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What to Expect From Fifth Third (FITB) This Earnings Season

Fifth Third's (FITB) Q4 earnings are likely to reflect growth in net interest and non-interest income, amid rising cost woes on technological investment. Fifth Third Bancorp FITB is scheduled to report fourth-quarter and 2021 results on Jan 20, before the opening bell. FITB’s December-quarter earnings and revenues are expected to have risen from the respective year-ago reported figures.Before we analyze the factors that might have impacted the fourth-quarter earnings, let’s look at Fifth Third’s performance over the last few quarters.In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. FITB’s performance displayed revenue growth, aided by fee and net interest income (NII). Also, benefit from credit losses came as a tailwind. However, results were largely affected by marginally higher expenses and soft loan growth.This Cincinnati, OH-based lender has an impressive surprise history. Earnings topped estimates in all the trailing four quarters, the average being 19.7%.Fifth Third Bancorp Price and EPS Surprise Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp QuoteFITB’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for fourth-quarter earnings of 91 cents has been unchanged in the past 30 days. Nonetheless, the figure indicates a 3.4% rise from the year-ago reported figure. The consensus estimate for revenues is pegged at $2.01 billion, suggesting growth of 2.3% from the year-ago reported figure.Here are the factors that might have impacted Fifth Third ’s quarterly performance:NII: In the fourth quarter, which is a seasonally strong quarter for loan growth, lending activity witnessed a decent acceleration, sequentially. Per the Fed’s latest data, the commercial and industrial loans, real-estate loans and consumer loan portfolios remained strong in October and November. Amid this, FITB is likely to have witnessed decent loan growth in the fourth quarter.The steepening of the yield curve (the difference between short and long-term interest rates) is likely to have supported the bank’s net interest margin (NIM). The yield on the 10-year U.S. Treasury Bond of 1.52% at the end of December was up 4 basis points from 1.48% at the end of September. Thus, NII is likely to have got some boost.Also, the Zacks Consensus Estimate for average interest-earning assets of $186 billion for the quarter indicates a 1.7% rise from the prior quarter’s reported figure. This is expected to have driven interest income for the fourth quarter.The consensus mark of $1.19 billion for NII indicates a slight increase, sequentially.Management expects average loans and leases to be up 1%, sequentially. Compared with the prior-quarter level, NII is estimated to be down 1% while net interest margin is projected to decline three-four bps due to compression in loan yields.Non-Interest Revenues: Per the Fed data, deposits improved in the quarter, led by stimulus-driven liquidity and a rise in money market balances. These are likely to have bolstered revenues from service charges on deposits. The consensus estimate of $154 million for the same suggests a 1.3% rise from the previous quarter’s actuals.Mortgage rates increased sequentially in the to-be-reported quarter. Also, mortgage origination activities are estimated to have decreased dramatically, with the rising rates hampering refinancing activity. The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $55 million, suggesting a 36% drop from the prior quarter’s reported number.Card fees are likely to have improved on higher consumer spending owing to a decreased unemployment level and upbeat consumer optimism.The Zacks Consensus Estimate for non-interest income is pegged at $840 million, suggesting a marginal rise, sequentially. Fifth Third expects non-interest income to be up 6%, sequentially.Expenses: Fifth Third’s ongoing strategic investments in areas like technology might have escalated expenses. Such escalation in costs might hinder bottom-line expansion in the upcoming period.On a sequential basis, excluding seasonal items, management expects expenses to be flat to up 1% in the fourth quarter.Let’s have a look at what our quantitative model predicts:Fifth Third does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Earnings ESP: The Earnings ESP for Fifth Third is -1.27%.Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.Stocks That Warrant a LookBOK Financial BOKF, The PNC Financial Services Group, Inc. PNC and Huntington Bancshares Incorporated HBAN are a few companies worth considering as these have the right combination of elements to beat on earnings in their upcoming releases, per our model.BOK Financial has an Earnings ESP of +3.64% and a Zacks Rank of 3 at present. BOKF is slated to report fourth-quarter and full-year results on Jan 19.Over the past 30 days, BOKF’s Zacks Consensus Estimate for quarterly earnings has moved marginally downward.PNC Financial is scheduled to release fourth-quarter 2021 and annual earnings on Jan 18. PNC, which is Zacks #3 Ranked at present, has an Earnings ESP of +2.29%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.PNC’s fourth-quarter earnings estimates have moved marginally lower over the past month.Huntington Bancshares is scheduled to release earnings on Jan 21. HBAN, currently a #3 Ranked player, has an Earnings ESP of +1.46%.The Zacks Consensus Estimate for Huntington Bancshares’ fourth-quarter earnings has remained unchanged over the past month.Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. 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 Fifth Third Bancorp (FITB): Free Stock Analysis Report The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report Huntington Bancshares Incorporated (HBAN): Free Stock Analysis Report BOK Financial Corporation (BOKF): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 14th, 2022

Delta Air Lines (DAL) Beats on Q4 Earnings, Warns of Q1 Loss

Cargo revenues at Delta (DAL) increase 63% in fourth-quarter 2021 from fourth-quarter 2019 levels. Delta Air Lines’ DAL fourth-quarter 2021 earnings (excluding 86 cents from non-recurring items) of 22 cents per share outpaced the Zacks Consensus Estimate of 15 cents. Results came against the year-ago quarter’s loss of $2.53 per share. Strong holiday travel demand and favorable pricing aided the December quarter’s results.Delta’s revenues came in at $9,470 million, which not only beat the Zacks Consensus Estimate of $9,232.1 million but also soared in excess of 100% from the year-ago figure as people resorted to air travel during the holidays.Despite the year-over-year improvement in air-travel demand (particularly for leisure) in the United States as more and more Americans get vaccinated, the overall picture remains bleak when compared to the fourth-quarter 2019 scenario, mainly due to the softness in business and international travel. Consequently, passenger revenues plunged 29% from the levels recorded in the comparable quarter of 2019 to $7,241 million.The uptick in air-travel demand in the United States can be gauged from the fact that 82.2% of fourth-quarter 2021 passenger revenues came from the domestic markets.Cargo revenues surged 63% to $304 million. This was the fifth consecutive quarter when cargo revenues increased from the comparable periods’ levels in 2019. Cargo revenues in the reported quarter were boosted by strong demand during the holidays and favorable yields. Revenues from other sources climbed 91% to $1,925 million. Total revenues in the December quarter declined 17% from the fourth-quarter 2019 level.Adjusted operating revenues (which exclude third-party refinery sales) came in at $8.4 billion. This reflected a 74% recovery from the fourth-quarter 2019 level. Fourth-quarter 2021 capacity was 79% restored compared with the fourth-quarter 2019 level.Other Financial Details of Q4Below we present all comparisons (in % terms) with fourth-quarter 2019 (pre-coronavirus levels).Revenue passenger miles (a measure of air traffic) tumbled 28% to 40,402 million. Capacity (measured in available seat miles) contracted 21% to 51,744 million. With the fall in traffic outpacing the capacity reduction, load factor (percentage of seats filled by passengers) was down to 78% from 86% in the comparable quarter of 2019.Passenger revenue per available seat mile (PRASM) declined 11% to 13.99 cents. Passenger mile yield decreased to 17.92 cents from 18.29 cents in the fourth quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) deteriorated 6% to 16.29 cents in the December quarter.Total operating expenses including special items declined 8% to $9,207 million. Aircraft fuel expenses and related taxes slumped 22% in the reported quarter. Fuel gallons consumed decreased 24% to $755 million. Average fuel price per gallon (adjusted) increased 6% to $2.10. Non-fuel unit cost increased 8% in the reported quarter.The airline had liquidity worth $14.2 billion at the end of the December quarter (including cash and cash equivalents, short-term investments and undrawn revolving credit facilities). Delta, currently carrying a Zacks Rank #3 (Hold), had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion. Operating cash flow during the quarter was $555 million. Free cash flow for the reported quarter was a negative $441 million.Update on Omicron ImpactDue to the highly transmissible omicron variant of COVID-19, Delta like other U.S. carriers was forced to cancel multiple flights with many crew members falling ill. This, in turn, impacted air travel. Due to the operational disruptions, DAL expects to incur loss in first-quarter 2022.  Per Delta president Glen Hauenstein, "The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President's Day weekend forward.  Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter."Delta’s CEO Ed Bastian sounded hopeful when he said that “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel." Dan Janki, Delta's chief financial officer sounded confident of the carrier posting profit in the other three quarters of 2022, “resulting in a meaningful profit in 2022”.Other Aspects of Q1 OutlookAll comparisons in percentage are made with first-quarter 2019. For the first quarter of 2022, the carrier expects to operate at a capacity that is in the 83-85% range of first-quarter 2019 levels. Non-fuel unit costs are expected to increase roughly 15% from the first-quarter 2019 actuals. Fuel price per gallon is expected in the $2.35-$2.50 range. Capital expenditures and adjusted net debt are likely to be $1.6 billion and $22 billion, respectively, in the March quarter.Stocks to ConsiderBelow we present some better-ranked stocks in the broader Transportation sector:Expeditors International of Washington EXPD currently sports a Zacks Rank #1 (Strong Buy). EXPD is being bolstered by upbeat airfreight revenues. Like the first three quarters of 2021, we expect airfreight revenues to aid Expeditors’ fourth-quarter 2021 results (scheduled to be out on Feb 22, 2022) as well.Shares of Expeditors have surged 32.2% in a year’s time. In May 2021, EXPD announced an 11.5% hike in its semi-annual cash dividend, taking the total to 58 cents per share. EXPD has an impressive record with respect to utilizing its shareholders’ money. The optimism surrounding the stock is evident from the 7.3% northbound revision of the Zacks Consensus Estimate for current-year earnings over the past 60 days.You can see the complete list of today’s Zacks #1 Rank stocks here.ArcBest Corporation ARCB currently carries a Zacks Rank #2 (Buy). ARCB has a stellar surprise history. Its earnings outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 27.4%.Shares of ArcBest have surged 99.2% in a year’s time. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Delta Air Lines, Inc. (DAL): Free Stock Analysis Report Expeditors International of Washington, Inc. (EXPD): Free Stock Analysis Report ArcBest Corporation (ARCB): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 14th, 2022

LEN or DHI: Which Housing Bigwig Has More Potential in 2022?

A resilient housing market makes investment in homebuilding stocks more profitable. Let us analyze which is a better pick, Lennar (LEN) or D.R. Horton (DHI), for 2022. It’s a fact that historically-low inventory levels, rising prices, supply chain bottlenecks, and affordability issues have been taking a toll on the U.S. housing market these days. Nevertheless, strong demand arising from the strengthening job market is a major tailwind.Also, the expected rise in mortgage rates is driving sales for new homes in the market. With the Fed pulling back on its purchases of mortgage-backed securities, the prospect of higher interest rates in 2022 is accelerating the decision for buyers in an otherwise slow season.Notable homebuilders like D.R. Horton, Inc. DHI, Lennar Corporation LEN, Meritage Homes Corporation MTH and Toll Brothers, Inc. TOL have been experiencing strong demand. As released by the National Association of Home Builders/Wells Fargo Housing Market Index, builders’ confidence in December edged higher for the fourth consecutive month. Even the component measuring sales expectations in the next six months held steady for the third consecutive month at 84.Given the current scenario, quality homebuilding stocks could offer a safe haven because of their stability and the fact that these are fundamentally strong enough to withstand the industry woes. The Zacks Building Products - Home Builders industry currently carries a Zacks Industry Rank #57, which places it at the top 22% of more than 250 Zacks industries.Among the industry bellwethers, D.R. Horton and Lennar are the most prominent ones. At present, the market capitalization of D.R. Horton is $35.53 billion, while that of Lennar stands at $33.59 billion. Both D.R. Horton and Lennar currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Before drawing a head-to-head comparison between DHI and LEN, let’s check out a few key statistics of the companies.What Defines These Homebuilders?D.R. Horton offers a diverse line of homes across various price points through a multi-brand platform like D.R. Horton, Emerald Homes, Express Homes and Freedom Homes. Moreover, the company enjoys one of the broadest geographic diversities in the industry and is not dependent on any particular market. It has a strong presence in 98 markets across 31 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. With 81,965 homes closed in fiscal 2021 for $26.5 billion, D.R. Horton completed its 20th consecutive year as the largest homebuilder in the United States.D.R. Horton reported solid results for fiscal 2021, with a 37% increase in Homebuilding revenues to $27.8 billion and 78% growth in earnings to $11.41 per share. As of Sep 30, 2021, the value of backlog sales orders was $9.5 billion (26,221 homes), an increase of 16% from $8.2 billion (26,683 homes) as of Sep 30, 2020.Conversely, Lennar operates as a homebuilder primarily under the Lennar brand in the United States, targeting first-time, move-up, and active adult homebuyers. The company provides mortgage financing and related services to customers through the financial services segment.Lennar’s core homebuilding results remained resilient in fiscal 2021. The results also benefited from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Full-year 2021 earnings came in at $13.00 per share, up 66% from the fiscal 2020 level. Revenues were $27.1 billion, up from $22.5 billion a year ago. Deliveries grew 13% to 59,825 homes from fiscal 2020. Backlog at fiscal 2021-end climbed 26% from a year ago to 23,771. Potential housing revenues from backlog advanced 45% year over year to $11.4 billion.Stock PerformanceDHI and LEN have gained 43.8% and 41.7%, respectively, over the past year. The industry has collectively gained 27.3% during the period. Although both the stocks have outperformed the industry, DHI fared much better than LEN on this front. Image Source: Zacks Investment Research Earnings Growth Rate & SurprisesThe ability to consistently boost profit levels defying industry woes is a defining characteristic of the best companies. Analysts expect DHI’s earnings to grow 27.7% in the current year. Comparatively, LEN’s earnings are expected to grow 9.3% over the same time frame. Hence, DHI’s higher growth rate implies a greater potential for capital appreciation.Considering earnings history, DHI and LEN both surpassed estimates in all the last four quarters, delivering average earnings surprise of 14.1% and 14%, respectively.ValuationThe industry is clearly undervalued than the S&P 500, with respect to the forward 12-month price-to-earnings (P/E) ratio. This implies that the industry has upside potential for the near future. The industry has an average forward 12-month P/E ratio — which is the best multiple for valuing homebuilding stocks — of 6.96, which is below the S&P 500’s average of 21.6. Hence, it might be a good idea to focus on stocks belonging to this particular industry.Coming to the two stocks under consideration, DHI and LEN — with a 12-month forward P/E ratio of 6.72 and 6.89, respectively — are undervalued than the S&P 500 and the industry.Comparing the two stocks, DHI is less pricey than LEN.ReturnsReturn on Equity (ROE) is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE in the trailing 12 months for DHI is 30.2%. LEN’s trailing 12-month ROE is 19.5%. Markedly, DHI provides more impressive returns to investors than LEN and the industry’s 19.5%.Bottom LineCurrently, D.R. Horton’s industry-leading market share, solid acquisition strategy, well-stocked supply of land, lots and homes, along with affordable product offerings across multiple brands and strong operational performance make it a better housing pick than Lennar. Specially, in terms of share price performance, earnings growth rate, returns and valuation, D.R. Horton has more upside potential than Lennar in 2022.A Brief Overview of the Other Two StocksToll Brothers currently sports a Zacks Rank #1. This Horsham, PA-based luxury homebuilder builds single-family detached and attached home communities; master-planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves. It has been benefiting from the strategy of broadening product lines, price points and geographies.Toll Brothers’ earnings for fiscal 2022 are expected to rise 46.3% year over year.Meritage Homes currently carries a Zacks Rank #2. Its successful execution of strategic initiatives to boost profitability and focus on entry-level LiVE.NOW homes bode well.Meritage Homes’ earnings are expected to rise 23.4% year over year in 2022. 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 Toll Brothers Inc. (TOL): Free Stock Analysis Report Lennar Corporation (LEN): Free Stock Analysis Report D.R. Horton, Inc. (DHI): Free Stock Analysis Report Meritage Homes Corporation (MTH): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 14th, 2022

