Our Head of North American Research, Gary Christie with an update on the U.S. Markets and this weeks focus.
Good morning, The S&P 500 declined by 0.77% last week.
On a daily chart, we remain bullish on the SPX as the index surpassed October highs. The index remains inside a bullish trend channel with a stop-loss set at 2790 and upside targets of 2900 and record highs of 2942.
Regarding the sectors, the worst performing stocks were in the Retailing (+2.43%), Telecommunication Services (+1.82%) and Food, Beverage & Tobacco (+1.57%) sectors.
Looking at the sectors from a technical point of view, we upgraded the Retailing sector to Rise-Outperform. Our sector focus for stock selection is in Real Estate and Semiconductors as they are currently outperforming the S&P 500.
Here are some stocks that might see increased activity due to last weeks market moves:
On the corporate front, Fidelity National Information Services (FIS +1.41% WoW to $110.41) has entered into a definitive agreement to acquire Worldpay (WP +11.87% WoW to $110.39), a global leader in eCommerce and payments, in a stock and cash deal worth appx $43B, including debt. Under the terms of the agreement, Worldpay shareholders will receive 0.9287 FIS shares and $11 in cash for each share of Worldpay. Finally, Fidelity shareholders will own 53% while Worldpay will own 47% of the combined company.
Becton Dickinson (BDX -5.43% WoW to $240.12) traded lower as the FDA sent a letter to health care providers signaling that it will hold an advisory committee regarding the mortality risks over the use of paclitaxel-coated balloons and paclitaxel-eluting stents, according to Bloomberg.
Coty Inc (COTY +3.03% WoW to $11.22) unveiled that its special committee has recommended that shareholders accept the offer from JAB Holdings to acquire 150M shares which would result in about 60% of the Co's outstanding stock.
Boeing Co/The (BA -4.44% WoW to $362.17) is under scrutiny as the Department of Transportation is probing the FAA's earlier approval of the Co's 737 Max aircraft line, according to The Wall Street Journal.
Monster Beverage (MNST -11.22% WoW to $53.51) sank as Wells Fargo hinted that the data provided by Nielsen through March 9th amplifies concerns about the effectiveness of the Co's pricing and suggests that the growth in recent US sales volume remained negative.
Advanced Micro Devices (AMD +13.22% WoW to $26.37) traded higher as Alphabet (GOOGL +1.46% WoW to $1207.65) unveiled a new game streaming service called Stadia, which uses AMD gaming chips for its data centers to run the service, according to Bloomberg.
General Mills (GIS +6.8% WoW to $50.74) announced 3Q adj. EPS of $0.83 (estimated $0.69) vs. $0.79 a year ago on revenue of $4.2B (forecasted $4.19B) compared to $3.88B in the prior year. The Co raised its FY view on adj. EPS to grow between 0% and 1% vs. prior view between -3% and 0%.
Nike (NKE -5.31% WoW to $82.19) announced 3Q diluted EPS of $0.68 (estimated $0.65) vs. LPS of $0.67 a year ago on revenue of $9.61B (forecasted $8.98B) compared to $8.98B in the prior year. Gross margin improved to 45.1% vs. 43.8% a year earlier.
Cintas (CTAS -5.35% WoW to $194.55) reported 3Q adj. EPS from continuing operations of $1.84 (estimated $1.72) vs. $1.37 a year ago on revenue of $1.68B (forecasted $1.69B) from $1.59B in the previous year. The Co sees FY adj. EPS from continuing operations of $7.42-$7.48 (expected $7.36) and expects FY revenue in a range of $6.87B-$6.89B (estimated $6.89B).
Tiffany & Co (TIF +6.89% WoW to $103.21) unveiled 4Q diluted EPS of $1.67 (estimated $1.6) vs. $0.50 a year ago on net sales of $1.32B, in-line with estimates, from $1.33B in the previous year. Comparable sales were flat, lower than the estimated growth of 0.1% while net income jumped by 230% YoY to $204.5M. The Co sees 2019 EPS increasing by mid-single-digits.
Micron Technology (MU +5.26% WoW to $41.62) reported 2Q adj. EPS of $1.71 (estimated $1.65) vs. $2.82 a year ago on net sales of $5.84B (forecasted $5.83B) compared to $7.35B in the prior year. Gross margin fell to 49.1% vs. 58.1% a year earlier while net income dropped by 51% YoY to $1.62B.
Darden Restaurants (DRI +6.13% WoW to $117.44) announced 3Q adj. EPS from continuing operations of $1.8 (estimated $1.75) vs. $1.71 a year ago on sales up 5.5% YoY to $2.25B (expected $2.24B). Comparable sales increased by 2.8%, beating forecasts of 2.3%. The Co raised their FY view on EPS from continuing operations to a range of $5.76-$5.8 (forecasted $5.7) vs. prior view of $5.6-$5.7. Finally, the Co expects FY comparable sales to grow by 2.5% - 2.7% vs. prior view of 2.5%.
Conagra Foods (CAG +14.55% WoW to $26.45) unveiled 3Q adj. EPS from continuing operations of $0.51 (estimated $0.49) vs. $0.62 a year ago on net sales of $2.71B (forecasted $2.75B) from $1.99B in the previous year. The Co sees FY19 total organic net sales up 1%.
Apple (AAPL +2.65% WoW to $191.05) gained momentum after Citi raised its price target to $220 from $170. In other news, the Co negotiated "the right to offer customer bundles of on-demand streaming services for one discounted price in its deals with media companies", reported The Information. Also, Apple tops Microsoft (MSFT +0.98% WoW to $117.05) as the most valuable firm in the U.S.
Biogen Idec (BIIB -34.3% WoW to $216.71) plunged after the Co ended its late-stage studies of Alzheimer's disease drug aducanumab, according to Bloomberg. In other news, the Co was cut to "market perform" from "outperform" at Wells Fargo. Besides, the Co printed a new 52w low.
Earnings preview this week:
PVH US: On Wednesday, PVH is likely to announce 4Q EPS of $1.74 vs. $1.58 a year ago on revenue of $2.4B from $2.5B a year earlier. In other news, the Co was downgraded to "market perform" from "outperform" at Cowen. From a technical point of view, the RSI is below its neutrality area at 50 while the MACD is below its signal line and negative. The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 112.7 and 110.18). Prices should continue lower towards $100.6 with a stop-loss of $113.2.
LEN US: On the same day, Lennar is awaited to post 1Q EPS of $0.759 vs. $1.11 last year on increased revenue of $4.1B compared to $3B in the prior year. Also, existing home sales jumped by 11.8% in February to 5.51M units (estimated 5.1M) compared to 4.93M in the previous month. Looking at the chart, the RSI is below 50 while the MACD is negative and below its signal line. The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 47.9 and 46.85). We expect additional pressure towards $41.2 with a stop-loss of $48.4.
PAYX US: On the same day as well, Paychex is anticipated to unveil 3Q EPS of $0.881 vs. $0.63 a year ago on higher revenue of $1B from $866.5M in the previous year. In other news, the Co was cut to "sell" from "hold" at Morningstar. From a chartist point of view, the RSI is above its neutrality area at 50 while the MACD is below its signal line and positive. The stock could retrace in the short term. Moreover, the stock is above its 20 and 50 day MA (respectively at 77.3 and 73.64). Paychex is currently trading near its 52 week high reached at 79.67 on 19/03/19. As long as the stock is trading above $77.1, we anticipate the stock to reach $81.6.