part of your question, we haven’t quantified €“ we won’t. And I would maybe caution a little bit to treat that as a big factor moving in one direction. There continues cost pressure on balance. We think that we will see more cost increases this year than decreases as our suppliers continue to stay under pressure. And while we’ve seen some reductions, and those are good, and we’re positive about that. We’re very cautious in how we think about that moving forward and the benefits that we would bake in. And I think you see that reflected and really how €“ I think we’ve talked about this for the last couple of quarters, but then also as we’ve laid out our outlook. Michael Lasser: Thank you so much and good luck to Brad and Brent in their new roles, and the entire team. Brad Beckham: Thank you, Michael. Brent Kirby: Thank you, Michael. Operator: Thank you. The next question is coming from Simeon Gutman from Morgan Stanley. Your line is live. Simeon Gutman: Hey, guys. I’m going to ask the one and a follow-up now. The first question on SG&A growth. Is this a 2023 event or €“ are the spending on the stores and people? Or do you foresee some of this spilling into next year? And then to clarify, if product the second is to follow up, if product acquisition costs start coming down, because you didn’t record a charge, does that create €“ does that €“ do we start creating a new debit balance? Just I think that, that won’t help the gross margin then since you didn’t create a charge you just build up another reserve. I just want to make sure that’s right. Greg Johnson: Yes. Simeon, I will take €“ I will start the SG&A response here, and then maybe Jeremy or Brent will want to chime in. We haven’t changed our focus. Our focus continues to be growing operating margin dollars. Our focus continues to be to grow top line faster than we grow SG&A. None of that’s changed. We still talk about our core culture value of expense control day-in and day-out. This change this year was a deliberate and a prudent effort to try to position us for future growth. There is a lot that’s changed over the past 2 years in the retail market and industries as a whole across all industries, actually. And we faced wage pressures, there is no secret there. We faced turnover. And we really looked ourselves in the mirror this year and had conversations with our team members about what is important. We want to stop the turnover, get back to normalized rates, make sure we have the ability to recruit, promote and retain the best talent, which is what we have been successful with for also €“ so part of that initiative, and I am not going to go into all of it, perhaps Brent or Brad would want to go into more detail. We called out the initiative on the PTO. That’s one example of us listening to our team members as to what’s important to them and an effort for us to position ourselves for future growth. I don’t know, Jeremy, if you had anything to add? Jeremy Fletcher: Yes. Maybe the only thing I would say is we establish our SG&A guidance 1 year at a time, and I don’t want to guide from a pure dollar perspective, what we look like beyond that. I think what Greg points to, though, is that we remain highly committed to making sure that we are driving the right results out of every part of what we invest in our business from an expense control standpoint. And so as we move beyond this year, we intend that these investments pay off, that we lever SG&A as a result of them. And I think what you would expect to see from that perspective hasn’t changed from a long-term standpoint. Does that mean we won’t find other things as we continue to move forward and invest in, we will continue to evaluate that. It is our intent to do what we can do to build the long-term strength of our business. And I think what you see in our guidance and what we talked about matches up with that. Maybe just briefly to address your second question around the LIFO perspective, to the extent we see cost decreases in the coming year, we again, don’t expect that on balance substantially. They are going to offset cost increases. It would require a magnitude of change there that’s far in excess of what we would expect for our LIFO accounting to push back into a debit balance. So, we will be on a credit LIFO for the foreseeable future and the impact of that is as we see cost increases that will get reflected pretty rapidly within our reported results. Simeon Gutman: Thank you. Jeremy Fletcher: Thanks. Operator: Thank you. The next question is coming from Greg Melich from Evercore ISI. Greg, your line is live. Greg Melich: Great. Thanks. I guess my first question was on wages. What was the inflation in average hourly wage that you saw last year? And what are you expecting this year in the guidance? Jeremy Fletcher: Yes. It was significant in 2022. It was in the mid to high-single digit range for inflation. It depends on market and type of position for us. We expect that to moderate off of those levels. We will have some carryover impact there from a comparative situation evolves. But we are still building in an expectation of somewhere in mid-single digit range from a wage perspective because of those factors. What I would tell you is that we see that is the ongoing regular management of our business. And we expect that, as we saw in 2022, that we will have the ability to pass along the cost increases to the extent that we have planned. And if that number ends up being different than what we foresee at this point in time, we will have the ability to pass it along as well. Greg Melich: Got it. And then my second question is on mix shift. You mentioned that as being a slight headwind to gross margin, I would love to have a little more detail on that and color within DIY and pro. Is there any trade-down occurring? What sort of behaviors are you seeing from your customers on both sides of the house? Brent Kirby: Yes. Greg, this is Brent. I can start on that and then others can chime in. We really €“ net overall, we haven’t seen a lot of trade-down. In some categories, we have actually seen trade up as cars become more sophisticated and OE requirements on batteries as an example, with AGM, and some of the higher price points that are required on a lot of replacement batteries today. So, we have seen a lot of that actually move the consumer from the best to the better in a lot of cases €“ or better to best, rather. We have seen a little bit a category where we still had some €“ a lot of inflation in the oil category, and we have had majors that have still struggled with their supply chain. In some cases, we have seen customers trade-down to some of our proprietary brands on oil. And quite frankly, they are happy with what they are getting and we are seeing some stickiness there with those customers with some of our proprietary brands, which long-term is a good thing for us. But net-net, we haven’t seen any violent move, one way or the other, in terms of trade-up or trade-down. Greg Johnson: And Greg, maybe specifically to your question, in Brett’s prepared comments, when you talked about some modest headwinds there, that’s really on the professional versus DIY mix, because we anticipate professional and our top line grows faster in that that creates just the mathematical pressure on Greg Melich: That’s a category mix effect, not within the two sides. Greg Johnson: That is side of business mix effect, not within each side from a category. Brent Kirby: The expectation is that the DIFM is going to outperform DIY. Greg Melich: Got it. Perfect. Well, good luck and thanks. Brent Kirby: Thanks Greg. Operator: Thank you. The next question is coming from Seth Basham from Wedbush. Seth, your line is live. Seth Basham: Thanks a lot and good morning. And my question is around the DIY side of the business. You mentioned that you see some opportunities for ticket growth, but you are more cautious. Now, even with the easier comparisons there in the first half of the year, would you expect ticket growth €“ ticket account growth, I should say, in the first half of 2023? Greg Johnson: Yes. Just to clarify, Seth, in Brad’s comments, we said we expect DIY tickets to be slightly down. Now, we see some benefit as we continue to perform well against the marketplace, we are gaining share on the DIY side of our business. And we will have some easier comparisons in the first part of the year because of the pressures we saw last year that you mentioned. That’s really all partial offsets against the longer term industry trend that we and others have talked about that pressures ticket count comps because of the increasing costs and complexity of vehicle parts that supports the average ticket price, but possibly lead to service intervals and repair cycles that extend out. So, we anticipate that, that is a bigger impact for us as we move through the year. But €“ and that is kind of consistent with how we would normally think about DIY tickets. Seth Basham: Got it. Okay. So, a little bit less pressure in the first half of the year and then more normal thereafter? Greg Johnson: Correct. Seth Basham: Thank you very much. Greg Johnson: Thanks Seth. Operator: Thank you. The next question is coming from Brian Nagel from Oppenheimer. Brian, your line is live. Brian Nagel: Hi. Good morning. Thanks for taking my questions. Congratulations on the promotions. Greg Johnson: Thanks Brian. Brent Kirby: Thank you, Brian. Brian Nagel: So, the first question, I guess it’s pretty simple, but the business did accelerate just from the comp perspective, even stacked up nicely here in Q4. And then the commentary you made suggests that strength has continued here to Q1. You mentioned weather is a driver. Is there €“ I guess, can we maybe quantify the benefits of weather within that acceleration? And are there other factors that could help to explain why the business has strengthened further off of already strong levels? Jeremy Fletcher: Yes. Brian, thanks for the question. The weather is a part of the acceleration, I would tell you, it’s not all of the acceleration. So, we continue to see traction. And maybe I will start here and the other guys can jump in. We continue to see strong traction within our professional business and the trends there we have seen, we are very encouraged by. From a DIY perspective