| To: Return to Sender who wrote (88680) | 7/19/2022 12:30:31 PM | | From: Sun Tzu | | | | Thank you. Useful info.
We are at an inflection point with an upward bias.
Bellow is an indicator that I have built based on the shape of VIX futures. VIX seems to have an uncanny ability to predict the market momentum.
There are two things to note:
(1) The bias is upward
(2) The Bollinger Bands are very narrow. That means a big move is ahead.
However, given the narrow width of the BB and lack of established trend, it is also possible that we could gap down below the BB for the next market leg down.
The safest trade maybe to go long VIX while also going long SOX or SPX.
As always, your mileage may vary.
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| To: Sun Tzu who wrote (88681) | 7/19/2022 12:59:38 PM | | From: Return to Sender | | | |
Use Your Firefox Browser for this to see my Short Term to Intermediate Indicators including the VIX. It's best to be cover shorts and enter long positions on cross overs of green lines. Best to go short on cross overs of the red lines and or exit long positions.
The first set of charts for market timing the SMH are based on using the NASDAQ New Highs and similar indexes are shown here. To go long: First wait for the NASDAQ New Highs to set a new low and reverse itself from an approach of the lower Bollinger Band. To go short: Wait for the NASDAQ new highs and other similar new high indices to set a new high print at, near, or above the upper Bollinger Band. I am also now using the NASDAQ McClellan Oscillator (Ratio Adjusted) $NAMO) to confirm the above - Overbought above 25 - Oversold below -25. These charts do not fully update until after market close.
Short Term Indicators vs. the SMH; any index can be used - The first set of short term indicators I use are based on the put to call ratio. To go long it is best to wait for the put to call ratio to close over 1.0. On the chart below the put to call ratio now updates intraday but it is not always accurate! Intraday reading of the put to call ratio can be found here updated every half hour after the open:
cboe.com 
The more days in a row the put to call ratio prints over 1.0 this the more likely the bottom will be a strong one. The link above shows intraday readings of the P/C ratio.
Also closes on the put to call ratio below 0.50 and sometimes a bit above are indicative of a short term top. Watch the simple moving averages as well because periods of too much buying of puts or calls will almost certainly bring about market bottoms and tops respectively. On the CPC/VIX ratio; this is largely a longer term indicator where investors are likely to make more money on the long side once the short-term 21 day sma has crossed above the 200 day sma. The reverse is true as well. An investor will likely make more money on the short side when the 21 day sma crosses below the 200 day sma:
Next I use the VIX, VXO and VXN (Fear Indices) because they can help to refine decision making on tops and bottoms upon reverses from upper or lower Bollinger Bands especially when the index stretches more than 10% above or below its 10 day simple moving average. When a volatility index stretches more than 10% above or below its 10 day sma it will generally reverse direction as will the market in general in the opposite direction.
Also TRIN and TRINQ readings on the 5 and 10 day simple moving averages over 1.5 are bullish while readings below 0.85 are bearish. These readings don't happen often especially with the 10 day sma. They are also early indicators so the market can continue higher or lower for a while but they are reliable for indicating market turns that are about to take place.
These charts simply forewarn of potential trend changes:
Ever heard of the Hindenburg Omen? The conditions necessary to give a warning are not met all that often but they can be seen on the chart below. If you want to know what a Hindenburg Omen is then click on the link above it first for an explanation:
en.wikipedia.org
The next two charts will not update until a couple hours after the market closes. They show that the market is anything but healthy (Jan 12, 2015) as we are setting an almost equally high number of 52 week lows as 52 week highs while we are very close to new all time highs.
The raw data comes from the WSJ site here:
markets.wsj.com
 Small caps lead in a healthy market advance. So looking at what the IWM is doing would be a good idea. Unfortunately I have not got the time to show it now.
Consumer staple stocks are often bought by investors when perceived risk in the market grows. This happens at the end of bull runs in the market:
Investors also buy more Utility stocks when they are chasing yield versus appreciation in the stock market because they think the stock market may not trade much higher in the future:
Healthcare is also seen as a safer investment in the market in uncertain times but I hope everyone will keep in mind that in a bear market every sector usually sells off:
RtS |
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| From: Elroy | 7/19/2022 2:34:21 PM | | | | | | Here's a topic that interests me, I don't know if anyone else cares. If you got an opinion I'd love to read it.
