As we jump into March, all traders eye the key 2816.50 level. Here is an brief run down of last weeks trading action and notable stock news written by our Head of North American Research, Gary Christie.
The S&P 500 (SPX) improved by 0.39% last week. The index is approaching the key 2816.5 resistance area for the 5th time, a failure to break above could have strong bearish implications. A break above would be an ideal scenario to add positions. Our stop-loss pivot is set at 2740 which is the overlap support level from Feb 06. We continue to see the 20-day moving average acting as support in the up-trend. Our targets are set at the challenging resistance area of 2816.5 and ultimately 2900 in extension.
On a longer time horizon (weekly chart), the SPX continues its up trend with a stop-loss set at 2630. The RSI is moving higher beyond its 50 level which is a bullish sign. The index has also surpassed its 50-week moving average indicating positive momentum. A break above October resistance at 2816.5 will help the index test records highs at 2942.
Regarding the weekly sector focus, The S&P 500 closed relatively flat on the week. The best performing stocks were in the Pharmaceuticals, Biotechnology & Life Sciences (+1.8%), Software & Services (+1.4%) and Commercial & Professional Services (+1.21%) sectors. The worst performing stocks were in the Household & Personal Products (-1.74%), Materials (-1.62%) and Health Care Equipment & Services (-1.5%) sectors.
Our sector focus is on sectors that continue to outperform the S&P 500. These are Commercial & Pro services, Capital goods, Software & Services and Consumer Durables & apparel.
On the economic data front, housing starts decreased to 1.078M units in December (estimated 1.256M) from 1.214M in November while building permits remained relatively unchanged at 1.326M in December (forecasted 1.29M) compared to 1.322M a month earlier. Also, mortgage applications increased by 5.3% in week ended February 22nd from 3.6% in the previous week. In other news, pending home sales advanced by 4.6% MoM in January (forecasted 1%) from a decline of 2.3% in December. Factory orders improved by 0.1% in December (expected 0.6%) vs. -0.5% in November while durable goods orders increased by 1.2% in December compared to 0.7% a month earlier. Finally, the Conference Board consumer confidence index increased to 131.4 in February (estimated 124.9) from 121.7 in January.
As earnings season comes to an end, here are 10 notable big movers last week that may have momentum in this weeks trading:
Mylan (MYL -12.19% WoW to $27.45) announced 4Q adj. EPS of $1.30 (estimated $1.35) vs $1.43 a year earlier on revenue of $3.08B (estimated $3.07B) from $3.24B in the prior year. Comparable sales improved by 1.7% (expected 1.9%). The Co sees 2019 adj. EPS of $3.80-4.80 (estimated $5.02) and revenue of $11.5-12.5B (forecasted $11.81).
Best Buy (BBY +12.19% WoW to $67.81) reported 4Q adj. EPS from continuing operations of $2.72 (estimated $2.56) vs. $2.42 last year on revenue of $14.8B (forecasted $14.69B) from $15.36B in the previous year. Comparable sales advanced by 3%, beating forecasts of 1.8%. The Co sees 1Q adj. EPS of $0.83-$0.88 (expected $0.82) and expects revenue to reach $9.05B-$9.15B (estimated $9.12B). The Board approved a new $3B share repurchase plan while the Co boosted its quarterly dividend to $0.5 from $0.45.
Booking Holdings (BKNG -10.28% WoW to $1714.08) reported 4Q adj. EPS of $22.49 (estimated $19.39) vs. $16.86 a year ago on revenue of $3.21B (forecasted $3.22B) from $2.8B in the previous year. The Co sees 1Q adj. EPS of $10.9-$11.2 (expected $12.88) and expects room nights booked to grow by 6%-8%. In other news, the Co was cut to "neutral" from "overweight" at Piper Jaffray.
HP (HPQ -17.44% WoW to $19.6) announced 1Q adj. EPS of $0.52, in-line with estimates, vs. $0.48 a year ago on net revenue of $14.7B (forecasted $14.9B) from $14.5B in the prior year. The Co sees 2Q adj. EPS of $0.5-$0.53 (expected $0.52) and reaffirmed its 2019 view on adj. EPS of $2.12-$2.22.
Monster Beverage (MNST +10.78% WoW to $64.74) unveiled 4Q diluted EPS of $0.43 (estimated $0.41) vs. $0.35 a year ago on net sales up 14.1% YoY to $924.2M (forecasted $901.1M). Finally, the Co authorized a new $500M share buyback program.