as we move further out in the middle part of the year when we saw pressure that, that customer has proven to be resilient and stabilized quite a bit. And we have seen some incremental improvements there that are positive. Obviously, as we think about those things, we look at them on a stack basis because of the comparison questions. But those types of things were positive. As we got to the last couple of weeks of the year, we had a cold snap that stretched across a lot of the country and we can see that pretty clearly. But even in that period of time, what we saw was broad-based across a lot of our regions and markets and customers. And we have been pleased with how we continue to see strength in the first quarter. Greg Johnson: Brian, I think one of the things we called out that I think you are referencing is the strength in winter categories. And we did see €“ actually it was the expected strength where we saw cold weather, snowy weather. Obviously, up in North, snow is probably better for us than it is in the South, but the recovery component after the snow gets cleared in the South helps us out as well. Brian Nagel: Got it. And then helpful. Then my second question, look, I know it’s early. We have been talking about it as an investment community inflation and within your business for a while. But maybe as you are starting to see those inflationary pressures begin to abate and recognizing you are not lowering prices, but prices may not be going up as much as they once were, are you seeing consumers react favorably to that? In other words, I am asking, are you starting to see the early indications of what may be sort of say, an elasticity of demand here? Jeremy Fletcher: Yes. It’s kind of tough to see that, Brian. I think it lays into a lot of other factors with the consumer. We don’t see the same types of pressure on our customers when we have those things pass through. The shocks are a big deal. We saw shocks in 2022. But pretty quickly, our consumer adjusted to that. They have a real non-discretionary need for what they buy from us. They got to keep their car on the road to be able to get to work, to take their kids to activities, to do so many things that are part of American life. So, as we move past that, we have, I think some benefits. Before we were a little bit more constrained, maybe we have more of an opportunity to add items to a job or to sell them up on the value perspective, and we feel positive. But I think our positivity is just around the overall strength of how we view that consumer. Greg Johnson: Brian, and to Brent’s earlier comments about a trading up, trading down, we just really haven’t seen evidence of a significant trade-down to drive us to think that there was tremendous cost pressure on the consumer. Some of the trade-up, trade-down, trade-across, as I have said in previous quarters, was about inventory availability. Perhaps we didn’t have the particular brand they wanted. But a lot of that subsided with the improvement in our supply chain. So, really haven’t seen any evidence of elasticity or trade-down. Brian Nagel: Got it. Alright. Guys, congrats again. Thank you. Greg Johnson: Thanks Brian. Operator: Thank you. And the next question is coming from Mike Baker from D.A. Davidson. Mike, your line is live. Mike Baker: Okay. Thanks guys. We sort of danced around this, I think a little bit, but I wanted to ask you about any concern about a price war or aggressive pricing? We talked about it a year ago, there was a big concern. It never really materialized. But now as auto is talking about getting more investment in pricing, your gross margin, the midpoint is down, can you just address how you talk about or think about pricing amongst your close-end competitors? Thanks. Greg Johnson: Yes, Mike. We €“ as we said last year when we introduced this concept of adjusting our prices, it was a very scientific process we went about. It was thought out, it was tested, it was evaluated. And it wasn’t across the board. It was directed to individual SKUs across individual categories. And we did not see any movement from our competitors at that time. Since then, we have clearly taken some market share. So, what our competitors do going forward, we don’t know. We have no control over it. But we have seen no evidence of that today. Brad, you live this day-in and day-out. What are your thoughts? Brad Beckham: Yes. Hi, good morning Mike. Yes. As you know, as we talked for a long time, all of us here have been in this industry a long time. We have been with the company a long time. That’s the first time in my 26-year career that we have really moved our framework down the way we did. And we have no plans to do that again. We felt like, as you know, there was a huge opportunity. We work in a $130 billion industry, and we do €“ we have 10% share. And as you know, on the professional side, it’s so much more fragmented. And with the disruption we saw the last couple of years in supply chain and some other things that hit the independents and some of the smaller players harder, especially some of the weaker ones, it was very strategic for us to make the decision we made. And we feel not only as good as we did a year ago, but we feel better in the decision we made. But it’s made, we did it, we rolled it out. And there is no plans to do that again. And just to remind you, Mike, our team’s pro-price initiative is probably fifth or sixth down the list when our operational and sales teams go to market. They are focused on having relationships with the installers. They are focused on having relationships with the decision makers, given the best delivery service in town, helping them turn their base. And I don’t necessarily contribute a large portion success last year to just pricing, it’s backing up the pricing with the top two, three, four things that make the pricing pay-off. And we feel really good about how that’s going to continue to build in 2023. Mike Baker: Yes. Sorry, go on. Brent Kirby: Yes. This is Brent. I was just €“ the only thing I would add to the comments Greg and Brad have already made on professional pricing is the framework remains intact and we monitor it on an ongoing basis. We monitor all our pricing on an ongoing basis. But we have stayed very rigorous around being competitive, but winning on service and parts availability. That’s how we win. Mike Baker: Yes. Makes perfect sense. Appreciate the color. Greg Johnson: Thank you. Operator: Thank you. The next question is coming from Chris Horvers from JPMorgan. Chris, your line is live. Chris Horvers: Thanks for squeezing me in. Dovetail on a couple of earlier questions. I guess on that DIY acceleration, you got past €“ gas prices came down, you had some favorable weather in December. But I guess as you would look at DIY, do you think your share gains accelerated sequentially? Like, to what degree was the acceleration some more of like non-specific to O’Reilly factors versus share gains that you have been driving? Jeremy Fletcher: Yes. Really hard to say, Chris. And I think, especially on the DIY side of the business, the pace of what we see from a ticket perspective, more modest than on the professional side. I think we talked about where it’s very clear that we know we are outperforming the market. We think that likely throughout the course of all of €˜22 and, frankly, 2021 and 2020, we have been outperforming the market and taking in share gain. So, I don’t know that we have seen a net incremental acceleration there. I think it would be hard to see. And maybe you would have to watch it for a few more quarters. I do think that a lot of what we have seen is our customers just continued to be strong and healthy. And the industry continues to prove out that there is a lot of value in investing in your vehicle at higher mileages that it’s €“ there is a good payback on that for customers. And I think that’s been a positive as well for us. Chris Horvers: And so I have sort of a two-part follow-up. So, one is, I guess on the PTO program, to what extent is this sort of a competitive need where direct competitors, companies like Walmart are €“ had a higher PTO option that you are reacting to in the environment? And then just second, as you think about the first half, obviously, weather always has an impact. It hasn’t been that great of a winter so far. Is the expectation as you lap that gas shock that is essentially muting what’s been a relatively warm winter? Brad Beckham: Hi Chris, this is Brad. I will touch on the PTO and then kick it over for the other. But as you know, Chris, we work in a people business. You have heard us talk for a long time about the importance of having tenure and knowledge and professional parts people. And quite frankly, we are very proud. When Brent and I talk, whether it’s the store teams or DC teams, we are very proud of our ability to retain and cut down on turnover amongst everything that’s happened in the last couple of years. But frankly, Chris, we are getting ahead. We are going to invest in our people. We are looking at human capital. We are looking at things that we are less looking at what maybe competitors do or other parts of retail is we feel like this is very strategic. We feel like our people value their time off. We feel like we need to be more flexible in the way we give them that time off. And so really, this for us is getting ahead, not following anybody. We are being proactive and we are going to invest in our people. Jeremy Fletcher: And then maybe on the weather part of your question Chris. I would say, obviously, we have had some positives there at the end of our fourth quarter just maybe more on balance, we would view weather as neutral. I think depending upon market, we see things, plus or minus, there is nothing from a significant change perspective that at least at this point, we would call out as having an overhang effect as we move through to the next couple of quarters as we think about cadence during the year, and I know Brad mentioned it in his comments. We do expect more strength in the first half of the year because of some of the opportunities on average ticket in the comparisons from a DIY and professional ticket count perspective is as we run up against some more opportunities there. But on balance, I think weather, we would say