Closing Market Summary: Nasdaq Ekes Out Another Record CloseThe Nasdaq (+0.1%) eked out another record close on Thursday, its third in a row, while the S&P 500 (unch) and the Dow (-0.1%) settled just short of their unchanged marks. Action was fairly range-bound with the benchmark index staying true to a ten-point range from start to finish.
There were few surprises in the latest policy decisions from the European Central Bank and the Bank of Japan, with both central banks deciding to leave interest rates unchanged. ECB President Mario Draghi said in his post-decision press conference that the economy has continued to expand, but a substantial degree of accommodation is still necessary as underlying inflation remains subdued.
However, Mr. Draghi didn't dispel the notion that the ECB might soon announce a tapering of the bank's asset purchase program, saying simply the ECB is not setting a date for a change to quantitative easing. The euro climbed 1.0% to 1.1627 against the greenback, sending the U.S. Dollar Index (94.09, -0.55) to an 11-month low.
Meanwhile, the BoJ pushed back the expected time frame for hitting its inflation target of 2.0% to "around FY19" from "around FY18", leaving the impression that it won't be changing its ultra-accommodative monetary policy anytime soon. The yen slipped 0.1% to 112.00 against the U.S. dollar.
In the states, Treasuries rallied across the curve following the aforementioned policy decisions. The benchmark 10-yr yield traded as low as 2.24%, but came up a bit in the late afternoon to finish just one basis point below its flat line at 2.26%.
Earnings season was once again the focal point in the stock market on Thursday. Dow components American Express (AXP 85.35, -0.58) and Travelers (TRV 124.57, -1.89) sold off after delivering their quarterly reports, losing 0.7% and 1.5%, respectively. AXP beat top and bottom line estimates, but reported a 33.0% decline in profit for the second quarter. Meanwhile, TRV missed bottom-line estimates.
However, despite the negative performances from AXP and TRV, the influential financial sector (-0.1%) managed to stay in line with the broader market. Similarly, the top-weighted technology space (unch) was able to keep pace despite challenges on the earnings front. Namely, Qualcomm (QCOM 53.97, -2.81) dropped 5.0% after providing disappointing earnings guidance.
The lightly-weighted telecom services group (+1.4%) settled at the top of the leaderboard after T-Mobile US (TMUS 61.12, -0.85) beat top and bottom line estimates in addition to raising its full-year guidance. However, ironically, TMUS was one of the only telecom components to not finish in positive territory, ending the day lower by 1.4%.
Like telecom services, the health care (+0.6%) and utilities (+0.7%) sectors outperformed, but, on the downside, a total of seven spaces finished in the red. The industrial space was one of the weakest performers, dropping 0.6%, as transports weighed, evidenced by the 1.0% decrease in the Dow Jones Transportation Average.
C.H. Robinson (CHRW 65.01, -3.68) paced the DJTA's retreat, dropping 5.4%, after missing bottom-line estimates. Union Pacific (UNP 106.14, -1.70) also underperformed, losing 1.6%, after its better than expected earnings and revenues were overshadowed by projections for flat volume growth in the third quarter.
It's also worth pointing out that Special Counsel Robert Mueller will be considering President Trump's business dealings in his investigation on Russia's involvement in the 2016 U.S. presidential election. The stock market slipped on the initial headline, but reclaimed the slide within 30 minutes.
Reviewing Thursday's economic data, which included the July Philadelphia Fed Index, the weekly Initial Claims Report, and the June Leading Indicators Index:
- The Philadelphia Fed Survey for July declined to 19.5 from an unrevised 27.6 in June while economists polled by had expected a reading of 22.0.
- The key takeaway from the report is that the downturn was led by a sharp drop in new orders, which isn't the best preliminary signal for third quarter economic growth prospects.
- The latest weekly initial jobless claims count totaled 233,000 while the consensus expected a reading of 245,000. Today's tally was below the revised prior week count of 248,000 (from 247,000). As for continuing claims, they rose to 1.977 million from the revised count of 1.949 million (from 1.945 million).
- The report covered the period in which the survey for the July employment report was conducted; accordingly, the key takeaway is that it should feed expectations for another month of strong nonfarm payroll gains.
