Here's Why We're Looking at Elevance Health, Coty and Applied Materials (original) (raw)
Wednesday's Flash January PMIs and Friday's December PCE Price Index will be important indicators of inflation.
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* Equity futures point to a positive open following quarterly results from Netflix and dovish comments from former Fed head Bullard
* Today's Flash January PMIs and Friday's December PCE Price Index will be a better indicator of inflation than Bullard
* Elevance shrugs off Humana's warning with a quarterly beat and dividend increase
* Inter Parfums and ASML news are positive for our shares of Coty and Applied Materials
US equity futures are pointing to a positive open later this morning with stocks being lifted by upbeat results from Netflix (NFLX) but also comments from former St. Louis Federal Reserve President James Bullard, who thinks interest rate cuts could happen as soon as March.
Bullard left the Fed last August and it's fair to say he does love to mug for the camera, his thinking is the Fed could move before inflation hits the central bank's target of 2%. Despite current Fed officials indicating otherwise in recent days and weeks, Bullard's comments pushed yields lower, with the U.S. 10-year Treasury yield falling 4 basis points to 4.10%.
While we shouldn't take his comments with a grain of salt, Friday's December PCE Price Index and what it shows about the pace of inflation improvement will be a far better indicator of the Fed's intentions when it comes to monetary policy. Comments on input and output prices found in today's January US Flash PMI data out at 9:45 am ET should also give us an indication of what's coming in the January CPI and PPI reports.
In reviewing the already published January Flash PMI data for the UK, we did see that supply chains were affected by longer container freight wait times after the Red Sea crisis. Vendor delivery times saw the steepest lengthening since September 2022, mainly due to longer international shipping times. We continue to think this will be a hot topic in the coming weeks as the December quarter earnings season rolls on, with more than 1,400 companies reporting between now and Super Bowl Sunday.
Elevance Health
Action Alerts PLUS name Elevance Health (ELV) shrugged off concerns raised by last week's pre-announcement from Humana (HUM) . Elevance reported December quarter EPS of 5.63,afewpenniesaheadoftheconsensusforecastwhilerevenueforthequarterrose7.05.63, a few pennies ahead of the consensus forecast while revenue for the quarter rose 7.0% year over year to 5.63,afewpenniesaheadoftheconsensusforecastwhilerevenueforthequarterrose7.042.45 billion, also besting consensus expectations. Elevance's medical loss ratio - the percentage of claims paid to premiums collected - was 89.2% for the fourth quarter, compared to analysts' average estimate of 89.4%, a very different picture than the one painted by Humana.
For the coming year, Elevance sees EPS coming in at 37.10,atadbetterthanthe37.10, a tad better than the 37.10,atadbetterthanthe37.05 consensus, but we have to remember this management team tends to lean on the conservative side.
We'll have more comments after the company's earnings call this morning, but before we move on, Elevance announced a 10% boost to quarterly dividend to $1.63 per share.
Coty
Fragrance company Inter Parfums (IPAR) issued upside guidance for its 4Q 2024 revenue of 329millionvs.the329 million vs. the 329millionvs.the323.83 million consensus. For the period, the company's European product sales rose 2% year over year while its US product sales climbed 13% on the same basis. This informs us the fragrance category was a strong one during the 2024 holiday shopping season, a positive data point for our shares of Coty (COTY) , which derives 60% of its revenue from Prestige and Consumer Beauty Fragrances.
The next known catalyst for COTY shares will be quarterly results from Estee Lauder (EL) on February 5, two days before Coty reports its most recent quarter.
Applied Materials
Our shares of Applied Materials (AMAT) have been performing exceptionally well of late following Taiwan Semiconductor's (TSM) robust 2024 revenue guidance. Our thinking was this would drive tighter capacity levels in the chip industry, fostering the need for additional capacity. Quarterly results this morning from ASML (ASML) that topped expectations and included the company's best-ever quarterly orders, paint a favorable picture for upcoming earnings and guidance from Applied.
That has us thinking about our current price target. We'll get more details in ASML's earnings call this morning and we'll cross-reference those with quarterly results after today's market close from Lam Research (LRCX) . Upon sizing up those collective comments, we'll revisit our AMAT price target.
Action Alerts PLUS is long ELV, COTY, AMAT.