MXL is a small diversified semi company. It's sort of a mini legacy pre-AVGO Broadcom. Well, they've bid $93 cash + about $15 MXL stock to acquire for each share of SIMO. Both boards have approved the deal.
SIMO and MXL report Q2 July 27
SIMO shareholders vote on the MXL-SIMO deal on August 31st, and then the deal will close after / if the Chinese regulatory agencies approve the transaction (expected some time in H1 2023).
If any other semiconductor company wants to own SIMO, it seems like that a counter bid would be made AFTER the Q2 report (so they can get more info on trends) and before the vote (because after the vote, it's perhaps too late??). Is that understanding correct? Has a new buyer every appeared AFTER shareholders have approved a sale?
Anyways, August may be the last chance to get something interesting out of SIMO (if another buyer appears). I've never understood why more companies don't compete to own SIMO, they are almost a monopoly in a necessary very high volume chip (flash controllers). It seems like the product segment should have modest growth, and very very high operating profitability. I wonder why these state of the art technology semi companies (like MRVL in particular) don't want to own a lower technology semi cash cow to fund their state of the art R&D expenses. |
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| To: Return to Sender who wrote (88672) | 7/19/2022 6:32:12 PM | | From: kckip | | | | Jumping the gun, but was wondering <g>
+80% on NYSE again today, but declining volume..... NDQ was middle of the road on moderate volume. We might be in for a decent bounce, but I suspect it will fail in the end.
Stock Market Update
Frequent updates on broad stock market activity, market data, and market-moving events. | Archive
Market Snapshot
Dow 31828.93 +754.44 (2.43%)
Nasdaq 11713.12 +353.10 (3.11%)
SP 500 3936.76 +105.84 (2.76%)
10-yr Note
NYSE Adv 2597 Dec 520 Vol 902 mln
Nasdaq Adv 3209 Dec 1095 Vol 5.1 bln
Industry Watch
Strong: Materials, Energy, Financials, Industrials, Communication Services
Weak: --
Moving the Market
-- Broad based rally effort
-- Contrarian-minded action after BofA Global Fund Manager Survey reveals lowest equity allocation since Lehman Bros. and highest cash levels since 2001
Closing Stock Market Summary
19-Jul-22 16:20 ET
Dow +754.44 at 31828.93, Nasdaq +353.10 at 11713.12, S&P +105.84 at 3936.76
[BRIEFING.COM] It was a rebound-minded trade today with each of the major indices showing sizable gains at the close. The market had a positive bias from the open thanks to lower energy prices, a weaker dollar, and an investor survey revealing how bearish fund managers have become. The S&P 500 steadily climbed to close near its intraday high, which put it above the key technical level of its 50-day moving average (3,922). Each of the main indices closed right around session highs.
There was relatively weak economic data this morning that did not dampen the rebound effort. The June housing starts and building permits report conveyed a weakening outlook for the housing market. This was taken in stride as sentiment was largely driven by the BofA Global Fund Manager Survey.
Today's contrarian-minded rally effort was fueled by the BofA Global Fund Manager Survey which revealed the lowest equity allocation since the Lehman Bros. bankruptcy and the highest cash levels since 2001. Most stocks came along for the ride and lifted with the rebound, as that survey conjured thoughts of a lot of pent-up buying potential.
Buyer enthusiasm could be seen in the advance-decline line. Advancing issuing outpaced declining issues by a 5-to-1 margin at the NYSE and a nearly 3-to-1 margin at the Nasdaq.
Further reflecting the uplift in sentiment was the S&P 500 sector performance. All 11 sectors closed in the green with gains from 0.7% (utilities) to 3.6% (industrials). The countercyclical consumer staples (+1.1%), health care (+1.8%), and utilities (+0.7%) sectors trailed the broader market.
