Today on Wall Street: Earnings season picks up pace

07/21/2021 | 10:23am

H1 earnings season is in full swing with a majority of positive surprises so far, offsetting the rise in global coronavirus circulation. The agenda is loading up, both at the corporate and macro level.

Equity markets rebounded strongly yesterday, but investors are keeping an eye on the spread of coronavirus. This context, a source of hesitation between strategies geared towards exploiting the economic cycle and those that are more defensive, is likely to dominate the month and a half left until September. All this will be accompanied by the results and prospects of companies, which are rather favorable so far, even if the covid hazard has made a strong comeback in the projections of financial managers.

The day's agenda, which is almost empty on the macroeconomic level, is very busy on the corporate side, with companies such as Johnson & Johnson and The Coca-Cola Company. Microsoft is due tomorrow.

This accumulation of results and forecasts is important because it will allow analysts to test their annual scenarios and will help to guide market sentiment. Sentiment will be more or less fixed by the end of next week, as a majority of companies will have published their results, allowing data providers to produce their usual array of statistics.

At this stage, it seems that earnings will be rather strong. On the Covid front, a debate is raging on how to interpret the pandemic figures. Instead of repeating the anxiety-provoking list of contaminations, why not stick to more meaningful figures, such as the number of serious cases and deaths in relation to the population, now that we have the necessary hindsight and that the data make it possible to integrate the (positive) impact of vaccination? A very good paper on this subject was published by a Bloomberg editorial writer this morning.

So today's session will be marked by a big set of results and the absence of major macroeconomic indicators. Tomorrow will be another day with a lot of corporate figures, but also the European Central Bank's announcements on its monetary policy. A highly anticipated meeting as the institution is at a crossroads in terms of strategy, still torn between its hardline fringe and its interventionist faction. 


Today's economic highlights

The weekly U.S. oil inventories are the main indicator of the day.

The euro-dollar pair is trading at EUR 0.8484. Gold lost ground to $1805 per ounce. Oil remains under pressure, with Brent crude at USD 71.24 and WTI at USD 69.15. The yield on US debt is up to 1.21% over 10 years. Bitcoin rebounds to USD 31,500.


On markets:

* Johnson & Johnson gained 1.2% in pre-market trading after it raised its annual revenue forecast on its quarterly earnings call and said it expects $2.5 billion from sales of its COVID-19 vaccine.

* Verizon on Wednesday reported a stronger-than-expected increase in monthly subscribers in the second quarter on stronger demand for 5G-related services and devices. Its stock is taking 1.3% in pre-market trading.

* Coca-Cola is gaining 3% in pre-market trading. The group raised its sales and profit forecasts for the year on Wednesday and reported quarterly revenue up 42% to $10.1 billion (8.58 billion euros), buoyed by the reopening of restaurants, stadiums and movie theaters.

* Harley-Davidson was up 3.3% in pre-market trading as the motorcycle maker reported better-than-expected quarterly profit on Wednesday.

* Tesla is up 0.3% in pre-opening trade. Elon Musk announced on Twitter that he wants to open the group's supercharger network to other electric vehicles later this year.

* J.P. Morgan announced on Tuesday that it is giving Jamie Dimon a one-time bonus of 1.5 million stock options that it says reflects the board's desire to see the CEO remain at the helm of the bank for a long time.

* Apple will release only 5G-capable iPhones starting next year and is expected to release a new version of its business model, the iPhone SE, in the first half of 2022, the Nikkei newspaper reported Wednesday, citing sources close to the matter.

* Netflix lost 0.3% in pre-market trading after announcing Tuesday that it expects weak subscriber growth in the current quarter as the video-on-demand specialist faces increased competition.

Chipotle Mexican Grill reported second-quarter sales and profit above estimates Tuesday, but warned that rising beef and freight costs may offset the benefits of its rate increases in the near term. The stock gained 5.3% in pre-market trading.

* Baker Hughes - The oilfield services company said Wednesday that its adjusted profit fell 9% in the second quarter from the previous three months as crude oil producers curbed spending.

* Prudential Financial agreed to sell its full-service retirement business to Empower Retirement, a U.S. unit of Great-West Lifeco, in a deal valued at C$4.45 billion, the companies announced Wednesday.

* United Airlines reported higher-than-expected second-quarter revenue on Tuesday and also cut its losses for the period. The airline's stock gained 1.6 percent in premarket trading.

* Anthem on Wednesday reported a 21.2% drop in second-quarter profit as a pickup in demand for non-COVID-19 care services pushed up the health insurer's medical costs.

* Lithia Motors - The U.S. auto distributor reported a fourfold quarterly profit Wednesday, boosted by higher vehicle prices and strong demand during the COVID-19 pandemic.


Analyst recommendations:

Allegiant Travel: MKM Partners raised the recommendation to buy from neutral. PT up 22% to $230
Avast : Goldman Sachs downgrades to neutral from buy
AvePoint : Goldman Sachs starts coverage at buy with $17 price target
Archer-Daniels-Midland: Jefferies reinstated coverage of Archer-Daniels-Midland Co. with a recommendation of hold. PT up 5.2% to $55
Ardelyx : Jefferies lowers to hold from buy, price target down to $2 from $11
Asos: Grupo Santander raised the recommendation on Asos Plc to hold from underweight. PT up 16% to 4,350 pence.
Autohome : Morgan Stanley cuts to equal-weight from overweight; price target is $50
Citizens Financial : Wedbush adjusts price target to $55 from $56, keeps outperform rating
Compass: Jefferies upgrades from Hold to Buy targeting GBp1660.
EasyJet: Liberum upgrades to buy from hold. PT up 16% to 900 pence
FB Financial : Keefe Bruyette & Woods upgrades stock to outperform from market perform; price target is $48
Fevertree: Jefferies remains at Hold with a price target reduced from GBp 2,300 to 2,100.
Halliburton: Goldman Sachs upgrades to buy from neutral. PT up 30% to $26
Hiscox: HSBC upgrades from hold to buy with a target of GBp1030.
IAC/InterActiveCorp : BMO Capital upgrades to outperform from market perform, adjusts price target to $170 from $250
Intertek: Kepler Cheuvreux raised the recommendation to buy from hold. PT up 13% to 6,200 pence
Intuitive Surgical : SVB Leerink adjusts price target to $975 from $930, maintains market perform rating
Next: Berenberg upgrades from sell to hold with a target of GBP 7100.
QuantumScape : JPMorgan starts coverage at neutral with $35 price target
Synchrony Financial : DA Davidson adjusts price target to $47 from $45, reiterates buy/add rating
Vimeo : BMO Capital starts coverage at market perform with $50 price target
3i Group: Kepler Cheuvreux initiates coverage of 3i Group Plc with a recommendation of buy. PT up 19% to 1,400 pence

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