Updated: 05-29-2017

Quotes at time of story, top stories today: 04:48PM | 11:01AM | 10:52AM | 10:04AM | 09:28AM | 09:25AM | 08:30AM | 08:12AM

04:48PM ET
Weekly Wrap

The stock market registered five wins this week, three of which resulted in a new record high for the S&P 500. A continuation of last week's 'buy-the-dip' trade fueled the bulls at the beginning of the week, but the FOMC minutes from the May 2-3 meeting became the catalyst for the midweek move to new record highs. For the week, the S&P 500 added 1.4%.

Before moving into record-high territory, investors had to repair the damage done by last week's 800-pound gorilla; namely, a New York Times article that highlighted a potential obstruction of justice move by President Trump. The allegation prompted the stock market's worst one-day decline since September on May 17, therefore, investors' first priority was reclaiming what was lost.

Two modest wins on Monday (+0.5%) and Tuesday (+0.2%) put the S&P 500 right at the 2,400 mark, which is the level it hit right before the swoon on May 17. Led by the financial sector, the benchmark index challenged said level a few times on Tuesday, but it just needed a little something extra to get over the hump. The FOMC minutes from the May 2-3 meeting answered the call on Wednesday.

In the minutes, the Fed revealed a possible approach to unwind its massive balance sheet; the central bank would like to introduce a gradual increase of caps to limit the reinvestment of maturing securities. In addition, the Fed's willingness to discuss the issue showed that the central bank has pretty good confidence in the economic outlook, having attributed first quarter weakness to transitory factors.

Following the report, the S&P 500 advanced to new record highs on Wednesday and Thursday. However, investors in the crude oil futures market weren't so bullish. The energy component tumbled nearly 5.0% on Thursday after OPEC and non-OPEC nations agreed to extend their current production adjustment by nine months, but stopped short of increasing the magnitude of the supply cut.

Equities finished the week with a sleepy, range-bound performance on Friday as investors got a jump start on the extended holiday weekend. For the week, the top-weighted technology sector outperformed yet again, adding 2.3%, with Apple (AAPL), Alphabet (GOOG), Microsoft (MSFT), Amazon (AMZN), and Facebook (FB) increasing their aggregate market value to an astounding $2.93 trillion.

The fed funds futures market still points to the June FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 83.1%, up from last week's 78.5%.

IndexStarted WeekEnded WeekChange% ChangeYTD %
DJIA20804.8421080.28275.441.36.7
Nasdaq6083.706210.19126.492.115.4
S&P 5002381.732415.8234.091.47.9
Russell 20001367.331382.2414.911.11.9

11:01AM ET
Veeva Systems grabs new all-time highs as Q1, guidance impress behind strong sub growth

Striking new all-time highs today, shares of cloud-based software firm Veeva Systems (VEEV 66.12, +4.38 +7.1%) are breaking out after a stellar Q1 report and guidance from last night.

On the top and bottom line for Q1, all looked well as total revenues were up about 31.8% compared to last year to $157.9 million while earnings per share (EPS) came in at $0.24. Subscription services revenues for Q1 were $127.3 million, up from $96.0 million a year ago, an increase of 33% year-over-year.

On top of the strong Q1 performance, VEEV forecasts an equally solid Q2 as EPS and revenue guidance both came in above market expectations. For Q2 EPS, VEEV sees $0.20 and revenues between $163-164 million. Looking a bit farther down the road, VEEV expects FY18 EPS in the range of $0.82-0.84 with revenues between $665-669 million, up from $655-660 million.

The beat was not all that surprising as VEEV has been in the business of beating expectations for the better part of the past two years. What's interesting, and new for that matter, is that VEEV is breaking into the clinical data management space with Veeva Vault CTMS and Veeva Vault EDC. The number of customers with multiple Vault products was up by nearly 30 in the quarter and more than 70% year-over-year. In addition, a top 20 pharmaceutical company selected the full Veeva Vault RIM suite and Veeva Vault QualityDocs as enterprise-wide standards. These cloud platforms should allow VEEV to take market share in the medical data space.