It was an upbeat day in general but semiconductors, a leading indicator, showed outsized gains. The PHLX Semiconductor Index closed with a gain of 4.7% versus a 2.8% gain in the S&P 500.
Notably moving opposite the broader market were Dow components Johnson & Johnson (JNJ 171.69, -2.54, -1.5%) and IBM (IBM 130.88, -7.25, -5.3%). The former reported better-than-expected earnings and revenue but cut free cash flow guidance while the latter posted better-than-expected earnings but cut its FY22 outlook.
Energy complex futures settled the session mostly lower. WTI crude oil futures fell 2.0% to $100.72/bbl. Natural gas futures fell 2.8% to $7.19/mmbtu. Unleaded gasoline futures rose 0.9% to $3.31/gal.
Treasury yields rose today with the 2-yr note closing up six basis points to 3.22%. The 10-yr note yield rose six basis points to 3.02%.
Looking ahead to Wednesday, ASML (ASML 498.27, +24.79, +5.2%), Baker Hughes (BKR 28.22, +1.06, +3.9%), and Biogen (BIIB 220.26, +5.92, +2.8%) headline the earnings reports before the open.
Market participants will receive the following economic data Wednesday:
Weekly MBA Mortgage Applications Index (prior -1.7%) at 7:00 ET
June Existing Home Sales (Briefing.com consensus 5.40 million; prior 5.41 million) at 10:00 ET
Weekly EIA Crude Oil Inventories (prior +3.25 million) at 10:30 ET
Today's economic data was limited to:
June Housing Starts 1.559 mln (Briefing.com consensus 1.598 mln); Prior was revised to 1.591 mln from 1.549 mln; June Building Permits 1.685 mln (Briefing.com consensus 1.680 ml); Prior was unrevised at 1.695 mln
An upward revision to housing starts in May helped mitigate the headline miss for June, but the key takeaway from the report is that permits for single-family homes declined across all geographic regions. In turn, single-family starts were down in all regions, except the small Midwest region (+2.1%) that accounted for less than 12% of total single-family start in June.
Dow Jones Industrial Average: -12.4% YTD
S&P 400: -16.4% YTD
S&P 500: -17.4% YTD
Russell 2000: -20.0% YTD
Nasdaq Composite: -25.1% YTD |
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| To: Return to Sender who wrote (88669) | 7/19/2022 8:01:47 PM | | From: Return to Sender | | | | BPNDX Rose 4 to 65 PnF Buy Signals - [ALGN AVGO LULU NTES NXPI added TEAM removed]
| Mon | Tues | | AAPL | AAPL | | ABNB | ABNB | | ADBE | ADBE | | ADI | ADI | | ALGN | ADSK | | AMAT | ALGN | | AMD | AMAT | | AMGN | AMD | | AMZN | AMGN | | ASML | AMZN | | AZN | ASML | | BIIB | AVGO | | BKNG | AZN | | CDNS | BIIB | | CHTR | BKNG | | COST | CDNS | | CPRT | CHTR | | CRWD | COST | | CTAS | CPRT | | DLTR | CRWD | | EA | CTAS | | FISV | DLTR | | FTNT | EA | | GOOGL | FISV | | IDXX | FTNT | | ISRG | GOOGL | | JD | IDXX | | KDP | ISRG | | KHC | JD | | LCID | KDP | | LRCX | KHC | | MAR | LCID | | MCHP | LRCX | | MELI | LULU | | META | MAR | | MNST | MCHP | | MRNA | MELI | | MRVL | META | | MU | MNST | | NFLX | MRNA | | NVDA | MRVL | | OKTA | MU | | ORLY | NFLX | | PEP | NTES | | PYPL | NVDA | | QCOM | NXPI | | REGN | OKTA | | ROST | ORLY | | SBUX | PEP | | SGEN | PYPL | | SIRI | QCOM | | SNPS | REGN | | SPLK | ROST | | SWKS | SBUX | | TEAM | SGEN | | TMUS | SIRI | | TSLA | SNPS | | TXN | SPLK | | VRSK | SWKS | | VRSN | TMUS | | VRTX | TSLA |
| TXN |
| VRSK |
| VRSN |
| VRTX | |
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| To: Return to Sender who wrote (88670) | 7/19/2022 8:05:06 PM | | From: Return to Sender | | | | BPSOX Rose 2 to 24 PnF Buy Signals - [AVGO NXPI added]
| Mon | Tues | | ADI | ADI | | AMAT | AMAT | | AMD | AMD | | ASML | ASML | | CRUS | AVGO | | ENTG | CRUS | | LRCX | ENTG | | MCHP | LRCX | | MKSI | MCHP | | MPWR | MKSI | | MRVL | MPWR | | MU | MRVL | | NVDA | MU | | ON | NVDA | | QCOM | NXPI | | QRVO | ON | | SLAB | QCOM | | SWKS | QRVO | | TER | SLAB | | TSM | SWKS | | TXN | TER | | WOLF | TSM |
| TXN |
| WOLF | |
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| To: kckip who wrote (88684) | 7/19/2022 8:11:31 PM | | From: Return to Sender | | | | OT: Sorry, taking care of my 85 and 95 year old parents earlier today. Volume and everything else looks pretty good to me but I am still planning on selling my swing trade on the next couple of days of strength.