- The Conference Board's Leading Indicators report for June increased 0.6% (consensus 0.4%) after moving higher by an unrevised 0.3% in May.
Investors will not receive any economic data on Friday.
eBay reports EPS in-line, revs in-line; guides Q3 EPS in-line, revs above consensus; reaffirms FY17 guidance; adds $3 bln to buyback
- Reports Q2 (Jun) earnings of $0.45 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.45; revenues rose 4.4% year/year to $2.33 bln vs the $2.31 bln Capital IQ Consensus.
- GMV $21.5 billion, increasing 3% on an as-reported basis and 5% on a foreign exchange (FX) neutral basis.
- Underlying total eBay Inc. performance, the Marketplace platforms delivered $20.5 billion of GMV and $1.9 billion of revenue. Marketplace GMV was up 3% on an as-reported basis and 6% on an FX-Neutral basis, driven by the continued expansion of new user experiences and marketing efforts, which led to revenue growth of 4% on an as-reported basis and 7% on an FX-Neutral basis.
- StubHub drove GMV of $1.0 billion, down 5%, and revenue of $236 million, up 5%, driven by a softer U.S. events landscape compared to last year, partially offset by strong international growth. Classifieds accelerated growth in the quarter, delivering revenue of $219 million, up 6% on an as-reported basis and 11% on an FX-Neutral basis, primarily driven by healthy traffic growth and strong user engagement.
- eBay added two million active buyers across its platforms, for a total of 171 million global active buyers.
- Co issues guidance for Q3, sees EPS of $0.46-0.48, excluding non-recurring items, vs. $0.48 Capital IQ Consensus Estimate; sees Q3 revs of $2.35-2.39 bln vs. $2.32 bln Capital IQ Consensus Estimate.
- Co reaffirms guidance for FY17, sees EPS of $1.98-2.03, excluding non-recurring items, vs. $2.01 Capital IQ Consensus Estimate; sees FY17 revs of $9.3-9.5 bln vs. $9.42 bln Capital IQ Consensus Estimate.
- Repurchased $507 million of common stock in Q2 -- Board approves additional $3.0 billion stock repurchase authorization
Microsoft beats by $0.04, beats on revs
- Reports Q4 (Jun) earnings of $0.75 per share, excluding a $0.23/share ($1.8 bln) tax benefit, $0.04 better than the Capital IQ Consensus of $0.71; revenues rose 9.1% year/year to $24.7 bln vs the $24.29 bln Capital IQ Consensus.
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Revenue in Productivity and Business Processes was $8.4 billion and increased 21% (up 23% in constant currency), with the following business highlights:
- Office commercial products and cloud services revenue increased 5% (up 6% in constant currency) driven by Office 365 commercial revenue growth of 43% (up 44% in constant currency)
- Office consumer products and cloud services revenue increased 13% (up 13% in constant currency) and Office 365 consumer subscribers increased to 27.0 million
- Dynamics products and cloud services revenue increased 7% (up 9% in constant currency) driven by Dynamics 365 revenue growth of 74% (up 75% in constant currency)
- LinkedIn contributed revenue of $1.1 billion during the quarter
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Revenue in Intelligent Cloud was $7.4 billion and increased 11% (up 12% in constant currency), with the following business highlights:
- Server products and cloud services revenue increased 15% (up 16% in constant currency) driven by Azure revenue growth of 97% (up 98% in constant currency)
- Enterprise Services revenue decreased 3% (down 1% in constant currency) with declines in custom support agreements offset by growth in Premier Support Services
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Revenue in More Personal Computing was $8.8 billion and decreased 2% (down 1% in constant currency) driven primarily by lower phone revenue, with the following business highlights:
- Windows OEM revenue increased 1% (up 1% in constant currency), slightly ahead of the overall PC market
- Windows commercial products and cloud services revenue increased 8% (up 8% in constant currency) driven by annuity revenue growth
- Surface revenue decreased 2% (down 1% in constant currency) mainly due to product lifecycle transitions
- Search advertising revenue excluding traffic acquisition costs increased 10% (up 11% in constant currency) driven by higher revenue per search and search volume
- Gaming revenue increased 3% (up 4% in constant currency) as strength in Xbox software and services offset lower hardware revenue.