it’s favorable constructive for the type of demand we would like to see in 2023. Chris Horvers: Thanks so much. Have a great spring. Greg Johnson: Thanks Chris. Operator: Thank you. And the next question is coming from Scot Ciccarelli from Truist. Scot, your line is live. Scot Ciccarelli: Hi guys. Scot Ciccarelli. Thanks for squeezing me in as well. Just €“ I guess one more question regarding kind of the same SKU inflation comments you guys have already made. Are some vendors actually reducing product costs, or are we just talking about reducing the magnitude of increases, because obviously, that’s two different things. Brent Kirby: Yes. Chris, this is Brent €“ Scot, rather, this is Brent. I would tell you it’s a little bit of a mixed bag out there. There are some suppliers that have been more impacted by wage rates and raw material costs than others, obviously. We are always going to negotiate hard. We are always going to negotiate for best first cost. None of that stopped. We are relentless with that. We are going to continue to be. I hit on in the prepared comments, we have seen transportation costs abate from what they were from the peak. We have seen some benefit from that. So, we have also still seen some continued inflation even later in the cycle on petroleum products. So, it’s a mixed bag out there, but our guide anticipates that we are not going to see any tailwinds from acquisition costs. We are going to negotiate hard, and we are going to do everything we can to control cost. And then where we do have to absorb any increases, we will be able to pass those along to our customers. Jeremy Fletcher: And just to be completely clear on that one, Scot, when we say our guide, it does include some benefit from cost reductions. I think what Brent is saying there is that we are not anticipating a lot of incremental things versus what we haven’t seen already. Scot Ciccarelli: Got it. Okay. That’s very helpful. And then just clarity on the $28 million PTO charge in SG&A. Was that treated as a charge because that was like an accrual catch-up of some sort and then we are basically on a run rate basis for €˜23? Jeremy Fletcher: Yes. Scott, we did have an accrual catch-up. As we converted to the plan, we had some existing balances and some other types of sick and personal time items that as we enhanced, we had a one-time catch-up for team members. And then our run rate will be higher as a result of what we have seen. On a comparative basis, it will have normal comparisons there with the difference, obviously, that it will be a run rate throughout €˜23 as opposed to a fourth quarter charge in €˜22. Scot Ciccarelli: Very helpful. Thanks guys. Greg Johnson: Thanks Scot. Operator: Thank you. We have reached our allotted time for questions. I will now turn the call back over to Mr. Greg Johnson for closing remarks. Greg Johnson: Thank you, Paul. We would like to conclude our call today by thanking the entire O’Reilly team once again for their unwavering commitment to our customers and for our strong results we have posted in 2022. We look forward to another strong year in 2023. I would like to thank everyone for joining our call today, and we look forward to reporting 2023 first quarter results in April. Thank you. Operator: Thank you. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation. Follow O Reilly Automotive Inc (NASDAQ:ORLY) Follow O Reilly Automotive Inc (NASDAQ:ORLY) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Category: topSource: insidermonkeyFeb 13th, 2023

3 Top Stocks From the Buoyant Security and Safety Services Industry

Thanks to growing urbanization, healthy demand for security solutions and products favors the Zacks Security and Safety Services industry's near-term prospects. Amid the positivity, AXON, ALLE and ADT are poised for growth. The Zacks Security and Safety Services industry is poised to benefit from healthy demand for security solutions and products, thanks to growing urbanization and increased awareness regarding the importance of security. Product upgrades, per changing market scenario and digitalization, bode well for the industry’s growth. These factors point to a rosy near-term outlook for the industry despite persistent supply chain disruptions and cost inflation.Against this buoyant backdrop, Axon Enterprise AXON, Allegion plc ALLE and ADT Inc. ADT are well-placed to take advantage of steady demand in the industry.About the IndustryThe Zacks Security and Safety Services industry comprises companies that provide sophisticated and interactive security solutions and related services, which are meant to be used for residential, commercial and institutional purposes. A few industry players develop electrical weapons for personal defense as well as military, federal, law enforcement and private security. Some of them provide solutions for the recovery of stolen vehicles, wireless communication devices, equipment for the safety of facility infrastructure and employees, and products for detecting hazards. A few companies provide a variety of services to automobile owners and insurance companies. The industry serves customers belonging to various end markets, including manufacturing, electronics, hospitality, education, construction, telecommunications, aerospace and medical. 3 Trends Shaping the Future of the Security and Safety Services IndustryDemand for Security and Safety Services: With growing urbanization, governments are increasingly focusing on the safety and security of people, assets and the like, thus driving demand in the industry. Thanks to rising instances of hacking, the industry is seeing growing demand for Internet security products and services like firewalls and unified threat management. Increasing efforts directed toward ensuring safe infrastructure in smart cities bode well for the industry.Product Launches and Digitalization: Focus on upgrading and developing new products to keep up with the changing market sentiment toward electronic security products and solutions is expected to bolster the top lines of security and safety services companies. Enhanced digitalization and technological developments are other tailwinds likely to benefit industry participants.Supply Chain Woes: Despite improving, supply chain disruptions, particularly related to the shortage of components, continue to plague the industry. High raw material and freight costs are weighing on the bottom line of safety and security service companies. Given substantial international exposure, these companies also suffer from foreign currency headwinds.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Security and Safety Services industry, housed within the broader Industrial Products sector, currently carries a Zacks Industry Rank #110. This rank places it in the top 44% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. The Zacks Consensus Estimate for the group’s 2023 earnings per share has increased more than 100% since October 2022-end.Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it is worth taking a look at the industry’s shareholder returns and its current valuation firstIndustry Lags Sector, Outperforms S&P 500While the Zacks Security and Safety Services industry has underperformed the broader sector over the past year, it has outperformed the Zacks S&P 500 composite index.Over this period, the industry has declined 3.6%, compared with the sector and the S&P 500 Index’s 1.3% and 11.7% decline, respectively.One-Year Price Performance Industry's Current ValuationOn the basis of forward P/E (F12M), which is a commonly used multiple for valuing security and safety services stocks, the industry is currently trading at 19.93X compared with the S&P 500’s 18.60X. It is also above the sector’s P/E (F12M) ratio of 17.12X.Over the past five years, the industry has traded as high as 26.32X, as low as 10.31X and at the median of 17.66X, as the chart below shows:Price-to-Earnings RatioPrice-to-Earnings Ratio3 Security and Safety Services Stocks to BuyBelow we discuss three stocks from the industry that have solid growth opportunities. Each of the stocks mentioned carries a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Axon: The company stands to benefit from strength in its TASER segment owing to the increasing popularity of the latest generation products like TASER 7 and TASER StrikeLight 2. The acquisition of Foundry 45 is fortifying its growth by expanding its presence in new markets globally. Focus on managing costs should aid AXON’s bottom-line performance. Axon currently sports a Zacks Rank #1.Headquartered in Scottsdale, AZ, Axon focuses on the development, manufacture and sale of conducted electrical weapons for the law enforcement, federal, military, corrections, private security and personal defense markets. The Zacks Consensus estimate for AXON’s 2023 earnings has remained steady in the past 60 days. The stock has rallied nearly 69% in the past six months.Price and Consensus: AXON Allegion: Strength in non-residential and electronics end markets bode well for the company’s growth. Effective pricing actions should drive its top line. The January 2023 acquisition of Plano Group, which has expanded ALLE’s Interflex portfolio and AWFM business with new capabilities in SaaS models and recurring revenue solutions, is expected to fuel growth. Allegion sports a Zacks Rank #1.Headquartered in Dublin, Ireland, Allegion is a global provider of security products and solutions for business and domestic purposes. The Zacks Consensus Estimate for the company’s 2023 earnings has remained steady in the past 60 days. The stock has gained 21.3% in the past six months. Price and Consensus: ALLE ADT: Higher average pricing, subscriber growth initiatives and improved customer retention augur well for the company’s growth. Reduced costs, thanks to higher customer satisfaction from ADT’s Virtual Assistance program, should contribute to margin expansion. The stock carries a Zacks Rank #2.Based in Boca Raton, FL, ADT provides security and automation solutions for homes and businesses, primarily in the United States and Canada. The Zacks Consensus Estimate for ADT’s 2023 earnings has remained steady in the past 60 days. Shares of the company have increased 9% in the past six months.Price and Consensus: ADT  7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.8% per year. So be sure to give these hand-picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Axon Enterprise, Inc (AXON): Free Stock Analysis Report ADT Inc. (ADT): Free Stock Analysis Report Allegion PLC (ALLE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 8th, 2023