Futures Slide After Disappointing JPMorgan Earnings, Tech Rout Worsens

Futures Slide After Disappointing JPMorgan Earnings, Tech Rout Worsens After trading flat for much of the overnight session, S&P futures slumped to session lows shortly after JPM reported earnings that disappointed the market (see our full write up here) and were last trading down 30 points or 0.64%, with Dow futures down 0.3% and Nasdaq futures taking on even more water as the "sell tech" trade was back with a bang. Treasury yields rose 3bps to 1.74% and the dollar reversed an overnight loss. The VIX jumped above 20 and was last seen around 21. The Nasdaq 100 fell to the lowest in almost three months yesterday as tech came under pressure after Fed Governor Lael Brainard said officials could boost rates as early as March. It looks like the selling will continue today. “Market sentiment has been shaken by concerns over the prospect of imminent Fed tightening along with record global Covid-19 infection rates, but we don’t expect either of these factors to end the equity rally,” said UBS Wealth Management CIO Mark Haefele in a note. “The fourth-quarter U.S. earnings season, which started this week, could turn investor attention back to strong fundamentals.” JPMorgan shares dropped in premarket trading after revenues and EPS beat thanks to a $1.8 billion reserve release while FICC trading revenue missed expectations even as its dealmakers posted their best quarter ever and Chief Executive Officer Jamie Dimon gave an upbeat assessment of prospects for growth. Wells Fargo advanced after reporting higher-than-estimated revenue. BlackRock Inc. became the first public asset manager to hit $10 trillion in assets, propelled by a surge in fourth-quarter flows into its exchange-traded funds. Here are some of the other notable pre-movers today: U.S.-listed casino stocks with operations in Macau rise after the announcement of much-anticipated changes to the local casino law aimed at tightening government oversight on the world’s largest gaming market. Las Vegas Sands (LVS US) +6.6%; Melco Resorts (MLCO US) +5.5%; Wynn Resorts (WYNN US) +5.6%. Apple (AAPL US) shares are up in U.S. premarket trading after Piper Sandler raises its target for the stock, saying that Apple’s set-up for 2022 is favorable. Broker adds that the tech giant’s venture into health-care and automotive markets are the next catalysts to drive the stock to a $4 trillion market cap and beyond. NextPlay Technologies (NXTP US) shares jump 19% in U.S. premarket trading after giving an update for fiscal 3Q 2022 late yesterday. Domino’s Pizza (DPZ US) is cut to equal-weight from overweight at Morgan Stanley, while Chipotle is upgraded to overweight from equal-weight amid a “mixed” view on restaurant stocks into 2022. Amicus Therapeutics (FOLD US) advanced in postmarket trading after being upgraded to outperform from market perform at SVB Leerink, which cited the potential of a treatment for Pompe disease, should it be approved. Spirit Realty dropped 4% postmarket after launching a share sale via Morgan Stanley and BofA Securities. European equities traded poorly and followed the drop in Asia, with most sectors trading lower, weighed down once again by a soft tech sector. Euro Stoxx 50 is down 0.8%, most major indexes dropped over 1% before rising off the lows. Oil & gas is the best Stoxx 600 performer with crude trading well. European technology stocks as well as pandemic winners are leading declines after a U.S. selloff in tech shares resumed Thursday as Federal Reserve officials signaled their intention to combat inflation aggressively.  European chipmakers are down in early trading Friday: ASM International -3.5% at 9.17 a.m. CET, Infineon -0.9%, ASML -2.9%, STMicroelectronics -2.3%. Meanwhile, energy and automakers outperformed. Utilities were also in focus as French nuclear energy producer Electricite de France SA (EDF) plunged by a record as the French government confirmed plans to force it to sell more power at a steep discount to protect households from surging wholesale electricity prices, a move that could cost the state-controlled utility 7.7 billion euros ($8.8 billion) at Thursday’s market prices. There was some good news: a majority of strategists still see the rally in European equities continuing this year. The Stoxx Europe 600 Index will rise about 5.2% to 511 index points by the end of 2022 from Wednesday’s close, according to the average of 19 forecasts in a Bloomberg survey. Equity funds once more led inflows among asset classes in the week through Jan. 12, as investors reduced cash holdings, according to BofA and EPFR Global data. Earlier in the session, Asian stocks slid as investors offloaded technology shares on growing speculation the Federal Reserve will raise interest rates in March.  The MSCI Asia Pacific Index fell as much as 1.3% before paring losses to 0.7% in afternoon trading. Alibaba, Keyence and Sony Group were among the largest contributors to the benchmark’s slide. The Hang Seng Tech Index, which tracks China’s biggest tech firms, closed down 0.5%. Electronics makers also dragged down indexes in Japan and South Korea, with benchmarks in both nations leading the region’s drop. China’s CSI 300 Index closed at its lowest since November 2020. Asian stocks have been whipsawed this year by remarks from Fed officials as investors try to gauge the timing and scope of the anticipated interest rate hikes. The renewed weakness on Friday was triggered by comments from Fed Governor Lael Brainard, who said officials could boost rates as early as March to ensure that price pressures are brought under control. “This kind of hawkishness and a rush for rate hikes is, of course, a minus for share prices,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank in Tokyo. If the Fed were to increase rates in March, “investors will want to make sure the economy remains strong despite the monetary tightening before making their move,” Sera added.  With Friday’s moves, Asia’s benchmark is set to pare its weekly gain to about 1.6%, which would still be its best weekly performance since October.    In Japan, sentiment worsened as Tokyo raised its Covid alert to the second-highest of four levels as virus cases surged. South Korea’s Kospi was also weighed down as the central bank increased its policy rate for the third time in just five months In rates, Treasuries pared declines with stock index futures under pressure as U.S. day begins. Yields beyond the 2-year reached session highs inside Thursday’s ranges amid a global government bond selloff. Treasury yields are cheaper by 3bp to 4bp across the curve with 10- year yields around 1.7274%, fading a bigger loss earlier and slightly underperforming bunds and gilts. Asia session featured speculation about tighter global monetary policy. IG dollar issuance slate empty so far and expected to remain light ahead of U.S. holiday weekend with markets closed Monday; four names priced $3.8b Thursday. In FX, the Bloomberg dollar spot is little changed around worst levels for the week, while NOK, JPY and CAD top the G-10 scoreboard. The yen advanced, and is set for its largest weekly advance in more than a year as speculation about a shift in the Bank of Japan’s policy spurred a further unwinding of dollar longs. The five-year Japanese government bond yield climbed to a six-year high. The volatility term structure in dollar-yen shifted higher Friday and inverted. The euro was little changed around $1.1460 and European sovereign bond yields rose, with the core underperforming the periphery. Norway’s krone and the Canadian dollar advanced as oil prices rose, with Brent trading above $85 per barrel, while the Australian and New Zealand dollars were the worst performers. The pound extended its longest winning streak in nearly two months as the U.K. economy surpassed its pre-pandemic size in November for the first time. Sweden’s krona inched down, shrugging off data showing that the nation’s inflation rate rose to the highest level in 28 years In commodities, crude futures rally with WTI recovering to Wednesday’s best levels near $83 and Brent putting in fresh highs near $85.40. Spot gold is little changed a brief retest of the week’s highs, trading near $1,823/oz. Base metals are mixed: LME nickel adds about 2% extending its recent surge; copper holds a narrow range in the red Looking at the day ahead now, data releases include US retail sales, industrial production and capacity utilisation for December, along with the University of Michigan’s preliminary consumer sentiment index for January and the UK’s GDP for November. Central bank speakers include ECB President Lagarde and New York Fed President Williams. Lastly, earnings releases include Citigroup, JPMorgan Chase, Wells Fargo and BlackRock. Market Snapshot S&P 500 futures up 0.3% to 4,667.00 STOXX Europe 600 down 0.5% to 483.71 MXAP down 0.8% to 195.28 MXAPJ down 0.5% to 639.13 Nikkei down 1.3% to 28,124.28 Topix down 1.4% to 1,977.66 Hang Seng Index down 0.2% to 24,383.32 Shanghai Composite down 1.0% to 3,521.26 Sensex up 0.1% to 61,320.31 Australia S&P/ASX 200 down 1.1% to 7,393.86 Kospi down 1.4% to 2,921.92 German 10Y yield little changed at -0.08% Euro up 0.1% to $1.1467 Brent Futures up 0.8% to $85.16/bbl Gold spot up 0.1% to $1,823.97 U.S. Dollar Index little changed at 94.73 Top Overnight News from Bloomberg Federal Reserve Governor Christopher Waller said that three interest-rate increases this year was a “good baseline” but there may be fewer or even as many as five moves, depending on inflation The U.K. and the European Union agreed to intensify post-Brexit negotiations over Northern Ireland, as Foreign Secretary Liz Truss led the British side for the first time in a meeting at her official country residence Germany’s economy contracted by as much as 1% in the final quarter of 2021 as the emergence of the coronavirus’s omicron strain added to drags on output from supply snarls and the fastest inflation in three decades Japan’s Government Pension Investment Fund, the world’s largest, may mull investing in Chinese government bonds if the market situation improves, GPIF President Masataka Miyazono says at a press conference in Tokyo Ukraine said a cyberattack brought down the websites of several government agencies for hours. Authorities didn’t immediately comment on the source of the outage, which comes as tensions with Russia surge over its troop buildup near the border Russia won’t wait “endlessly” for a security deal with NATO and progress depends on the U.S., Foreign Minister Sergei Lavrov said Friday, keeping up pressure after a week of high-level talks with the West failed to yield noticeable progress Turkey’s newly appointed finance chief said the country’s inflation will peak months earlier and at a level far lower than predicted by top Wall Street banks The global pressures driving inflation higher represent a “major change in trends” and will keep price growth high for the foreseeable future, Bank of Russia Governor Elvira Nabiullina said North Korea appears to have fired two ballistic missiles into waters off its east coast-- in what could be its third rocket-volley test in less than 10 days -- hours after issuing a fresh warning to the Biden administration A more detailed look at global markets courtesy of Newsquawk Asian equity markets weakened amid headwinds from the US where all major indices declined led by losses in tech and consumer discretionary amid a slew of hawkish Fed speak, while mixed Chinese trade data added to the cautiousness in the region. ASX 200 (-1.1%) traded lower as tech and consumer stocks mirrored the underperformance of stateside peers and with nearly all industries on the back foot aside from utilities and gold miners. Nikkei 225 (-1.3%) briefly gave up the 28k level amid a firmer currency and source reports that BoJ policy makers are said to debate how soon they can begin signalling a rate hike. In terms of the notable movers, Fast Retailing was the biggest gainer after it reported a record Q1 net, followed by Seven & I Holdings which also benefitted post-earnings, while Hitachi Construction was at the other end of the spectrum after news that parent Hitachi will offload half its majority stake. KOSPI (-1.4%) eventually underperformed after the Bank of Korea hiked rates by 25bps for a third time in the current tightening cycle to 1.25%, as expected. BoK also noted that CPI is to stay in the 3% range for a while and BoK Governor Lee made it clear that rates will continue to be adjusted which has fuelled speculation of similar action at next month’s meeting. Hang Seng (-0.2%) and Shanghai Comp. (-1.0%) were also pressured with participants digesting the latest trade figures which showed weaker than expected Imports although Exports topped estimates. Nonetheless, the downside was somewhat limited amid ongoing expectations for PBoC easing to support the economy as the Fed moves closer towards a rate lift off and with some encouragement after Evergrande averted its first onshore debt default whereby bondholders approved a six-month postponement of bond redemption and coupon payments. Finally, 10yr JGBs retreated beneath the 151.00 level following the source report that suggested debate within the BoJ on how soon a rate increase can be signalled which could occur ahead of the 2% price target, while this coincided with an increase in the 5yr yield to a 6-year high and a weaker than previous 20yr JGB auction. Top Asian News Chinese Developer R&F Downgraded to Restricted Default by Fitch Macau Cuts Casino License Tenure, Caps Float as Controls Tighten Inflation Irks Asia as Japan Yields Hit Six-Year High, BOK Hikes China Builders’ Dollar Bonds Slump Further; Logan, KWG Lead The major cash equity indices in Europe remain subdued but off worst levels (Euro Stoxx 50 -0.7%; Stoxx 600 -0.6%) as the downbeat APAC mood reverberated into the region amid a slew of hawkish Fed speak, while the mixed Chinese trade data added to the concerns of a slowdown ahead of next week’s GDP metrics. Newsflow had overall been quiet during the European session ahead of the start of US earnings season, but geopolitical tensions remain hot on the radar after North Korea fired its third missile of the year (albeit landing outside Japan’s EEZ), whilst Russia closed all communication channels with the EU and exerted some time-pressure on Washington with regards to Moscow’s security demands. Back to trade, a divergence is seen between Europe and the US as the former catches up to the late accelerated sell-off on Wall Street yesterday; US equity futures have been consolidating with mild broad-based gains seen across the ES (+0.2%), YM (+0.2%), NQ (+0.2%) whilst the RTY (Unch) narrowly lags. Delving into Europe, the UK’s FTSE 100 (-0.1%) is cushioned by gains across its Oil & Gas and Financial sectors as crude oil prices and yields clamber off intraday lows, whilst the SMI (-0.3%) sees some losses countered by its heavyweight healthcare sector. Sectors in Europe are mostly in the red with a slight defensive tilt, although Oil & Gas stands as the top gainer and the only sector in the green. The downside meanwhile sees Tech following a similar sectorial underperformance seen on Wall Street and APAC overnight. In terms of individual movers, DAX-heavyweight SAP (-0.3%) conforms to the losses across tech after initially rising as a result of upgraded guidance and the announcement of a share buyback programme of up to EUR 1bln. The most notable mover of the day has been EDF (-17.5%) as the Co. withdrew guidance after noting the impact of new French price cap measures is forecast to be around EUR 8.4bln on FY22 EBITDA. Top European News EDF Slumps by Most on Record on Hit From Price Cap U.K. Economy Surpasses Pre-Pandemic Size With November Surge German Recovery Lags Rest of Europe on Supply Snarls, Inflation HSBC Markets Chief Georges Elhedery To Take Six-Month Sabbatical In FX, another lower low off a lower high does not bode well for the index and Buck more broadly, but some technicians will be encouraged by the fact that chart supports in the form of a Fib retracement and 100 DMA have only been breached briefly. Meanwhile, Friday may provide the Greenback with a prop via pre-weekend position squaring and US data could lend a hand if upbeat or better than expected at the very least. For now, the DXY is restrained between 94.887-626 confines, with the upside capped by a major trendline that falls just below 95.000 around 94.980, and the Dollar also hampered by pressure emanating outside the basket from the likes of the Yuan, crude oil and other commodities. CAD/JPY/GBP - The Loonie has reclaimed 1.2500+ status in line with a rebound in WTI towards Usd 83/brl, but still faces stiff trendline resistance vs its US counterpart at 1.2451 and probably conscious that several multi-billion option expiries roll off either side of the 1.2500 level today. Conversely, the Yen has cleared the psychological 114.00 hurdle with some fundamental impetus coming from hawkish BoJ source reports contending that policy-setters are contemplating how soon the Bank can telegraph a rate hike that is likely to be delivered prior to inflation reaching its 2% target. Elsewhere, Sterling remains elevated above 1.3700, though unable to scale 1.3750 even with tailwinds from stronger than forecast UK GDP and IP or a narrower than feared trade gap amidst ongoing political uncertainty. CHF/EUR/NZD/AUD - All narrowly divergent and contained against their US rival, with the Franc straddling 0.9100 and Euro holding within a 1.1483-51 range and immersed in hefty option expiry interest spanning 1.1395 to 1.1485 (see 7.01GMT post on the Headline Feed for details). On the flip-side, the Aussie and Kiwi have both lost a bit more momentum after probing 0.7300 and approaching 0.6900 respectively yesterday, and Aud/Usd appears to have shrugged off robust housing finance data in the run up to China’s trade balance revealing sub-consensus imports. SCANDI/EM - Firmer than anticipated Swedish CPI and CPIF metrics have not offered the Sek much support, as the stripped down core ex-energy print was in line and bang on the Riksbank’s own projection. However, the Huf has been underpinned by hot Hungarian inflation and the Cnh/Cny in wake of the aforementioned Chinese trade data showing a record surplus for December and 2021 overall. In Turkey, the Try is flattish following the latest CBRT survey that predicts a weaker year-end Lira from current levels, but above record lows and still well above target CPI, while in Russia the Rub is benefiting from Brent’s rise above Usd 85.50/brl (in keeping with the Nok) against the backdrop of geopolitical and diplomatic strains as the country’s Foreign Minister declares that all lines of communication with the EU have ended. In commodities, WTI and Brent front-month futures have been on an upward trajectory since the Wall Street close, with the former now above USD 83/bbl (vs 81.58/bbl low) and the latter north of USD 85.50/bbl (vs 83.99/bbl low) in European hours. Overall market sentiment has been a non-committal one amid a lack of fresh macro catalysts, however, geopolitical updates have been abundant: namely with Russia’s punchy rhetoric surrounding its security demand from NATO and Washington, whilst North Korea fired what is said to be ballistic missiles which landed just outside Japan’s Exclusive Economic Zone (EEZ). On the demand side of the equation, eyes remain on China’s economic and COVID situations, with the import figures indicating China's annual crude oil imports drop for the first time in 20 years, whilst the nation grounded further flights between the US due to its zero-COVID policy. On the supply side, reports suggested that China will release oil stockpiles in the run-up to the Lunar New Year (dubbed as the largest human migration). The release is part of a coordinated plan with the US and other major consumers, according to the reports, which cited sources suggesting China will likely ramp up its releases if prices top USD 85/bbl. Turning to metals, spot gold is trading sideways and prices waned after again hitting the resistance zone around USD 1,830/oz flagged earlier this week. LME copper meanwhile remains under USD 10,000/t – subdued by the sharp slowdown in Chinese imports suggesting weaker demand, albeit annual imports of copper concentrate hit a historic high in 2021. The trade data also indicated a fall in iron ore imports as a factor of the steel production curbs imposed last year to tackle pollution and high iron ore prices. US Event Calendar 8:30am: Dec. Import Price Index YoY, est. 10.8%, prior 11.7%; MoM, est. 0.2%, prior 0.7% Export Price Index YoY, est. 16.0%, prior 18.2%; MoM, est. 0.3%, prior 1.0% 8:30am: Dec. Retail Sales Advance MoM, est. -0.1%, prior 0.3% Dec. Retail Sales Ex Auto MoM, est. 0.1%, prior 0.3% Dec. Retail Sales Ex Auto and Gas, est. -0.2%, prior 0.2% Dec. Retail Sales Control Group, est. 0%, prior -0.1% 9:15am: Dec. Industrial Production MoM, est. 0.2%, prior 0.5% Capacity Utilization, est. 77.0%, prior 76.8% Manufacturing (SIC) Production, est. 0.3%, prior 0.7% 10am: Nov. Business Inventories, est. 1.3%, prior 1.2% 10am: Jan. U. of Mich. Sentiment, est. 70.0, prior 70.6; Expectations, est. 67.0, prior 68.3; Current Conditions, est. 73.8, prior 74.2 U. of Mich. 1 Yr Inflation, est. 4.8%, prior 4.8%; 5-10 Yr Inflation, prior 2.9% DB's Jim Reid concludes the overnight wrap There was no rest for markets either yesterday as the tech sell-off resumed in earnest, which came as fed funds futures moved to price in a 93% chance of a March rate hike, the highest closing probability to date. At the same time, however, the US dollar continued to weaken and has now put in its worst 3-day performance in over a year, having shed -1.25% in that time. And all this is coming just as earnings season is about to ramp up, with a number of US financials scheduled to report today ahead of an array of companies over the next few weeks. Starting with sovereign bonds, yields on 10yr Treasuries fell a further -3.9bps yesterday, their biggest decline since mid-December, to their lowest closing level in a week, at 1.704%, with most of the price action again happening during the New York afternoon. Lower inflation breakevens helped drive the decline, with the 10yr breakeven down -3.4bps after the producer price inflation data for December came in softer than expected. Indeed, the monthly gain of +0.2% (vs. +0.4% expected) was the slowest since November 2020, and in turn that left the year-on-year measure at +9.7% (vs. +9.8% expected), which is actually a modest decline from the upwardly revised +9.8% in November. As with the previous day’s CPI reading though, there was a more inflationary interpretation for those after one, as the core PPI measure came in at a monthly +0.5% as expected, leaving the year-on-year change at an above-expected +8.3% (vs. +8.0% expected). So something for everyone but no massive surprises either way. The latest inflation data came as numerous Fed speakers continued to match the recent hawkish tone, which helped strengthen investor conviction in the odds of a March hike as mentioned at the top. Philadelphia Fed President Harker said at an event that “My forecast is that we would have a 25 basis-point increase in March, barring any changes in the data”, and that he had 3 hikes pencilled in but “could be convinced of a fourth if inflation is not getting under control.” Separately, we heard from Governor Brainard, who appeared before the Senate Banking Committee as part of her nomination hearing to become Fed Vice Chair. She signalled that she would be open to a March hike as well, saying that they would be in a position to hike “as soon as asset purchases are terminated”, which they’re currently on course to do in March. Even President Evans, one of the most dovish members of Fed leadership, said a March rate hike and multiple hikes this year were a possibility. As it happens, today is the last we’ll hear from various Fed speakers for a while, as tomorrow they’ll be entering their blackout period ahead of the next FOMC announcement later in the month. Staying on the Fed, Bloomberg reported overnight that President Biden has picked three nominees for the vacant slots. They include Sarah Bloom Raskin, previously Deputy Secretary of the Treasury, who’s reportedly going to be nominated to become the Vice Chair of supervision, as well as Lisa Cook and Philip Jefferson, who’d become governors. Cook is an economics professor at Michigan State University, and Jefferson is an economics professor at Davidson College in North Carolina. All 3 would require Senate confirmation, and bear in mind those choices haven’t been officially confirmed as of yet. Over on the equity side, the main story was a further tech sell-off that sent both the NASDAQ (-2.51%) and the FANG+ index (-3.72%) lower for the first time this week, and taking the former to a 3-month low. That weakness dragged the S&P 500 (-1.5%) lower, though despite the stark headline numbers, it was only just over half of the shares in the index that were in the red on the day. Meanwhile in Europe, the STOXX 600 (-0.03%) also saw a modest decline, though the STOXX Banks (+1.10%) hit a fresh 3-year high after advancing for the 8th time in the last 9 sessions. Sovereign bond yields echoed the declines in the US too, with those on 10yr bunds (-3.1bps), OATs (-3.3bps) and BTPs (-4.6bps) all moving lower. Following that tech-driven fall overnight on Wall Street on the back of those hawkish comments, Asian stock markets are trading lower this morning. Japan's Nikkei (-1.42%) extended the previous session’s losses while briefly falling over -2%, as the Japanese Yen found a renewed bid amid the risk-off mood. Additionally, the Kospi (-1.37%) widened its losses, after the BOK lifted borrowing costs by 25bps to 1.25% amidst rising concerns about inflationary pressure. That takes the benchmark rate back to pre-pandemic levels after the central bank's 25bps rate increase in August and November last year. Meanwhile, the Korean government unveiled a supplementary budget worth 14 trillion won in size to continue providing support to the economy. Elsewhere, the Hang Seng index (-0.86%), CSI (-0.60%) and Shanghai Composite (-0.53%) have all moved lower as well. Data released in China showed that exports went up +20.9% y/y in December (vs +20.0% market expectations) albeit imports in December rose +19.5% y/y less than +28.5% as anticipated. That meant that they posted a trade surplus of $94.46bn last month, above the consensus forecast for a $74.50bn surplus. Looking ahead, futures on both the S&P 500 (-0.19%) and DAX (-0.79%) are pointing to further losses later on. Elsewhere in markets, yesterday saw another surge in European natural gas futures (+13.71%), albeit still at levels which are less than half of the peaks seen in mid-December. The latest moves came as Russia’s deputy foreign minister Sergei Ryabkov said that talks with the US had reached a “dead end”, amidst strong tensions between the two sides with Russia rejecting any further expansion of NATO as well as calls to pull back its forces from near Ukraine’s border. In response, the Russian ruble weakened -2.31% against the US dollar yesterday, whilst the MOEX stock index (-4.05%) suffered its worst daily performance since April 2020. Turning to the Covid-19 pandemic, the decline in UK cases continued to accelerate yesterday, with the number of cases over the past week now down -24% relative to the previous 7-day period. Looking at England specifically, the total number of Covid-19 patients in hospital is now down for a 3rd day running, and in London the total number in hospital is down to its lowest level since New Year’s Eve. To the day ahead now, and data releases include US retail sales, industrial production and capacity utilisation for December, along with the University of Michigan’s preliminary consumer sentiment index for January and the UK’s GDP for November. Central bank speakers include ECB President Lagarde and New York Fed President Williams. Lastly, earnings releases include Citigroup, JPMorgan Chase, Wells Fargo and BlackRock. Tyler Durden Fri, 01/14/2022 - 08:13.....»»

