>>> Intel beats Q3 estimates after raising revenue, gross margin guidance on Sep

--> -2.5% in after hours

Intel beats Q3 estimates after raising revenue, gross margin guidance on Sept 16; guides Q4 revs in-line, gross margin lower Q/Q at midpoint
  • Reports Q3 (Sep) earnings of $0.80 per share, excluding non-recurring items, $0.08 better than the Capital IQ Consensus of $0.72; revenues rose 9.1% year/year to $15.78 bln vs the $15.61 bln Capital IQ Consensus; adj. gross margin 64.8%. GAAP EPS $0.69 vs. $0.67 consensus.
  • On September 16, co raised Q3 rev guidance to $15.3-15.9 bln from $14.4-15.4 bln; raised non-GAAP gross margin to 63% from 62%.
  • Q3 results by segment:
    • Client Computing Group revenue of $8.9 bln, up 21 percent sequentially and up 5 percent yearover-year
    • Data Center Group revenue of $4.5 bln, up 13 percent sequentially and up 10 percent yearover-year
    • Internet of Things Group revenue of $689 mln, up 20 percent sequentially and up 19% Y/Y
    • Non-Volatile Memory Solutions Group revenue of $649 mln, up 17 percent sequentially and down 1% Y/Y
    • Intel Security Group revenue of $537 mln, flat sequentially and up 6% Y/Y
    • Programmable Solutions Group revenue of $425 mln, down 9 percent sequentially
  • Co issues in-line guidance for Q4, sees Q4 revs of $15.2-16.2 bln vs. $15.88 bln Capital IQ Consensus; gross margin 63% +/- a couple percent. This revenue forecast is lower than the average seasonal increase for the fourth quarter.

>>> Cree misses by $0.01, reports revs in-line; guides Q2 EPS below consensus, r

--> -8.7% in after hours

Cree misses by $0.01, reports revs in-line; guides Q2 EPS below consensus, revs below consensus (numbers excluding sale of WolfSpeed)

  • Reports Q1 (Sep) earnings of $0.09 per share, excluding non-recurring items, $0.01 worse than the Capital IQ Consensus of $0.10; revenues fell 15.8% year/year to $321.3 mln vs the $322.77 mln Capital IQ Consensus.
  • Co issues downside guidance for Q2, sees EPS of $0.04-0.10 vs. $0.13 Capital IQ Consensus Estimate; sees Q2 revs of $310-330 mln vs. $336.73 mln Capital IQ Consensus Estimate.
  • Gross margin from continuing operations increased from 26.4% in Q4 of fiscal 2016 to 26.9% on a GAAP basis and decreased from 28.2% to 27.7% on a non-GAAP basis.
  • Wolfspeed Sale Update: As previously announced, Cree reached an agreement to sell the Wolfspeed business to Infineon Technologies (IFNNY). The parties are continuing to work together to obtain the customarily required regulatory approvals in various jurisdictions, including foreign and domestic antitrust approvals, as well as CFIUS approval. The parties received a second request for additional information from the United States Federal Trade Commission in late September. Cree and Infineon continue to target closing the transaction around the end of calendar 2016.

>>> Yahoo! beats by $0.06, reports revs in-line; guides Q4 revs below consensus

Yahoo! beats by $0.06, reports revs in-line; guides Q4 revs below consensus
--> +1.6% in after hours
  • Reports Q3 (Sep) earnings of $0.20 per share, excluding non-recurring items, $0.06 better than the Capital IQ Consensus of $0.14; revenues fell 14.6% year/year to $857 mln vs the $860.82 mln Capital IQ Consensus.
  • Q3 Maven (Mobile, Video, Native and Social)
    • Revenue +24% y/y; Q2 +26% y/y
    • Q3 Mobile revenue represented 32% y/y of traffic-driven revenue; Q2 +46% y/y
  • Q1 Search Revenue:
    • Gross search revenue -14% y/y; Q2 -13% y/y
    • Number of Paid Clicks -22% y/y; Q2 -22% y/y
    • Price-per-Click +9% y/y; Q1 +8% y/y Q1
  • Display Revenue:
    • GAAP display revenue -7% y/y; Q2 -7% y/y
    • Number of Ads Sold -5% y/y; Q2 +9% y/y
    • Price-per-Ad +1% y/y; Q2 -15% y/y
  • Co issues downside guidance for Q4, sees Q4 revs of $880-920 vs. $939.30 mln Capital IQ Consensus Estimate; ; Adjusted EBITDA in the range of $260-300 mln.
  • Tightens FY16 revenue guidance to $3.440-3.480 bln ex tac (Prior$3.4-3.6 bln); Raises adjusted EBITDA to $810-850 mln (Prior adj. EBITDA $700-800 mln).