I just cannot see this as anything other than a bear market rally.
Don't fight the Fed in either direction my friend.
RtS |
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| To: Return to Sender who wrote (88688) | 7/19/2022 8:14:08 PM | | From: Return to Sender | | | |
Market Snapshot
briefing.com
| Dow | 31828.93 | +754.44 | (2.43%) | | Nasdaq | 11713.12 | +353.10 | (3.11%) | | SP 500 | 3936.76 | +105.84 | (2.76%) | | 10-yr Note |
|
|
|
| | NYSE | Adv 2597 | Dec 520 | Vol 902 mln | | Nasdaq | Adv 3209 | Dec 1095 | Vol 5.1 bln |
Industry Watch
| Strong: Materials, Energy, Financials, Industrials, Communication Services |
| | Weak: -- |
Moving the Market
-- Broad based rally effort
-- Contrarian-minded action after BofA Global Fund Manager Survey reveals lowest equity allocation since Lehman Bros. and highest cash levels since 2001
|
Closing Stock Market Summary
19-Jul-22 16:20 ET
Dow +754.44 at 31828.93, Nasdaq +353.10 at 11713.12, S&P +105.84 at 3936.76
[BRIEFING.COM] It was a rebound-minded trade today with each of the major indices showing sizable gains at the close. The market had a positive bias from the open thanks to lower energy prices, a weaker dollar, and an investor survey revealing how bearish fund managers have become. The S&P 500 steadily climbed to close near its intraday high, which put it above the key technical level of its 50-day moving average (3,922). Each of the main indices closed right around session highs.
There was relatively weak economic data this morning that did not dampen the rebound effort. The June housing starts and building permits report conveyed a weakening outlook for the housing market. This was taken in stride as sentiment was largely driven by the BofA Global Fund Manager Survey.
Today's contrarian-minded rally effort was fueled by the BofA Global Fund Manager Survey which revealed the lowest equity allocation since the Lehman Bros. bankruptcy and the highest cash levels since 2001. Most stocks came along for the ride and lifted with the rebound, as that survey conjured thoughts of a lot of pent-up buying potential.
Buyer enthusiasm could be seen in the advance-decline line. Advancing issuing outpaced declining issues by a 5-to-1 margin at the NYSE and a nearly 3-to-1 margin at the Nasdaq.
Further reflecting the uplift in sentiment was the S&P 500 sector performance. All 11 sectors closed in the green with gains from 0.7% (utilities) to 3.6% (industrials). The countercyclical consumer staples (+1.1%), health care (+1.8%), and utilities (+0.7%) sectors trailed the broader market.
It was an upbeat day in general but semiconductors, a leading indicator, showed outsized gains. The PHLX Semiconductor Index closed with a gain of 4.7% versus a 2.8% gain in the S&P 500.