Category: dealsSource: nytJan 14th, 2022

Delta Air Lines Announces December Quarter and Full Year 2021 Financial Results

ATLANTA, Jan. 13, 2022 /PRNewswire/ -- Delta Air Lines (NYSE:DAL) today reported financial results for the December quarter and full year 2021 and provided its outlook for the March quarter 2022.  Highlights of the December quarter and full year 2021 results, including both GAAP and adjusted metrics, are on page five and are incorporated here. "2021 was a year like no other for Delta, with significant progress in our recovery supported by growing brand preference, enabling us to be the only major U.S. airline to deliver profitability across the second half of the year," said Ed Bastian, Delta's chief executive officer.  "As always, our people drove this success, which is why we were happy to announce this morning a special profit-sharing payment for all eligible employees." "While the rapidly spreading omicron variant has significantly impacted staffing levels and disrupted travel across the industry, Delta's operation has stabilized over the last week and returned to pre-holiday performance," Bastian said.  "Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel." December Quarter 2021 Financial Results  Adjusted pre-tax income of $170 million excludes a net impact of $564 million primarily in equity method losses, mark-to-market adjustments on investments and special profit-sharing payment Adjusted operating revenue of $8.4 billion, which excludes third-party refinery sales, was 74 percent recovered versus December quarter 2019 on capacity that was 79 percent restored Total operating expense decreased $833 million compared to the December quarter 2019. Adjusted for costs from third-party refinery sales, total operating expense decreased $1.9 billion or 19% percent in the December quarter 2021 versus the comparable 2019 period Remuneration from American Express in the quarter was $1.2 billion, up 11 percent compared to the December quarter 2019 At the end of the December quarter, the company had $14.2 billion in liquidity, including cash and cash equivalents, short-term investments and undrawn revolving credit facilities Full Year 2021 Financial Results  Adjusted pre-tax loss of $3.4 billion excludes a net benefit of $3.8 billion from items primarily related to the Payroll Support Programs (PSP), partially offset by equity method losses, debt extinguishment charges and special profit-sharing payment Generated a pre-tax profit of $1.1 billion in the second half of 2021. Excluding PSP, mark-to-market adjustments, equity method losses and debt extinguishment charges reported an adjusted pre-tax profit of $386 million in the second half of 2021 Adjusted operating revenue of $26.7 billion, which excludes third-party refinery sales, was 57 percent recovered versus full year 2019 on capacity that was 71 percent restored Total operating expense, which includes $4.5 billion of benefit related to PSP, decreased $12.4 billion compared to 2019. Adjusted for the benefits related to PSP and costs from third-party refinery sales, total operating expense, adjusted decreased $10.9 billion or 27 percent versus 2019 Remuneration from American Express for full year 2021 was $4.0 billion, 98 percent restored compared to full year 2019 Invested $2.9 billion back in the business and reduced financial obligations by $7 billion, including fully funding the pension plans on a Pension Protection Act (PPA) basis The company had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion at the end of December 2021 March Quarter 2022 Outlook 1Q22 Forecast Capacity 1 83% - 85% Total Revenue 1, 2 72% - 76% Fuel Price ($/gal) 2, 3 $2.35 - $2.50 CASM-Ex 1, 2, 4 Up ~15% Gross Capital Expenditures 2 ~$1.6 billion Adjusted Net Debt 2 ~$22 billion 1 Compared to March quarter 2019 2 Non-GAAP measure 3 Fuel guidance based on prices as of January 11 (Brent at $81, cracks at $17, Monroe profit with RINS at $1.31) 4 Includes an ~3 point impact of operational disruption related cost Revenue Environment "The commercial strengths we spoke about last month at Capital Markets Day are evident in our December quarter results.  We ended December with revenues nearly 80 percent recovered to 2019 levels on strong demand and pricing during the holiday period, our premium products continued to perform well, we saw encouraging trends in business and international travel and our diverse revenue streams remained resilient," said Glen Hauenstein, Delta's president. "The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President's Day weekend forward.  Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter."  Operating revenue, adjusted of $8.4 billion for the December quarter 2021 improved 2 percent, or $149 million from September quarter 2021.  Compared to the same period in 2019, operating revenue, adjusted was 74 percent restored, in line with the company's mid-December guidance update on system capacity that was 79 percent restored compared to December quarter 2019 levels. Compared to the September quarter 2021, system yields improved 7 percent on a system load factor decline of 2 points to 78 percent.  As a result, total unit revenue, adjusted improved 6 percent sequentially. Revenue-related Highlights: Domestic revenue recovery progresses on strong holiday demand: Domestic passenger revenue was 78 percent restored compared to December quarter 2019, a 6 point sequential improvement in the rate of recovery versus the September quarter 2021 driven by robust leisure demand, improving corporate travel and strong holiday bookings. International passenger revenue recovered to 50 percent of December quarter 2019 levels, an 8 point improvement sequentially. Premium cabins continue to outperform main cabin: Domestic and short-haul Latin premium product revenue recovery outpaced main cabin by approximately 10 points, flat sequentially, with Domestic premium revenues 84 percent recovered compared to December quarter 2019. Business demand continues to improve: Business travel continues to progress with domestic passenger volumes approaching 60 percent restored during the December quarter 2021. This includes both managed corporate and Small and Medium Enterprises. American Express remuneration exceeded 2019 levels: American Express remuneration of $1.2 billion in the quarter was up 11 percent compared to December quarter 2019 and up 8 points sequentially. Co-brand spend was 121 percent of December quarter 2019, driven by strong holiday retail spend and T&E spend that exceeded December quarter 2019. Co-brand card acquisitions were 86 percent recovered compared to December quarter 2019. Cargo revenue achieves five consecutive quarters of positive growth: Cargo revenue increased to $304 million, a 63 percent improvement compared to the December quarter 2019 and up 24 points sequentially on strong holiday demand and yields. Cost Performance "The Delta team executed incredibly well in 2021, delivering another profitable quarter in an environment that remains dynamic," said Dan Janki, Delta's chief financial officer.  "With omicron impacting our near-term outlook, we expect losses in January and February months with a return to profitability in the month of March.  Despite expectations for a loss in the March quarter, we remain positioned to generate a healthy profit in the June, September and December quarters, resulting in a meaningful profit in 2022." For 2021, total operating expense, adjusted of $29.2 billion decreased 27 percent compared to full year 2019, driven by lower salaries and related benefits, fuel and volume and selling-related expense.  Non-fuel CASM for 2021 increased 11.4 percent versus 2019, on 29 percent lower capacity over the same period. Total operating expense, adjusted of $8.1 billion in the December quarter 2021 increased 3 percent sequentially, driven by both higher fuel and non-fuel costs from the continued restoration of the airline.  Fuel expense, adjusted of $1.6 billion in the December quarter 2021 increased 4 percent, or $55 million compared to the September quarter 2021.  Adjusted fuel price of $2.10 per gallon was up 8 percent compared to the September quarter 2021 driven by higher market prices and partially offset by continued refinery contribution and an improvement in RINs pricing and volume obligations.  During the December quarter 2021, fuel efficiency, defined as gallons per 1,000 ASMs, improved 4.3 percent versus the same period in 2019 as a result of our fleet renewal efforts.  In addition, carbon offsets expensed during the quarter drove a 3¢ impact on fuel prices as Delta supports its commitment to carbon neutrality by pursuing high quality, verified offsets.  Non-fuel cost, adjusted of $6.5 billion was up 3 percent sequentially on a 4 percent decrease in capacity.  This was driven primarily by people-related and seasonal costs.  Compared to the December quarter of 2019, non-fuel unit costs (CASM-Ex) were 8.3 percent higher, including a 1.2 point impact primarily due to omicron disruptions the last two weeks of the December quarter. Non-operating expense for the December quarter 2021 was $658 million including equity method losses, mark-to-market losses on certain investments and losses on the extinguishment of debt.  Non-operating expense, adjusted was $175 million. Balance Sheet, Cash and Liquidity "During 2021, we made significant progress restoring our balance sheet, reducing gross debt by $6 billion and fully funding our pension plans on a PPA basis," Janki said.  "Reducing debt remains a top financial priority as operating cash flow improves to support the return of our balance sheet back to investment grade metrics by 2024." At the end of the December quarter 2021, the company had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion and a weighted average interest rate of 4.2 percent.  Operating cash flow during the December quarter 2021 was $555 million.  Free cash flow was negative $441 million for the quarter with gross capital expenditures reinvested in the business of $948 million. The company's Air Traffic Liability was $6.4 billion at December quarter-end, approximately flat compared to the end of the September quarter.  Delta ended the December quarter with $14.2 billion in liquidity, including $2.9 billion in undrawn revolver capacity.  Other Highlights from the December Quarter 2021 Culture and People Increased vaccination rates to more than 95 percent of employees as Delta continues to prioritize the health and safety of the Delta people Provided free, convenient COVID-19 testing options to Delta people Celebrated 75 years of Delta Cargo, which has played a pivotal role throughout the pandemic transporting vaccines and personal protective equipment as well as life-saving organs for transplant Committed to an eight-year partnership with LA28, making Delta the inaugural founding partner of the Olympic and Paralympic Games Los Angeles 2028 and a sponsor of the United States Olympic and Paralympic teams through 2028. As Team USA's official airline, Delta will manage travel for U.S. Olympians and Paralympians to Beijing 2022, Paris 2024, Milano Cortina 2026 and Los Angeles 2028 Celebrated 200 Chairman's Club inductees through a historic 25th annual gala; this special one-time class of 200 honorees were recognized for embodying the spirit of Delta Customer Experience and Loyalty Named No. 1 in the annual Business Travel News Airline Survey for the 11th consecutive year, sweeping all categories for the 8th straight year Opened the first-ever Delta-TSA PreCheck express lobby and bag drop at Hartsfield-Jackson Atlanta International Airport, with expanded facial recognition capabilities for touch-free, seamless entry Installed high-speed Viasat-powered Wi-Fi on 300 aircraft in 2021, enabling customers on Delta's most popular routes to stream and browse their favorite sites at fast speeds for a simple, flat rate of $5 per flight Launched in-flight entertainment partnership with leading interactive fitness platform Peloton to offer exclusive well-being focused content, giving customers more ways to stretch and unwind at their seats Enhanced Delta FlyReady, a digital solution that takes the guesswork out of international travel in the pandemic era, enabling customers to understand and manage entry requirements at their destination Extended Medallion Status for current Medallion members and rolled over all Medallion Qualification Miles for the second year in a row Launched updates to Global Upgrade Certificates, allowing customers more access to premium seats in Delta Premium Select Environmental, Social and Governance Announced strengthening of executive leadership team with the hiring of Pam Fletcher as the industry's only C-suite Chief Sustainability Officer Recognized as the No. 1 transportation company on The Just 100: Companies Doing Right By America and an overall ranking of No. 38 on the comprehensive global list Promoted health equity and responded to employee feedback with a new 2022 healthcare option designed to increase predictability and lower unplanned, out-of-pocket expenses for plan participants Engaged senior leaders in Racial Equity Leadership Workshops, led by the Groundwater Institute Built upon Delta's commitment to supplier diversity by launching vodka from Du Nord Social Spirits, America's first Black-owned distillery, on all domestic flights and Une Femme's 100 percent women-made wine on select flights Concluded 2021 with a robust set of climate-related goals including committing to set a medium-term science-based target for our global airline as well as a net zero emissions target for 2050, both aligned with the SBTi framework and the UN Race to Zero Signed 27 SAF agreements with corporate and agency customers in 2021. Beginning in 2025, Delta expects to receive 81 million gallons of SAF annually from producers Aemetis, Gevo, Neste and NWABF December Quarter and Full Year 2021 Results December quarter and full year results have been adjusted primarily for the government grant recognition, impairments and equity method losses, losses on extinguishment of debt, unrealized losses on investments, special profit-sharing payment and third-party refinery sales as described in the reconciliations in Note A. GAAP Adjusted GAAP Adjusted ($ in millions except per share and unit costs) 4Q21 4Q19 4Q21 4Q19 FY21 FY19 FY21 FY19 Pre-tax (loss)/income (395) 1,397 170 1,417 398 6,198 (3,415) 6,214 Net (loss)/income (408) 1,099 143 1,098 280 4,767 (2,598) 4,776 (Loss)/diluted earnings per share (0.64) 1.71 0.22 1.70 0.44 7.30 (4.08) 7.32 Pre-tax margin (4.2)% 12.2 % 2.0 % 12.4 % 1.3 % 13.2 % (12.8)% 13.3 % Operating revenue 9,470 11,439 8,430 11,384 29,899 47,007 26,670 46,718 Total revenue per available seat mile (TRASM) (cents) 18.30 17.47 16.29 17.39 15.37 17.07 13.71 16.97 Operating expense 9,207 10,040 8,086 9,961 28,013 40,389 29,197 40,082 Capital expenditures 1,217 1,072 948 954 3,247 4,936 2,876 5,306 Total debt and finance lease obligations 26,920 11,160 26,920 11,160 Adjusted net debt 20,581 10,489 20,581 10,489 Cost per available seat mile (CASM) (cents) 17.79 15.34 12.56 11.59 14.40 14.67 12.12 10.88 Fuel expense 1,577 2,012 1,588 1,983 5,633 8,519 5,625 8,477 Average fuel price per gallon 2.09 2.01 2.10 1.99 2.02 2.02 2.02 2.01 Non-operating expense 658 2 175 6 1,488 420 888 422 Operating cash flow / free cash flow 555 969 (441) 141 3,264 8,425 1,255 4,164 About Delta Air Lines  In a world that thrives on connection, no one better connects the world than Delta Air Lines (NYSE:DAL). Powered by its people around the world, Delta is the U.S. global airline leader in safety, innovation, reliability and customer experience. Delta was named by J.D. Power & Associates as the No. 1 airline in its 2021 North American Satisfaction Study, a recognition of its decade-long airline industry leadership in operational excellence and award-winning customer service. Delta is a values-driven company with a mission of connecting the people and cultures of the globe, striving to foster understanding across a diverse world. Delta is the first airline to commit to becoming carbon neutral on a global basis by focusing on carbon reductions and removals, stakeholder engagement, and coalition building. Delta's long-term vision is zero-impact aviation: air travel that does not damage the environment directly or indirectly via greenhouse gas emissions, noise, waste generation or other environmental impacts. Its people are committed to these values while leading the way in ensuring safe, reliable and comfortable travel. Forward Looking Statements Statements made in this press release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments or strategies for the future, should be considered "forward-looking statements" under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees or promised outcomes and should not be construed as such. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the material adverse effect that the COVID-19 pandemic is having on our business; the impact of incurring significant debt in response to the pandemic; failure to comply with the financial and other covenants in our financing agreements; the possible effects of accidents involving our aircraft or aircraft of our airline partners; breaches or lapses in the security of technology systems on which we rely; disruptions in our information technology infrastructure; our dependence on technology in our operations; our commercial relationships with airlines in other parts of the world and the investments we have in certain of those airlines; the effects of a significant disruption in the operations or performance of third parties on which we rely; failure to realize the full value of intangible or long-lived assets; labor issues; the effects of weather, natural disasters and seasonality on our business; the cost of aircraft fuel; the availability of aircraft fuel; failure or inability of insurance to cover a significant liability at Monroe's Trainer refinery; failure to comply with existing and future environmental regulations to which Monroe's refinery operations are subject, including costs related to compliance with renewable fuel standard regulations; our ability to retain senior management and other key employees, and to maintain our company culture; significant damage to our reputation and brand, including from exposure to significant adverse publicity; the effects of terrorist attacks, geopolitical conflict or security events; competitive conditions in the airline industry; extended interruptions or disruptions in service at major airports at which we operate or significant problems associated with types of aircraft or engines we operate; the effects of extensive government regulation we are subject to; the impact of environmental regulation, including increased regulation to reduce emissions and other risks associated with climate change, on our business; and unfavorable economic or political conditions in the markets in which we operate or volatility in currency exchange rates. Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and our Quarterly Report for the quarterly period ended September 30, 2021. Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of the date of this press release, and which we undertake no obligation to update except to the extent required by law. DELTA AIR LINES, INC. Consolidated Statements of Operations (Unaudited) Three Months Ended Year Ended December 31, December 31, (in millions, except per share data) 2021 2019 $ Change % Change 2021 2019 $ Change % Change Operating Revenue: Passenger $       7,241 $     10,245 $      (3,004) (29)% $     22,519 $     42,277 $    (19,758) (47)% Cargo 304 187 117 63% 1,032 753 279 37% Other 1,925 1,007 918 91% 6,348 3,977 2,371 60%   Total operating revenue 9,470 11,439 (1,969) (17)% 29,899 47,007 (17,108) (36)% Operating Expense: Salaries and related costs 2,632 3,046 (414) (14)% 9,728 11,601 (1,873) (16)% Aircraft fuel and related taxes 1,577 2,012 (435) (22)% 5,633 8,519 (2,886) (34)% Ancillary businesses and refinery 1,233 299 934 NM 3,957 1,245 2,712 NM Contracted services 697 742 (45) (6)% 2,420 2,942 (522) (18)% Landing fees and other rents 542 538 4 1% 2,019 2,176 (157) (7)% Depreciation and amortization 504 622 (118) (19)% 1,998 2,581 (583) (23)% Regional carrier expense 478 536 (58) (11)% 1,736 2,158 (422) (20)% Aircraft maintenance materials and outside repairs 386 417 (31) (7)% 1,401 1,751 (350) (20)% Passenger commissions and other selling expenses 313 542 (229) (42)% 953 2,211 (1,258) (57)% Passenger service 236 325 (89) (27)% 756 1,312 (556) (42)% Aircraft rent 118 105 13 12% 430 423 7 2% Restructuring charges (16) — (16) NM (19) — (19) NM Profit sharing 108 387 (279) (72)% 108 1,643 (1,535) (93)% Government grant recognition — — — NM (4,512) — (4,512) NM Other 399 469 (70) (15)% 1,405 1,827 (422) (23)%   Total operating expense 9,207 10,040 (833) (8)% 28,013 40,389 (12,376) (31)% Operating Income 263 1,399 (1,136) (81)% 1,886 6,618 (4,732) (72)% Non-Operating Expense: Interest expense, net (265) (72) (193) NM (1,279) (301) (978) NM Impairments and equity method (losses)/gains (232) 18 (250) NM (337) (62) (275) NM Gain/(Loss) on investments, net (197) 136 (333) NM 56 119 (63) (53)% Loss on extinguishment of debt (54) — (54) NM (319) — (319) NM Miscellaneous, net 90 (84) 174 NM 391 (176) 567 NM   Total non-operating expense, net (658) (2) (656) NM (1,488) (420) (1,068) NM (Loss)/Income Before Income Taxes (395) 1,397 (1,792) NM 398 6,198 (5,800) (94)% Income Tax Provision (13) (298) 285 (96)% (118) (1,431) 1,313 (92)% Net (Loss)/Income (408) 1,099 (1,507) NM $          280 $       4,767 $      (4,487) (94)% Basic (Loss)/Earnings Per Share $        (0.64) $         1.71 $         0.44 $         7.32 Diluted (Loss)/Earnings Per Share $        (0.64) $         1.71 $         0.44 $         7.30 Basic Weighted Average Shares Outstanding 637 642 636 651 Diluted Weighted Average Shares Outstanding 637 644 641 653   DELTA AIR LINES, INC. Passenger Revenue (Unaudited) Three Months Ended Year Ended December 31, December 31, (in millions) 2021 2019 $ Change % Change 2021 2019 $ Change % Change Ticket - Main cabin $       3,687 $       5,238 $      (1,551) (30)% $     11,626 $     21,919 $    (10,293) (47)% Ticket - Business cabin and premium products 2,585 3,684 (1,099) (30)% 7,713 14,989 (7,276) (49)% Loyalty travel awards 573 726 (153) (21)% 1,786 2,900 (1,114) (38)% Travel-related services 396 597 (201) (34)% 1,394 2,469 (1,075) (44)% Total passenger revenue $       7,241 $     10,245 $      (3,004) (29)% $     22,519 $     42,277 $    (19,758) (47)%.....»»

