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It’s tough to get a firm handle on this market. One day it looks like a trading rotation into undervalued equities from big run-ups elsewhere, the next day it’s a major selloff across the board. This day, we were back to the “rotation” scenario: the Dow gained +81 points, +0.20%, and the small-cap Russell 2000 kept up its two-week dominance, +1.47%, while the S&P 500 sold off another -0.51% and the Nasdaq -0.93% following the single-worst trading day of 2024 (so far).
During the massive gains on the A.I. trade a year-plus ago, the Nasdaq and S&P pulled way ahead. Small-cap stocks, including regional banks and such, were left out in the cold. Now, with the A.I. trade long in the tooth and the promise of an interest rate cut from the Fed (not likely next week; more like September’s meeting), it’s the small-caps catching a bid. Since July 10, the Russell is +9.8% while the Nasdaq is -8.3%. That’s a fairly wide gap in just two weeks and a day.
Two major retailers reported this afternoon. DeckersDECK, the maker of Hoka footwear, UGG boots and more, posted a giant beat on its fiscal Q1 bottom line: earnings of $4.52 per share blew the doors off the $3.59 expected and the $2.41 per share from the same quarter last year, for an +87% earnings beat over estimates. Revenues of $825 million outpaced the $805.5 million estimated, a +22% year-over-year increase. The company only has one earnings miss in the past five years.
That said, earnings guidance, while higher, is still below consensus. A range of $29.75-30.65 per share remains below the $30.81 earlier estimate Zacks analysts had surmised. Shares are still +7.9% in late trading, as the overall quarterly results are solid. Hoka grew +29.7% from a year ago, UGG was +14%, Teva +4.3% and the company will be divesting from its smaller, underperforming Sanuk brand, which brought in less than $7 million in the quarter.
SkechersSKX also reported Q2 earnings after the close. The less-expensive portfolio of footwear and accessories missed on both top and bottom lines: earnings of 91 cents per share on $2.16 billion in revenues were shy of the 94 cents per share and $2.22 in sales anticipated. This breaks the six-quarter earnings winning streak, though the company did announce a $1 billion share buyback. The company also raised guidance going forward. Shares are up +2.8% on the news.
Friday morning, we’ll see Personal Consumption Expenditures (PCE) for June. This will be the last major non-jobs-related economic print ahead of the week’s Fed meeting, and the Fed’s favorite set on inflation metrics. Year-over-year expectations are for headline PCE to tick down to +2.5% from +2.6% in the previous month, with core year-over-year PCE staying at +2.6%, steadily coming down over the longer term. PCE has basically been cut in half over the past two years or so.
We’ll also see the latest batch of earnings reports. 3MMMM expects both earnings and sales to come in lower by double digits, Bristol Myers-Squibb BMY is expected to come in lower on earnings but higher on revenues, and Colgate-PalmoliveCL expects double-digit earnings growth and single-digit sales growth. All three companies currently carry a Zacks Rank #3 with a Value-Growth-Momentum score of C.
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Urban Outfitters is poised for growth on the back of its decent Retail segment, merchandising improvements and store-rationalization efforts. Its FP Movement initiative also bodes well.
Under Armour is progressing well with multi-year transformation plan. Efforts to build brand image, strengthen supply chain, manage inventory and contain costs should benefit company in the long run.
Progressive’s growth is likely to be aided by an expanded multi-product lineup, solid policies in force, competitive rates and leadership position in product, service and distribution innovation.
Iridium’s solid subscriber base, enhanced mesh architecture and strategic relationship with government organizations enable it to generate higher revenues.
A strong balance sheet position and revenue growth will likely support Deutsche Bank's financials. Also, the company’s strong liquidity profile aids sustainable capital distribution activities.
Investments in product suite and go-to-market are positives for the company. Also, rising cyber security indicates continued positive growth for CyberArk, going forward.
Weakness in Europe, ongoing supply chain, labor, freight and logistics challenges might impact Terex's results. Also higher input costs will continue to weigh on the margins in the near term.
With no approved products in its commercial portfolio, Rocket lacks a source of generating regular income. Any pipeline/regulatory setback could also mar the stock's growth prospects.
Sluggish restaurant traffic due to high menu prices poses concerns for Sysco. Also, the company remains vulnerable to risks related to industry competition and currency volatility.
Weakness in the HST segment, escalating selling, general and administrative expenses and unfavorable movements in foreign currencies are major challenges for IDEX.
Teladoc's debt has increased substantially in the past few years, leading to a spike in interest costs. Competition in the virtual care space continues to bother.
The weakness in heavy equipment and rail cars may weigh on the company's shipments. Lower steel prices are also expected to hurt margins. The steel industry is also reeling under oversupply.
Amazon is benefiting from its Prime program, delivery and logistic system in the e-commerce space. Further, its dominant position in cloud market is a positive.
American Eagle remains well-placed on the back of cost-reduction efforts, strength in Aerie and a solid online show. Also, its Real Power Real Growth value creation plan bodes well.
Strong air-travel demand promises growth. A good liquidity position gives operational flexibility while the resumption of dividend indicates cash flow stability and a shareholder-friendly stance.
Netflix’s growing subscriber base, driven by content strength, focus on originals across various genres and languages, rapid international expansion and partnerships with telcos are key drivers.