Notably moving opposite the broader market were Dow components Johnson & Johnson (JNJ 171.69, -2.54, -1.5%) and IBM (IBM 130.88, -7.25, -5.3%). The former reported better-than-expected earnings and revenue but cut free cash flow guidance while the latter posted better-than-expected earnings but cut its FY22 outlook.
Energy complex futures settled the session mostly lower. WTI crude oil futures fell 2.0% to $100.72/bbl. Natural gas futures fell 2.8% to $7.19/mmbtu. Unleaded gasoline futures rose 0.9% to $3.31/gal.
Treasury yields rose today with the 2-yr note closing up six basis points to 3.22%. The 10-yr note yield rose six basis points to 3.02%.
Looking ahead to Wednesday, ASML (ASML 498.27, +24.79, +5.2%), Baker Hughes (BKR 28.22, +1.06, +3.9%), and Biogen (BIIB 220.26, +5.92, +2.8%) headline the earnings reports before the open.
Market participants will receive the following economic data Wednesday:
- Weekly MBA Mortgage Applications Index (prior -1.7%) at 7:00 ET
- June Existing Home Sales (Briefing.com consensus 5.40 million; prior 5.41 million) at 10:00 ET
- Weekly EIA Crude Oil Inventories (prior +3.25 million) at 10:30 ET
Today's economic data was limited to:
- June Housing Starts 1.559 mln (Briefing.com consensus 1.598 mln); Prior was revised to 1.591 mln from 1.549 mln; June Building Permits 1.685 mln (Briefing.com consensus 1.680 ml); Prior was unrevised at 1.695 mln
- An upward revision to housing starts in May helped mitigate the headline miss for June, but the key takeaway from the report is that permits for single-family homes declined across all geographic regions. In turn, single-family starts were down in all regions, except the small Midwest region (+2.1%) that accounted for less than 12% of total single-family start in June.
- Dow Jones Industrial Average: -12.4% YTD
- S&P 400: -16.4% YTD
- S&P 500: -17.4% YTD
- Russell 2000: -20.0% YTD
- Nasdaq Composite: -25.1% YTD
Market holding strong ahead of the close
19-Jul-22 15:30 ET
Dow +691.42 at 31765.91, Nasdaq +339.53 at 11699.55, S&P +99.47 at 3930.39
[BRIEFING.COM] There hasn't been much movement up or down for the market recently with each major index trading just below session highs.
Energy complex futures settled the session mostly lower. WTI crude oil futures fell 2.0% to $100.72/bbl. Natural gas futures fell 2.8% to $7.19/mmbtu. Unleaded gasoline futures rose 0.9% to $3.31/gal.
Treasury yields rose today with the 2-yr note closing up six basis points to 3.22%. The 10-yr note yield rose six basis points to 3.02%.
After the close, Netflix (NFLX 200.50, +9.61, +5.1%) will report earnings.
Looking ahead to Wednesday, ASML (ASML 499.45, +26.10, +5.5%), Baker Hughes (BKR 27.99, +0.83, +3.1%), and Biogen (BIIB 220.78, +6.42, +3.0%) headline the earnings reports before the open.
Market participants will receive the following economic data Wednesday:
- Weekly MBA Mortgage Applications Index (prior -1.7%) at 7:00 ET
- June Existing Home Sales (Briefing.com consensus 5.40 million; prior 5.41 million) at 10:00 ET
- Weekly EIA Crude Oil Inventories (prior +3.25 million) at 10:30 ET
Semiconductors outpace with sizable gains
19-Jul-22 15:00 ET
Dow +674.04 at 31748.53, Nasdaq +322.82 at 11682.84, S&P +96.82 at 3927.74
[BRIEFING.COM] The major indices trade just off session highs currently, with the S&P 500 reaching above its 50-day moving average (3922). The Nasdaq is up 2.9% but its the Russell 2000 (+3.4%) that leads all indices.
The semiconductors are outpacing the market ahead of the Senate procedural vote on the CHIPS act semiconductor manufacturing bill. The PHLX Semiconductor Index is up 4.3% with every index component trading in positive territory. The biggest gains are seen in NVIDIA (NVDA 169.41, +8.40, +5.3%), Advanced Micro Devices (AMD 85.90, +4.47, +5.5%), and ON Semi (ON 58.29, +3.35, +6.1%).