4 Food Stocks Worth Relishing on Strong Industry Trends

The Zacks Food-Miscellaneous industry players are benefiting from strong pricing actions and portfolio growth efforts amid cost inflation. These upsides keep Conagra Brands (CAG), The J.M. Smucker (SJM), Campbell Soup (CPB) and Lamb Weston (LW) well-placed. Players in the Zacks Food-Miscellaneous industry have been benefiting from their constant focus on innovation, product upgrades and portfolio refinement to cater to consumers’ altering tastes and preferences. Elevated at-home consumption has been working well for food companies.Additionally, strong pricing endeavors have been helping food companies like Conagra Brands, Inc. CAG, The J. M. Smucker Company SJM, Campbell Soup Company CPB and Lamb Weston Holdings, Inc. LW battle cost inflation. About the IndustryThe Zacks Food-Miscellaneous industry consists of companies that manufacture and sell a wide range of food and packaged food items such as cereals, flour, sauces, bakery items, spices and condiments, natural and organic food items as well as frozen products. Some of the companies also provide comfort food items such as chocolates and ready-to-serve meals, soups and snacks. A few players are engaged in providing pet food products and supplements. Several food companies also offer organic and natural products. The companies operating in this space sell their products mostly through wholesalers, distributors, large retail organizations, grocery chains, mass merchandisers, drug stores as well as e-commerce service providers. Some also cater to foodservice channels, including restaurants, cafes and hotels. Others offer services to schools, hospitals and industry caterers.Major Trends Shaping the Future of the Food IndustryRefining Portfolio to Suit Consumer Needs: Food companies have been taking to product upgrades and innovations on a regular basis to cater to consumers’ changing tastes and preferences. Companies are also focused on making capacity expansions and technology investments to enhance efficiency in their operations. Apart from this, companies have been coming up with organic and nutrient-rich food options as health and wellness have gained further importance amid the pandemic. A number of miscellaneous food companies are enriching their portfolio by adding more plant-based and natural brands. Additionally, companies often engage in portfolio refinement through strategic buyouts and divestiture of non-core elements.Higher At-Home Consumption Fuels Demand: Food companies have been witnessing improved demand from retailers (compared with pre-pandemic levels) thanks to consumers’ elevated at-home consumption. Notably, the pandemic has made society even more aware of the importance of consuming healthy and nutritious food by cooking at home. At-home demand is likely to remain elevated as a number of Americans have cultivated cooking and baking at home as a new habit. As a result, the demand for organic and fresh food products has been high. Increased at-home consumption has been working well for companies offering packaged food and snacks, ready-to-cook meals, as well as confectionery and bakery items.E-commerce Investments Gain Predominance: Consumers’ high dependency on digital transactions has pushed several food companies to bolster online offerings. Online sales have been boosting revenues of several food companies. To continue building on the sales momentum, companies in the food space are striving to bolster operations at fulfillment centers.Rising Costs: Food players have been encountering input cost inflation for a while now. A number of the companies, in their last earnings releases, stated that they expect input costs to remain high in the near term. Apart from this, supply-chain hurdles have increased warehouse, packaging and other logistics expenses. The rise in these expenses, along with a tough labor market, has been plaguing margins. That said, companies have been focused on undertaking initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing manufacturing capacity and supply networks as well as adopting effective pricing policies.Zacks Industry Rank Indicates Solid ProspectsThe Zacks Food-Miscellaneous industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #70, which places it in the top 28% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Since the beginning of December 2022, the industry’s earnings estimate for 2023 has increased nearly 1%.Let’s take a look at the industry’s performance and current valuation.Industry Vs. Broader MarketThe Zacks Food-Miscellaneous industry has outperformed the S&P 500 and the broader Zacks Consumer Staples sector over the past year.The industry has dipped 0.9% over this period compared with the S&P 500’s decline of 9.8%. Meanwhile, the broader sector has dropped 5% in the said time frame.One-Year Price PerformanceIndustry's Current ValuationOn the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer staples stocks, the industry is currently trading at 17.22X compared with the S&P 500’s 18.74X and the sector’s 18.55X.Over the past five years, the industry has traded as high as 20.6X and as low as 15.08X, with the median being at 17.93X, as the chart below shows.Price-to-Earnings Ratio (Past 5 Years) 4 Food Stocks to Keep a Close Eye onConagra Brands: This consumer-packaged goods food company has been gaining from its robust pricing actions in the face of increasing cost of goods sold inflation. Constant focus on innovation as well as ongoing execution of the Conagra Way playbook is working well for this Zacks Rank #1 (Strong Buy) company. Conagra has a long-term earnings growth rate of 7%. The Zacks Consensus Estimate for CAG’s current financial-year EPS has risen 8.1% over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here. The consensus mark for current fiscal year sales suggests growth of 7.2% from the year-ago period reported figure. Shares of CAG have risen 4.2% in the past year.Price and Consensus: CAGLamb Weston: Lamb Weston’s efforts to boost capacity enable it to meet rising demand conditions for snacks and fries. This value-added frozen potato products company has been gaining from pricing actions, which has been helping it battle input, manufacturing and transportation cost inflation. The consensus mark for current fiscal year sales suggests growth of 19.6% from the year-ago period reported figure.The Zacks Consensus Estimate for Lamb Weston’s current financial year's EPS has jumped 30.7% over the past 30 days. LW has a long-term earnings growth rate of 29.8%. Shares of this Zacks Rank #1 company have rallied 52.6% in the past year.Price and Consensus: LWCampbell Soup: This well-known manufacturer and marketer of food and beverage products has been gaining from brand strength, pricing actions and supply chain improvements. Apart from this, Campbell Soup is benefiting from strength in its Snacks business as well as focus on innovation.The Zacks Consensus Estimate for Campbell Soup’s current financial year's EPS has increased 3.1% over the past 60 days. CPB has a long-term earnings growth rate of 3.4%. Shares of this Zacks Rank #2 (Buy) company have gained 16.8% in the past year. The consensus mark for current fiscal year sales suggests growth of 8.2% from the year-ago period reported figure.Price and Consensus: CPBThe J.M. Smucker: The company has been progressing well with core priorities, which include driving commercial excellence; reshaping portfolio; streamlining cost structure and unleashing its organization to win. Strength in the Away from Home division and efficient pricing have been upsides for The J. M. Smucker Company. The manufacturer and marketer of branded food and beverage products has been witnessing strength in the Pet and Coffee businesses. SJM’s investments in growth areas like the Uncrustables brand bodes well. This Zacks Rank #2 stock has jumped 9.4% in a year’s time.The Zacks Consensus Estimate for The J. M. Smucker Company’s current financial-year EPS has risen by a penny over the past 30 days. SJM has a long-term earnings growth rate of 3.3%. The consensus mark for current fiscal year sales suggests growth of nearly 6% from the year-ago period reported figure.Price and Consensus: SJM Free Report: Must-See Hydrogen Stocks Hydrogen fuel cells are already used to provide efficient, ultra-clean energy to buses, ships and even hospitals. This technology is on the verge of a massive breakthrough, one that could make hydrogen a major source of America's power. It could even totally revolutionize the EV industry. Zacks has released a special report revealing the 4 stocks experts believe will deliver the biggest gains.Download Cashing In on Cleaner Energy today, absolutely free.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Conagra Brands (CAG): Free Stock Analysis Report Campbell Soup Company (CPB): Free Stock Analysis Report The J. M. Smucker Company (SJM): Free Stock Analysis Report Lamb Weston (LW): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 7th, 2023

3 Communication Stocks Likely to Ride on Fiber Densification