Category: earningsSource: benzingaJan 13th, 2022

US stock futures edge higher along with bond yields, as 39-year-high inflation reading sinks in

US inflation soared to a 39-year high of 7% in December, data showed on Wednesday, but stocks were unfazed. It's been a rocky year so far on Wall Street.John Moore/Getty Images US stock futures inched higher Thursday after data showed inflation soared to 7% in December. Bond yields also rose slightly as investors digested the hottest inflation reading since 1982. One strategist said he expects the key US bond yield to hit 2% but for stocks to continue to rise. US stock futures edged higher, having earlier fallen into the red, as investors digested data which showed inflation hit a 39-year high in December. Bond yields also rose.S&P 500 futures were up 0.11%, Dow Jones futures were 0.06% higher, while Nasdaq 100 futures had risen 0.18% as of 5.50 a.m. ET.Stocks rose Wednesday, despite the red-hot inflation reading, with the benchmark S&P 500 finishing 0.28% higher.Year-on-year consumer price index (CPI) inflation hit 7% in December, according to data released Wednesday.It was the biggest increase in prices since 1982 and the third straight month above 6%, although it was in line with analysts' expectations.Strong inflation has caused the Federal Reserve to pivot towards fire-fighting mode. Markets now expect the central bank to raise interest rates at least three times in 2022, starting in March, while many investors expect four or more hikes.Expectations that the Fed will turn off the stimulus taps has caused volatility at the start of the year. Speculative tech stocks – which zoomed higher when interest rates were at rock bottoms – have been particularly hard hit. The tech-heavy Nasdaq 100 index was down 2.5% for the year as of Wednesday's close.Fed Governor Lael Brainard said Wednesday that "inflation is too high", in prepared remarks to Congress ahead of her confirmation hearing to become vice chair. In a sign of the Fed's new focus, she said bringing down prices is the central bank's "most important task."Asian stocks moved broadly lower overnight, with China's CSI 300 falling 1.64% and Hong Kong's Hang Seng eking out a 0.11% gain.Europe's continent-wide Stoxx 600 and London's FTSE 100 were both flat in early trading.Read more: Stocks should shake off their early-2022 plunge and could rally 18% this year, according to Evercore. Here are 6 things to buy as it happens.Government bond yields, which move inversely to prices, resumed their steady climb higher after dipping Tuesday and treading water Wednesday. With interest rates expected to go up, investors are demanding higher returns on bonds.The yield on the key 10-year US Treasury note rose by less than a basis point to 1.75%. It's up sharply from mid-December, when it traded at around 1.4%."We expect the US 10-year yield to move from the current [level] to around 2% over the coming months," said Mark Haefele, chief investment officer at UBS Global Wealth Management.Yet Haefale said he thinks equities will be able to climb despite bond yields going up, saying that fourth-quarter earnings season, which kicks off this week, is likely to boost investor confidence.Major banks Wells Fargo, Citigroup and JPMorgan are set to get things going with their fourth-quarter earnings Friday.Analysts at data company FactSet estimate that earnings for S&P 500 companies rose 22% in the fourth quarter, with the energy, industrials and materials set for the biggest gains.Elsewhere in markets, oil prices edged higher as investors bet on economic growth and robust demand. Brent crude was up 0.17% to $84.82 a barrel while WTI crude was 0.08% higher at $82.71 a barrel.Bitcoin rose 2.7% to $43,902 as it tried to break out of its recent slump. The digital asset is a long way off its November record high of close to $69,000 however, having been hit hard by expectations that the Fed will sharply cut its support for markets.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 13th, 2022

MillerKnoll, Inc. Reports Second Quarter Fiscal 2022 Results

ZEELAND, Mich., Jan. 4, 2022 /PRNewswire/ -- Strong demand drove quarterly orders of $1.2 billion; an increase of 83.9% over the prior year, up 26.4%* organically Our diversified go-to-market strategy helped drive growth in every segment Integration of the Knoll acquisition is progressing as planned; we remain confident in our ability to deliver $100 million of run rate cost synergies within two years of the closing, and now expect $120 million by the end of year three Webcast to be held Tuesday, January 4, 2022, at 5:30 PM ET Second Quarter Fiscal 2022 Financial Results (Unaudited) (Unaudited) Three Months Ended Six Months Ended (Dollars in millions, except per share data) November 27, 2021 November 28, 2020 % Chg. November 27, 2021 November 28, 2020 % Chg. Net Sales $ 1,026.3 $ 626.3 63.9 % $ 1,816.0 $ 1,253.0 44.9 % Gross Margin % 34.2 % 39.0 % N/A 34.6 % 39.4 % N/A Adjusted Gross Margin %* 34.6 % 39.0 % N/A 35.2 % 39.5 % N/A Operating Expenses $ 346.8 $ 173.2 100.2 % $ 677.1 $ 327.8 106.6 % Adjusted Operating Expenses* $ 294.4 $ 170.8 72.4 % $ 529.6 $ 326.6 62.2 % Operating Earnings (Loss) % 0.4 % 11.3 % N/A (2.7) % 13.3 % N/A Adjusted Operating Earnings %* 5.9 % 11.7 % N/A 6.0 % 13.5 % N/A Net (Loss) Earnings Attributable to MillerKnoll, Inc. $ (3.4) $ 51.3 N/A $ (64.9) $ 124.2 N/A (Loss) Earnings Per Share – Diluted $ (0.05) $ 0.87 N/A $ (0.92) $ 2.10 N/A Adjusted Earnings Per Share – Diluted* $ 0.51 $ 0.89 (42.7) % $ 1.00 $ 2.13 (53.1) % Orders $ 1,157.9 $ 629.7 83.9 % $ 2,074.4 $ 1,185.7 75.0 % Backlog $ 967.3 $ 403.4 139.8 % *Items indicated represent Non-GAAP measurements; see the reconciliations of Non-GAAP financial measures and related explanations below. To our shareholders: During the second quarter of fiscal year 2022 we reached exciting and symbolic milestones.  It was our first full quarter as MillerKnoll, our company name officially changed, and we began trading with our new stock ticker symbol, NASDAQ: MLKN. We are making excellent progress on our integration journey and remain confident that we will deliver our cost synergies target of $100 million within two years of closing. Furthermore, as our teams completed integration planning, they identified additional synergy opportunities and we now expect to increase run rate savings to $120 million by the end of year three. In bringing together the best of Herman Miller and Knoll, we've created a stronger and more resilient organization, built for long-term success. Second quarter demand shows the power of MillerKnoll and we are confident in our ability to drive continued growth and shareholder value.  Financial Results The following table highlights non-comparable items that impacted U.S. GAAP net earnings per diluted share, defined as earnings per diluted share adjusted, to exclude the impact of special charges, acquisition and integration-related expenses, expense related to debt extinguishment, and intangible asset amortization related to the Knoll acquisition. Three Months Ended Six Months Ended November 27,2021 November 28, 2020 November 27, 2021 November 28, 2020 (Loss) Earnings per Share - Diluted $ (0.05) $ 0.87 $ (0.92) $ 2.10 Non-comparable items: Add: Special charges, after tax — — — 0.01 Add: Amortization of purchased intangibles, after tax 0.16 — 0.52 — Add: Acquisition and integration charges, after tax 0.40 — 1.26 — Add: Debt extinguishment, after tax — — 0.14 — Add: Restructuring expenses, after tax — 0.02 — 0.02 Adjusted Earnings per Share - Diluted $ 0.51 $ 0.89 $ 1.00 $ 2.13 Weighted Average Shares Outstanding (to Calculate Adjusted Earnings per Share) – Diluted 75,304,752 59,267,398 70,803,483 59,043,928 Note: The adjustments above are net of tax. For the three and six months ended November 27, 2021, the tax impact of the adjustments were $0.20 and $0.51, respectively. For the three and six months ended November 28, 2020, the tax impact of the adjustments was immaterial. MillerKnoll Consolidated Results Second quarter consolidated net sales were $1.0 billion, reflecting an increase of 63.9% on a reported basis and 11.1% organically compared to prior year. Orders in the quarter of $1.2 billion were 83.9% higher than the prior year. Notably, order levels were up over prior year across all four reporting segments. On an organic basis, orders of $795.7 million reflected sequential improvement of 6.4% compared to the first quarter, and were up 26.4% over the prior year.  While order demand was strong, our ability to produce and ship orders was impacted in the near-term by continued global supply chain and labor supply disruptions. We estimate these disruptions adversely impacted net sales by approximately $50 million during the quarter. We continue to implement a range of countermeasures to combat these pressures, but expect to continue to feel their effects in the second half of this fiscal year.   Gross margin for the quarter was 480 basis points lower than the prior year, due largely to the impact of rising commodity prices, particularly steel, and other inflationary pressures including labor and transportation. The price increase we implemented in the first quarter helped mitigate some of these inflationary pressures. Additional price increases implemented in the second and third quarters are expected to help further offset these pressures.  Consolidated operating expenses for the quarter were $346.8 million, compared to $173.2 million in the prior year. Consolidated adjusted operating expenses of $294.4 million, were up $123.6 million from last year, primarily due to the inclusion of Knoll adjusted operating expenses of $99.1 million and additional variable selling expenses as a result of increased sales in the current year. We are managing operating expenses carefully and will continue to adapt based on evolving market dynamics.  Operating margin for the quarter was 0.4% compared to 11.3% during the prior year. On an adjusted basis, which excludes acquisition and integration-related charges of $57.2 million, consolidated operating margin was 5.9% compared to 11.7% in the prior year. Despite inflationary pressures, our Global Retail business delivered another strong quarter of profitability with adjusted operating margins of 11.3%. We reported a net loss per share of $0.05 for the quarter. Adjusted earnings per share were $0.51 in the quarter, compared to $0.89 in the prior year. At the end of our second quarter, our liquidity position reflected cash on hand and availability on our revolving credit facility totaling $573.8 million. Using the Power of MillerKnoll and Delivering Cost Synergies We are making progress bringing Herman Miller and Knoll together, unleashing the power of our combined brands and delivering cost synergies. At the close of the second quarter, we had implemented $43 million in run rate savings. This meaningful progress toward our goal, and along with our robust integration roadmap, gives us confidence that we will achieve our planned cost synergies, even with inflationary and supply chain pressures.  During the quarter, we completed the work behind creating our new MillerKnoll organizational structure. This involved selecting talent and integrating the two teams into a new structure to execute our strategies and drive the business forward. Our new structure ensures we are capturing operational efficiencies across our collective of brands while strengthening the unique position of each individual brand to drive continued growth and create future development opportunities for our employees. The most compelling reason for creating MillerKnoll is the power of our combined portfolio and distribution network. MillerKnoll will have the largest and most capable dealer network in the world and together we will offer our customers the most comprehensive suite of products and services in the industry. Creating the MillerKnoll dealer network is our top priority and we are well on our way. Our first MillerKnoll dealer pilots in Texas and Arizona have been successful, and the learnings will inform the plan for operationalizing the network. We are on track with our plans to transition from the legacy Herman Miller and Knoll dealer networks to a unified MillerKnoll dealer network in the middle of calendar 2022.  As MillerKnoll, we also have a greater impact in our communities. November 2 was MillerKnoll's Global Day of Purpose. Our combined 11,000 employees took the day to give back to their communities in a variety of meaningful ways. It was an extraordinary culture-building moment for our organization and a testament to the good we can, and will, do together.  Driving Growth Across Geographies With a Diversified Go-To-Market Strategy That Combines Contract and Retail Retail Momentum Continues Second quarter Global Retail sales were up 18.2% and orders were up 20.6% compared to the prior year. This growth was fueled, in part, by investments we've made to drive customer acquisition and by continued assortment expansion. We are focused on improving our operational capabilities with new order management, planning and allocation, and point-of-sale systems coming later in the fiscal year.  Following the opening of our San Jose and San Francisco stores in the quarter, our total fleet of Herman Miller retail stores now stands at 13. These stores, which highlight Herman Miller's unmatched collection of ergonomic seating products, are an important entry point for customers experiencing our brands for the first time and we expect to build on our initial success with this concept through an expanded brick-and-mortar presence in 2022.   International Retail, which includes Herman Miller and HAY International, was another bright spot in the quarter, with sales up 22.1% and orders up 10.9% versus the prior year. We launched new Herman Miller websites in Germany and France, and both exceeded sales and orders expectations for the quarter. The Global Retail segment also felt the macro-economic pressures the industry is experiencing. We increased shipping fees on furniture and implemented a shipping fee on task seating. These actions helped offset freight costs without impacting demand. We also implemented targeted price increases across our retail product lineup in the second quarter to help offset inflationary pressures.   We entered the important holiday shopping season with momentum. The Retail team delivered our strongest performance during the Black Friday-Cyber Monday period. In addition, our gaming product sales were strong during this timeframe and throughout the second quarter. We will continue to drive growth in the gaming segment through new product introductions, regional expansion in Europe, and strategic partnerships. We expect the Retail business to continue delivering double-digit revenue growth and low teens operating margin in the near term. Longer term, we expect our growth investments in retail will enable further margin expansion from current levels. Growth initiatives in the second half of the fiscal year include upgrading our Herman Miller Japan and China eCommerce platforms, expanding our product assortment with a steady drumbeat of new products across our brands, including gaming, and expanding studios and stores.  Strong Demand Environment During the second quarter, we saw continued improvement in the demand environment in each of our other segments- Americas Contract, International Contract and Knoll. Americas Contract Americas Contract sales of $361.5 million increased 4.1% over the prior year. Business fundamentals in the Americas reflect continued improvement in the demand environment as organizations accelerated their return to the workplace. Order entry levels of $407.2 million were strong across all regions and sectors and were 29.3% higher than the prior year. The Americas segment felt the impact of supply chain and internal manufacturing capacity disruptions in the quarter, which impacted our ability to ship orders in the period. Our teams are actively working on initiatives to help mitigate these pressures, but we do expect them to remain a factor in our operations in the second half of the fiscal year. International Contract International Contract performance was strong across all geographies and brands in the quarter. Orders were up 30.3% and sales were up 23.3% over the prior year. Many regions met or exceeded pre-COVID performance as the global return to the workplace continued to accelerate through the quarter. Demand in Europe, including the UK, was especially strong, with orders in Europe up 42% over prior year. Cost pressure impacts have been less of a factor in the International Contract segment compared to Americas Contract segment. Global account activity drove a significant portion of the strong orders performance in this segment during the quarter, with significant wins in India and Japan. We expect this trend to continue as more customers bring employees back to the workplace in 2022. At the same time, we are seeing an increase in activity from local domestic companies which is driving new and sustained growth, especially in Australia and China.  With the global return to offices pacing ahead of the Americas, we are gaining a clearer picture of workplace design trends. More mature markets are leaning into floorplates with more collaborative spaces, while developing markets like India and China continue to favor a more traditional floorplate, albeit with a gradual shift to more collaborative spaces. HAY Contract's performance in Europe speaks to the demand for collaborative solutions in that region, with orders up 55% and sales up 48% from prior year. Knoll Knoll sales were up 5.3% and orders were up 29.6% versus the prior year. Both the Knoll workplace and residential categories grew in the quarter. Notably, Holly Hunt and Muuto both experienced record sales in the quarter. Through the pandemic, these two brands have demonstrated consistent growth across channels, including to-the-trade and consumer retail. This performance points to the power of our diversified strategy and strong business fundamentals. Applying Our Research and Firsthand Experience to Deliver Innovative Future of Work Solutions MillerKnoll is the global leader in providing adaptable solutions to create innovative, productive environments for the workplace and homes of our clients. We are sharing our firsthand experiences with hybrid workplaces and leveraging our global insight partnerships to inform the future of work.  While the world continues to grapple with the impacts of the pandemic, including new variants and regional surges in cases, leasing data indicates that companies are returning to the office. In our conversations with C-suite executives from a variety of industries, there is a strong desire among leaders to bring their teams back together for the purposes of culture building, collaboration, and problem-solving efficiency. Research also indicates that most people want the option to return to the office. According to Future Forum's consortium of companies working on the Future of Work, more than 80% of employees want access to an office, but not every day and not from 8:00 am to 5:00 pm. In fact, 76% of employees want more flexibility in where they can work, and far more, 93%, want flexibility in when they can work. Employers are recognizing their workplaces need to be reimagined as desirable and on-demand resources that are designed to meet the changed expectations of the post-pandemic workforce. We have the products, the services, and the tools to help them achieve their goals for their workplaces. Leveraging Our Competitive Advantages to Drive Growth and Create Value for Our Shareholders We believe in the power of design to solve problems. While we are facing many of the same headwinds as the rest of our industry, our people are delivering creative and sustainable solutions to overcome these challenges. We are leveraging our global distribution, production, design, and sales capabilities to combat supply chain issues, shipping delays, and inflationary pressures. We've ramped up production capacity in facilities closer to our customers and built inventory behind higher demand items. We are also leaning into the partnerships that exist across our collective of brands to increase global shipping capacity even during this period of extreme scarcity. Our pricing and discount strategies are helping to offset margin pressures – contract pricing increases began in Q1 and continued through the quarter, with Global Retail price increases to take effect in the third quarter.  We are innovating across our brands and leveraging our relationships with a global network of designers to bring new solutions such as the Knoll Iquo indoor/outdoor café chairs in partnership with Ini Archibong. Across MillerKnoll's expansive textile capability we introduced several new products this quarter, including Knoll's New Fundamentals Collection, and expanded Maharam's Textiles of the 20th Century series with the reissue of six of Alexander Girard's most enduring designs across three applications (upholstery, wallcoverings, and a hand-woven rug).  Outlook We expect sales in the third quarter of fiscal year 2022 to range between $1,010 million and $1,050 million. The mid-point of this range implies a revenue increase of 74% compared to the same quarter last fiscal year on a reported basis and 18% on an organic basis, excluding the impact of the Knoll acquisition. We anticipate earnings per share to be between $0.24 and $0.30 for the period. Our forecast for the third quarter also considers the near-term impacts of supply chain disruptions and inflationary pressures.  Designing the Future MillerKnoll is built for growth. We are powered by the most comprehensive portfolio of complementary brands in our industry. With our enhanced capabilities and the financial strength of our diversified business, we are well positioned to drive growth and increase value for all our stakeholders as we design our future as MillerKnoll.  We appreciate your continued support of our company and look forward to an exciting 2022 together.  Andi Owen Jeff Stutz President and Chief Executive Officer Chief Financial Officer Financial highlights for the three and six months ended November 27, 2021 follow: MillerKnoll, Inc. Condensed Consolidated Statements of Operations (Unaudited) (Dollars in millions, except per share and common share data) Three Months Ended Six Months Ended November 27, 2021 November 28, 2020 November 27, 2021 November 28, 2020 Net Sales $ 1,026.3 100.0 % $ 626.3 100.0 % $ 1,816.0 100.0 % $ 1,253.0 100.0 % Cost of Sales 675.7 65.8 % 382.1 61.0 % 1,187.9 65.4 % 758.8 60.6 % Gross Margin 350.6 34.2 % 244.2 39.0 % 628.1 34.6 % 494.2 39.4 % Operating Expenses 294.4 28.7 % 170.8 27.3 % 529.6 29.2 % 326.6 26.1 % Restructuring Expenses — — % 2.4 0.4 % — — % 1.2 0.1 % Acquisition and Integration Charges 52.4 5.1 % — — % 147.5 8.1 % — — % Operating Earnings (Loss)  3.8 0.4 % 71.0 11.3 % (49.0) (2.7) % 166.4 13.3 % Other Expenses, net 8.2 0.8 % 2.2 0.4 % 26.1 1.4 % 3.7 0.3 % (Loss) Earnings Before Income Taxes and Equity Income (4.4) (0.4) % 68.8 11.0 % (75.1) (4.1) % 162.7 13.0 % Income Tax (Benefit) Expense (3.4) (0.3) % 16.2 2.6 % (14.1) (0.8) % 36.9 2.9 % Equity (Loss) Income, net of tax (0.1) — % 0.2 — % — — % 0.4 — % Net (Loss) Earnings (1.1) (0.1) % 52.8 8.4 % (61.0) (3.4) % 126.2 10.1 % Net Earnings Attributable to Redeemable Noncontrolling Interests 2.3 0.2 % 1.5 0.2 % 3.9 0.2 % 2.0 0.2 % Net (Loss) Earnings Attributable to MillerKnoll, Inc. $ (3.4) (0.3) % $ 51.3 8.2 % $ (64.9) (3.6) % $ 124.2 9.9 % Amounts per Common Share Attributable to MillerKnoll, Inc. (Loss) Earnings Per Share – Basic ($0.05) $0.87 ($0.92) $2.11 Weighted Average Basic Common Shares 75,304,752 58,908,094.....»»

