>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • CNM +8.1%, PLAB +6.4%, FLNC +5.9%, CSV +5% (releases FY24 financial goals)

Other news:

  • MRTX +9.6% (receives FDA accelerated approval of KRAZATI)
  • MRNA +7.8% (Moderna and Merck (MRK) announce investigational cancer vaccine mRNA-4157/V940 has met primary efficacy endpoint)
  • NFE +6.2% (provides update to dividend policy plan to return significant capital to shareholders)
  • NRIX +4.9% (presents positive results from Novel BTK Degrader)
  • KOPN +3.6% (joint tech solution with OPTAC-X and RealWear)
  • NYMT +3.1% (names new President)
  • PGEN +3.1% (Phase 1 Dose Escalation Data for Autologous PRGN-3006 UltraCAR-T)
  • MASI +3% (hosts Investor Day to detail next phase of its growth trajectory at 7:30 am PT (10:30 am ET))
  • EVGO +2.6% (EVgo Inc. and Lyft (LYFT) launch new partnership to accelerate rideshare electrification nationwide)
  • BA +2.2% (United (UAL) finalized its order to purchase 100 firm Boeing 787 aircraft scheduled to be delivered starting with eight aircraft in 2024) 
  • HUT +2% (replaces CFO)
  • NYT +1.5% (CFO to retire next year)
  • SSRM +1.3% (positive exploration results)
  • TNDM +1.1% (to acquire Insulin Patch Pump Developer AMF Medical)
  • DEN +1% (announce agreement for CO2 sequestration site with Weyerhaeuser)

Analyst comments:

  • PHR +2.5% (upgraded to Buy from Neutral at Citigroup)
  • ANGI +1.9% (initiated with a Buy at Citigroup)
  • TTD +1.5% (initiated with a Buy at Citigroup)
  • EQIX +1.4% (upgraded to Outperform from Market Perform at Cowen)
  • W +1.3% (initiated with a Buy at Citigroup)
  • ETSY +0.9% (initiated with a Buy at Citigroup)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • MRTX +14.7%, FLNC +7%, PGEN +5.6%, CSV +5%, NRIX +4.9%, PLAB +3.6%, ORCL +3.2%, NYMT +3.1%, NFE +2.9%, IVZ +2.6%, ETNB +2.3%, HUT +2%, NYT +1.5%, GOOD +1.5%, FSLR +1.1%, A +1.1%, DEN +1%, AB +0.9%, SSRM +0.9%, PLL +0.9%, META +0.8%
  • Gapping down:
    • LEV -15.4%, IHG -5%, TRMB -3.9%, BLBD -3.6%, LLY -3.2%, GFI -3.2%, BMO -2.1%, JOAN -2.1%, TNDM -1%, MIRM -0.5%

>>> Europe : Brokers Upgrades & Downgrades - 13th of December 2022 V2(+)

>>> Up
* Aena Raised to Outperform at Oddo BHF; PT 148 euros (+)
* BP Raised to Add at AlphaValue/Baader
* Chr. Hansen Raised to Hold at Jefferies; PT 550 kroner
* Chr. Hansen Raised to Neutral at Exane
* Elior Group Raised to Buy at Citi; PT 4.10 euros
* Fraport Raised to Neutral at Oddo BHF; PT 47 euros (+)
* Neoen Raised to Overweight at Barclays; PT 47 euros
* CORRECT: Richemont Still Rated Neutral at Oddo BHF (+)
* Wizz Air Raised to Outperform at Oddo BHF; PT 2,900 pence (+)

>>> Down
* Air France-KLM Cut to Neutral at Oddo BHF; PT 1.30 euros (+)
* Bpost Cut to Neutral at Oddo BHF; PT 7 euros
* Danone Cut to Underperform at Credit Suisse
* EASYJET CUT TO SELL VS HOLD AT DEUTSCHE BANK (+)
* EasyJet Cut to Underperform at Oddo BHF; PT 300 pence (+)
* EMS-Chemie Cut to Hold at Stifel; PT 700 Swiss francs
* Erste Cut to Underperform at KBW; PT 32.10 euros
* CORRECT: Hermes Still Rated Outperform at Oddo BHF
* IAG Cut to Underperform at Oddo BHF; PT 103.04 pence (+)
* IOG Plc Cut to Hold at Investec; PT 20 pence (+)
* Kojamo Cut to Hold at SEB Equities; PT 15.50 euros
* Novozymes Cut to Equal-Weight at Barclays; PT 430 kroner
* Reckitt Cut to Neutral at Credit Suisse
* Sanoma Cut to Hold at SEB Equities; PT 11.50 euros
* SAP Cut to Hold at M.M. Warburg; PT 110 euros (+)
* SKF Cut to Sell at UBS; PT 150 kronor
* Tinybuild Cut at Liberum on ‘Concerning’ Hello Neighbor 2 Data
* Trelleborg Cut to Hold at Pareto Securities; PT 260 kronor (+)