Signature Bank underperforms as deposits slow; PVH leads discretionary names in S&P 500
19-Jul-22 14:30 ET
Dow +691.01 at 31765.50, Nasdaq +335.83 at 11695.85, S&P +100.46 at 3931.38
[BRIEFING.COM] All three major averages continued to make session highs in the last half hour, the benchmark S&P 500 (+2.62%) still firmly in second place.
S&P 500 constituents PVH (PVH 62.33, +5.15, +9.01%), Caesars Entertainment (CZR 42.01, +3.41, +8.83%), and ON Semiconductor (ON 58.55, +3.60, +6.55%) dot the top of the index. Strength in consumer discretionary (+2.96%) names aides advances in PVH and CZR today, while ON benefits from the chip bill procedural vote in the Senate.
Meanwhile, regional New York bank Signature Bank (SBNY 182.85, -13.27, -6.77%) is today's worst performer following earnings; the company beat on earnings, but reported a miss on deposits and pre-tax revs while expenses also pressured results.
Gold ends modestly higher on Tuesday
19-Jul-22 14:00 ET
Dow +642.17 at 31716.66, Nasdaq +321.60 at 11681.62, S&P +93.31 at 3924.23
[BRIEFING.COM] The major averages have trotted to session highs in the last 30 minutes; with about two hours to go the tech-heavy Nasdaq Composite (+2.83%) remains atop the standings.
Gold futures settled less than $1 higher (flat) to $1,710.70/oz, unable to move meaningfully higher despite a modest move lower in the dollar.
Meanwhile, the U.S. Dollar Index is down about -0.7% to $106.64.
Lockheed Martin misses target in Q2, but reworked F-35 contract may be waiting in the wings (LMT)
Updated: 19-Jul-22 14:27 ET
Lockheed Martin (LMT), a leading defense contractor that makes the F-35 and F-16 fighter jets, was a high-flyer earlier this year, but this morning's lackluster Q2 report isn't helping shares to take flight again. Russia's invasion of Ukraine and growing tensions with North Korea and China fueled expectations that the U.S. and its allies would ramp up defense spending. However, worsening supply chain issues have prevented LMT and other defense companies, such as Boeing (BA) and Raytheon (RTX), from completing work on time as they struggle to secure parts.
The impact from part shortages was evident across LMT's business as revenue fell on an yr/yr basis in each of its four core segments (Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, Space). Most notably, the company disclosed that it took a $790 mln hit from lost sales and higher production costs related to its F-35 contract with the U.S. Department of Defense. In fact, production costs began to exceed the contract value and available funding on the next set of F-35s, causing LMT to terminate its work. This situation was a major factor in LMT missing analysts' Q2 EPS and revenue estimates and lowering its FY22 guidance.
After an initial nose-dive lower, shares have meaningfully recovered this afternoon as investors home in on some key positives.
- CEO James Taiclet offered an encouraging update on the F-35 program, stating that an agreement to rework the contract was in place, but that final details are still being negotiated. The modified contract is expected to commence in Q3 with LMT recovering unrecognized sales and resuming invoicing costs from the contract.
- Originally, LMT agreed to produce 156 F-35s annually for the government; now, the company is aiming for 147-153 aircraft in 2023 and 2024 due to supply chain issues. LMT is hoping to achieve the 156 aircraft target in 2025.
- The company still generated healthy cash flow from operations and free cash flow of $1.3 bln and $1.0 bln, respectively, for the quarter. Consequently, it was able to return $1.1 bln of cash to shareholders through dividends and share buybacks, while also investing in key classified projects like hypersonic missiles.
- Although LMT cut its FY22 EPS and revenue guidance, it maintained its cash flow from operations and free cash flow guidance of $7.9 bln and $6.0 bln, respectively.
- According to CFO Jay Malave, the total pipeline for new defense orders is stronger than it was a year ago. Once the supply chain situation improves, LMT will be in a better position to capitalize on rising defense budgets.