Category: earningsSource: benzingaJan 4th, 2022

These 5 catalysts could keep the bull market in stocks alive and well in 2022, according to JPMorgan

"There was some multiple compression last year, driven by very strong EPS growth, and we expect in 2022 there will be further P/E compression." Lucas Jackson/ReutersThe bull market in stocks is set to continue in 2022, according to a Monday note from JPMorgan."We believe there is further upside for stocks, despite a strong run so far," analysts said.These are the five bullish catalysts detailed by JPMorgan that will support stock prices into 2022.Sign up here for our daily newsletter, 10 Things Before the Opening Bell.The bull market in stocks has plenty of gas left in the tank heading into 2022, according to a Monday note from JPMorgan.The bank advised its clients to "stay bullish, [as] positive catalysts are not exhausted," said analysts, who highlighted five. And while JPMorgan acknowledges an already impressive run in stocks has materialized, the strength should continue on continued economic growth across the globe.The S&P 500 surged about 27% in 2021, extending a strong three-year streak for stocks despite a global pandemic and periods of economic shutdowns. But with the economy continuing to grow and accommodative policies from the Federal Reserve and governments remaining in place, these five catalysts should keep the bull market alive and well into 2022, according to JPMorgan.1. Economic Growth Continues"The pace of growth is likely to stabilize into 2022, with a number of areas of concern receding," JPMorgan said. The bank expects 2022 to be another year of real GDP growth being above its long-term trend, especially overseas in Europe. "Inventories are very low and their replenishing should be a tailwind," the bank said, adding that fiscal support from governments remains in place while credit spreads are showing no indications of stress.2. The Federal Reserve"Fed is unlikely to keep moving further and further into hawkish territory in the first half of 2022, at least relative to what is priced in currently," JPMorgan said. The bank believes headline inflation is "likely peaking, which will result in steeper curves [and] a tailwind for stocks," according to the note. 3. Earnings Growth to Continue"We continue to see gains for earnings, and believe that consensus projections for 2022 will again prove too low. Q4 of 2021 EPS is expected by consensus to be sequentially below Q3, which doesn't typically happen. Strong beats are likely for the Q4 reporting season," JPMorgan said.4. Valuations Compressed in 2021"In absolute terms, P/E multiples are elevated, but not equity yields vs. credit and bond yields. Notably, there was some multiple compression last year, driven by very strong EPS growth, and we expect in 2022 there will be further, mild and benign, P/E compression. The cushion before rising yields hurt the overall market remains significant," JPMorgan said. 5. Favorable Technicals"The overall technical picture is favorable, with equities typically performing well at the start of the year," the bank said, pointing to solid seasonal stock market performance in the month of January.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 4th, 2022

Futures, Global Markets Start 2022 With A Bang

Futures, Global Markets Start 2022 With A Bang If 2021 ended with a whimper, then 2022 is starting off with a bang, as futures on all major U.S. equity indexes rise on the first trading day of the year amid light volumes with markets including the U.K., Japan China, Australia and New Zealand closed for holidays. Europe’s Stoxx 600 rose 0.6%. In Hong Kong, property shares dropped and China Evergrande Group halted trading without an explanation. The dollar rose, as did bond yields and bitcoin, while oil erased earlier gains.  At 745am, emini S&P futures traded 29 points, or 0.61% higher, and rising as high as 4,790, just inches away from all time highs of 4,799.75; Dow futs were 172 points or 0.48% higher and the Nasdaq was also in the green by 29 points or 0.6%. Investors continue to weigh the impact of the rapid spread of the omicron Covid-19 variant on the economic recovery, even as it appears less severe than earlier strains. Investors are also focusing on the policy trajectory of the Federal Reserve and other central banks into 2022, particularly as inflation continues to present a challenge. In premarket moves, Tesla’s shares climbed 6.8% in U.S. premarket trading after the company reported record quarterly deliveries.  Alibaba ADRs dropped in premarket trading with shares listed in Hong Kong on concern that some investors may pare stakes amid data showing the conversion of company’s ADRs into Hong Kong shares has picked up pace. And with the new year, broad, sweeping assessments are hitting the tape, such as this one from Jefferies strategist Sean Darby who wrote that last year “was simply a period of ‘risk on,’” adding that “peering into 2022, we expect volatility to rise, meaning that the return per unit of risk comes to the forefront." European equities rose on the first day of trading in 2022 and headed for a record on bets that the global economy can weather the impact of the omicron coronavirus variant. The Stoxx Europe 600 Index rose 0.5% to 490.47, above the record closing level set in November, led by gains by automakers and chemical sector companies. Meanwhile, the Euro Stoxx 50 climbed 0.9%. U.K. markets were closed for a holiday on Monday. European stocks had climbed 22% last year and have posted seven consecutive quarters of gains -- the longest winning streak since 1998. Most strategists expect this year’s returns to be more muted, with an average target of 506 index points for the Stoxx 600. Among individual movers, Vestas Wind Systems A/S dropped after the company announced details of its fourth-quarter order intake. Sydbank AS said the order tally was “weak.” Asian stocks were mixed on their first trading session of 2022, with Hong Kong’s benchmark gauge dropping on concerns over the spread of the omicron variant and the financial health of China’s real estate sector.    The MSCI Asia Pacific Index was little changed after rising as much as 0.3%, weighed down by consumer discretionary and health-care firms. Hong Kong’s Hang Seng Index slid 0.5%, with Chinese developers tumbling on media reports that China Evergrande Group has been ordered to tear down apartment blocks in Hainan province. Read: Property Stocks Sink After Demolition Order: Evergrande Update Shares in Hong Kong also dropped amid a fresh wave of infections tied to an outbreak at a local restaurant. The city administered more than 7,000 initial injections on both Saturday and Sunday, the most since the end of November. “Any further restrictions to curb virus spreads remain a key risk to watch, and more clarity will be sought from economic data over the coming weeks to validate the resilience of the economy” of the U.S., said Jun Rong Yeap, a strategist at IG Asia Pte in Singapore. Malaysia’s stock index was the region’s worst performer, dropping 1.2%, while South Korea and Taiwan equities rose. Markets in mainland China, Japan, Australia and New Zealand were closed for holidays. Asia’s stock benchmark capped an annual loss of 3.4% in 2021 in its worst performance since 2018, lagging behind the U.S. and Europe. India’s key equity gauges posted their best gain in nearly four weeks, led by a rally in banking and software stocks as investors shift focus to the upcoming corporate earnings season for the latest quarter.  The S&P BSE Sensex rose 1.6% to 59,183.22 in Mumbai, the most since Dec. 8. The benchmark also posted its biggest advance on the first trading day of a new year since 2009. The NSE Nifty 50 Index gained by a similar magnitude on Monday. All of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by gauges of banking and financial companies. The corporate earnings season for the December quarter will start with Infosys and Tata Consultancy Services announcing results on Jan. 12. Investors will be focusing on the software exporters’ commentary on demand amid rising cost pressures. HDFC Bank contributed the most to the index gain, increasing 2.7%. Out of 30 shares in the Sensex index, 25 rose and five fell With much of Europe including the U.K. on bank holiday, Treasuries reopen around 7am ET with yields cheaper by 2bp to 4bp across the curve and losses led by belly.  U.S. 10-year yields around 1.535%, cheaper by ~2bp vs Friday’s close, while 5-year yields are higher by more than 3bp; 5s30s is flatter by ~1bp. Gains for most European stock benchmarks add to cheapening pressure on yields, as S&P 500 futures trade above Friday’s high.  Ahead of the cash open Treasury futures edged lower during Asia session European morning on light volume as S&P 500 futures advanced toward last week’s record highs. In FX, the Bloomberg Dollar Spot Index inched up and the dollar traded mixed against its Group-of-10 peers in thin trading, with Japan, Australia and New Zealand markets shut for holidays. The Canadian dollar was the worst performer while the New Zealand dollar climbed against all of its Group-of-10 peers. The euro slipped to trade around $1.1350 and Bund yields rose, led by shorter maturities, while European peripheral spreads narrowed. In commodities, in early trading oil rose towards $79 a barrel on Monday supported by tight supply and hopes of further demand recovery in 2022 spurred in part by a view that the Omicron coronavirus variant is unlikely to significantly dampen the outlook. Libyan oil output will be cut by 200,000 barrels per day for a week due to pipeline maintenance. OPEC and its allies, known as OPEC+, are expected to stick to a plan to raise output gradually at a meeting on Tuesday. Brent crude rose 95 cents, or 1.2%, to $78.73 a barrel. West Texas Intermediate crude added $1.03 or 1.4%, to $76.24. Last year, Brent rose 50%, spurred by the global recovery from the COVID-19 pandemic and OPEC+ supply cuts, even as infections reached record highs worldwide. "Infection rates are on the rise globally, restrictions are being introduced in several countries, the air travel sector, amongst others, is suffering, yet investors' optimism is tangible," said Tamas Varga of oil broker PVM. "It seems that the current strain produces less severe symptoms than its predecessors, which might just help us to struggle through the fourth wave of the pandemic." Some see more gains in 20222: "Crude and oil product prices should benefit from oil demand moving above 2019 levels," said a report from UBS analysts including Giovanni Staunovo. "We expect Brent to rise into a $80–90 range in 2022." Key U.S. events this week include minutes of the December FOMC meeting and non-farm payrolls; on deck today is the Flash Markit Manufacturing PMI read for December as well as the November construction spending data. Market Snapshot S&P 500 futures up 0.5% to 4,781.25 STOXX Europe 600 up 0.5% to 490.21 MXAP little changed at 193.17 MXAPJ little changed at 630.24 Nikkei down 0.4% to 28,791.71 Topix down 0.3% to 1,992.33 Hang Seng Index down 0.5% to 23,274.75 Shanghai Composite up 0.6% to 3,639.78 Sensex up 1.6% to 59,208.86 Australia S&P/ASX 200 down 0.9% to 7,444.64 Kospi up 0.4% to 2,988.77 Brent futures up 1.6% to $78.99/bbl Gold spot down 0.1% to $1,827.19 U.S. Dollar Index up 0.1% to 95.80 German 10Y yield little changed at -0.18% Brent futures up 1.4% to $78.83/bbl Top Overnight News from Bloomberg Senate Majority Leader Chuck Schumer is vowing to bring a revised version of the $2 trillion tax, climate and spending package to the floor for a vote as soon as this month, despite unresolved differences within his party that have stalled the legislation President Joe Biden reaffirmed U.S. support for Ukraine’s sovereignty on Sunday in a call with the country’s president, Volodymyr Zelenskiy Germany’s Finance Minister Christian Lindner said the new government is working on tax relief measures of more than 30 billion euros ($34 billion) Turkish inflation surged to a 19-year high in December, propelled by a slump in the lira and President Recep Tayyip Erdogan’s push for cheaper borrowing Asia’s factory activity continued its expansion in December, lifted by resilient demand and easing supply-chain bottlenecks as the omicron strain begins to spread in the region Top Asian News North Korean Defector Likely Crossed DMZ Twice, Seoul Says Property Stocks Sink After Demolition Order: Evergrande Update Alibaba Drops on Concern Over Conversion of ADRs to H.K. Shares Hong Kong’s Stock Benchmark Marks Its Worst Start in Three Years Star China Stock Fund Manager Suffers a Disastrous 2021 Tokyo Finds 103 New Covid Cases, Most in Nearly Three Months Top European News Nordea Analysts Who Wrote Retracted Report to Leave Bank Iveco Valued at $4.4 Billion in Spinoff to Navigate Truck Shift Germany Heads Toward New Pandemic Measures as Omicron Threatens US Event Calendar 9:45am: Dec. Markit US Manufacturing PMI, est. 57.7, prior 57.8 10am: Nov. Construction Spending MoM, est. 0.7%, prior 0.2% Tyler Durden Mon, 01/03/2022 - 08:02.....»»

Category: blogSource: zerohedgeJan 3rd, 2022

PVH (PVH) Up 5.3% Since Last Earnings Report: Can It Continue?

PVH (PVH) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. It has been about a month since the last earnings report for PVH (PVH). Shares have added about 5.3% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is PVH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. PVH Corp Beats Q3 Earnings Estimates, Raises 2021 ViewPVH reported third-quarter fiscal 2021 results, wherein the bottom line surpassed the Zacks Consensus Estimate, while the top line missed the same. Both metrics improved year over year. The results gained from brand strength, particularly in Calvin Klein and Tommy Hilfiger, as well as the solid performance in its international business and robust pricing actions. The company also noted that holiday season sales are off to a solid start. Management raised the fiscal 2021 view.Q3 HighlightsPVH Corp reported adjusted earnings of $2.67 per share compared with the year-ago quarter's $1.32. The bottom line beat the Zacks Consensus Estimate of $2.07. On a GAAP basis, the company reported earnings of $3.89 per share, reflecting a sharp improvement from 98 cents in the prior-year quarter.In the fiscal third quarter, revenues advanced 10% year over year to $2,333 million. However, the top line missed the Zacks Consensus Estimate of $2,402 million. Adverse impacts related to the shift in the timing of wholesale shipments across the United States from the third quarter to the fourth as well as the sale of the Heritage Brands business hurt the top line to some extent.Direct-to-consumer revenues remained flat year over year in the quarter. The company's retail stores continue to face pressure due to the pandemic. Certain stores in Australia remained closed for the majority of the quarter. Wholesale revenues jumped 17% in the fiscal third quarter, driven by double-digit growth in the online business of its traditional and pure-play wholesale customers. Revenues in the digital channel rose roughly 15%, representing 21% of total revenues in the quarter under review.The company's gross profit amounted to $1,345.1 million, up 22.1% year over year. The gross margin expanded 570 bps to 57.7%, owing to full-price selling and a positive sales mix, which offset higher freight costs. Adjusted selling, general and administrative expenses rose 11.5% year over year to $1,089.3 million. Adjusted earnings before interest and taxes totaled $266 million compared with $132 million in the prior-year quarter, driven by higher sales and improved margins.Segment AnalysisPVH Corp reports financial results under three segments — Calvin Klein, Tommy Hilfiger and Heritage Brands.Revenues for the Calvin Klein segment improved 22% year over year. While sales for Calvin Klein North America increased 27% and Calvin Klein International climbed 19%.Revenues for the Tommy Hilfiger segment rose 12% year over year in the reported quarter. Revenues were up 13% at Tommy Hilfiger North America and 11% at Tommy Hilfiger International.The Heritage Brands segment's revenues declined 36% year over year in the quarter under review.Financial DetailsPVH Corp ended the quarter with cash and cash equivalents of $1,298.7 million, long-term debt of $2,605.2 million and stockholders' equity of $5,171.7 million. The company also bought back $149 million worth of shares under its existing share repurchase program and resumed dividend payments.OutlookManagement raised its fiscal 2021 view despite the continued uncertainty related to the new COVID-19 variant Omicron as well as supply-chain and logistics disruptions, which might lead to production and delivery delays across stores and online. The company's outlook assumes transportation shortages, labor shortages and port congestion.For 2021, revenues are anticipated to be 27-28% year over year (up 25-26% on a cc basis), suggesting an improvement from the earlier mentioned 26-28% (indicating a 24-26% rise at cc). Adjusted earnings are now expected to be $9.25 per share compared with the prior mentioned $8.50. The figure compares favorably against an adjusted loss of $1.97 reported in 2020. The adjusted earnings outlook excludes $48 million of pre-tax costs related to restructuring actions, including lowering headcount in a few international markets, and reducing real estate footprint, comprising certain store closures and reduced office space. It also excludes $21 million of costs associated with the exit from the Heritage Brands Retail business and the $113-million gain expected to be recorded for the Heritage Brands transaction.For fourth-quarter fiscal 2021, management expects year-over-year revenue growth of 11-14% (up 16-19% on a cc basis). Adjusted earnings are likely to be $1.94 per share, up from 38 cents reported in the prior-year quarter. The gross margin is anticipated to improve year over year, driven by full-price selling and a positive sales mix, which more than offset higher freight costs. The international business is likely to outpace the pre-pandemic revenue levels, while the North America business is expected to remain sluggish due to the lack of tourism.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in fresh estimates.VGM ScoresCurrently, PVH has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, PVH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. 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 7 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 PVH Corp. (PVH): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 2nd, 2022

Why Is Five Below (FIVE) Up 3.9% Since Last Earnings Report?

Five Below (FIVE) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. A month has gone by since the last earnings report for Five Below (FIVE). Shares have added about 3.9% in that time frame, underperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Five Below due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. Five Below Q3 Earnings Beat, Comparable Sales Up 14.8%In spite of a challenging supply chain environment, Five Below, Inc. posted stellar third-quarter results, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Impressive comparable sales run also continued in the quarter. Better-than-expected performance, prompted management to provide an upbeat view for fiscal 2021.Five Below stated that the holiday season is off to a robust start. The company’s focus on providing trend-right products, strengthening digital and distribution capabilities as well as delivering better WOW products, including the Five Beyond offering, bode well. It is adding assisted checkout capabilities and committed toward providing same-day delivery service to make shopping convenient.Let’s IntrospectFive Below delivered third-quarter fiscal 2021 earnings of 43 cents a share that topped the Zacks Consensus Estimate of 29 cents. Remarkably, the bottom line improved from earnings of 36 cents reported in third-quarter fiscal 2020.Net sales of $607.6 million came ahead of the Zacks Consensus Estimate of $562.7 million. The metric rose 27.5% from revenues of $476.6 million in third-quarter fiscal 2020, thanks to solid product trends that drove traffic and new customers to outlets.We note that comparable sales for the quarter under review climbed 14.8% compared with an increase of 12.8% registered in the year-ago period. The growth was driven by increase in comp transactions of 14.3% and a comp ticket increase of 0.5%.Gross profit surged 33.9% year over year to $202.4 million, while gross margin expanded 160 basis points to 33.3%. The increase in gross margin was driven mainly by occupancy leverage, thanks to strong sales results which helped offset higher inbound freight costs. Also, lower distribution labor and store freight expense, primarily due to the shift of receipts and flow of inventory to stores from the third quarter into the fourth quarter contributed to the gross margin.We note that SG&A expenses climbed 26.1% to $159.9 million during the quarter. As a percentage of sales, SG&A expenses decreased approximately 30 basis points to 26.3%, driven primarily by fixed cost leverage, offset in part by higher incentive compensation. Operating income amounted to $42.4 million during the quarter under discussion, up 75.1% from $24.2 million in the third quarter of fiscal 2020. Operating margin expanded 190 basis points to 7% during the quarter.FinancialsFive Below ended the quarter with cash and cash equivalents of $86.8 million and short-term investment securities of $224.6 million. Total shareholders’ equity was $1,033.2 million as of Oct 30, 2021.Management incurred capital expenditures of approximately $213.2 million during the 39-week period ended Oct 30, 2021. Five Below anticipates capital expenditures of approximately $310 million in fiscal 2021, excluding the impact of tenant allowances.Store UpdatesDuring the quarter, Five Below opened 52 new stores across 24 states, including entering the 40th state, New Mexico. This took the total count to 1,173 stores, as of Oct 30, 2021, reflecting an increase of 15.2% from the year-ago count. The company also informed that with the additional 17 new stores opened in the final quarter, it has completed 171 new openings for the fiscal year.GuidanceFive Below envisions fourth-quarter fiscal 2021 net sales in the range of $985 million to $1,005 million compared with $858.5 million reported in the year-ago period. The company guided 2-4% increase in comparable sales versus the record comparable sales growth of 13.8% last year. Management forecast fourth-quarter earnings between $2.36 and $2.48 per share compared with $2.20 in the prior-year period.The company foresees operating margin to delever by about 125 basis points in the fourth quarter, as store and marketing expenses are expected to be higher. It also expects gross margin to delever slightly when compared with the prior-year period, as some of the costs associated with the handling of delayed inventory receipts, shifted from the third quarter into the fourth quarter.Management projected fiscal 2021 net sales in the band of $2,837 million to $2,857 million compared with $1,962.1 million reported in the year-ago period. The company anticipates a 30% jump in comparable sales. Management forecast earnings between $4.82 and $4.94 per share compared with $2.20 in the prior-year period, including benefit from share-based accounting of approximately 8 cents. The company anticipates operating margin to reach a record 13% or leverage of over 120 basis points versus fiscal 2019.How Have Estimates Been Moving Since Then?It turns out, estimates revision have trended upward during the past month.VGM ScoresAt this time, Five Below has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Five Below has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. 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 7 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 Five Below, Inc. (FIVE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 2nd, 2022

Flight Cancellations Upset Holiday Air-Travel Plans: A Review

Mass flight cancellations over the past few days by the likes of Delta (DAL), United Airlines (UAL) and JetBlue (JBLU) are likely to hurt their Q4 top-line numbers. The aviation space had a much better run in 2021 compared with the coronavirus-ravaged scenario in 2020. However, despite this improvement, the airlines seem on the backfoot with a slew of flight cancellations in the last few days of the current year, which is about to end.What is more damaging is that a plethora of flights cancelled by the likes of Delta Air Lines DAL, United Airlines UAL and JetBlue Airways JBLU hurt the holiday travel plans of many in the United States.Let’s delve deep into this latest setback for the airline stocks.Omicron-induced staff crunch and weather woes prompted the U.S. carriers to call off multiple flights, thereby hampering travel plans of many passengers, particularly over the Christmas holiday weekend. Evidently, United Airlines canceled more than 100 Christmas Eve flights amid a spike in the coronavirus cases induced by the Omicron variant.Bryan Quigley, United Airlines’ senior vice president of flight operations, reportedly wrote in a message, “Our current pilot Covid-19 case count is on the rise.” Quigley added, “Pilots who have developed symptoms are also in quarantine and we have a high number of pilots on the sick list.” United Airlines is continuously looking to rebook as many affected passengers as possible.Delta also cancelled multiple flights over the Christmas holiday weekend. This issue was just not limited to Delta and United Airlines. Evidently, U.S. airlines cancelled several flights (more than 800) over the Christmas weekend with its crew being laid low by omicron.The flight cancellation spree has continued even after Christmas. For example, Delta had to cancel roughly 250 of 4,179 scheduled mainline and Delta Connection flights yesterday. Management said that it is rebooking customers affected by the cancellations on the next available itinerary to their final destination. DAL expects to cancel between 200 and 300 flights (including both Delta mainline and Delta Connection operated flights) over the new year weekend. The severity of this situation can be gauged from the alarming figures furnished by the U.S. airlines, which cancelled more than 1,000 flights on Dec 30.Low-cost carrier JetBlue also had to call off many flights over the past week due to the omicron-led staff crisis. On Dec 30, JBLU announced the removal of roughly 1,300 flights from its schedule through the middle of January. The removed flights reportedly will affect 10% of JBLU’s schedule.A JetBlue spokesman was quoted saying, "We expect the number of COVID cases in the northeast – where most of our crew members are based – to continue to surge for the next week or two."Amid this omicron-induced mass cancellations, the Centers for Disease Control and Prevention’s decision to reduce the recommended isolation period for the Americans (infected with COVID-19 but are asymptomatic) to five days from 10 brought some cheer to the airlines, as this is likely to go a long way in tackling the issue of insufficient staffing.CDC also stated that asymptomatic patients should wear a mask (when around others) for five more days after leaving the isolation zone. Welcoming this move, JetBlue management hoped that the new requirements will help bring sick staff back faster.The reduced traffic due to the omicron strain and foul weather-induced flight cancellations is likely to limit top-line growth of the airlines in the December quarter. Delta, currently carrying a Zacks Rank #3 (Hold), will kickstart the fourth-quarter earnings season for airlines on Jan 13.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 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 7 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 Delta Air Lines, Inc. (DAL): Free Stock Analysis Report United Airlines Holdings Inc (UAL): Free Stock Analysis Report JetBlue Airways Corporation (JBLU): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 2nd, 2022