The accelerated pace of 5G deployment should help the Zacks Communication - Components industry thrive despite short-term headwinds. ANET, HLIT and TESS are well-positioned to make the most of the demand for seamless connectivity solutions. The Zacks Communication - Components industry appears well poised to gain from fading supply chain adversities, increased fiber densification and a faster pace of 5G deployment. However, large-scale investments for infrastructure upgrades to support the transition to 5G, high inflationary pressures and elevated inventory levels amid a challenging macroeconomic environment and uncertain market conditions have led to intense volatility in raw material prices.Nevertheless, Arista Networks, Inc. ANET, Harmonic Inc. HLIT and TESSCO Technologies Incorporated TESS might benefit in the long run as pent-up demand for scalable infrastructure rises for seamless connectivity with the wide proliferation of IoT.Industry DescriptionThe Zacks Communication - Components industry primarily comprises companies that provide diverse telecom products and services to develop scalable network architecture, demand-driven video solutions and broadband access equipment. These include various building blocks such as small cells, routers and antennas incorporated into equipment and facilities and subsequently utilized by service providers to build networks for end users. The product portfolio encompasses optical and copper connectivity products, hybrid fiber-coaxial equipment, edge routers, metro Wi-Fi, storage and distribution equipment for cable TV operators, modems, EMTAs (Embedded Multimedia Terminal Adapter), gateways, set-top boxes, analog and digital microphones, audio processors, glass substrates for LCD TVs and notebooks, ceramic substrates for mobile and laboratory filtration products.What's Shaping the Future of the Communication Components IndustryEvolution to Demand-Driven Business Model: Fiber networks are essential for the growing deployment of small cells that bring the network closer to the user and supplement macro networks to provide extensive coverage. Telecom service providers are increasingly leaning toward fiber optic cable to meet the burgeoning demand for cloud-based business data and video-streaming services by individuals. Moreover, the fiber-optic cable network is vital for backhaul and last-mile local loop, which are required by wireless service providers to deploy the 5G network. Higher utilization of advanced routers to deliver data packets from one network to another is gaining prominence, while state-of-the-art antenna systems remain essential architectural components for seamless connectivity. Telecom firms are aiding their customers to move away from an economy-of-scale network operating model to demand-driven operations by offering easy programmability and flexible automation. The convergence of network technologies requires considerable investments from traditional carriers (telecom and cable) and cloud service providers. Although these investments will eventually help minimize service delivery costs to support broadband competition and wireless densification, short-term profitability has largely been compromised.Rising Demand for Scalable Infrastructure: Consumer demand for faster Internet speeds with more capacity continues to grow at an escalating rate, primarily driven by the increasing consumption of videos. The vast proliferation of cloud networking solutions is further resulting in increased storage and computing on a virtual plane. As consumers and enterprises use the network, there is tremendous demand for quality networking equipment. Moreover, the demand for faster data transfer is fueling the growth of optical networks. The industry participants provide the technology that enables customers to manage this exponential bandwidth development cost-effectively through steady investments in state-of-the-art technologies. These include DOCSIS (Data Over Cable Service Interface Specification), DSL (Digital Subscriber Line) and Next Generation PON (Passive Optical Network) platforms that enable service providers to deliver the highest bandwidth to subscribers across any physical connection. Further, some firms offer a variety of pathways for providing services through a combination of network-based video transcoding, packaging, storage and compression technologies required to deliver new IP video formats and home gateways to connected devices inside and outside the home.Short-Term Profitability at Stake: The exponential growth of mobile broadband traffic and home Internet solutions have resulted in a massive demand for advanced networking architecture, forcing service providers to spend more on routers and switches as carriers aim to upgrade their networks. Further, there is a continuous need for network tuning and optimization to maintain superior performance standards, creating demand for state-of-the-art wireless products and services. Although higher infrastructure investments will eventually help minimize service delivery costs to support broadband competition and wireless densification, short-term profitability has largely been compromised. Margins are likely to be affected by the high cost of first-generation 5G products, profitability challenges in China, the Russian invasion of Ukraine and pricing pressures. Uncertainty regarding chip shortage and supply-chain disruptions leading to a dearth of essential fiber materials, shipping delays and scarcity of other raw materials are likely to affect the expansion and rollout of new broadband networks. Extended lead times for basic components are also likely to affect the delivery schedule and increase production costs. High technological obsolescence of most products has escalated operating costs with steady investments in R&D. High customer inventory levels remain another headwind for the companies.Zacks Industry Rank Indicates Bullish TrendsThe Zacks Communication - Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #106, which places it among the top 42% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.Before we present a few communication component stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Lags S&P 500, Outperforms SectorThe Zacks Communication - Infrastructure industry has lagged the S&P 500 composite but outperformed the broader Zacks Computer and Technology sector over the past year.The industry has lost 9.7% over this period compared with the S&P 500 and sector’s decline of 9.1% and 16.5%, respectively.One-Year Price PerformanceIndustry's Current ValuationOn the basis of the trailing 12-month price-to-book (P/B), the industry is currently trading at 3.41X compared with the S&P 500’s 5.77X. It is also below the sector’s trailing-12-month P/B ratio of 5.29X.Over the past five years, the industry has traded as high as 4.31X, as low as 1.99X and at the median of 3.09X, as the chart below shows.Trailing 12-Month price-to-book (P/B) Ratio3 Communication Components Stocks to Keep a Close Eye onArista: Santa Clara, CA-based Arista provides cloud networking solutions for data centers and cloud computing environments. It offers one of the broadest product lines of datacenter and campus 1/2.5/5/10/25/40/50/100/400 Gigabit Ethernet switches and routers in the industry. The stock has gained 64.9% in the past two years. The Zacks Consensus Estimate for the current and next fiscal earnings has been revised 20.6% and 23.8% upward, respectively, over the past year. It has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.Arista continues benefiting from the expanding cloud networking market, driven by strong demand for scalable infrastructure. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance and programmability that enable integration with third-party applications for network management, automation and orchestration. The company’s product portfolio facilitates the implementation of high-performance, highly scalable and appropriate solutions for every environment. Arista currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price and Consensus: ANETHarmonic: Headquartered in San Jose, CA, Harmonic provides video delivery software, products, system solutions and services worldwide. With more than three decades of experience, it has revolutionized cable access networking via the industry's first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit Internet service to consumers' homes and mobile devices.Harmonic, carrying a Zacks Rank #3 (Hold), delivered an earnings surprise of 55.3%, on average, in the trailing four quarters. The stock has gained 57.3% over the past year. It has a VGM Score of B. Earnings estimates for Harmonic for the current year have moved up 48.4% since February 2022.Price and Consensus: HLITTESSCO: Headquartered in Hunt Valley, MD, TESSCO offers base station infrastructure products, including base station antennas, cable and transmission lines, and network systems products, such as fixed and mobile broadband radio equipment and security and surveillance products. It offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry. The Zacks Consensus Estimate for the current-year earnings of this Zacks Rank #3 stock has moved up 38.2% over the past year.With the completion of the sale of the retail business, the company is likely to be better focused and more growth-oriented, even as the industry grapples with various supply constraints. TESSCO has multiple growth drivers over the next several years and is poised to benefit from the faster rollout of 5G and the increasing prevalence of IoT. Focus on pricing, stringent cost-cutting initiatives and an emphasis on high-margin products are additional tailwinds.Price and Consensus: TESS Just Released: Free Report Reveals Little-Known Strategies to Help Profit from the  $30 Trillion Metaverse Boom It's undeniable. The metaverse is gaining steam every day. Just follow the money. Google. Microsoft. Adobe. Nike. Facebook even rebranded itself as Meta because Mark Zuckerberg believes the metaverse is the next iteration of the internet. The inevitable result? Many investors will get rich as the metaverse evolves. What do they know that you don't? They’re aware of the companies best poised to grow as the metaverse does. And in a new FREE report, Zacks is revealing those stocks to you. This week, you can download, The Metaverse - What is it? And How to Profit with These 5 Pioneering Stocks. It reveals specific stocks set to skyrocket as this emerging technology develops and expands. Don't miss your chance to access it for free with no obligation.>>Show me how I could profit from the metaverse!Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Arista Networks, Inc. (ANET): Free Stock Analysis Report Harmonic Inc. (HLIT): Free Stock Analysis Report TESSCO Technologies Incorporated (TESS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksFeb 6th, 2023

"The More He Talked, The More Dovish He Was": Futures, Global Stocks Surge As Powell Steamrolls Bears