The main takeaway is that ongoing complications in producing the F-35 was a main stumbling block again this quarter as LMT faced parts and components shortages. Investors are seemingly looking further out on the horizon, though, anticipating that a renegotiated F-35 agreement will provide a boost in 2H22 and beyond.
Hasbro rides resilient demand for toys and strength in tabletop games to post earnings beat (HAS)
Updated: 19-Jul-22 11:17 ET
Hasbro (HAS) played its cards well in Q2 as the owner of the Dungeons & Dragons and Magic: The Gathering brands comfortably beat earnings expectations. Solid demand for the company's tabletop games, along with price increases in its Consumer Products division (Nerf, My Little Pony, Play-Doh, etc.), pushed adjusted net earnings higher by 10% on an yr/yr basis. The earnings growth is a nice accomplishment given that freight and production costs were also up sharply for the quarter.
Although revenue grew by a scant 1.3% to $1.34 bln, slightly missing analysts' estimates, the top-line result wasn't quite as bad as it may seem.
- Like many other companies, HAS is feeling the impact of a strengthening dollar, which created a significant foreign exchange headwind in Q2. Excluding the effect of foreign exchange, total revenue was up 4%, with the Consumer Products segment posting solid growth of 9%.
- HAS also lapped a very challenging quarter in its Wizards of the Coast and Digital Gaming segment. In the year-earlier period, the company launched Dark Alliance and Magic: The Gathering Arena mobile. Consequently, digital and licensed gaming revenue declined by 36% yr/yr.
- In the key tabletop gaming category, revenue was up by 15%, reflecting strength in the Magic: The Gathering franchise and validating HAS's strategy to invest in the Wizards of the Coast and Digital Gaming segment. Relatedly, the company recently completed its $146.3 mln acquisition of D&D Beyond, complementing its D&D franchise and adding a growth catalyst to its role-playing game business.
One notable weak spot was the Entertainment segment as revenue fell by 18% to $185.2 mln. Film & TV revenue was down due to the delivery of fewer scripted TV half-hours, but the company is expecting a rebound in 2H22. For Q3, HAS expects to deliver 32 half-hours of scripted TV vs. 28 in the year-earlier period, including the first delivery of episodes for The Rookie: Feds, and episodes of The Rookie Season 5.
On a consolidated basis, the company maintained its FY22 revenue growth outlook, forecasting low-single digit growth in constant currency. However, while HAS still expects to achieve adjusted operating profit margin of 16%, it now believes that operating cash flow will come in at the low end of its prior guidance range of $700-$800 mln.
Overall, though, it was a good quarter for HAS, illustrating that consumer spending for toys and games remains healthy in this inflationary environment. That bodes well for fellow toy maker Mattel (MAT), which is slated to report earnings on Thursday afternoon after the market closes.
Johnson & Johnson extends its earnings streak in Q2 despite severe inflationary and FX impacts (JNJ)
Updated: 19-Jul-22 10:57 ET
Johnson & Johnson (JNJ) kept its earnings streak, which spans over five years, alive in Q2 while reversing a string of top-line misses with solid revenue upside. However, tempering enthusiasm to a degree was JNJ's second-straight quarter trimming its FY22 outlook.
The company now expects just $10.00-10.10, down from its prior forecast of $10.15-10.35 and initial outlook of $10.40-10.60. Meanwhile, instead of reaffirming its FY22 revenue forecast, as was the case last quarter, JNJ slashed this figure, expecting revs of $93.8-94.3 bln, down from $94.8-95.8 bln. Both metrics fell short of analyst expectations.
Inflationary and foreign exchange impacts were the primary factors. Inflationary pressures fueled a 270 bp and 210 bp decline yr/yr in Consumer Health and MedTech margins, respectively, in Q2. At the same time, without excluding FX headwinds, sales in Consumer Health and MedTech fell 1.3% and 1.1% yr/yr, respectively, lagging total revenue growth of 3.0% yr/yr in the quarter. In total, unfavorable FX headwinds are generating an estimated $4.0 bln hit to full-year sales and a $0.65 dent in earnings, of which roughly half will carry over into FY23.