Holiday Sales Surge: Take Advantage With These 3 Strong Buys

Holiday Sales Surge: Take Advantage With These 3 Strong Buys U.S. consumers returned to stores this holiday season as overall sales from Nov. 1st to Dec. 24th grew 8.5% relative to 2020. A report from Mastercard SpendingPulse showed department stores witnessed a 21% surge from last year and a gain of 11% from pre-pandemic levels. Sales jumped across the board as consumers spent more money on apparel, jewelry and electronics. Clothing sales spiked 47%, while jewelry sales leapt 32% and electronics grew by 16% compared to 2020 levels. The supply chain issues that have been plaguing the global economy caused consumers to start shopping earlier than normal. Mastercard observed this trend starting last year as the pandemic shifted some shopping to the earlier months.Online shopping also grew by double digits, climbing 11% versus last year. The share of overall holiday sales from e-commerce has steadily grown over the last decade, now accounting for approximately 21% of all holiday sales.Retailers have been some of the biggest beneficiaries of the spending surge. The Zacks Retail – Apparel and Shoes industry group is ranked in the top 18% of all 253 industry groups and contains all three companies we will discuss below. This industry group is part of the Zacks Retail and Wholesale sector, currently ranked #3 out of all 16 sectors.The Zacks Retail – Apparel and Shoes industry group is showing some favorable characteristics including an average 12.29 P/E as well as projected EPS growth of 126.92% - far above the S&P’s 21.15%. Quantitative research has shown that approximately half of a stock’s future price appreciation is due to its industry grouping.As investors, we want to target stocks that are in high-performing industry groups. As this industry group is within the top 50% of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months. Let’s take a peek behind the curtain on three individual stocks within this industry group that sport a Zacks #1 Strong Buy ranking and are all outperforming the market.The Buckle, Inc. (BKE)The Buckle operates as a leading retailer of casual apparel, footwear, and accessories for fashion-conscious young men and women in the United States. The company markets denims, tops, sportswear, outerwear, and footwear under a host of brand names and private labels. Founded in 1948 and headquarter in Kearney, NE, Buckle operates 443 retail stores in 42 states.BKE has topped earnings estimates in each of the last five quarters and is averaging a 42.84% beat over the past year. The stock trades at an attractive valuation (8.59 forward P/E) while advancing over 68% on the year. BKE most recently reported EPS in November of $1.26, a 26% positive surprise over consensus.Buckle, Inc. The Price, Consensus and EPS Surprise The current-year earnings consensus among analysts covering BKE has increased by 12.26% in the past 60 days. The Zacks Consensus Estimate for BKE EPS now stands at $4.76, representing growth of 78.95% relative to 2020 earnings. BKE’s next earnings announcement is slated for March 11th, 2022.Boot Barn Holdings, Inc. (BOOT)Boot Barn Holdings is a lifestyle retail chain and operates specialty retail stores domestically. The company offers work-related footwear and apparel including boots, denims, western shirts, cowboy hats, belts, buckles, and jewelry. Founded in 1978 and based in Irvine, CA, BOOT operates 275 stores in 36 states. The company also sells its products through its e-commerce websites, including bootbarn.com; sheplers.com; and countryoutfitter.com.BOOT has either met or exceeded earnings expectations in each of the past six quarters. The company most recently reported EPS in October of $1.22, a +29.79% surprise over consensus. BOOT has delivered an average positive surprise of 35.29% over the past four quarters, aiding the stock’s 180% return this year.Boot Barn Holdings, Inc. Price, Consensus and EPS Surprise What the Zacks Model RevealsThe Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently seen positive earnings estimate revision activity. This more recent information has proven to be an accurate predictor of the future, giving investors a leg up during earnings season. When combining a Zacks Rank #3 or better, stocks have produced a positive surprise 70% of the time according our 10-year backtest.With a Zacks #1 (Strong Buy) ranking and a +0.91% Earnings ESP, our proprietary model predicts an earnings beat for BOOT for the upcoming earnings announcement.Analyst covering BOOT are in agreement in terms of recent earnings revisions, upping their estimates by 25.68% over the past 60 days. The Zacks Consensus Estimate for fiscal 2022 EPS now stands at $5.53, translating to growth of 188.02% compared to last year. BOOT is scheduled for its next quarterly earnings report on January 24th.Tilly’s, Inc. (TLYS)Tilly’s operates as a specialty retailer in the action sports industry, selling apparel, footwear and accessories domestically for young men and women. Tilly’s merchandise includes tops, outerwear, bottoms and dresses. TLYS also sells backpacks, hats, sunglasses, handbags, watches and jewelry. Founded in 1982 and headquartered in Irvine, CA, Tilly’s operates 238 stores in 33 states. The company also retails its products via its website, tillys.com.Trading at a relatively undervalued 7.16 forward P/E, TLYS has surpassed earnings estimates in each of the past five quarters. The company has a trailing four-quarter average earnings surprise of 296.16%, supporting the stock’s 120% return this year. TLYS most recently reported EPS earlier this month of $0.66, a 100% surprise over consensus.Tilly's, Inc. Price, Consensus and EPS Surprise Analysts covering TLYS have increased their fiscal 2022 EPS estimates by 25.88% in the past 30 days. The Zacks Consensus Estimate is now $2.14, a phenomenal 5,450% growth rate relative to last year. TLYS is due to report earnings on March 10th, 2022.These three retailers have benefitted from the surge in holiday spending and look to continue their strong momentum heading into the new year. 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(TLYS): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 27th, 2021

Why Is Gap (GPS) Down 3.6% Since Last Earnings Report?

Gap (GPS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. A month has gone by since the last earnings report for Gap (GPS). Shares have lost about 3.6% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Gap due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. Gap Misses Q3 Earnings and Sales Estimates, Cuts ViewGap reported lower-than-expected top and bottom-line numbers for third-quarter fiscal 2021. Supply chain headwinds, including factory closures and port congestion, led to product delays, making it difficult for the company to fulfill the strong customer demand. Lower inventory levels during the quarter hurt the top line. Management expects supply chain issues to persist in the days ahead. Nevertheless, it is progressing well with the Power Plan 2023 strategy.For the fiscal third quarter, the company’s earnings of 27 cents per share missed the Zacks Consensus Estimate of 49 cents. Yet, the metric improved 8% from 25 cents per share in the year-ago quarter.Net sales fell 1.3% year over year and 1.4% from the 2019 pre-COVID level to $3,943 million. The figure also lagged the Zacks Consensus Estimate of $4,453 million. This was mainly due to industry-wide supply chain issues.Despite store openings, the company continued to witness strength in the online business, with digital sales increasing 48% from third-quarter fiscal 2019, accounting for 38% of total sales for the reported quarter.Comparable sales (comps) advanced 5% from third-quarter fiscal 2019. Comps included online sales and the comparable sales days for stores that were open on the same days in both 2020 and 2019 comparable periods.Brand-Wise Sales & CompsOld Navy: Net sales at Old Navy Global improved 8% from third-quarter fiscal 2019, driven by higher sales in the back-to-school season. Comps fell 6% from the pre-pandemic levels and declined 9% year over year. The launch of BODEQUALITY, Old Navy brand’s inclusive sizing launch and higher average transaction value aided results.Gap Global: For third-quarter fiscal 2021, net sales declined 10% ona  two-year basis at Gap Global due to store closures. Comps for Gap Global rose 3% from third-quarter fiscal 2019 and 7% year over year. The Gap brand’s Partner to Amplify strategy, solid sales of its newly launched Yeezy Gap Hoodie, and expansion of its second home collection at Walmart.com to include furniture and rugs contributed to growth.Banana Republic: Net sales declined 18% and comps were down 10% on a two-year basis. On a year-over-year basis, comps rose 28%. The relaunch of the Banana Republic brand in September along with an increased focus on enhancing customers’ shopping experience via improved products, omnichannel capabilities and marketing efforts act as growth drivers.Athleta: Net sales improved 48% for the Athleta brand while comps increased 41% from the 2019 comparable period. Comps improved 2% on a year-over-year basis. Segment results gained from continued strength in activewear and the launch of its online fitness and wellness platform namely, Athleta. The launch of its Canadian online business, the first company-operated Canadian store in Vancouver and its second store in Toronto also bode well. It is making efforts to expand base internationally with franchise partnerships in Costa Rica and Europe.Margins & CostsGross profit of $1,661 million reflected a 2.5% increase from $1,620 million in the prior-year quarter and improved 6.5% on a two-year basis. Adjusted gross margin of 41.9% expanded 430 basis points (bps) from third-quarter fiscal 2019, backed by a 290-bps improvement in leverage from lower rent and occupancy costs, stemming from online growth, store closures and negotiated rent.Operating expense rose 4.4% year over year. Adjusted operating expenses increased 17.5% to $1,482 million while adjusted operating expense rate of 37.6% increased 610 bps from third-quarter fiscal 2019. The increase in operating expenses can be attributed to higher investments in marketing and technology, and a rise in compensation and fulfillment costs, which somewhat offset lower store expenses.Operating income grew 12.6% year over year. Adjusted operating income of $170 million increased 43.1%, but adjusted operating margin of 4.3% contracted 320 bps from third-quarter fiscal 2019.Other FinancialsGap ended the fiscal third quarter with cash, cash equivalents, and short-term investments of $1,076 million, representing a significant decline from $2,649 million in the year-ago period. As of Oct 30, 2021, it had total stockholders’ equity of $2,787 million and long-term debt of $1,484 million.For the nine months ended Oct 30, 2021, the company generated an adjusted free cash flow of $196 million. Gap bought back 2.9 million shares worth $73 million and approved a quarterly dividend of 12 cents during the quarter under review. For fiscal 2021, the company anticipates a capital expenditure of $800 million.Store UpdateAs of Oct 30, 2021, Gap had 3,459 stores in more than 40 countries, out of which 2,873 were company-operated and 586 were franchise outlets. In fiscal 2021, GPS plans to close 75 Gap and Banana Republic stores in North America. It also expects to open 30-40 Old Navy and 20-30 Athleta stores.Fiscal 2021 GuidanceDriven by drab quarterly results and the expectation of persistent supply-chain woes, Gap slashed its view for fiscal 2021. It envisions adjusted earnings of $1.25-$1.40, down from $2.10-$2.25 per share mentioned earlier. GAAP earnings per share are expected to be 45-60 cents, down from the earlier mentioned $1.90-$2.05. The company expects an adjusted operating margin of 5%, down from the 7% mentioned earlier. GPS expects year-over-year sales growth of 20% compared with 30% stated earlier.How Have Estimates Been Moving Since Then?It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -122.89% due to these changes.VGM ScoresCurrently, Gap has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Gap has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Gap, Inc. (GPS): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 23rd, 2021

Why Is Abercrombie (ANF) Down 12.9% Since Last Earnings Report?

Abercrombie (ANF) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. It has been about a month since the last earnings report for Abercrombie & Fitch (ANF). Shares have lost about 12.9% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Abercrombie due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Abercrombie Q3 Earnings Beat, Digital Sales RiseAbercrombie posted third-quarter fiscal 2021 results, wherein both the top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. A robust back-to-school season contributed to the company’s upbeat performance. Evidently, lower promotions and markdowns, efficient expense management, and strategic investments across marketing, technology and fulfillment aided the results.However, it is reeling under ongoing supply-chain bottlenecks, including production and delivery delays as well as higher freight costs. Well, the company has been trying all means to navigate through these challenges.Overall Sales & Earnings PictureAbercrombie & Fitch delivered adjusted earnings of 86 cents a share in third-quarter fiscal 2021 that comfortably surpassed the Zacks Consensus Estimate of 68 cents and increased from 76 cents earned in the year-ago quarter. The year-over-year increase in the bottom line can be attributed to higher net sales.Net sales of $905.2 million advanced 10% year over year and exceeded the Zacks Consensus Estimate of $894.4 million. Digital net sales rose 8% to $413 million and represented 46% of total sales. We note that store sales jumped 11% from the year-ago period. Better customer engagement, digital and omni-channel enhancements, and higher average unit retail or AUR across brands and channels aided the top-line performance.Sales By Region and BrandsSales were strong in the United States, up 17% year over year to $654.9 million. However, International sales declined 4% to $250.3 million owing to lower sales in the EMEA and APAC regions.Sales in the EMEA region fell 6% to $179.2 million. Business remained strong in the U.K., thanks to favorable customer response for products. This was offset by continued COVID-induced restrictions and impacts across key Western European countries, including prime markets, Germany and France. In APAC, sales were down 12% to $38.2 million because of traffic headwinds due to coronavirus cases inside China and Hong Kong and slow vaccination progress in Japan.Brand wise, net sales at Hollister advanced 10% year over year to $522.3 million, while at Abercrombie, the metric increased 12% to $382.8 million.MarginsGross profit increased 10% year over year to $576.2 million, however, gross margin contracted 30 basis points to 63.7%. The gross profit rate decline was due to roughly 300 basis points of higher average unit cost from freight inflation and efforts to mitigate supply chain challenges, offset by higher AUR on lower promotions.Operating expense, excluding other operating income, net, rose 8% from the year-ago period. This increase reflects higher marketing expenses and payroll and a decrease in store occupancy. As a percentage of sales, operating expenses decreased to 55.8% from 56.8% last year. Adjusted operating income totaled $79.5 million compared with $64.9 million in the year-ago quarter. We note that operating margin expanded 90 basis points to 8.8%.Other FinancialsAbercrombie & Fitch ended the quarter with cash and cash equivalents of $865.6 million, long-term gross borrowings under the senior secured notes of $308 million, and stockholders’ equity of $918.3 million. Net cash provided by operating activities was $131.3 million for the year-to-date period ended Oct 30, 2021.Management continues to anticipate capital expenditures of approximately $100 million for fiscal 2021. About 50% of the capital spending is expected to be utilized for investments in digital and technology and the other half in real estate and maintenance items.During the quarter under review, the company repurchased 2.7 million shares for $100 million. The company’s board of directors approved a new share buyback program of up to $500 million, replacing the February 2021 share repurchase program of 10 million shares, which had 3.9 million shares remaining. In the final quarter, the company intends to repurchase at least $100 million worth of shares.Store UpdateIn the third quarter, the company opened five stores and closed three locations. This brings the total both year-to-date store openings and store closures to 23. As of Oct 30, 2021, the company’s total store base was 735, including 536 stores in the United States and 199 stores internationally.OutlookFor the fiscal fourth quarter, management envisions net sales to be up 3-5% from the 2019 reported level of $1.185 billion. It expects the United States to continue to outperform the EMEA and APAC regions.Abercrombie & Fitch expects the gross profit rate to be around flat to the 2019 level of 58.2%. The guidance takes into account an expected adverse impact of $75 million of freight cost pressure due to increasing ocean and air rates as well as higher air deliveries. Nonetheless, given positive customer response to holiday, the company remains committed to lower markdowns and promotions to improve AUR to offset this headwind.The company anticipates operating expenses, excluding other operating income, to be up in the low to mid-single digits to 2019 adjusted level of $565 million.Considering the above mentioned expectations, management guided operating margin of 9-10% for the current fiscal year — the highest since fiscal 2008.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 11.28% due to these changes.VGM ScoresAt this time, Abercrombie has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Abercrombie has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksDec 23rd, 2021

Why Is Nordstrom (JWN) Down 6.3% Since Last Earnings Report?

Nordstrom (JWN) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. A month has gone by since the last earnings report for Nordstrom (JWN). Shares have lost about 6.3% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Nordstrom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. Nordstrom Q3 Earnings Lag Estimates, Revenues BeatNordstrom reported third-quarter fiscal 2021 results, wherein the bottom line missed the Zacks Consensus Estimate while the top line beat the same. Both the metrics rose year over year. The results gained from improved merchandise, innovative brand partnerships, solid e-commerce growth and sturdy performance at its Nordstrom banner store. The company is making efforts to optimize inventory levels and improve Nordstrom Rack's performance.It is progressing well with the merchandising strategy and has recently partnered with Fanatics and ASOS in a bid to offer a broader assortment in new and existing categories. The ASOS brand will now be available on nordstrom.com and in two stores. The company intends to expand in-store ASOS offering with a market rollout launch this spring. Nordstrom is on track with plans to integrate the network of stores and digital platforms for this year's holiday season.Quarterly HighlightsNordstrom posted adjusted earnings of 39 cents per share, up 77.3% from the year-ago reported figure of 22 cents. Yet, the metric missed the Zacks Consensus Estimate of 56 cents per share.Total revenues grew 17.7% year over year to $3,637 million and beat the Zacks Consensus Estimate of $3,536 million. This marked the fifth straight quarter of sequential top-line growth. Net sales jumped 18% year over year to $3,534 million, while the metric declined 1% from third-quarter fiscal 2019. Credit Card net revenues grew 18.4% from the prior-year quarter to $103 million.For third-quarter fiscal 2021, net sales for the Nordstrom brand rose 11% year over year to $2,343 million and improved 3% from third-quarter fiscal 2019. Better store traffic and increased consumer spending aided quarterly growth. Strength in home, active, designer, and beauty categories remained upsides, with products including dresses, men's suiting and dress shirts, dress shoes, and makeup witnessing a sequential improvement.Sales for the Nordstrom Rack brand advanced 35% year over year to $1,191 million but declined 8% from third-quarter fiscal 2019. This was mainly due to low inventory levels in premium brands and core categories such as women's apparel and shoes. Nordstrom Rack is known for offering premium brands at affordable prices. That said, management is making efforts to strengthen Rack's brand awareness and drive traffic. The company launched a new marketing campaign, namely More Reasons to Rack, in September. It expects gains from this endeavor in the fiscal fourth quarter, with a significant improvement in first-half fiscal 2022.Nordstrom also remains focused on improving supply chain and inventory, accelerating delivery speed, expanding in-store shopping as well as other omni-channel capabilities like same-day and next-day pickup along with increasing labor and fulfillment velocity and throughput in distribution and fulfillment centers to drive top-line growth at both Nordstrom and Nordstrom Rack.Digital sales fell 12% year over year but rose 20% from the third quarter of fiscal 2019. For the fiscal third quarter, digital sales represented 40% of net sales compared with 54% in the year-ago period.Nordstrom's gross profit margin expanded 230 basis points (bps) year over year to 35% for the reported quarter. This substantial growth resulted from lower markdowns and leverage from higher net sales. The metric also expanded 80 bps from third-quarter fiscal 2019 on the back of reduced buying and occupancy costs as well as improved merchandise margins.Ending inventory grew 13% from third-quarter fiscal 2019, owing to forward receipts in order to support early holiday sales and partly offset supply chain backlogs.Selling, general and administrative ("SG&A") expenses — as a percentage of sales — expanded 230 bps year over year to 34% for the fiscal third quarter due to higher labor cost, which was somewhat offset by robust sales growth. The metric also expanded 260 bps from third-quarter fiscal 2019 due to higher fulfillment and labor costs, offset by gains from the resetting of cost structures in 2020.Earnings before interest and taxes ("EBIT") of $127 million reflected growth of 19.8% from $106 million in the year-ago quarter. The increase was mainly the result of higher sales volume and expanded merchandise margins, which somewhat offset elevated labor cost. EBIT declined $66 million from third-quarter fiscal 2019 due to higher fulfillment and labor costs, offset by gains from the resetting of cost structures in 2020.Other FinancialsNordstrom ended third-quarter fiscal 2021 with a strong balance sheet. Available liquidity as of Oct 30, 2021, was $867 million, including $267 million of cash and cash equivalents. It had long-term debt (net of current liabilities) of $2,851 million and total shareholders' equity of $359 million.As of Oct 30, 2021, the company provided $277 million of net cash for operating activities and spent $361 million as capital expenditure.Fiscal 2021 OutlookDespite persistent supply-chain issues and higher labor costs, management retained its fiscal 2021 view. The company continues to anticipate revenue growth of 35%. It still expects an EBIT margin of 3-3.5% compared with the previously mentioned 3%. Nordstrom predicts supply-chain disruptions to persist in the next year.For the fiscal fourth quarter, the company envisions significant gross margin improvement on a two-year basis, driven by lower promotional activity and higher regular price sell-through. SG&A expenses related to fulfillment and labor costs are likely to remain high in the fiscal fourth quarter.How Have Estimates Been Moving Since Then?It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -5.04% due to these changes.VGM ScoresAt this time, Nordstrom has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nordstrom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nordstrom, Inc. (JWN): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 23rd, 2021

Markets Flat-to-Down, Final Q3 GDP +2.3%

Markets are now creeping a little lower into the red, flushing out yesterday's gains made after Monday's big drop. Wednesday, December 22, 2021Markets are flat — seemingly exhausted after so much volatile back-and-forth — in Wednesday’s early trading session. We’re on the back half of the week, with the stock exchanges closed in this country Friday for Christmas (Eve). Markets are actually now creeping a little lower into the red, flushing out yesterday’s gains made after Monday’s big drop.Most focus currently is on 2022 — the Fed tightening, the Omicron variant — with plenty of questions regarding how strong the economy will be over the next few months. And when we talk about the Omicron strain of Covid-19 coronavirus, the U.S. is only part of the puzzle: how will countries, particularly big U.S. trading partners, deal with the rapid spread of this latest mutation? What will it do to supply chains in 2022? Will the Fed need to make further adjustments to monetary policy?That’s a lot of questions to ask coming into the end of 2021. Yet at this stage we’re still looking at double-digit percentage gains on all major stock indexes, even with the Great Reopening many of us had expected running into many speed-bumps along the way. So while we’ve shown resiliency in the face of market and economic challenges, we’re not out of the woods of our current predicaments quite yet.Looking backwards a moment, the final revision to Q3 Gross Domestic Product (GDP) came in surprisingly upwardly revised 20 basis points to +2.3% last quarter. Personal consumption gained 30 basis points to a solid +2.0% in the quarter. For the Q3 GDP Price Index, we see a headline number of +6.0% — in-line with expectations, and slightly off the June read of +6.1%, which just so happened to be the biggest gain in quarterly GDP pricing in 40 years.Quarter over quarter, core Personal Consumption for Q3 came in at +4.6%, moderating a bit from the +6.1% reported last time around — which itself was a 38-year-high. So all things considered, we’re looking pretty strong on the consumer/pricing tack. And this includes the challenges we faces with the Delta variant of Covid sweeping through the global economy and, what we just saw reported yesterday, the lowest U.S. population growth last year in our country’s history.Q3 GDP at +2.3% represents by far the lowest quarter of 2021, following +6.3% in Q1 and +6.7% in Q2, and with current projections for Q4 somewhere in the +6.5% range. And, as we saw during the Q3 earnings season recently concluded, companies generally experienced success in combatting these myriad headwinds. Looking forward to Q4 results, Omicron probably came too late to have a major affect on the numbers, so we remain positive that we’ll have returned to strong growth.After today’s open, we’ll get a look at December’s Consumer Confidence Index. Expectations are for a slight rise to 110.0. Also Existing Home Sales results come out for November, with an increase to 6.5 million homes sold from 6.34 million reported in October. In short, wide economic strength is expected to continue. And even if it doesn’t, and these actuals come in below projections, we don’t expect either metric to have a disruptive affect on today’s trading.Questions or comments about this article and/or its author? Click here>> Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Invesco QQQ (QQQ): ETF Research Reports SPDR S&P 500 ETF (SPY): ETF Research Reports SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research 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.....»»