- "We delivered a strong finish to the year with 30% growth in commercial bookings this quarter."
- Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Web.com sale talks in holding pattern, source says
20 JUL 2017
Web.com [NASDAQ:WEB] is not moving forward with a sale at this time, according to a source familiar with the matter and a sector advisor.
It remains to be seen whether the Jacksonville, Florida-based developer of websites for small businesses ultimately sells, the source said, adding that no transaction is expected in the near term. The sector advisor said he heard the process had busted.
In May, Reuters reported that Web.com was holding discussions with private equity firms in response to inbound approaches. The report said the talks were at an early stage.
Web.com’s stock has jumped over 30% since July 2016 to give the company a close to USD 1.3bn market cap. The company is scheduled to report 2Q17 results on 3 August.
A spokesperson for the company declined to comment.
A spokesperson for the company declined to comment.
Bunge chief says ‘nothing off limits’ in cost-cutting drive
Grain trading house is dealing with sliding margins and bid interest from Glencore
Bunge, the grain trading house, has detailed plans to slash $450m in costs and capital spending as it deals with weakening profit margins and a possible takeover bid from commodities titan Glencore.
The New York-listed company, the world’s biggest oilseed processor and a leading merchant of corn, soyabeans and wheat, issued a second-quarter profit warning late on Wednesday, citing “unprecedented” crop hoarding by South American farmers.
Grain middlemen have struggled as bumper harvests depress prices, leaving farmers reluctant to sell and customers wary of paying a premium for advance supplies.
Most of Bunge’s revenue and profit come from its agribusiness division, which buys wholesale grains and oilseeds and stores, ships and sells them around the world.
“We concluded at the end of last year that we had to think bigger and bolder,” Soren Schroder, Bunge chief executive, said on a conference call on Thursday. “We are now ready to implement significant changes . . . There is nothing in this process which is off limits.”
Mr Schroder made no mention of discussions with Glencore. He reiterated earlier statements that the grain industry needed consolidation in some locations, such as the US, and that Bunge sought to pursue regional alliances with partners. “We are very open to that. We would like to lead it where possible,” he told analysts.
Glencore Agriculture in May said it had approached Bunge about a business combination, drawing a cool response. Glencore, the Swiss-based mining-to-oil commodities company, is seeking to expand in agriculture through its joint venture with two Canadian pension funds.
For Glencore and its partners, a deal with Bunge is attractive for strategic reasons but also because of the opportunity to cut costs.
Bunge has $1.35bn in annual selling, general and administrative expenses. It aims to reduce these by $250m by the end of 2019 by adopting initiatives such as “zero-based budgeting,” improving procurement functions, sharing technology, moving to lower-cost locations and automating business processes, it said.
The company also outlined $650m in capital spending for 2018, down from $850m originally planned for this year.
Bunge shares were up 1.1 per cent to $79.59 at lunchtime in New York on Thursday.
Robert Moskow, analyst at Credit Suisse, expressed dissatisfaction with the cost-cutting measures. “We think investors will find this initiative insufficient if it is meant as a defence plan to fend off Glencore’s interest in the company or if it signals a sudden lack of interest on Glencore’s part,” he wrote.
Bunge’s profit warning comes even as global food consumption continues to rise, undergirded by population growth and incomes in emerging economies. But trading houses have been squeezed as harvests more than keep up with demand.
CHS, a US-based grain trader cooperatively owned by farmers, last week reported a net loss.
And Cargill, the world’s largest agricultural trading house, streamlined management, reduced costs, paid down debt and divested businesses as its profits flagged. Its results have improved, but challenges remain.
“Unless there is some weather event, the market is going to be pretty well supplied. That makes it harder for people like ourselves,” Marcel Smits, Cargill’s chief financial officer, said last week.
Mr Schroder said he believed agricultural commodity conditions were close to hitting bottom, citing recent moves in grain prices as a drought threatens crop yields in parts of the US corn belt.
“You’re already seeing how small changes even in the US crops are creating fairly dynamic markets and creating opportunities. We are at the worst moment, or we’re very close to it anyway,” he said.