The stock came in hot on the Q1 print, with shares up about +63.7% YTD ahead of the results, riding a +24.4% May-to-date. 

10:52AM ET
Looking Ahead - May 30, 2017 - Personal Income and Spending Report

Market participants are apt to find plenty of pleasant distractions over the Memorial Day weekend, but when they return on Tuesday, they'll have to shift their focus quickly to an important economic report that will factor into second quarter GDP estimates and the Fed's monetary policy considerations.

Personal Income and Spending Report for April (Tuesday, May 30, at 8:30 a.m. ET)

  • Why it's important
    • Real personal consumption expenditures (PCE) account for 69% of GDP.  This report provides an insightful, and comprehensive, overview of personal spending on goods, nondurable goods, and services
    • This report breaks down the composition of personal income, which is the fuel for consumer spending
      • Employee compensation is the biggest component of personal income followed by personal current transfer receipts, personal income receipts on assets, proprietors' income, and rental income
    • The data for April is noteworthy since it will directly impact Q2 GDP forecasts
      • The Atlanta Fed's GDPNow Model forecast for real GDP growth in the second quarter is currently 4.1%
    • The PCE Price Index, which is part of the Personal Income and Spending Report, is the Federal Reserve's ("Fed") primary gauge for assessing inflation trends
    • The minutes from the May 2-3 FOMC meeting conveyed the reservations among some participants about softening inflation data. A weak inflation print in this report, and particularly in the core-PCE Price Index, could force a re-think of the expected rate hike at the June 13-14 FOMC meeting
      • The figure in focus won't be the month-over-month change. Rather, it will be the year-over-year change since the Fed is looking for progress toward its longer-run inflation target of 2.0% as part of its assessment for determining the path of monetary policy.

  • A closer look
    • Real PCE increased 0.3% in March and was up 2.8% year-over-year.  Real disposable personal income increased 0.5% in March and was up 2.4% year-over-year
    • The PCE Price Index was up 1.8% year-over-year in March, down from the 2.1% year-over-year change for February
    • The core PCE Price Index was up 1.6% year-over-year in March, down from the 1.8% year-over-year change for February

   

  • What's in play?

    • Treasuries (TBT, TLT, SHY, SCHO) 
    • S&P futures
    • Fed funds futures

    • Currencies
      • EUR/USD
      • USD/JPY
      • GBP/USD
      • USD/CHF

    • Index ETFs
      • SPDR S&P 500 ETF (SPY)
      • PowerShares QQQ Trust (QQQ)
      • iShares Russell 2000 (IWM)
      • SPDR Dow Jones Industrial Average ETF (DIA)

    • Consumer Discretionary Selects Sector SPDR ETF (XLY)

    • Rate-sensitive groups
      • Financials (XLF, KRE, KIE, IAK)
      • Utilities (XLU, VPU, IDU, FXU)
      • REITs (VNQ, IYR, ICF, REM)
      • Homebuilders (XHB, ITB)
      • Dividend Payers (VIG, DVY, SDY, VYM, HDV) 

10:04AM ET
Splunk trades lower on earnings/guidance; revenue mix and EMEA weakness seem to be why

Splunk (SPLK) is trading sharply lower today (-7%) after reporting Q1 (Apr) results last night. Many investors have probably heard the Splunk name but they do not really understand what they do. Basically, Splunk provides software that allows its customers to collect, index, search, monitor and analyze data regardless of format or source. Its software helps make sense of large and diverse data sets commonly referred to as big data and it's specifically tailored for machine data.

Machine data is produced by nearly every software application and electronic device at a company. Each thing that happens contains a time-stamped record of various activities, such as transactions, customer activities, and security threats. Beyond a company's traditional IT and security infrastructure, every processor-based system generates machine data.

Examples include HVAC controllers, manufacturing systems, smart electrical meters, GPS devices and radio-frequency identification tags, and many consumer-oriented systems, such as electronic wearables, mobile devices, automobiles and medical devices that contain embedded processor chips. These things are continuously generating machine data. Splunk's software helps make sense of all these data points in real-time so management and IT staff can make the correct operational decisions.