"The More He Talked, The More Dovish He Was": Futures, Global Stocks Surge As Powell Steamrolls Bears Global markets rose, with US futures solidly in the green as tech stocks were set to extend their rally on Thursday, lifted by Powell’s comments on inflation and Meta surging 20% in US premarket trading after the social-media giant’s earnings and buyback news. Summarizing yesterday's market moving FOMC decision and presser, Goldman said that even though the "FOMC Statement was Hawkish: kept 'ongoing' and 'appropriate', however "more importantly presser was dovish: 1) Powell’s disinflation language (“we can say the disinflation process has started”, something that’s “welcome, encouraging, and gratifying”) and 2) the fact Powell didn’t warn markets RE easing financial conditions in the last few weeks." In kneejerk reaction bears everywhere were steamrolled as Powell triggered a marketwide short squeeze. Nasdaq futures were up 1.3% at 7:45 a.m. ET after the tech-heavy index jumped 2% during the previous session and closed at its highest level since September; the Nasdaq 100 is up 13% this year, having posted the best monthly gain since July in January. The recovery follows last year’s 33% slump, which was the worst since the 2008 global financial crisis. S&P futures added another 0.4% to yesterday's surge, which pushed spoos to 4152, the highest since August as the consensus bearish trade (JPM, MS, GS, BofA are all bearish) gets steamrolled. In premarket trading, it was all about Meta, whose gain of about 20% - the biggest one-day surge in the stock since 2013 - represents about 75 points in Nasdaq 100 futures’ advance, or about three quarters of the rise as the social media giant posted quarterly sales that topped estimates and boosted its stock-buyback authorization. If the gains hold, Meta will more than double its market value since a Nov. 3 low. The owner of Facebook is the best performer in the S&P 500 Index since the stock’s recent November 3 closing low of $88.91, and is poised to more than double in value since then. Shares of social-media companies such as Snap Inc. and other tech companies such as Alphabet Inc. gained in US premarket today. The Google parent, Apple and Amazon.com Inc. are among tech giants reporting results today. Here are some other premarket movers: Bank stocks are higher in premarket trading Thursday amid a broader rally by risk assets following the Federal Reserve’s interest-rate decision. In corporate news, Citigroup’s wealth arm has stopped accepting securities of Gautam Adani’s group of firms as collateral for margin loans. Meanwhile, Bank of America’s global mining head Omar Davis, one of the most senior bankers covering the sector, is retiring Carvana jumped as much as ~31%, putting the used car dealer on course for its sixth session of straight gains amid the rally in riskier assets. Shares in companies exposed to cryptocurrencies gained as Bitcoin held at its highest level since last August. The euphoric mood was set by Powell’s comment Wednesday that the “disinflation process has started” suggesting that the aggressive tightening cycle is starting to reduce the pace of price growth, even as he warned of a “couple” more hikes to come. Positioning in US swaps markets assumes the Fed is getting closer to cutting rates as traders bet that economic conditions are likely to keep it from the additional rate increases that policy makers still anticipate. "The more he talked, the more dovish he was,” Charles-Henry Monchau, chief investment officer at Banque Syz, said of Powell’s briefing. “It’s possible we’ll continue to see a series of volatility, but definitely the conditions seems to be more risk-on than last year,” he said on Bloomberg Television. That said, some bears were stuck in denial: “Markets heard what they wanted to hear from the Fed,” said Veronique Riches-Flores, economist and founder of RichesFlores Research. “Markets will likely surf on this wave in the short term and it’s a good environment for risk assets.” “Moving forward though there will likely be a lot of volatility around key indicators, such as the jobs data on Friday,” she said. “At one stage, if the data shows the economy is really resilient, investors will need to anticipate that Powell will need to take back control and that can lead to even more volatility.” European stock also rose, tracking Wednesday’s gains on Wall Street after the Fed downshifted to a 25bps rate increase and noted inflation had eased somewhat. The Stoxx 600 was up 0.8% with tech, real estate and retail the best performing sectors. Here are some of the biggest European movers: Shell shares rise as much as 2.2% in London after the oil major launched a $4 billion share buyback, and posted full-year results that showed a record performance in 2022 Banco Santander shares jump as much as 4.3% after the Spanish lender beat estimates, and offered positive guidance that analysts said could lead to further consensus upgrades Telecom Italia shares jump as much as 14%, the most intraday since November 2021, after KKR made a non-binding offer for a stake in the phone company’s multi-billion-euro network Dassault Systemes shares gain as much as 5.4%, the biggest intraday climb since November, after the software company’s FY constant-currency sales growth forecast topped estimates Siemens Healthineers gains as much as 6.8% as analysts flag solid order book momentum at the medtech group, offsetting a miss to first-quarter Ebit Telenor shares gain as much as 6.8%, the biggest intraday climb since March 2020, after the telecom operator’s guidance for Ebitda growth in Nordic markets beat analyst expectations Infineon shares jump as much as 8.8%, the most since March, after the chipmaker lifted its full-year margin forecast and kept its revenue outlook while factoring in a weaker dollar ING shares drop as much as 8.2% in early trading as analysts said the lack of a new buyback announcement and some areas of weakness in the Dutch lender’s results offset a profit beat Electrolux shares drop as much as 11% with analysts saying the appliances manufacturer’s update was much worse than anticipated Roche falls as much as 1.4% after a cautious outlook weighed on an overall weak quarterly report from the Swiss pharmaceutical giant Deutsche Bank shares drop 5.3%, most in four months, after the German lender’s earnings missed estimates. JPMorgan analysts say lack of buyback guidance also weighed Asian stocks advanced as the Federal Reserve chair said efforts to quell inflation are making progress, supporting risk sentiment.  The MSCI Asia Pacific Index climbed as much as 1% before paring more than half of the advance. Interest-rate sensitive tech stocks led gains, with TSMC, Samsung and Baidu giving among the biggest boost to the gauge.  Tech-heavy benchmarks including Taiwan and South Korea led a rally in the region, while measures in Japan were mixed as the yen strengthened against the dollar. Key gauges in Hong Kong and Singapore fell, while Adani Group shares dragged on Indian benchmarks. Investors cheered remarks by Jerome Powell that price pressures have started to ease, even as the Fed chair also said more interest-rate hikes are in store after delivering a quarter percentage-point rate increase. The dollar extended its fall following the Fed’s decision, helping boost foreign inflows to Asian equities.  “Markets are really charting out their own path right now, looking at what inflation has been doing,” Charu Chanana, a senior markets strategist at SAXO Capital Markets, said in an interview with Bloomberg TV, adding that she would be more careful about risks ahead.  “Even though Chair Powell highlighted dis-inflationary pressures that are there, we are potentially looking at inflation really being a monster,” she said.   The key Asian stock index briefly touched its highest level since April after climbing some 27% from its October trough amid euphoria over China’s reopening and growing bullish calls on Asia. The gauge has outperformed the S&P 500 Index by about two percentage points so far this year.  Japanese equities ended mixed, bucking a broader rally in global stocks, as the Federal Reserve’s slower pace of rate hike strengthened the yen.  The Topix Index fell 0.4% to 1,965.17 as of market close, while the Nikkei advanced 0.2% to 27,402.05. Toyota Motor Corp. contributed the most to the Topix Index decline, decreasing 1.2%. Out of 2,164 stocks in the index, 608 rose and 1,462 fell, while 94 were unchanged. “Powell’s acknowledgment of a slowdown in inflation while mentioning that the labor market is strong were well received,” said Takashi Ito, a senior strategist at Nomura Securities. Still, Japanese stocks are unlikely to rise as much as US peers as the yen strengthened.  Stocks in India were mostly higher on Thursday as investors looked beyond the rout in Adani Group shares, while companies continued to report strong earnings performance.  All but one of the 10 companies related to the Adani Group declined as a week-long selloff in the diversified conglomerate’s shares stretched to $108 billion. On Wednesday, the group’s flagship firm Adani Enterprises, abruptly scrapped its fully-subscribed $2.4 billion follow-on stock sale plan amid carnage in its shares. It was the worst performer on Thursday, falling 27%, while three firms extended slide by 10% each.  The S&P BSE Sensex rose 0.4% to 59,932.24 in Mumbai, while the NSE Nifty 50 Index was little changed. For the week, the Sensex is up 1% while the Nifty is steady, dragged by some of Adani companies and insurers, which have come under pressure following changes to India’s tax rules for the sector. Even as the carnage in Adani shares has dampened sentiment, investors are starting to focus on companies’ earnings performance and growth outlook. Tata Consumer was the latest to report higher-than-expected profit for the December quarter while mortgage lender HDFC and jewelry maker Titan’s earnings met the consensus view The Dollar Index fell 0.1% following the Fed rate decision and after Chairman Jerome Powell said the central bank has made progress in its battle against inflation, while the Norwegian krone and British pound are the weakest among the G-10 currencies.  “The slowdown in the pace of Fed tightening to 25bps underlines the fact that the risk reward balance for central banks fighting the inflation threat is changing and after the aggressive action last year and the signs of easing inflation, greater caution in tightening policy is feasible,” MUFG analysts write in a note, adding that policy announcements from the ECB could highlight a policy divergence between the central banks. “The greater caution by the ECB last year means it has more work to do and that should be on show today with a 50bp hike coupled with still a hawkish message of more work to do to reach a level of policy consistent with price stability,” they add EUR/USD rose as much as 0.4% to 1.1033, extending gains for the third day before the ECB is expected to hike rates and warn that it will maintain its position that more aggressive rate rises are in store. A more hawkish policy stance by the ECB compared with the Fed suggest that investors are likely to focus on rate differentials, which could push EUR/USD towards 1.15 in the coming months USD/JPY slips 0.1%, after falling around after the Fed announcement EUR/SEK hovers near 11.4 hit earlier in the week, its strongest since March 2020. The Swedish krona has come under selling pressure over the past two weeks amid growing concerns about Sweden’s sluggish growth and a deteriorating housing market due to higher inflation. In rates, Treasuries were richer across belly of the curve, broadly holding Wednesday’s post-Fed move along with stocks. US yields richer on the day by up to 1.5bp across belly of the curve, the 10Y trading at 3.38% after closing around 3.42%; gilts had brief setback after Bank of England decision, followed by new yield lows for 10-year sector, richer by 16bp on the day (as reported earlier, Bank of England delivered a 50bp rate hike as expected with a vote split of 7-2 for a hike to 4%; statement said that inflation risks were skewed significantly to the upside). In Europe, focus now shifts to ECB rate decision at 8:15am New York time and President Christine Lagarde’s press conference.  Three-month dollar Libor +0.99bp at 4.80614%. US economic data slate includes January Challenger job cuts (7:30am), 4Q nonfarm productivity, initial jobless claims (8:30am) and December factory orders (10am) In commodities, WTI trades around session lows under USD 76.50/bbl (vs a USD 77.24/bbl high) while its Brent counterpart sits under USD 82.75/bbl (vs a USD 83.61/bbl high). Shell CEO sees continued appetite for gas in China, too early to say if the European energy crisis over. Adds, gas business can keep growing next year. Spot gold is holding onto gains above the $1950/oz mark with the 19th April peak at USD 1981/oz ahead while LME Copper reclaimed USD 9.1k/T after slipping below the mark on Wednesday. Looking to the day ahead now, and the main highlights will be the ECB and BoE policy decisions, along with the subsequent press conferences from President Lagarde and Governor Bailey. Otherwise, US data releases include the weekly initial jobless claims, December’s factory orders, and the preliminary reading of nonfarm productivity in Q4. Lastly, earnings releases include Apple, Amazon and Alphabet. Market Snapshot S&P 500 futures up 0.4% to 4,150.25 STOXX Europe 600 up 0.6% to 456.03 MXAP up 0.2% to 169.87 MXAPJ up 0.3% to 557.20 Nikkei up 0.2% to 27,402.05 Topix down 0.4% to 1,965.17 Hang Seng Index down 0.5% to 21,958.36 Shanghai Composite little changed at 3,285.67 Sensex up 0.4% to 59,945.83 Australia S&P/ASX 200 up 0.1% to 7,511.65 Kospi up 0.8% to 2,468.88 German 10Y yield little changed at 2.26% Euro little changed at $1.0994 Brent Futures little changed at $82.82/bbl Gold spot up 0.2% to $1,954.63 U.S. Dollar Index little changed at 101.17 Top Overnight News from Bloomberg The dollar has had its worst start to the year since 2018, and chances are the losses may deepen with some help from the European Central Bank on Thursday. Currency option investors are looking for the Bank of England’s rate decision to have a bigger near-term impact on the pound than European Central Bank’s move later Thursday will have on the euro. Traders who’ve shrugged off Federal Reserve Chair Jerome Powell’s repeated warnings that interest rates will remain elevated this year will have their wagers tested again within weeks by key economic data. European stocks climbed with US equity futures, building on Wall Street’s advance after Federal Reserve Chair Jerome Powell said the central bank had made progress in its battle against inflation. Bank of Japan Deputy Governor Masazumi Wakatabe signaled there will be no policy change next month shortly before the end of his term and warned against further adjustments to the central bank’s yield curve control program. The Bank of Japan may be able to step toward normalizing policy this year by achieving its sustainable inflation target, according to Takatoshi Ito, an ally of Haruhiko Kuroda and a contender to replace him in April. Investors are readying for the final stretch in the race to replace Bank of Japan Governor Haruhiko Kuroda, a decision that could whipsaw markets from the yen to Treasuries. North Korea’s Foreign Ministry said the door remains shut for talks with the US on winding down its atomic arsenal, setting the stage for renewed provocations by pledging to respond to what it saw as threats from Washington. More detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly higher in the aftermath of the FOMC meeting where the Fed slowed the pace of rate increases and Fed Chair Powell provided a slew of two-sided remarks in which he pointed to a couple more rate hikes to get to an appropriately restrictive stance but noted they are not very far from that level and acknowledged that the disinflationary process had begun. ASX 200 was led by outperformance in gold miners and tech but with gains limited by weakness in other commodity-related sectors and after mixed data. Nikkei 225 notched marginal gains with earnings releases driving the best and worst performing stocks and the 27,500 level continued to elude the index. Hang Seng and Shanghai Comp. initially gained although price action was then choppy after the HKMA raised rates in lockstep with the Fed and the PBoC continued its substantial post-holiday liquidity drain. Top Asian News Hong Kong Monetary Authority raised its base rate by 25bps to 5.00%, which was as expected and in lockstep with the Fed. Australia-China trade discussions have the Australian PM Albanese "anticipating" a Beijing visit in 2023, via SCMP citing sources; adding, next steps amid the easing of tensions will see Trade Minister Farrell visiting Beijing prior to the PM. Subsequently, Chinese Commerce Minister Wentao and Australian Trade Minister Farrell will hold talks next week via video link, via Global Times. Maker of $555,000 Flying Motorbikes to Begin Trading on Nasdaq StanChart, HSBC Slip as Goldman Says Rates Boost Played Out Kuroda Ally Ito Sees Chance of BOJ Starting Unwinding in 2023 Ex-BOJ Deputy Gov Nakaso Says to Serve on APEC Advisory Body Gold Rises to Nine-Month High as Fed Signals End to Rate Hikes European bourses are benefitting from post-FOMC tailwinds with heavyweight earnings reports bolstering performance in the Tech, Telecoms and Energy sectors, Euro Stoxx 50 +1.1%. Stateside, futures are firmer across the board with action more contained vs European peers, ES +0.4%, with the exception of the NQ +1.3% which outperforms post-META. Meta Platforms Inc (META) - The social media bellwether surged over 20% afterhours after Q4 results, where although EPS missed expectations, revenue topped estimates, as did DAUs for the group, while advertising revenue was also above the consensus view, and it boosted its buyback by USD 40bln. +19% in pre-market trade Top European News France’s Le Maire Expects Lawmaker Majority for Pension Reform Lagarde May Further Fuel Euro’s Bullish Run: ECB Cheat Sheet European Stocks Climb Before ECB as Fed Fuels Inflation Optimism Swedish Home Developer Bonava Slumps as Sales Drop Sparks Cuts European Gas Prices Mixed With Focus on Demand, LNG Shipments German VDMA: 2022 engineering orders -4% YY, Domestic -5% Foreign -4%. FX The DXY has reclaimed and marginally extended above the 101.00 mark to a current 101.23 peak, after printing a fresh YTD trough at 100.81 post-Fed, to the modest detriment of peers ex-NZD. NZD has reclaimed some of yesterday's lost ground against the AUD in wake of mixed data releases for Australia overnight. USD/CAD is contained near 1.32 pre-data while the EUR is essentially unchanged near 1.10 ahead of the ECB. In slight contrast, GBP has been erring lower and currently resides at the lower-end of 1.2319-1.24 parameters pre-BoE, with EUR/GBP firmly above 0.89 given the differing conviction levels on the magnitude and guidance between the BoE and ECB. PBoC set USD/CNY mid-point at 6.7130 vs exp. 6.7142 (prev. 6.7492) Brazil Central Bank maintained the Selic rate at 13.75%, as expected. BCB will remain vigilant and assess if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation, while it will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected and noted that despite some recent moderation, consumer inflation and measures of underlying inflation are above the range compatible with meeting the inflation target. Fixed Income USTs have seemingly paused for breath after Wednesday's rally with upside in EGBs also exhausted for the time being pre-ECB and perhaps to digest hefty issuance from France and Spain. Currently, USTs are contained in 115.10-18 parameters while Bunds are at the lower end of a 137.00-62 band. In contrast, Gilts continue to climb and have been within 20 ticks or so of 106.00 with the associated yield at 3.20% ahead of the BoE and the potential for a lessening to tightening guidance. Commodities Crude benchmarks are in close proximity to the unchanged mark after paring back modest overnight gains amid a slight bounce in the USD with newsflow elsewhere limited. WTI trades around session lows under USD 76.50/bbl (vs a USD 77.24/bbl high) while its Brent counterpart sits under USD 82.75/bbl (vs a USD 83.61/bbl high). Shell (SHEL LN) CEO sees continued appetite for gas in China, too early to say if the European energy crisis over. Adds, gas business can keep growing next year. Spot gold is holding onto gains above the USD 1950/oz mark with the 19th April peak at USD 1981/oz ahead while LME Copper reclaimed USD 9.1k/T after slipping below the mark on Wednesday. Geopolitics North Korean state media said the US and allies’ military drills have pushed the situation to an extreme