Category: topSource: zacksDec 23rd, 2021

Is the S&P 500 Due for a Major Pullback? 3 Ultra-Safe Stocks

Given the rate at which the virus is spreading, the market could be headed for a major pullback. So it may be good idea to play safe. The one big thing on everyone’s minds at the moment is Omicron and the way that it is spreading. For investors, it isn’t just the fear of getting infected or worse, hospitalized. It’s also a concern about what it could do to the market, if people rush back indoors. And of course, the things that will be hit first will be travel, airlines, hotels, restaurants and so on that we were all betting on as reopening stories.For the most part, people are sticking with their holiday plans, and making the most of test kits, masks and other precautions to stay safe. But it is feared that right after the holiday season things could fall dramatically. And by then we could be in pretty bad shape considering that Omicron is much more contagious than Delta. Of course, the Biden administration’s free test kits for at-home testing will come in handy. The government has said that it will buy 500 million test kits and deliver them free of cost to people who want them starting January.It’s extremely unlikely that the catastrophic situation that we had when the virus first hit will repeat this time because 200 million people are already vaccinated, we have better therapeutics and people in general know what to do to stay safe. A lot of infrastructure is also in place to allow people to operate remotely. But the risks can’t be ignored.And they are in addition to other concerns about inflation, supply chains, product shortages and labor issues that we were already in the midst of.While the stock market has been one of the best places to put your money in this year, the stage seems set for a major pullback in the S&P 500. And that’s going to hurt a lot of people. So you may be wondering what to do to tide over the situation.One tried and tested strategy for times like this, sometimes overlooked because it’s so easy, is to select stocks with a low beta. A low beta stock refers to a stock with a beta value less than 1. Stocks that have historically performed in line with the S&P 500 (usually the S&P 500, but may also be with respect to the Dow Jones Industrial Average or Nasdaq 100) will have a beta value of 1. Stocks that don’t move as much as the index have a beta value less than 1 and stocks that move more than the index have a beta value that’s greater than 1. So basically, beta is a volatility measure with respect to some index, usually the S&P 500. When there are significant uncertainties in the market, it makes sense to pick low-beta stocks because they will not be as volatile.And if it also pays a dividend and has a relatively sound growth profile, it makes all the more sense to invest in.At Zacks, we also have a system of ranking stocks in our universe on the basis of their near-term performance (over the next month). So a stock with strong upside potential would have a Zacks Rank #1 (Strong Buy), if the chances are slightly lower, it would have a Zacks Rank #2 (Buy), then #3 for Hold, #4 for Sell and #5 for Strong Sell.These three stocks combine the above factors, so they may be considered ultra-safe-Broadcom Inc. AVGOBroadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor (CMOS)-based devices and analog III-V based products.Headquartered in San Jose, CA, Broadcom’s semiconductor solutions are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays.In the last quarter, Broadcom’s results were more or less in line with estimates. The company is seeing ongoing strength in the 5G infrastructure and data center markets and the breadth and depth of its product offerings is helping sales. In the last 30 days, the Zacks Consensus Estimates for its 2022 (ending October) and 2023 earnings moved up. The estimate for 2022 increased $2.02 (6.5%) while the estimate for 2023 increased $2.82 (8.5%).After growing a sedate 11.6% this fiscal year, Broadcom’s revenue is expected to grow 4.7% the following year. Its earnings are expected to grow 17.9% and 9.4%, respectively.The company pays a dividend that yields 2.23%. And best of all, it has a beta value of 0.93.Bank of Nova Scotia BNSBank of Nova Scotia is one of Canada’s leading banks offering retail banking and wealth management services primarily to customers in Canada, the U.S., Mexico, Peru, Chile, Colombia, the Caribbean and Central America. Bank of Nova Scotia is headquartered in Halifax, Canada.In the last quarter, the company’s reported earnings came in 8.5% above the Zacks Consensus Estimate. And management expressed confidence in its diversified business model, which has demonstrated its resilience through the pandemic. They also believe that the bank is well positioned to achieve its full earnings power in the upcoming year. Bank of Nova Scotia’s estimates continue on an upward trajectory. And in the last 30 days, the estimate for 2022 (ending October) increased 43 cents (7.1%) while the estimate for 2023 increased 52 cents (8.1%).Analysts currently expect its 2022 revenue and earnings to grow a respective 3.0% and 6.6% while the 2023 revenue and earnings to grow a respective 5.8% and 3.7%.If that feels like very low growth, it’s worth remembering that Bank of Nova Scotia also pays a dividend that yields 4.2%. And the best part, for the purposes of this topic, is that the beta value for the stock is 0.94.DENSO Corp. DNZOYDENSO develops, manufactures and sells automotive parts in Japan, rest of Asia, North America, Europe and elsewhere. It provides a very broad range of products from wind shield wipers to cooling and heating systems, powertrains and other automotive electronics. It is based in Kariya, Japan.The company’s focus on advanced technologies has positioned it for success in a world that is moving toward an electric and self-driving future. As a result, it is able to sign lucrative deals with companies like Toyota and Honeywell.In the last quarter, DENSO’s earnings missed the Zacks Consensus Estimate by 36.4%. However, its estimates for both 2022 (ending March) and 2023 moved up. The last 30 days saw the Zacks Consensus Estimate for 2022 increase 20 cents (10.5%) while the estimate for 2023 increased 30 cents (12.9%).DENSO Corp’s revenue is currently expected to grow 8.1% in 2022 and 12.1% in 2023. Its earnings are expected to grow 177.6% and 24.2%, respectively, in the two years.DENSO's dividend yields 1.22%. Its beta is 0.94.3-Month Price TargetImage Source: Zacks Investment Research Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to 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 Broadcom Inc. (AVGO): Free Stock Analysis Report Bank of Nova Scotia The (BNS): Free Stock Analysis Report Denso Corp. (DNZOY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 23rd, 2021

Battery Shortage In 2022

In his Daily Market Notes report to investors, while commenting on the battery shortage in 2022, Louis Navellier wrote: Q3 2021 hedge fund letters, conferences and more Jim Cramer Gets Exercised Yesterday, we saw a major relief rally as Omicron fears calmed. It helped that millions of investors saw Jim Cramer on CNBC on Monday […] In his Daily Market Notes report to investors, while commenting on the battery shortage in 2022, Louis Navellier wrote: 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 Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Jim Cramer Gets Exercised Yesterday, we saw a major relief rally as Omicron fears calmed. It helped that millions of investors saw Jim Cramer on CNBC on Monday tell us he caught Omicron last week and still felt good enough to have a workout in his home gym, feeding hopes that Omicron, while very contagious, only delivers mild symptoms. That is still not the official medical conclusion. Kramer was a fully vaccination-boosted patient with no comorbidities and even optimistic investors must wait to see how hard the fast-moving variant hits the large blocks of unvaccinated people in the US and around the world. Perhaps as much as a concern is the risk of policy mistakes that may be made regarding trying to contain the new variant. In the same vein, there are concerns about mistakes by the Fed in addressing inflation:  Are they being aggressive enough?  Will they be too aggressive and hurt a reopening recovery?  Fortunately, the primary market driver, earnings growth, remains strong as do general economic outlooks.  Consumer confidence numbers came in strong today too. Santa Claus Rally With interest rates still moderate despite the very high inflation statistics and announced plans to tighten monetary policy, stocks remain the most attractive investment alternative, and prospects for further gains in 2022 are good enough to expect a Santa Claus rally next week, especially if the outlook for Omicron infections increasingly look out to be as mild for most people as they were for Cramer. Interestingly, regarding the port bottlenecks, major European ports, like Hamburg and Rotterdam according to The Wall Street Journal are “roughly flat or lag behind 2019 levels.”  However, major U.S. ports are processing almost 20% more container volume than they did in 2019.  The bottom line is U.S. consumers continue to boost spending on goods, while European consumers remain much more cautious.  According to the Bank of England, the U.S. accounts for almost 90% of a 22% worldwide surge in durable goods orders since the end of 2019.  U.S. GDP growth is forecasted to grow at a 6% annual pace in 2021 and 4% in 2022.  The primary reason that the U.S. dollar is strong is due to higher GDP growth as well as higher absolute interest rates than Europe and Japan. A strong U.S. dollar will eventually help to suppress inflationary pressure since almost all commodities are priced in U.S. dollars.  Furthermore, since approximately half the sales in the S&P 500 are outside of the U.S., many multi-international companies will be posting better than expected sales due to a “currency tailwind.”  As a result, it is hard to not be optimistic about 2022, since the U.S. is driving overall global growth. Battery Shortage In 2022 The Wall Street Journal recently featured a very good article on the demand for batteries as California and other states strive to store growing solar energy during off-peak hours.  In fact, the demand for large battery storage packs, which resemble shipping containers, for electric grid storage is further complicating the automotive industry’s transition to electric vehicles (EVs).  As an example, Volkswagen Group recently had to halt the production of its EVs at two plants in Germany due to supply shortages.  LG Chem primarily supplies Volkswagen Group with lithium-ion batteries from its massive battery plant in Poland, but VW is investing in six new European giga factories, while its manufacturing plant in Chattanooga, Tennessee will be supplied by SK Innovations new battery plant in Georgia. Interestingly, Ford’s F-150 Lightning has almost 200,000 orders and new reservations have been temporally suspended due to 200,000 vehicles representing almost a three-year order backlog.  Although Ford has pledged to double the production of the F-150 Lightning and reopen its order books, you might be wondering why it takes Ford three years to produce 200,000 F-150 Lightning trucks, when Tesla is making over 200,000 EVs per quarter?  The answer lies in the ongoing shortage of lithium-ion batteries for all EV manufacturers.  Tesla has wisely shifted to less efficient, but safer (from fires) iron-phosphate batteries at its Shanghai manufacturing plant, otherwise it would also be impeded by the acute shortage of lithium-ion batteries. General Motors has announced that its new EVs by Cadillac and GMC will be using 75% less cobalt than other lithium-ion batteries.  The fact of the matter is that due to a shortage of raw materials to make lithium-ion batteries, like cobalt, new battery technologies and formulas will be necessary, otherwise, the EV revolution is expected to stall.  Even Tesla has not yet formally revealed its new larger 4680 batteries that it is supposed to use at its new manufacturing plants at Austin and Berlin.  As well as Tesla has done boosting its EV production with multiple battery suppliers and technologies, I am starting to worry that complications with its 4680 batteries, including the supply of raw materials may impede Tesla’s ambitious sales growth.  As a result, I expect that the EV battery shortage will be big news in 2022, just like the semiconductor shortage has been big news this year. Overall, the Green Energy Revolution is going to take decades and likely depend on new battery technologies that do not excessively rely on cobalt and other rare earth minerals.  One reason that fossil fuel prices remain high is that a lack of investment in new production as governments try to break away from fossil fuels has caused acute shortages to emerge, so it will be interesting if any governments try to slow down their transition to EVs and greener energy.  As an example, the Biden Administration has pledged for the federal government to buy 600,000 EVs, but between Ford, GM, and Stellantis (formally Chrysler), the Big 3 combined are not expected to manufacture 600,000 EVs by the end of the Biden Administration’s first term. Encouraging Economic News The economic news this week was very encouraging.  The Conference Board announced on Wednesday that its consumer confidence index surged to 115.8 in December.  Interestingly, the Present Situations component was relatively flat at 114.1 in December.  However, the Expectations component surged to 96.9 in December.  Obviously, if consumer expectations are high, it bodes well for the holiday shopping season as well as the outlook for the New Year. The National Association of Realtors reported on Wednesday that existing home sales rose 1.9% in November.  Although absolute home sales were down 2% compared to October, year-to-date, existing home sales have risen 10%.  The inventory of existing homes for sale in November declined 9.8% from October, which represents a 2.1-month supply at the current sales pace.  In the past 12 months, median home prices have risen 13.9%.  The National Association of Realtors noted that in the past 12 months, expensive home sales, between $500,000 to $750,000 have risen 31%, while homes between $750,000 to $1 million rose 37% and homes above $1 million have surged 50%.  Median home prices are expected to continue to rise due to tight inventory as well as strong expensive homes sales. Coffee Beans Venus could be becoming "more habitable" after evidence of bacterial "lifeforms" were found in its clouds, scientists have said. The scientists believe that ammonia present in Venus' atmosphere could neutralize surrounding droplets of sulfuric acid, with pH at a level life could potentially survive at. Source: Sky News. See the full story here. Updated on Dec 22, 2021, 4:28 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkDec 23rd, 2021