Its flagship product is Splunk Enterprise, a machine data platform, comprised of collection, indexing, search, reporting, analysis, alerting, monitoring and data management capabilities. Splunk Enterprise can collect and index hundreds of terabytes of machine data daily, irrespective of format or source. Its platform uses Splunk's patented data processing architecture that performs dynamic schema creation on the fly, enabling users to run queries on data without having to define or understand the structure of the data prior to collection and indexing. This is in contrast to traditional IT systems that require users to establish the format of their data prior to collection in order to answer a pre-set list of questions.

More than 13,000 customers in over 110 countries in a wide variety of industries use Splunk software and cloud services. For example, Dubai Airport uses Splunk Enterprise to create a real-time airport dashboard to visualize the complex operational processes at one of the world's busiest airports. They're using Splunk to gain insights into every passenger touch point to drive an excellent experience and to effectively deploy resources. Another good example is Dunkin' Donuts using Splunk Enterprise to analyze the preferences of its five million loyalty program members and gain real time insights into the effectiveness of their marketing campaigns.

Other recent new or expansion customers include Alabama Dept of Transportation, California Dept of Social Services, Experian Consumer Services, Jefferson County Public Schools, Lockheed Martin, Take-Two, UK Ministry of Defence. So you can see the wide variety of industries that use Splunk.

AprQ Analysis:

Turning to the Q1 (Apr) results, Splunk reported a non-GAAP loss of $(0.01) per share which was actually better than market expectations. Revenue rose 30.4% year/year to $242.4 mln, which was a good bit better than prior guidance of $231-233 mln. In terms of guidance, Splunk expects Q2 (Jul) revenue to come in around $267-269 mln, pretty much in-line with market expectations.

So why is the stock down? It seems the revenue mix was a bit disappointing as the market was hoping for better license revenue growth, which is higher margin. License revenue rose 16% YoY to $117 mln while Maintenance/Services revenue jumped 48% YoY to $126 mln. Also, license revenue as a percent of total revenue came in at 48% vs 54% in the year ago period. In fairness, part of the reason for such strong growth in the M&S segment was the fact that cloud more than doubled YoY to $17.7 mln. Its cloud business is included in its Services unit and investors should be happy to see nice growth there.

Another factor weighing on the stock was some weakness in its EMEA (Europe, Middle East, Africa) region. However, on the call, management said they have initiated a leadership change there. SPLK noted on the call that the TAM (total addressable market) in EMEA is as large as the US. Splunk remains really enthusiastic about EMEA longer term.

In sum, this was not a great quarter for Splunk, but it was not horrible. They reported nice upside for AprQ and the JulQ revenue guidance was decent. In fairness, the stock had run 12% since mid-April heading into this report. That's a big move for this stock which has basically just traded sideways for most of the past year. As such, perhaps expectations were set for perfection and investors were looking to lock in profits on any negativity.

09:28AM ET
Costco Climbs After Beating Estimates

Costco (COST 177.79, +3.06) has climbed 1.8% in pre-market after beating expectations for the third quarter. Today's gain puts the stock within ten points of its intraday record of $183.18, which was notched on May 4. Shares have enjoyed a steady uptrend in recent years, outperforming many other retailers who have been suffered due to growth at Amazon (AMZN 995.35, +1.97).

The wholesale retailer reported above-consensus third quarter earnings of $1.40 per share on revenue of $28.86 billion, which increased 7.8% year-over-year, exceeding expectations.

Total comparable sales grew 5.0% with increases across all segments. U.S. sales increased 6.0% to lead the way while Canada sales increased 2.0% and Other International Sales grew 4.0%. Excluding gasoline and the impact of foreign exchange, total comparable sales also increased 5.0%. U.S. sales grew 5.0%, Canada sales rose 3.0%, and Other International sales climbed 6.0%.

Membership fees increased 4.2% year-over-year to $644 million. Costco plans to increase membership fees by $5 on June 1, representing the first fee hike in six years.

Costco had 732 warehouses in operation at the end of the quarter with 510 locations in the United States and Puerto Rico.