>>> US Close Dow +0.42% S&P +0.62% Nasdaq +0.85% Russell +0.59%

Closing Market Summary: Stocks End Higher As Earnings Season Heats Up

The stock market ended the Tuesday affair on a higher note as positive quarterly results from Netflix (NFLX 118.79, +18.99) and a few other bellwethers stoked risk appetite in the broader market. The tech-heavy Nasdaq (+0.9%) finished ahead of both the S&P 500 (+0.6%) and the Dow Jones Industrial Average (+0.4%).

The third-quarter earnings reporting season picked up in earnest this morning as participants pored over reports from the likes of Netflix (NFLX 118.79, +18.99), UnitedHealth (UNH 143.39, +9.26), Goldman Sachs (GS 172.63, +3.63), IBM (IBM 150.72, -4.05) and Johnson & Johnson (JNJ 115.41, -3.08). All five names topped bottom-line estimates for the quarter, but the results were met with mixed reactions.

A positive bias in global markets and some mixed inflation data also contributed to today's upbeat demeanor.

European markets outperformed on the heels of an above-consensus inflation reading out of the UK. The UK's September Consumer Price Index (CPI) increased to a two-year high of 1.0% year-over-year (expected: +0.9%). However, CPI data from the US came in slightly mixed relative to consensus estimates. Total CPI rose 0.3% in September (consensus +0.3%) while core CPI, which excludes food and energy, rose by 0.1% (consensus +0.2%).

The latest domestic inflation data led to some minute adjustments to U.S. rate hike expectations, but they were largely walked back by the end of the day. The response was fairly muted as participants assessed progress towards the Fed's long-run inflation target of 2.0%. Total CPI and core CPI are up a respective 1.5% and 2.2% year-over-year. 

The Tuesday advance lost some steam in the final hour as the S&P 500 (+0.6%) narrowed its gain into the close. 

All eleven S&P 500 sectors finished in the green with health care (+1.1%), materials (+0.9%), utilities (+0.8%), financials (+0.8%), and technology (+0.7%) leading the pack. 

The health care space (+1.1%) paced the advance as managed health names drafted higher alongside Dow component UnitedHealth (UNH 143.39, +9.26). The stock finished atop the price-weighted average after beating analysts' estimates for the quarter and issuing above consensus full-year guidance. Conversely, Johnson & Johnson (JNJ 115.41, -3.08) declined by 2.6% despite beating bottom-line estimates for the quarter. 

Biotechnology names finished slightly ahead of the broader health care sector as the iShares Nasdaq Biotechnology ETF (IBB 269.43, +3.71) gained 1.4%, The ETF narrowed its October loss to 6.9%. 

In the consumer discretionary space (+0.6%), Netflix (NFLX 118.79, +18.99) spiked 19.0% after handily beating earnings and net subscriber growth estimates. 

Fellow F.A.N.G. members gained following the upbeat report as Facebook (FB 128.57, +1.03), Amazon (AMZN 817.65, +4.70), and Alphabet (GOOG 795.26, +15.30) advanced between 0.6% and 2.0%.

The influential technology sector (+0.7%) finished slightly ahead of the broader market as chipmakers outperformed. Intel (INTC 37.75, +0.46) gained 1.2% ahead of this evening's quarterly earnings report. On the flipside, IBM (IBM 150.72, -4.05) lost 2.6% despite beating estimates.

Treasuries finished on a higher note as yields pulled back across the curve. The yield on the 2-yr note declined one basis point to 0.81% while the yield on the benchmark 10-yr note settled lower by two basis points (1.74%). 

Today's trading volume fell below the average of 858 million as 742 million shares changed hands at the NYSE floor.

Today's economic data included the CPI Report for September and the NAHB Housing Market Index for October: 

  • The all items index was up 0.3% in September, which was in-line with expectations, while the all items index, excluding food and energy, was up 0.1% (consensus +0.2%).
  • The NAHB Housing Market Index for October came in at 63 (consensus 59.0) from an unrevised 65 in September.