Celgene (CELG -3.57% WoW to $85.96) fell as Bristol-Myers Squibb (BMY +4.39% WoW to $53.22) top holder, Wellington Management, does not support the proposed $74B acquisition of Celgene due to "too much risk". Starboard Value, another stockholder of Bristol-Myers Squibb, sent a letter to the Co expressing that the proposed merger is ill-advised and will not be in the best interest of Bristol-Myers.
Gap (GPS +19.18% WoW to $29.51) announced 4Q diluted EPS of $0.72 vs. $0.52 last year on net sales of $4.62B (estimated $4.7B) from $4.78B in the prior year. Total comparable sales declined by 1%, below expectations of +0.2%. The Co sees FY19 EPS to a range of $2.11-$2.26 and expects growth in FY19 comparable sales to be flat to up slightly. Finally, the Co plans to separate into two independent publicly traded companies: Old Navy and a yet-to-be-named company.
Dentsply Sirona (XRAY +18.02% WoW to $49.13) unveiled 4Q adj. EPS of $0.58 (estimated $0.54) vs. $0.82 a year ago on net sales of $1.05B (forecasted $1.03B) compared to $1.08B a year earlier. The Co sees 2019 adj. EPS of $2.25-$2.4 (expected $2.17).
Nektar Therapeutics (NKTR -4.79% WoW to $38.13) posted 4Q LPS of $0.57 (estimated $0.68) vs. $0.21 last year on revenue of $39.8M (forecasted $26.1M) from $95.5M in the previous year. Net loss dug deeper towards $98.2M vs. $33.8M in the prior year.
Foot Locker (FL +5.75% WoW to $63.07) reported 4Q adj. EPS of $1.56 (estimated $1.4) vs. $1.14 a year ago on sales of $2.27B (forecasted $2.19B) compared to $2.21B in the previous year. Comparable sales jumped by 9.7%, beating expectations of 4.6%. The CEO is confident that in 2019, the Co can generate a "mid-single digit comparable sales gain and another double-digit percentage increase in EPS".
Earnings preview this week:
CRM: On Monday in the after-hours, Salesforce.com is likely to announce 4Q EPS of $0.553 vs. $0.35 a year ago on higher revenue of $3.6B from $2.9B in the previous year. In other news, the Co expanded their regional headquarters in Ireland by adding 1,500 new local jobs over the next 5 years. From a chartist point of view, the RSI is above 50 while the MACD is positive and below its signal line. The stock could retrace in the short term. Moreover, the stock is above its 20 and 50 day MA (respectively at 159.39 and 148.15). Salesforce.com is currently trading near its 52 week high reached at 164.6 on 28/02/19. We are confident prices will continue higher towards $176.5 with a stop-loss of $157.
TGT: On Tuesday, Target is awaited to post 4Q EPS of $1.52 vs. $1.37 last year on revenue of $23B compared to $22.8B in the prior year. The Co has become one of the latest merchants to support Apple Pay, according to Bloomberg. From a technical point of view, the RSI is above its neutrality area at 50 while the MACD is below its signal line and positive. The stock could retrace in the short term. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at 72.12 and 69.21). Prices are likely to continue advancing towards $77.7 with a stop-loss at $69.8.
DLTR: On Wednesday, Dollar Tree is anticipated to unveil 4Q EPS of $1.95 vs. $1.89 a year ago on lower revenue of $6.2B vs. $6.4B a year earlier. In other news, the Co was cut to "market perform" from "outperform" at Oppenheimer. Looking at the chart, the RSI is below its neutrality area at 50 while the MACD is positive and below its signal line. The MACD must penetrate its zero line to expect further downside. Moreover, the stock is below its 20 day MA (97.74) but above its 50 day MA (94.48). We anticipate further downside towards $90.8 with a stop-loss of $98.5.
COST: On Thursday, Costco is expected to report 2Q EPS of $1.69 vs. $1.42 last year on revenue reaching $35.7B from $33B in the previous year. The Co unveiled that comparable sales in January advanced by 5.2%, missing forecasts of 5.7%. Technically speaking, the RSI is above its neutrality area at 50 while the MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (respectively at 212.4 and 209.56). As long as the stock remains above $210.6, we expect to reach $225