Stocks, Yields Tumble As Quad-Witching Fears Add To Broader Market Slide

Stocks, Yields Tumble As Quad-Witching Fears Add To Broader Market Slide US futures tumbled after hitting an all time high less than 24 hour ago, as the favorable if paradoxical bounce in risk from the hawkish FOMC pivot faded from memory and as investors questioned whether global stocks are due for a rough ride on the backdrop of growing risks from inflation and the omicron virus variant. S&P 500 futures slumped about 0.5% Friday morning, while the U.S. 10-year Treasury yield fell for a second straight day to 1.394%, the lowest since Dec. 6. Futures were dragged down by tech stocks as volatility surged amid mounting concerns about monetary tightening and the omicron coronavirus variant. “Rates hikes do not end bull markets, but reversal of central banks’ liquidity means less speculative froth and more volatility,” said Barclays strategist Emmanuel Cau. “Policy angst may be here to stay, but following months of unclear guidances and conflicting signals, the direction of travel is clear now.” Investors are also bracing for the quarterly rebalancing of the S&P 500 Index after the market close and the triple witching expiration of equity derivatives that could magnify market moves. General Motors dropped in premarket trading after the company said Cruise unit Chief Executive Officer Dan Ammann is leaving the company.  Here are some of the other notable premarket movers today: Tesla (TSLA US) shares fall as much as 2.4% in U.S. premarket trading as CEO Elon Musk sells another chunk of shares in the electric vehicle maker. FedEx (FDX US) boosted its adjusted earnings-per-share forecast for the full year, with the guidance beating the average analyst estimate. Shares rose about 4.8% in premarket trading. Spruce Biosciences (SPRB US) shares soar as much as 30% in U.S. premarket trading after Oppenheimer initiated coverage with an outperform rating and a $15 price target that implies 500% upside in the stock from Thursday’s closing price. Cerner (CERN US) shares rise 17% in U.S. pre- trading hours amid a report that Oracle is in talks to buy the medical-records company for about $30b. Rivian Automotive (RIVN US) shares slump 9% in U.S. premarket trading after the electric pickup maker reported results. Piper Sandler says that after- hours share-price loss is “noise,” and remains positive following earnings call. General Motors (GM US) dropped postmarket after it said Cruise Chief Executive Officer Dan Ammann is leaving the company. Steelcase (SCS US) declined in the after hours session after the furniture company reported 3Q revenue that missed the average analyst estimate due to supply chain disruptions. U.S. Steel Corp. (X US) shares declined premarket after it warned fourth-quarter results will be lower than Wall Street had been expecting. In Europe, technology companies and carmakers were among the worst-performing industries, dragging the Stoxx Europe 600 Index down 1%. Tech, autos and utilities are the weakest sectors. Miners and travel are the only Stoxx 600 sectors in small positive territory.  Cellnex slumped 4.1% to a six-month low after a British regulator said the Spanish company’s purchase of CK Hutchison Holdings’s European telecommunication towers raised “significant” competition concerns. Asian stocks slid, as a risk-off mode resumed amid concerns over tighter monetary policies and ongoing tensions between the U.S. and China. The MSCI Asia Pacific Index dropped as much as 1%, set for the fifth decline over the past six days. Technology shares around the region took a hit, led by Chinese giants including Tencent and Alibaba Group, as a global sector selloff continued on higher rate fears. China was among the region’s worst performers after the Biden administration added 34 Chinese targets to its banned-entity list, weighing on sentiment. Japanese stocks held their losses after the Bank of Japan lengthened its cautious withdrawal from emergency pandemic aid. Asia’s benchmark was set to cap a more than 1% slide this week as central banks around the world attempt to curb inflation, dampening prospects for the usual year-end rally. The Federal Reserve plans to double the pace of its asset-tapering program and the Bank of England hiked interest rates, prompting investors to edge away from riskier assets. “I expect the choppy price action to continue to spoof fast-money players into the year-end, both in the U.S. and elsewhere,” said Jeffrey Halley, a senior market analyst at Oanda. In Australia, the S&P/ASX 200 index rose 0.1% to close at 7,304.00, snapping a three-day losing streak. Material and energy shares led the advance on the back of strong commodity prices. Gold miner Norther Star was the best performer on the benchmark. Domain Holdings was the worst performer, followed by Afterpay, after the U.S. government said it launched a regulatory probe into buy now, pay later companies. In New Zealand, the S&P/NZX 50 index fell 0.5% to 12,717.94 In rates, treasuries were mixed with the yield curve flatter as U.S. trading begins, retracing a portion of Thursday’s bull-steepening move that unfolded as futures further marked down likelihood of Fed rate increases beyond mid-2022. Yields out to the 10-year are within 1bp of Thursday’s closing levels, with longer maturities lower by 1bp-2bp; 5s30s is flatter by ~2bp after steepening 7.2bp Thursday, remains ~4bp steeper on week. Yields remain lower on week led by the 5Y, which declined 8.1bp Thursday.  Bunds bull flatten a touch, long-end richer by ~2bps, brushing off some hawkish comments from ECB’s Muller. Peripheral spreads tighten slightly. Gilts are bear steeper, cheaper by 2.5bps at the back end. In FX, the Bloomberg Dollar Spot Index was steady and the greenback was mixed versus its Group-of-10 peers, with most currencies confined to narrow ranges. Treasury yields rose by up to 2bps, led by the belly. The euro was flat at $1.1330 and bund yields were little changed. The pound steadied amid seasonal flows into the dollar and as the boost from Thursday’s surprise Bank of England rate hike wore off. U.K. retail sales last month rose 1.4% from October, when they grew a revised 1.1%, the Office for National Statistics said. Economists had expected an increase of 0.8%. Sales excluding auto fuel grew 1.1%. The yen edged higher on concerns about the risk that eventual draw-down in central bank liquidity could trigger a reversal in the rally. Japanese government bonds were in ranges as they shrugged off the Bank of Japan’s status quo outcome. Australian and New Zealand dollar led G-10 declines as falling stocks and mounting virus numbers sapped demand for risk currencies. Turkish lira once again goes sharply offered, briefly weakening over 9% to print through 17/USD before further central bank intervention. In commodities, WTI dropped 1.5%, holding above $71 so far; Brent trades slips below $74. Spot gold holds Asia’s gains, near $1,804/oz. Base metals are in the green with LME tin outperforming. Bloomberg’s Markets Live team is running an anonymous survey on asset views for 2022. It takes about two minutes and the results will be shared in the latter part of December. Looking at the day ahead, data releases include Germany’s Ifo business climate indicator for December, as well as November data on German PPI and UK retail sales. From central banks, we’ll also hear from the Fed’s Waller and the ECB’s Rehn. Market Snapshot S&P 500 futures down 0.8% to 4,635.00 MXAP down 0.9% to 191.41 MXAPJ down 0.8% to 618.58 Nikkei down 1.8% to 28,545.68 Topix down 1.4% to 1,984.47 Hang Seng Index down 1.2% to 23,192.63 Shanghai Composite down 1.2% to 3,632.36 Sensex down 1.5% to 57,011.01 Australia S&P/ASX 200 up 0.1% to 7,303.97 Kospi up 0.4% to 3,017.73 STOXX Europe 600 down 0.6% to 473.64 German 10Y yield little changed at -0.36% Euro little changed at $1.1330 Brent Futures down 1.4% to $73.99/bbl Gold spot up 0.5% to $1,808.56 U.S. Dollar Index little changed at 95.98 Top Overnight News from Bloomberg Boris Johnson suffered a seismic political upset as his ruling Conservatives lost a key parliamentary election, a result that will heap intense pressure on the U.K. prime minister and may even call his position into question Leading central banks made a big call this week, deciding that the coronavirus is no longer calling the shots in their economies, and inflation is now the bigger threat Bank of France Governor Francois Villeroy de Galhau said the difference between the new forecast for 1.8% inflation in 2023 and 2024 and the ECB’s 2% target is within the “margin of uncertainty.” In a Bundesbank report showing German inflation will run above 2% through 2024, Jens Weidmann urged vigilance as he sees “risks to the upside” throughout the currency bloc ECB Governing Council member Olli Rehn said “there’s considerable uncertainty about the path which inflation will take” Germany’s main gauge of business expectations slipped to 92.6 in December, falling for a sixth month, according to the Ifo institute. That’s a bigger decline than predicted by economists in a Bloomberg survey. Current conditions were also assessed as weaker than in November EU leaders failed to reach a deal on how to react to the unprecedented gas crisis that sent energy prices to record levels after Poland and the Czech Republic demanded stronger action to cap the costs of pollution A more detailed look at global markets courtesy of Newsquawk Asian equity markets were mostly lower with sentiment in the region downbeat after the tech-led declines in the US and yesterday’s central bank frenzy. Overnight US equity futures held a downside bias. The ASX 200 (+0.1%) traded positively amid notable outperformance in the commodity-related sectors which was spearheaded by gold miners as the precious metal reclaimed with the USD 1800/oz level and with sentiment also helped by the announcement of a UK-Australia trade deal. The Nikkei 225 (-1.8%) was the biggest laggard as exporters suffered from detrimental currency inflows and following the BoJ announcement to scale back its pandemic relief measures in March. The Hang Seng (-1.2%) and Shanghai Comp. (-1.2%) were lacklustre after further restrictive measures by the US on Chinese companies including the passage of the Uyghur bill aimed at China which bans imports from Xinjiang unless the US government determines they were not produced with forced labour, while tech suffered after the US included several Chinese companies to its investment and trade restrictions lists. Finally, 10yr JGBs were flat despite the steepening seen in the US and underperformance of Japanese stocks, with demand subdued amid the BoJ decision to scale back pandemic relief measures. Top Asian News Japan Expedites Virus Boosters for Some as Omicron Looms Hong Kong Stock Exchange to Allow SPAC Listings Next Month Thailand May Impose Stock-Trading Tax to Lift Government Revenue Asian Stocks Drop as Worries on Global Policy Tightening Linger European equities have succumbed to the weakness seen on Wall Street and across most APAC markets (Euro Stoxx 50 -1.1%; Stoxx 600 -0.6%) as global central banks turn hawkish and Quad Witching gets underway in holiday-thinned liquidity. US equity futures have also drifted lower, with the March 2022 contracts softer to the tune of 0.1-0.3% across the ES, NQ, YM and RTY. On the recent central bank pivots, analysts at Barclays suggest that rate hikes do not end bull markets, but reduced liquidity means “less speculative froth”. Barclays sees persisting inflation as a risk to markets and Omicron as an increasing downside risk to European growth, albeit the impact is contained thus far. Back to trade, Eurozone bourses see broad-based weakness whilst the UK’s FTSE 100 (+0.2%) holds its head above water – aided by outperformance in the basic materials sector and a softer Sterling. Overall sectors kicked off the day with a defensive bias, albeit that theme has since faded, with some cyclicals making their way up the ranks. Sectors are mostly in the red, however. Auto names are the laggards, with European car registrations -17.5% in November (prev. -30% MM). Tech also resides towards the bottom amid outflows from growth, and with the hefty valuations state-side also stoking some concerns. Chip names are also hit amid news Apple (-0.8% pre-market) is reportedly planning to build a new office to bring wireless chips in-house which may replace parts from Broadcom and Skyworks. STMicroelectronics (-3%), ASM (-2.4%), BE Semiconductor (-2.6%) are among the biggest losers in the Stoxx 600. Top European News European Gas Plunges After Russia Books Pipeline at Last Minute Stellantis Revamps Auto-Finance Business With BNP, Santander Cellnex Drops Most in 11 Months on CK Hutchison Deal Woes Johnson Suffers Humiliating Defeat in U.K. Special Election In FX, it feels like Friday fatigue has set in and markets are already in weekend mode as the Greenback sticks to relatively tight lines against most G10 peers and the index holds close to the 96.000 level within a narrow 96.118-95.875 band. Consolidation and sideways price action is hardly a surprise given this week’s extremely volatile trade on a combination of thin seasonal volumes and the abundance of final global Central Bank policy meetings for the year all scheduled within a few days. However, the Dollar and a few of its key counterparts may also be tied up in option expiry interest that ranges from large to huge in certain cases, awaiting comments from Fed’s Waller as the first official post-FOMC speaker. CHF/EUR/GBP/JPY - The Franc remains above 0.9200 vs the Buck and is testing 1.0400 against the Euro again in wake of an unchanged SNB yesterday, while the single currency is holding above 1.1300 vs the Greenback even though Germany’s latest Ifo survey was downbeat and perhaps underpinned by hawkish remarks from ECB’s Simkus and Muller over the comparatively neutral/dovish Rehn. Elsewhere, Sterling retains an element of its post-BoE hike momentum, but not enough for Cable to breach the 30 DMA that comes in at 1.3344 today or stay above a Fib retracement at 1.3321 irrespective of Chief Economist Pill expressing the view that further tightening is likely. Conversely, the BoJ stuck to its dovish stance and balanced the termination of corporate and commercial QE by extending the COVID-19 funding facility for SMEs another 6 months, to leave the Yen meandering between 113.86-44, though nearer 113.50 amidst the latest bout of risk aversion. Note also, Usd/Jpy will likely be contained by a swathe of option expiries stretching from 113.00 up to 114.50 and the same can be said for Eur/Usd and the Pound given the sheer size of interest at various strikes rolling off today - see 7.24GMT post on the Headline Feed for details. NZD/AUD/CAD - A further deterioration in NBNZ business outlook and decline in own activity have compounded the aforementioned downturn in overall sentiment to the detriment of the Kiwi more than Aussie or Loonie that is feeling the heat from renewed weakness in WTI crude. Hence, Nzd/Usd is nearer 0.6750 than 0.6800, while Aud/Usd is hovering within a 0.7185-53 range and Usd/Cad sits just above 1.2800. In commodities, WTI and Brent futures have been trundling lower in tandem with risk appetite – with WTI Jan closer to USD 71/bbl (vs high USD 72.26/bbl) whilst Brent Feb resides under USD 73/bbl (vs high USD 74.98/bbl). The morning did see updates on the Iranian nuclear front whereby sources suggested the parties in the Vienna talks have been able to reach a new draft by incorporating Iran's views, which, if finalised, will be the basis for upcoming talks. Although nothing is yet set in stone, this is much more constructive than had been the case this time last week. Further, the oil complex juggles the fluid COVID situation as the steeper rise in global cases backs the notion of stricter measures. That being said, reports thus far continue to suggest the lower severity of the Omicron variant. Analysts at Goldman Sachs said Omicron hasn't had much of an impact on mobility and oil demand, while it sees strong oil demand in 2022 from rising CAPEX and infrastructure construction. Furthermore, it stated that average oil demand is to hit record highs in 2022 and 2023. Elsewhere, spot gold remains firm after topping the group of DMAs yesterday (21 at 1787, 100 at 1788, 200 at 1794 and 50 at 1798) alongside the USD 1,800/oz mark. LME copper hovers around the USD 9,500/t mark awaiting the next catalyst, whilst Dalian iron ore continued to gain overnight with traders citing a recovery in steel demand. US Event Calendar No economic events 1pm: Fed’s Waller Discusses the Economic Outlook DB's Jim Reid concludes the overnight wrap Well this is my last EMR of 2021. Henry will be in charge on Monday and Tuesday of next week but by then I’ll be catching up on sleep to prepare myself for the onslaught of Xmas with three hyper excitable kids. Thanks for all your support and interactions over the past year. Hopefully you’ll continue to read in 2022. Try to have as exciting a holiday season as the virus permits and see you on the other side. As I have done most years, at the end today I’m listing my favourite TV series and films of the year. I used to do favourite albums of the year but I’m ashamed to say that the person who used to buy a few hundred albums a year and try out all sorts of new music has turned into someone who listens to playlists and old albums. All a bit dull. The odd film and lots of TV continues to keep me sane after a day working in financial markets. So I hope you enjoy the countdown. Talking of countdowns, yesterday was probably the last active market day of the year with a slew of Central Bank activity over the last 36 hours. However the FOMC-inspired risk rally peaked out by lunchtime in Europe and the S&P 500 eventually shed -0.87% amidst significant declines in technology stocks (Nasdaq -2.47%). Meanwhile there was continued caution about the Omicron variant among investors, as many of the key economies await a fresh wave of cases over the coming weeks. We’ll start with the ECB, who yesterday said that they would be ending net asset purchases under their Pandemic Emergency Purchase Programme (PEPP) at the end of March 2022, and that purchases over Q1 would be “at a lower pace than in the previous quarter”. Nevertheless, they also moved to soften the blow by confirming a step up in purchases by the Asset Purchase Programme (APP) to €40bn a month in Q2 2022, followed by a reduction to €30bn in Q3, and then €20bn a month from October “for as long as necessary to reinforce the accommodative impact of its policy rates.” They also said that they expected net purchases would conclude “shortly before it starts raising the key ECB interest rates.” Overall this was a somewhat hawkish decision (see European economists’ recap here), since although APP purchases will be increasing, those volumes are fixed and will taper out, whilst expectations were that the ECB may retain more flexibility with the APP. That flexibility seems confined to PEPP reinvestments, which will grant policy optionality as the inflation outlook remains uncertain. That said, it seems like the ECB communicated a set path for policy during 2022, with rate hikes not coming until 2023, according to our economists. Sovereign bond yields ended the day higher across most of the continent, although they gave up some of that increase towards the close, with those on 10yr bunds (+1.1bps), OATs (+2.2bps) and BTPs (+5.5bps) all rising. However, some shorter-dated yields did move lower, with those on 2yr bunds (-1.3bps) and OATs (-0.2bps) declining. When it comes to the ECB’s inflation forecasts, these were upgraded yet again, with the central bank now expecting 2022 inflation at +3.2% (vs. +1.7% in September), whilst their 2023 and 2024 projections now stand at +1.8%. However, the 2023 and 2024 projections are still beneath the ECB’s 2% target, and in their forward guidance they’ve said that they wouldn’t raise raises until inflation was seen reaching the target “durably for the rest of the projection horizon”, so even with the upgrade to 2023 they’re still forecasting inflation beneath target then. The other central bank decision came from the BoE yesterday, who hiked rates by 15bps to 0.25%. The consensus had been expecting them to keep rates on hold given the Omicron variant, hence the decision came as something of a surprise to markets, although we should say that DB’s own UK economist made an out-of-consensus but accurate call for a 15bps hike. In the minutes, the decision was described as “finely balanced” due to the uncertainty around Covid, but an 8-1 majority on the MPC voted in favour, and Governor Bailey said afterwards in a BBC interview that “We’ve seen evidence of a very tight labour market and we’re seeing more persistent inflation pressures, and that’s what we have to act on”. It comes as inflation has continued to surpass the BoE’s own forecasts, and the summary of the latest meeting said that Bank staff were now expecting inflation to peak “around 6% in April 2022”, up from its current level of 5.1%. Given the decision came as a surprise to many, there was a sharp rise in gilt yields in response, with those on 10yr gilts initially up +10bps before following the global bond rally which meant we only closed up +2.2bps to 0.75%. That move was entirely driven by higher real rates, and the 10yr inflation breakeven fell -5.5bps as investors moved to price in a lower trajectory for inflation, with the 5yr breakeven down by an even larger -12.3bps. Meanwhile investors also moved to price in a faster pace of hikes over the coming months, with the next 25bps hike fully priced in by the time of the March 2022 meeting, and a +73% chance of one priced in at the next meeting in February. In terms of DB’s own expectations, our UK economist writes in his reaction note (link here) that he now expects the next 25bps hike as soon as February 2022, followed by two further hikes in November 2022 and May 2023. Against this backdrop there was a fairly mixed equity reaction on either side of the Atlantic. The S&P 500 fell -0.88% as mentioned, with the NASDAQ seeing a major -2.47% decline, erasing their post-FOMC gains. In Europe however there was a much stronger performance as they caught up with the US rally following the Fed’s policy decision, and the STOXX 600 advanced +1.23%. Separately, US Treasuries also diverged from their European counterparts, with the 10yr yield down -4.6bps at 1.41%. In terms of the latest on the pandemic, there was a further record number of cases in the UK yesterday, with 88,376 reported, which beats the previous record set only the day before. Against that backdrop, France moved to restrict travel from the UK, with tourist and non-essential business travel prohibited. Separately in South Africa, hospitalisations now stand at 7,614, which is currently up +59% on the previous week. When it comes to the economic impact, yesterday’s release of the December flash PMIs from around the world pointed to weakening growth momentum across the major economies. Indeed, the composite PMI declined on the previous month in the US, Euro Area, Germany, France, UK, Japan and Australia. The headline numbers were the Euro Area composite PMI, which fell to a 9-month low of 53.4 (vs. 54.4 expected), whilst the US composite PMI fell to 56.9. So both still above the 50-mark that separates expansion from contraction, but some way down from their peaks in the middle of the year. Over in the US, it appears the gap between Democratic senators on President Biden’s Build Back Better bill is just too big, as Democratic leaders acknowledged that negotiations and votes could well drag over into next year. In a statement, President Biden said that “It takes time to finalize these agreements, prepare the legislative changes, and finish all the parliamentary and procedural steps needed to enable a Senate vote. We will advance this work together over the days and weeks ahead”. Obviously longer-term outlooks will hinge on whether or not the bill passes, but there’s implications for 2022 growth, too, as the bill was set to extend child tax credits that comprise a not-insubstantial portion of consumer income. Overnight in Asia the main equity indices are trading lower, with the KOSPI (-0.33%), Shanghai Composite (-0.90%), Hang Seng (-1.28%), CSI (-1.31%) and the Nikkei (-1.75%) all declining amidst losses in technology stocks. Some of the main headlines came from the Bank of Japan however, which kept its main policy rates unchanged, announced that it would slowly reduce its corporate debt holdings, but also extended a special covid loans program by six months to end in September 2022, which aims to support small and medium-sized firms. Futures markets in US & Europe are also indicating a slow start, with those on the S&P 500 (-0.14%) and the DAX (-0.67%) both trading in the red. In terms of yesterday’s other data, the weekly initial jobless claims in the US moved up from their half-century low the previous week to 206k (vs. 200k expected). In spite of the uptick however, it was still enough to push the 4-week moving average down to 203.75k. Otherwise, US industrial production grew by +0.5% in November (vs. +0.6% expected), housing starts accelerated to an annualised rate of 1.679m (vs. 1.567m expected), their highest level in 8 months, and building permits rose to an annualised 1.712m (vs. 1.661m expected). To the day ahead now, and data releases include Germany’s Ifo business climate indicator for December, as well as November data on German PPI and UK retail sales. From central banks, we’ll also hear from the Fed’s Waller and the ECB’s Rehn. Tyler Durden Fri, 12/17/2021 - 08:07.....»»

Category: blogSource: zerohedgeDec 17th, 2021

Builder Confidence Highest Since February: 5 Stocks to Buy

Solid demand and current traffic despite ongoing supply-side bottlenecks have given a boost to homebuilders like Toll Brothers (TOL), Meritage Homes (MTH), Tri Pointe (TPH), Beazer Homes (BZH) and Lennar (LEN). U.S. homebuilders’ sentiment ended 2021 on a strong note. Homebuilders have been optimistic over the last four quarters as they are witnessing solid demand despite ongoing supply-side bottlenecks. Builder sentiment for single-family homes jumped for the fourth consecutive month at 2020-end and attained the highest reading in February 2021.Despite the usually slower season for housing, continued supply, labor, and material woes, and new COVID variants, homebuilders are are increasingly confident. Solid demand trends for homes and limited homes have benefited  companies like Toll Brothers, Inc. TOL, Meritage Homes Corporation MTH, Tri Pointe Homes, Inc. TPH, Beazer Homes USA, Inc. BZH and Lennar Corporation LEN.U.S. Builder Confidence Strongest in DecemberThe NAHB/Wells Fargo Housing Market Index (HMI) reading unveiled that sentiment among U.S. homebuilders for newly-built single-family homes rose one point to 84 this month from November’s reading of 83. Yet, the metric is still six points below the November 2020 record high reading of 90. Nonetheless, the reading of more than 80 is still encouraging.Image Source: NAHBThe indicator that gauges present sales conditions rose one point to 90 from the last month. Prospective buyer traffic also improved one point to 70. Sales predictions for the next six months, which gives an idea of future industry movement, remained steady at 84.Regionally, the three-month moving averages for the HMI reading gained across the regions served.How 2022 is Poised for Homebuilding Industry?Yesterday, the Federal Reserve or Fed updated its outlook and projections to further tighten the monetary policy to combat elevated levels of inflation. Although it did not announce any change in the federal funds target rate, it expects three 25 basis point rate hikes in 2022 and three more in 2023. It now expects inflation in 2021 to grow 5.3% from the prior projection of 4.2%. For 2022, it now expects inflation rate of 2.6% from 2.2% expected earlier.The Fed expects to keep interest rates near zero only until maximum employment level is achieved. Per the recent job data published by the U.S. Bureau of Labor Statistics or BLS, total nonfarm payroll employment rose 210,000 in November, and the unemployment rate fell 0.4 percentage points to 4.2%. Construction employment rose by 31,000 for the said month backed by strong job growth in specialty trade, construction of buildings, and heavy and civil engineering construction.Image Source: Zacks Investment ResearchContinuing the positivity, single-family permits for the first 10 months of the year — issued by the Census Government — reached 948,32 (up 17.3% year over year), backed by solid regional growth.Yet, ongoing supply chain issues, labor shortage, and affordability hurdles are concerning almost every homebuilder. NAHB chief economist Robert Dietz said, “Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24% higher than the pre-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.”Per the BLS recent report, prices of goods used in residential construction ex-energy rose 1.8% in November due to price increases in nearly every product category. Robert Dietz suggests, “Policymakers need to work on supply chain improvements and controlling costly inflation. Addressing lumber tariffs would be a good place to start.”So far this year, the Zacks Building Products - Home Builders industry has gained 32.9% compared with the Zacks Construction sector and the S&P 500 composite’s 28.5% and 26% rally, respectively. Solid buyers’ traffic depicts an encouraging picture for builders to build more.Stocks Worth a LookDefying all odds, we have shortlisted five top-ranked stocks from the Zacks homebuilding industry on solid demand for homes and encouraging buyers’ traffic. Investors may add these stocks to their portfolio, given their solid prospects. These stocks have been picked with the help of the Zacks Stock Screener.Toll Brothers is a luxury homebuilding company that currently sports a Zacks Rank #1 (Strong Buy). The company is primarily gaining from limited competition in the market and the strategy of broadening product lines, price points as well as geographies.Toll Brothers' shares have gained 65.5% so far this year. Estimates for TOL's fiscal 2022 earnings suggest 17.8% year-over-year growth. You can see the complete list of today’s Zacks #1 Rank stocks here.Meritage Homes, a leading designer and builder of single-family homes, mainly benefits from strategic initiatives to boost profitability and focus on entry-level LiVE.NOW homes.This Zacks Rank #1 company’s earnings are expected to grow 22.2% in 2022. Meritage Homes has gained 43.9% year to date.Tri Pointe is involved in the design, construction, and sale of single-family detached and attached homes. Primarily, it has been gaining from robust demand, pricing and better operating leverage.Shares of this Zacks Rank #1 company have gained 58.3% in the year-to-date period. Estimates for Tri Pointe's 2022 earnings imply 9.6% year-over-year increase.Beazer Homes currently sports a Zacks Rank #1. This Atlanta-based homebuilder continues to gain from strong operational execution and persistent strength in the housing market.Beazer Homes’ shares have gained 47.8% year to date. BZH's earnings are expected to rise 23.7% in fiscal 2022.Lennar, a well known homebuilder, currently carries a Zacks Rank #2 (Buy). It is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn is resulting in higher operating leverage.Lennar’s earnings for fiscal 2022 are expected to rise 5.1% year over year. LEN's shares have gained 48.3% year to date. 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 Toll Brothers Inc. (TOL): Free Stock Analysis Report Lennar Corporation (LEN): Free Stock Analysis Report Meritage Homes Corporation (MTH): Free Stock Analysis Report Beazer Homes USA, Inc. (BZH): Free Stock Analysis Report Tri Pointe Homes Inc. (TPH): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksDec 16th, 2021