Weekly Research Report_20190218

Weekly Research Report – 18 February 2019

Clay Carter

The Dow Jones Industrial Average climbed 776.92 points, or 3.1%, to 25,883.25 last week, while the S&P 500 rose 2.5% to 2,775.60. The Nasdaq Composite advanced 2.4% to 7,472.41. European markets had a nice bounce as well. It was the Dow’s eighth straight week of gains, the longest winning streak since November 2017.

A rally in technology stocks also lifted the Nasdaq Composite to its eighth consecutive weekly rise as well. Tech companies have largely reported fourth-quarter results that exceeded expectations, while easing fears among investors about trade tensions and rapid interest-rate increases have also propelled the index higher. The Nasdaq is now more than 20% above its Christmas Eve low.

For the week, decent earnings and trade talks are main market drivers. Trump said it would be "an honour" to remove tariffs if the US can make deal with China. The Wall Street Journal reported US and China working toward a “Memorandum of Understanding” (MoU) that could serve as a framework for a deal finalised by Trump and Xi. Talks will continue this week.

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Source: Bloomberg    


U.S corporate earnings results

HubSpot (NYSE: HUBS)

HubSpot Q4 Non-GAAP EPS of $0.37 beat by $0.07; GAAP EPS of -$0.29 beat by $0.03. Revenue of $144.02M (+35.2% Y/Y) ahead by $6.54M Q1 guidance has upside revenue from $146.5M to $147.5M (consensus: $145.95M) with EPS from $0.23 to $0.25 with consensus of $0.24). FY19 guidance has upside revenue from $648M to $652M (consensus: $636.55M) with EPS from $1.08 to $1.16 (consensus: $1.12). Q4 revenue breakdown: Subscription, $136.8M (consensus: $131.3M); Professional services and other, $7.2M (consensus: $6.2M). Operating margin was 9.8% compared to the 8.7% consensus.

Twilio (NYSE: TWLO)

Twilio Q4 Non-GAAP EPS of $0.04 in was-line. Revenue of $204.3M (+77.3% Y/Y) beat by $19.83M. FY19 guidance includes the SendGrid acquisition (from February 1) so the consensus estimates aren't comparable. Q1 guidance expects revenue from $222M to $225M with EPS from $0 to $0.01. FY19 guidance has revenue of $1.065B to $1.077B and EPS from $0.08 to $0.11. Q4 revenue breakdown: Base, $186.2M (consensus: $174.4M); Variable, $18.1M (consensus: $10.2M).

CenturyLink (NYSE: CTL)

CenturyLink Q4 Non-GAAP EPS of $0.37 beats by $0.05; Revenue of $5.78B (-3.7% Y/Y) in-line. Alongside Q4 results, CenturyLink also announced a cut in the annual dividend to $1 per share from $2.16. The company is cutting its leverage target to 2.75x from 3.25x.

Cisco (NASDAQ: CSCO)

Cisco Systems Q2 Non-GAAP EPS of $0.73 beat by $0.01; GAAP EPS of $0.63 misses by $0.02. Revenue of $12.45B (+4.7% Y/Y) beat by $30M. Q3 guidance has upside revenue growth of 4% to 6% or about $12.91B to $13.2B (consensus: $12.85B) and in-line EPS from $0.76 to $0.78 (consensus: $0.76). Cisco's board approved a $15B increase to the existing program bringing the total up to $24B. Revenue breakdown: Products, $9.27B (consensus: $9.15B); Services, $3.17B (consensus: $3.25B).

Criteo (NASDAQ: CRTO)

Criteo S.A. Q4 Non-GAAP EPS of $0.84 beat by $0.11; GAAP EPS of $0.57 beat by $0.13. Revenue of $271.86M (-1.8% Y/Y) beat by $11.45M Criteo guided up Q1  revenue from $233M to $235M (consensus: $231.37M) and adjusted EBITDA from $59M to $61M.For FY19, CRTO expects ex-TAC revenue growth of 3% to 6% in constant currency with an adjusted EBITDA margin of about 30%. Q4 revenue ex-TAC was nearly flat Y/Y in constant currency at $272M or 41% of total revenue. Adjusted EBITDA fell 12% Y/Y to $105M or 39% of revenue ex-TAC. Cash flow from operating activities increased 8% to $86M, FCF was $40M. Cash and equivalents dropped $50M to $364M partly due to acquisitions.

Gaming and Leisure Properties (NASDAQ: GLPI)

Gaming and Leisure Properties: Q4 FFO of $0.45 may not be comparable to consensus of $0.73. Revenue of $303.3M (+26.0% Y/Y) misses by $2.82M. Gaming and Leisure Properties' guidance for Q1 and FY 2019 beat estimates for adjusted FFO per share but trailed estimates for revenue. Sees year adjusted FFO per share of $3.40-$3.45 vs. estimate of $3.17; sees Q1 adjusted FFO per share of 85 cents vs. estimate of 82 cents Q4 FFO of 45 cents compares with 55 cents a year ago; adjusted FFO per share of 84 cents improves from 77 cents a year ago; consensus estimate is 73 cents. 2019 revenue guidance of $1.15B to $1.16B compares with consensus estimate of $1.27B; Q1 revenue guidance of $288.5M vs. estimate of $319.6M.