>>> Initiation
* Domino's Pizza Group Rated New Buy at Panmure Gordon
* EDP Renovaveis Rated New Buy at Mirabaud Securities; PT 25 euros
* Eni Rated New Buy at Stifel; PT 19.10 euros
* Forterra Rated New Neutral at Redburn; PT 210 pence (+)
* Ibstock Rated New Sell at Redburn; PT 140 pence (+)
* Network International Assumed Buy at Jefferies
* Nexi Assumed Hold at Jefferies
* Orron Energy Rated New Equal-Weight at Barclays; PT 27 kronor
* Pantheon Infrastructure Rated New Hold at Stifel (+)
* Wise Rated New Hold at Jefferies; PT 624 pence
* Worldline Assumed Hold at Jefferies

>>> Call
* Adyen Top EU Payments Pick at Jefferies, Wise Started at Hold
* Elior Group Raised to Buy at Citi on Route Toward Deleveraging
* EMS-Chemie Cut With Weak 4Q and Tough Start to 2023 Seen: Stifel
* Erste Sentiment Too Optimistic, KBW Downgrades to Underperform
* Forterra Rated Neutral as Redburn Is Cautious on Brick Makers (+)
* Reckitt and Danone Cut as CS Positions in EU Staples for 2023
* Rolls-Royce Placed on Negative Catalyst Watch at JPMorgan
* Jefferies Strategists Are Bullish on European Stocks for 2023 (+)

FT : GDP recessions vs earnings recessions

GDP recessions vs earnings recessions

We and much of Wall Street have been singing from the same hymnal for some time now: recession is coming and earnings are going to roll over hard. Ever so slowly, analysts are starting to listen. This chart from Strategas shows how bottom-up earnings estimates for the next 12 months have climbed down since the 2021 peak:


But again: slowly. Yearly profits growth of 5.5 per cent is still the 2023 consensus expectation for the S&P 500. Some think this is plausible. Diane Jaffee, a portfolio manager at TCW, made the point to us last month that a little inflation tends to boost earnings, a nominal variable, and is especially helpful to sectors such as consumer staples. If there’s not a recession, she buys 5 ish per cent earnings growth next year.

A look at net profit margin estimates, derived from analyst revenue and profits estimates, inspires doubt, however. Analysts expect them to nudge up from 12 per cent this year to 12.3 per cent in 2023. According to John Butters of FactSet, such a result would make 2023 profit margins the second-widest since 2008 (when FactSet started tracking this), second only to the bull market of 2021.

That beggars belief, even if you are sceptical that a proper recession is coming. One reason is that sales don’t have to fall much to squish margins. Since most firms have some level of fixed costs, a slowdown or mild contraction in topline revenue can become a heavy weight on margins and earnings. In a note out yesterday, Michael Wilson of Morgan Stanley offers this chart showing how smallish swings in sales become big swings in margins:


Even a sales slowdown, as the chart shows, can significantly compress margins. Not to mention the abundance of recent data pointing to other pressures on margins: elevated wage growth raising fixed costs still higher, or discounted sales of excess inventory dragging down revenue. How all this adds up to 5.5 per cent earnings growth next year is something we cannot figure.

>>> Stoxx 600 Pre-Market Indications

  • Wacker Chemie (WCH TH) +3.2%
  • Adyen (1N8 TH) +2.1%
    • Adyen Top EU Payments Pick at Jefferies, Wise Started at Hold
  • Wolters Kluwer (WOSB TH) +1.3%
  • PZU (7PZ TH) +1%
  • Axa (AXA TH) +0.8%
  • VW (VOW3 TH) +0.6%
  • Erste (EBO TH) -0.8%
    • Erste Sentiment Too Optimistic, KBW Downgrades to Underperform
  • Danone (BSN TH) -1.2%
    • Reckitt and Danone Cut as CS Positions in EU Staples for 2023
  • Haleon (H6D0 TH) -1.3%
    • Reckitt and Danone Cut as CS Positions in EU Staples for 2023
  • Nel (D7G TH) -1.5%