- On the bright side, JNJ's largest segment, Pharmaceutical (~55% of Q2 sales), outshone these cloudy numbers. Margins expanded 260 bps yr/yr to 42%, with operational sales surging 12.3% yr/yr to $13.32 bln. Even when backing out COVID-19 vaccine sales, operational revs still jumped 8.6%.
- JNJ's robust Pharmaceutical growth has been a recurring theme for multiple periods, highlighting the company's success in transforming itself into a pharmaceutical titan. This growth is not likely to slow down either. JNJ anticipates operational sales modestly accelerating through the end of FY22.
- Strength within Pharmaceutical fueled company-wide operational revenue growth of 8.0% and a 4.4% expansion yr/yr in adjusted EPS to $2.59 in Q2.
Overall, JNJ's Q2 earnings were plagued by inflationary pressures and FX headwinds. However, these challenges are being outshone by positive developments on the horizon. For example, regarding inflation, JNJ is seeing signs of fewer disruptions going forward, particularly in Consumer Health. This bodes well for the struggling segment as it heads toward becoming a standalone company, which is expected sometime in FY23. Additionally, JNJ reaffirmed its FY22 operational sales growth of +7% yr/yr and adjusted operational EPS of $10.70, both of which exclude FX impacts.
Bottom line, JNJ's Pharmaceutical business is continuing to operate at a high level, cushioning against the adverse effects other headwinds in the quarter likely would have had on shares today. The strength in this segment also bodes well for other pharmaceutical giants that report Q2 earnings over the next two weeks, such as Pfizer (PFE), AstraZeneca (AZN), and Eli Lilly (LLY).
IBM heads lower despite upside results lower margins, reduced FCF guidance weigh on sentiment (IBM)
Updated: 19-Jul-22 10:55 ET
IBM (IBM -7%) is heading lower despite reporting upside Q2 results and reaffirming FY22 revenue guidance. However, when you dig a bit deeper, it makes sense that the stock would be lower. Before digging into it, recall that IBM spun off Kyndryl (KD) last November. This was a massive change for IBM, but the transaction allows the company to focus on hybrid cloud and AI. The new IBM also has a higher mix of recurring revenue, dominated by Software, so results should be more predictable.
So why is the stock lower?
- The upside was pretty modest for both EPS and revenue. And that is despite a huge quarter from its Infrastructure segment, which posted a huge 19% jump in revenue, fueled by the launch of its z16 mainframe computer. It has been three years since the last major update, so clients clearly had been eagerly awaiting this launch. The point here is that Infrastructure did so well, but the beat was modest, which makes it likely that Software was a bit light.
- In fairness to IBM, FX headwinds were strong in Q2 as the US dollar has strengthened and IBM has a lot of international exposure. So when IBM converts overseas revenue back into dollars, the top line number takes a hit.
- While IBM reaffirmed its FY22 constant currency revenue guidance at the high end of its mid-single digit model, it did trim its FY22 free cash flow guidance to $10 bln from $10.0-10.5 bln. IBM says it was not caused by underlying fundamentals. IBM cited FX headwinds and the exiting of its Russia operation. However, it is still making investors nervous.
- Another issue was gross margin compression, which dropped to 53.4% from 55.2% a year ago. This was mostly caused by escalating labor, particularly at its Consulting segment, and component costs. IBM is addressing this through pricing but it takes some time to show up in margins.
We now have two full quarters of the new IBM in the books (post-Kyndryl). The upside results in both quarters have been pretty underwhelming, however, some of that has been some fierce FX headwinds. We still like IBM's new profile, with a higher growth and a higher value mix. But it is going to take some time. Looking ahead, we expect a big Infrastructure segment result in Q3 as it will benefit from a full quarter of the z16 launch.
In terms of what this means for other tech companies as we head into earnings season, it is clear that enterprise spending remains strong but expect big FX headwinds from names with international exposure. The somewhat lackluster Software segment and lowered FCF guidance makes us a bit nervous though.
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