Tomorrow's economic data will include the 7:00 ET release of the the weekly MBA Mortgage Index. Separably, Housing Starts (consensus 1168k) and Building Permits (consensus 1164k) for September will each cross the wires at 8:30 ET. The day's data will be capped off with the release of the Fed's Beige Book for October at 14:00 ET. 

  • Russell 2000: +7.2% YTD
  • Nasdaq Composite: +4.7% YTD
  • S&P 500: +4.7% YTD
  • Dow Jones: +4.2% YTD

>>> Saudi Arabia releases price guidance for first international debt sale

Saudi Arabia releases price guidance for first international debt sale

Saudi Arabia has released price guidance for its debut international bond.

The kingdom’s first sale of international debt – one of the most keenly awaited issues this year – is being split into three maturities, writes Elaine Moore.
A five year bond is being offered with a yield 160 basis points above US government bonds, while a benchmark 10-year bond comes with a 185 basis point premium. The longer-dated 30 year bond is being offered with a yield 235 basis points above US Treasuries.
Prices may tighten in the course of the sale but the early indication puts Saudi Arabia’s 10 year borrowing rate around 3.6 per cent – in line with the expectations of investors who attended the bond roadshow.
Riyadh is thought to be targeting a sale between $10bn and $15bn, making it the largest issue of international debt in the Middle East and a potential rival to Argentina’s record-breaking $16.5bn emerging market bond sale earlier this year.
Books will close at 5pm New York time, with the sale finalised on October 19.

(BofA-ML) French banks : Prefer BNP ahead of Q3 Results

Q3 earnings to sustain positive share price momentum
We expect the quarterly results to support our superior capital return story for French
banks, delivering c.6.0% yields (at a 45-50% payout) while trading at below 8x 2016E
earnings. Q3 should give the market confidence that EPS revisions have bottomed and
that capital build-up is in motion. What matters most in this earnings season is the
management outlook for 2017; we expect it to be reassuring, especially for BNPP.

Good Q3 driven by CIB rebound and resilient French Retail
A CIB profitability YoY comparison will look favourable, in our view. This should be driven
by solid performance in FICC while Equities should be flattish YoY, benefiting BNPP and
CAsa. In Retail, we expect resilient Q3 revenues, helped by a pick-up in mortgage
renegotiations in France this quarter, which should mainly benefit CAsa and SocGen.
However, adjusting for that effect, Eurozone retail revenue pressure should continue,
partly offset by modest volume growth, tentative re-pricing and management efforts to
boost fee-generative products. We expect operating costs to remain under control.

Capital & leverage ratios build-up to show progress in Q3
We are particularly positive on French banks’ ability to build capital We estimate a FLB3
CET1 ratio in 3Q16 of 11.2% for BNPP (including 5bp from the FHB first tranche IPO),
11.2% for SocGen and 12.0% for CAsa (including the €1.25bn capital gain booked in the
quarter). These ratios are after accruing dividends at a 45%, 50% and 50% payout, and
modest 0.5% RWA QoQ growth. Capital build should continue in the following quarters
and we forecast BNPP to reach 12.1% by 2017 (pro forma FHB full IPO), with SocGen at
11.7% and CAsa at 12.4%.

BNPP – a story we like; SocGen rated Buy, CAsa Neutral
We expect BNPP to outperform in an environment where the hunt for dividend yield is
intensifying. We value its defensive and quality earnings profile thanks to its diversified
franchise and self-help strategy in cutting costs. We also believe BNPP’s strategy to
gain market share in its CIB business is likely to exceed market expectations. BNPP
enjoys adequate capitalisation and offers an attractive dividend yield at c.6.0% in 2016-
17E while trading at less than 8x P/E and still at a 25% discount to book for 9.8% ROTE.

Next catalyst (4Q16/1Q17) will be clarity on regulation
We do not expect to learn much about progress on regulation in the Q3 results. But we
believe the potential reduction of ECB minimum requirements and dilution of the latest
Basel discussion papers’ proposals should have a manageable impact on French banks in
the coming months. However, we think French banks could provide some first
indications on SREP and the split between guidance/requirement components.

FT : Former PM Monti urges Italians to reject Renzi’s referendum

Former PM Monti urges Italians to reject Renzi’s referendum
Intervention could reassure moderates who are tempted to side with No campaign

Mario Monti, the former Italian prime minister, delivered an unexpected blow to Matteo Renzi by announcing he would vote against the premier’s flagship constitutional reforms in a high-stakes December referendum.

