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Another good week for most markets. China (CSI 300) was the big winner - up 7.19% in AUD. The Chinese market is rallying on the announcement that China A-shares will go to 20% in the emerging market MSCI index (from 5%) in three stages, and positive trade news flow. US officials are apparently preparing a final trade deal for Trump and Xi to sign, potentially as soon as mid-March according to Bloomberg.

Weekly returns to 1 March 2019 
(AUD return far right- hand column)

190304_1Source: Bloomberg


  • 10-Year Treasury yield: +11 basis points to 2.75%
  • WTI crude oil: -2.5% to US$55.80
  • AUD/USD: 70.92 (-0.5%)

U.S corporate earnings results

(source: FactSet)

For Q4 2018 (with 96% of the companies in the S&P 500 reporting actual results for the quarter), 69% of S&P 500 companies have reported a positive EPS surprise and 61% have reported a positive revenue surprise.

Earnings Growth: For Q4 2018, the blended earnings growth rate for the S&P 500 is 13.1%. If 13.1% is the actual growth rate for the quarter, it will mark the fifth straight quarter of double-digit earnings growth for the index.

Ten of the eleven sectors are reporting year-over-year growth in earnings. Five sectors are reporting double-digit earnings growth, led by the Energy, Communication Services, and Consumer Discretionary sectors.

Earnings highlights

Home Depot (NYSE: HD)

Home Depot Q4 Non-GAAP EPS of $2.25 beat by $0.09. Revenue of $26.49B (+10.9% Y/Y) light by some $90M. Home Depot reported comparable-store sales rose 3.2% in Q4. The comp sales for the U.S. stores was 3.7%. Gross margin rate was up 20 bps to 34.1%. SG&A expense rate flat at 18.6%. Operating margin rate fell 60 bps to 12.8%. Merchandise inventory advanced 9.2% to $13.93B. Number of customer transactions grew 7.7% to 394.8M. Store count +3 Y/Y to 2,287 for the period. FY2019 Guidance: Sales: ~+3.3%; Comparable-store sales: ~+5%; Gross margin rate: ~34%; Operating margin rate: ~14.4%; Tax rate: ~25.5%; Diluted EPS: $10.03 (~+3.1%); Capex: ~$2.7B; Repurchases: ~$5B; Net new stores: +5.


Baidu Q4 Non-GAAP EPS of $1.92 beat by $0.16 Revenue of $3.96B (+9.4% Y/Y) ahead by $80M. In-line Q1 outlook has revenue of $3.42B to $3.6B compared to the $3.56B consensus estimate. Active online marking customers grew 15% in the quarter while the revenue per market customer fell roughly 4%. Adjusted EBITDA totaled $577M and Baidu ended the quarter with $20.57B in cash and equivalents.

Mosaic (NYSE: MOS)

Mosaic Q4 Non-GAAP EPS of $0.77 beat by $0.20; Revenue of $2.5B (+19.6% Y/Y) beat by $130M. Q4 net sales rose to $2.5B from $2.1B Y/Y, primarily driven by the acquisition of Vale Fertilizantes and higher realised prices, partially offset by a decline in phosphates sales volumes; Q4 operating earnings came in at $258M, more than double $127M a year ago, as margin per ton rose in the potash, phosphates and Mosaic Fertilizantes businesses. Potash net sales rose 19% Y/Y to $592M, driven by higher average realised sales prices and higher sales volumes; Q4 gross margin was 34% of net sales vs. 23% a year ago. Also, net sales in the Mosaic Fertilizantes segment soared 86% to $969M, driven by higher average realised selling prices and the acquisition of production assets from Vale Fertilizantes; Q4 gross margin was $56/ton vs. $23/ton for the same period a year ago. MOS issued basically in-line guidance for FY 2019, sees EPS of $2.10-$2.50 vs. $2.41 analyst consensus estimate, and initiates adjusted EBITDA guidance of $2.2B-$2.4B as well as phosphate volumes of 8.6M-9M metric tons, potash 1.7M-2M tons, and fertilizer 1.3M-1.6M tons.


Splunk reported Q4 Non-GAAP EPS of $0.93 which was ahead of consensus by $0.17; Revenue of $622M (+35.3% Y/Y) topped consensus by $59.15M. In-line Q1 guidance has revenue at $395M and upside FY20 guidance has revenue of about $2.2B (consensus: $2.15B). License revenue totaled $411M which was way ahead of the $345M consensus. Services revenue came in at $211.1M (consensus: $215.6M). Non-GAAP operating margin was 26.8% compared to the 25.4% consensus.


AMC Entertainment Q4 GAAP EPS of $0.43 was ahead by $0.22. Revenue of $1.41B (-0.7% Y/Y) beat by $10M. AMC Entertainment said attendance increased 6% Y/Y. The average ticket price at AMC fell to $9.26 from $9.92 with the new subscription service in play. AMC's adjusted EBITDA margin of 18.7% during the quarter was lower than last year's mark of 20.3%, but ahead of the consensus estimate of 16.9%. Management also revealed that the number of A-List members (the subscription service) surpassed 700,000 shortly before earnings.


The week ahead

A full economic calendar coming up with a focus on employment data and housing. The ISM Non-Manufacturing Index is important and some will try to find meaning in the Fed Beige book.

For markets - news on the US/China trade negotiations will remain most important.

Source: briefing.com

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