Arista Networks (NYSE: ANET)

Arista Q4 Non-GAAP EPS of $2.25 beat by $0.19; GAAP EPS of $2.10 beats by $0.30. Revenue of $595.7M (+27.3% Y/Y) ahead by $4.45M. Gross profit rose 22% to $375M; gross margin was 64.1% vs. Q3's 64.6% and last year's 65.9%. Net income (non-GAAP) rose 32% to $182.2M from $137.3M. Revenue breakout: Product, $503.2M (up 23.6%); Service, $925M (up 52.4%). For Q1, ANET is guiding to revenues of $588M-$598M (vs. consensus for $588.1M), a gross margin of 63-65% and operating margin of about 35%.

Borg Warner (NYSE: BWA)

BorgWarner Q4 Non-GAAP EPS of $1.10 beat by $0.03; GAAP EPS of $1.21 beat by $0.14.Revenue of $2.57B (-0.8% Y/Y) beat by $20M. BorgWarner also announced new business backlog within a range of $430M to $580M in 2019, $750M to $875M in 2020 and $800M to $950M in 2021.The company expects its new business backlog to drive organic growth over the company's estimated light vehicle market exposure of 5.0% to 6.0% for 2019 through 2021. Asia is expected to account for 60% of the backlog, primarily from China. While the company slipped past estimates with its Q4 report on sales growth of -0.5%, guidance was set below expectations. BorgWarner sees full-year revenue of $9.90B to $10.37B vs. $10.82B consensus and 2019 EPS of $4.00 to $4.35 vs. $4.56. consensus.

Coca Cola (NYSE: KO)

Coca-Cola Q4 Non-GAAP EPS of $0.43 was in-line but GAAP EPS of $0.18 missed by $0.25. Revenue of $7.1B (-5.5% Y/Y) beat by $30M. Coca-Cola reported its organic revenue increased 5% in Q4, consisting concentrate sales growth of 1% and price/mix growth of 4%. Unit case volume was flat during the quarter. Organic revenue was up 7% for the Asia Pacific and Latin America businesses, while flat in North America. Pricing actions across the portfolio in North America offset a more challenging cost environment. KO’s operating income was up 21% for the quarter. Operating margin expansion was driven by divestitures of lower-margin bottling operations and the company's ongoing productivity efforts. Looking ahead, Coca-Cola expects organic revenue growth of 4% for the full year and EPS growth of -1% to +1%.

Nvidia (NASDAQ: NVDA)

Nvidia Q4 Non-GAAP EPS of $0.80 beats by $0.17; GAAP EPS of $0.92 beat by $0.29. Revenue of $2.21B (-24.1% Y/Y) missed by $30M. So Q4 results beat on EPS but missed on revenue although the figure was in-line with the $2.2B midpoint of the guidance cut in January. Downside Q1 guidance has revenue within 2% of $2.2B or about $2.156B to $2.244B (consensus: $2.34B) with a 59% gross margin and $755M in operating expenses. FY20 guidance expects revenue flat to slightly down on the year compared to the analyst estimate of a 5% drop. Revenue breakdown: GPU, $1.98B (-20% Y/Y; 29% Q/Q); Gaming, $954M (-45% Y/Y; Q3: $1.76B); Professional Visualization, $293M (+15% Y/Y; Q3: 305M); Datacenter, $679M (+12%; Q3: $792M); Auto, $163M (Q3: $172M); OEM & IP, $116M (Q3: $148M).

Deere (NYSE: DE)

Deere Q1 Non-GAAP EPS of $1.54 missed by $0.22; GAAP EPS of $1.54 missed by $0.20. Company attributed earnings miss to soft farmer sentiment re trade and tariff issues. However Net Revenue of $6.94B (+0.4% Y/Y) beat by $90M; De’s net income of $498.5M in the fiscal first quarter, or $1.54 per share, compared with a net loss of $535.1M, or $1.66 per share a year ago. Worldwide net sales increased 15% Y/Y to $7.984B. Segment Sales: Equipment +16%; Agriculture & Turf. +10%; Construction & Forestry +31%. Net sales and revenues are still projected to increase by about 7% for fiscal 2019, with net income attributable to the company forecast to be about $3.6B.


The week ahead

U.S. markets are closed Monday for Presidents’ Day. Starting Tuesday, 46 S&P 500 companies report results for their last period of 2018 this week.

The economic calendar is light this week:

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Source: Briefing.com


Chart of the day

Why Stocks are a long- term investment!

Looking back over the past 100 years, according to Ibbotson Associates, over one-year holding periods, stocks make money 73% of the time. Over five-year holding periods, stocks make money 85% of the time; over 10-year periods, 95% of the time; and over 20-year periods, 100% of the time.

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Source: Ibbotson Associates

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