Mr Monti, a former EU commissioner who led the government at the height of the eurozone debt crisis in 2012, also dismissed concerns that a No vote would plunge the eurozone’s third-largest economy into a new era of political instability and market turmoil.

“The EU never asked for this constitutional change, and it can stay calm. Italy does not risk falling over and crushing the euro, like it did five years ago,” Mr Monti said in an interview with Corriere della Sera, the daily newspaper.

Mr Monti’s intervention could damage Mr Renzi’s campaign by helping to reassure moderate centre-right voters who are tilting towards voting No that such an outcome would not inflict serious economic damage.

Yet he remains a highly unpopular figure in Italy, having pushed through a series of tough austerity measures during his time in office, so the impact of his remarks may be muted.

Mr Monti also used the interview to attack the prime minister’s economic policies, saying they were nothing more than an attempt to use the public purse to generate political consensus.

Italy’s 2017 budget published on Tuesday contained a series of targeted measures designed to stimulate the economy but also boost Mr Renzi’s political standing in key constituencies. Italy is now targeting a deficit to GDP ratio of 2.3 per cent, compared with 1.8 per cent which was previously agreed with the EU, which is raising eyebrows in Brussels.

“I cannot accept the judgment that a partial constitutional change, acquired at such a great cost to the public finances, would be beneficial to Italy’s economic and social growth,” Mr Monti said. “To vote Yes would be to keep Italians dependent on this kind of state welfare,” he added.

Polls show the No camp is slightly ahead in a tight referendum race, with a large number of voters still undecided.

Mr Monti’s intervention was immediately criticised by members of Mr Renzi’s Democratic party (PD). “So Monti is basically voting No in the constitutional referendum because things were better with his blood-and-tears budgets. We need patience,” Alessia Morani, a PD lawmaker wrote on Twitter.

Tensions between Mr Monti and Mr Renzi have been growing, particularly over the prime minister’s tendency to criticise the EU. Mr Monti believes confrontation with Brussels is counterproductive, while also spurring anti-establishment feelings in Italy. “[Renzi] is doing the work of the populists, attacking Europe,” Mr Monti said.

Mr Monti also voted in favour of Mr Renzi’s constitutional reform in 2014 before turning against it.

The rebuke for Mr Renzi stands in stark contrast with the praise and support the prime minister is set to receive on Tuesday in Washington, where he will be hosted by Barack Obama for his last state dinner as US president. Mr Obama has support Mr Renzi’s reformist agenda and embraced him as a key ally in Europe.

The constitutional reform championed by Mr Renzi would sharply limit the legislative powers of the Italian Senate, turning it into a body of regional representatives, in an attempt to reduce gridlock in the political system. It would also hand power over major decisions — for instance on infrastructure spending — back to the central government from the regions.

The proposed changes follow the approval of a controversial electoral law which would hand over a supermajority in the lower chamber of parliament to the winning party, which supporters say would make it easier to govern the country.

But Mr Monti suggested this was all besides the point. “I gradually convinced myself that Italy’s problems don’t depend so much on the constitutional reform or the electoral law, but a few fundamental traits: tax evasion, corruption and a political class that uses the money of tomorrow’s Italians as a barrier against its own unpopularity,” he said.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • BMI -8.3%, IBM -2.7%, WWW -2%, FLOW -1.8%, (ticking lower after issuing downside guidance), HOG -1.4%, RF -1.2%,CPSS -1%, JNJ -0.4%
M&A news:
  • AYA -26.2% (provides update on special committee process; Board opts to remain independent; also reported earnings)
  • OAS -2.6% (acquisition of drilling locations from SM Energy (SM); also announces a 40 mln share underwritten public offering and downgraded to Sell from Neutral at Goldman)
Other news:
  • CTRV -5.6% (modestly pulling back following yesterday's recent strength)
  • NKTR -4.3% (announces a $175 mln underwritten public offering of common stock)
  • AXAS -2.5% (ticking lower after releasing October 2016 presentation)
  • V -0.9% (Visa CEO Charlie Scharf resigns effective December 1; co has appointed former American Express President Alfred Kelly, Jr. as CEO)
Analyst comments:
  • CY -0.5% (downgraded to Equal Weight from Overweight at Barclays)
  • CMG -0.5% (downgraded to Underperform from Mkt Perform at Raymond James)