red line and that US drills threaten to turn the peninsula into a huge war arsenal, according to Reuters and SCMP. Furthermore, the White House said it rejects the notion that US joint military exercises in the region serve as a provocation for North Korea and said the US has no hostile intent towards North Korea, while it seeks serious diplomacy and will work with allies to fully enforce UN Security Council resolutions aimed at limiting North Korean weapons programs. Russian Foreign Minister Lavrov says will ensure that events organised by the West for the anniversary of the special operation in Ukraine will not be the only thing to attract world attention. Russian President Putin to speak on Thursday at a "celebratory concert" in Volgograd, via NY Times. Russian Foreign Minister Lavrov says that Moldova could become the new "anti-Russian" project after Ukraine. Adds, our relations with China are stronger than a military alliance, there is no limit. US Event Calendar 07:30: Jan. Challenger Job Cuts 440% YoY, prior 129.1% 08:30: Jan. Initial Jobless Claims, est. 195,000, prior 186,000 08:30: Jan. Continuing Claims, est. 1.68m, prior 1.68m 08:30: 4Q Nonfarm Productivity, est. 2.4%, prior 0.8% 08:30: 4Q Unit Labor Costs, est. 1.5%, prior 2.4% 10:00: Dec. Factory Orders, est. 2.3%, prior -1.8% 10:00: Dec. Factory Orders Ex Trans, est. 0.2%, prior -0.8% 10:00: Dec. Durable Goods Orders, est. 5.6%, prior 5.6% 10:00: Dec. -Less Transportation, est. -0.1%, prior -0.1% 10:00: Dec. Cap Goods Orders Nondef Ex Air, prior -0.2% 10:00: Dec. Cap Goods Ship Nondef Ex Air, prior -0.4% DB's Jim Reid concludes the overnight wrap An FOMC meeting that was going as expected turned into a major positive event for both bonds and equities last night once Powell's press conference developed. Next stop the ECB and the BoE today and then 12% of the S&P 500 reporting after the bell (Apple, Alphabet and Amazon) before payrolls tomorrow. Reviewing the Fed now and the expected +25bps hike was accompanied by a statement where the FOMC said they anticipate, ”that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.” In a shift from previous statements, the Fed said that inflation “has eased somewhat but remains elevated,” as well as saying that future increases of the policy rate will be dependent on a number of factors including the “cumulative tightening” of monetary policy rather than the “pace” of tightening as it had said before. Markets initially grabbed on to the idea that there would still be multiple more rate hikes, with the S&P 500 and US 10yr yields down -0.8% and -2.0bps, respectively, as Chair Powell’s press conference started. During Chair Powell’s press conference, equities started turning higher when the Chair said that the, “disinflation process has started.” Chair Powell also did not actively talk down risk markets when asked if financial conditions were too easy, by saying that the focus is “not on short-term moves but on sustained changes.” Powell also did not push back on markets pricing in rate cuts this year, saying that it reflects views that inflation will ease faster than the Fed expects. So whether it was Powell's intention or not, the market takeaway was biased towards the Fed being relaxed about loosening financial conditions and that cuts could happen if inflation behaved as the market expects it too. See our economists' review of the FOMC here. They still expect two more 25bps hikes in March and May, with the latter being a little more debatable. By the close, the S&P had rallied 2.0% off the day’s lows to finish up +1.05% after trading in a 2.7% intraday range. The gains were led by semiconductors (+5.3%), autos (+3.9%), transports (+2.1%) and software (+1.9%), meaning the Nasdaq outperformed, having rallied 2.75% off the lows to end up +2.00%. Those moves took the S&P 500 and Nasdaq to their highest levels since late September. US 10yr yields fell -9.0bps to 3.417% (with yields remaining fairly stable overnight) while the more policy-sensitive 2yr yields were down -9.5bps on the day after being up +5.4bps on the FOMC statement release before rallying as the press conference began. In terms of fed futures, the market is pricing in a terminal rate of 4.89% in June, which was down -2.4bps on the day, as well as 41.1bps of rate cuts by the January ‘24 meeting, down around 8bps from the previous day. After the close, equities saw further good news with Meta seeing shares spiking +20.16% in after-hours trading on the back of news of a $40bn boost to the company’s share buyback plan as well as outperforming on revenues and higher user engagement. Against that backdrop, in overnight trading, US stock futures are adding gains with those on the S&P 500 (+0.28%) and NASDAQ 100 (+0.91%) marching higher. Meanwhile, the US dollar (-0.32%) is extending its decline this morning, trading at 100.90 – its lowest level since April 2022 amid risk appetite spurred by easing rate-hike expectations. Moving on to Asia, those overnight gains in US equities are also reverberating across regional markets with the KOSPI (+0.85%), Hang Seng (+0.41%), the Nikkei (+0.18%), the Shanghai Composite (+0.29%) and the CSI (+0.06%) all trading moderately higher. In early morning data, South Korea’s CPI rose to a 3-month high of +5.2% y/y in January (v/s +5.0% expected), compared to a +5.0% rate seen in December, thus keeping open the possibility of additional policy tightening despite the nation’s economy weakening. It might seem like ancient history now, but before the Fed took centre-stage, we got a few challenging data prints earlier in the day. First was the ISM manufacturing, where the headline slightly underwhelmed at 47.4 (vs. 48.0 expected), but the prices paid indicator rose for the first time since March with an increase to 44.5 (vs. 40.4 expected). There was a notable warning from the new orders component however, which fell to just 42.5, and has normally meant that a recession had either begun or was just months away. Indeed, you’ve got to go all the way back to 1952 for the last time the new orders component was that low and a recession was still more than a year away. Alongside that, the latest JOLTS report pointed to a significantly tighter labour market than expected, with job openings in December at a 5-month high of 11.012m (vs. 10.3m expected). That also takes the number of job vacancies per unemployed worker up to 1.92, which again is the highest since July. In the meantime, the quits rate (which is strongly correlated with wage growth) remained at 2.7%, which is the same as it’s been throughout most of H2 last year. The Fed may be out of the way now, but attention will remain on central banks today with the ECB decision at 13:15 London time. It’s widely anticipated that they’ll deliver another 50bps hike, which would take the deposit rate up to a post-2008 high of 2.5%. But the bigger question is what the ECB will signal going forward, with officials debating whether they should maintain the 50bps pace or downshift to 25bps at the next meeting in March. In their preview (link here), our European economists are expecting President Lagarde to say that “interest rates will continue to rise significantly at a steady pace”, and reiterate the meting-by-meeting, data-dependent approach. The other big thing to look out for from the ECB will be any details about quantitative tightening, particularly given the last meeting statement said we’d get “the detailed parameters for reducing the APP holdings” at today’s meeting. For those looking for more on QT, our economists and strategists have also released a primer (link here). Ahead of all that, yesterday saw the release of the Euro Area flash CPI print for January. That showed headline inflation coming down by more than expected to 8.5% (vs. 8.9% expected), which is its third consecutive monthly decline. However, the more concerning detail was that core inflation held steady at its record 5.2%, rather than falling back a touch as the consensus had expected. One thing to note is that we don’t have actual data for Germany (the Euro Area’s biggest economy) because of the data processing issues, so estimates are being used there. So we might see some more attention than usual on the final number on February 23. Against that backdrop, European markets put in a steady performance before the Fed’s decision, with the STOXX 600 down just -0.03%. Bank stocks continued to outperform as well, with the STOXX Banks up a further +1.12%, bringing their YTD gains to +17.22%. Sovereign bonds also held steady, with yields on 10yr bunds (-0.2bps), OATs (+0.1bps) and gilts (-2.5bps) seeing little movement as well. Italian BTPs were the one underperformer on the day, with yields up +14.2bps as inflation data was hotter than expected. Incidentally, the decline in Treasury yields meant that the spread of 10yr Treasuries over 10yr bunds fell to its tightest level since September 2020 at 112.7bps, which is in line with our rates strategists’ call for a tighter 10yr UST-Bund spread. They'll likely be a bit of re-wideneing this morning as Bunds follow the US story but then the ECB will be pivotal. Given all that's happening at the moment, the Bank of England’s decision today is unlikely to get as much attention as usual, but the consensus and our own economists are similarly expecting a 50bp hike. That would take Bank Rate up to 4%, and we should also get the MPC’s updated forecasts, which our economists’ preview (link here) expects to show a dramatically improved economic outlook. In terms of the forward guidance, they think the MPC will signal that "some further modest tightening may be appropriate in the coming months depending on the economic outlook". After today’s 50bp move, they’re expecting another couple of 25bp moves in March and May that would take the terminal rate to 4.5%. To the day ahead now, and the main highlights will be the ECB and BoE policy decisions, along with the subsequent press conferences from President Lagarde and Governor Bailey. Otherwise, US data releases include the weekly initial jobless claims, December’s factory orders, and the preliminary reading of nonfarm productivity in Q4. Lastly, earnings releases include Apple, Amazon and Alphabet. Tyler Durden Thu, 02/02/2023 - 08:15.....»»

Category: blogSource: zerohedgeFeb 2nd, 2023