09:25AM ET
Nutanix

After the close last night, cloud software developer Nutanix (NTNX) issued upside Q3 results while also providing Q4 revenue guidance that was ahead of the Capital IQ consensus. Specifically, it reported a loss per share of ($0.42), beating the ($0.45) consensus, with revenue rising 67% to $191.8 million, also exceeding the $185.6 million consensus. The solid report has shares popping by about 17% in pre-market trading. And, undoubtedly, NTNX was in need of some good news. Since closing at $37.50 the day after its IPO day (9/30/16), shares have cratered by about 55%.

Overview

For some quick background on the company, NTNX is a developer of computer storage technology which makes it easier and more cost-effective for companies to run servers. The technology it uses is called "hyperconverged", a cloud platform that converges traditional silos of servers, virtualization, and storage into one integrated system. NTNX's platform is comprised of two software product families: Acropolis and Prism. Here is a closer look at each:

  • Acropolis: This software delivers distributed storage, application mobility capability, and a built-in "hypervisor", which is software that allows multiple operating systems to share a single hardware host.
  • Prism: Prism provides integrated virtualization and infrastructure management, operational analytics, and administrative capabilities.

NTNX believes that its platform is much more agile that competitors since it converges silos, virtualization, and storage infrastructure into one system. To put that benefit into some context, an IDC study indicated that customers can deploy its technology in up to 85% less time than traditional infrastructure. Additionally, with NTNX's application, infrastructure can be provisioned in minutes with one click by a single IT administrator.


Quarterly Results

NTNX actually does has a track record of exceeding analysts' top and bottom line estimates. In fact, it has beaten the EPS and revenue consensus each of the three times it has issued quarterly results.

However, what has been the issue has been its guidance. In its Q2 report on March 2, NTNX issued EPS guidance that was well below expectations -- ($0.48)-($0.45) vs. the ($0.35) consensus. This instigated a 26% plunge in the stock the next day and shares continued to sink for several weeks thereafter. The stock finally bottomed at the beginning of May.

With the stock so battered and with a low bar to hurdle, the stage was set for a significant pop if NTNX delivered an upside report. As noted above, the company beat on both the top and bottom lines. One of the main catalysts for the upside report was that it added 790 new customers during the quarter. Furthermore, it had success winning larger deals. It ended the quarter with 34 customers at over $1.0 million in business during the quarter.

There are some blemishes to the report, though. For instance, gross margin declined materially to 56.6% from 62.2%. And, the company burned quite a lot more cash during the quarter than the year ago period. Free cash flow came in at ($29.2) million vs. ($11.0) million in 3Q16.

For now, though, the focus is on the better-than-expected headline numbers and the upside Q4 revenue guidance of $215-$220 million. Another key point is that with the dive in the stock price, the valuation has become considerably more attractive. At the moment, NTNX is trading with a 1-year forward P/S of about 2.5x. 

08:30AM ET
GameStop Beats Estimates, but Domestic Comparable Sales Decline

GameStop (GME 21.73, -1.89) has given up 8.0% in pre-market despite beating expectations for the first quarter. The decline leaves the stock roughly one point above this year's low.

The video game retailer reported above-consensus first quarter earnings of $0.58 per share on a 3.8% year-over-year increase in revenue to $2.05 billion, which was also ahead of expectations.

Consolidated comparable store sales grew 2.3%, which masked a 2.4% consolidated comparable store sales decline in the U.S. thanks to 17.1% growth in the international segment.

GameStop saw a spike in its new hardware sales, which jumped 24.6% to $389.90 million, mostly due to demand for the newly-released Nintendo Switch. Sales of Collectibles also showed strong growth, spiking 39.1% to $114.50 million, thanks to strong global sales of Pokemon-related products. GameStop opened nine Collectibles stores, increasing its total global count to 95.

While the company benefited from demand for the new Nintendo console, it is worth noting that hardware releases are infrequent and sales are likely to moderate after an initial surge, which will return focus to the company's core business, which is game sales.

New video game software sales fell 8.2% to $520.50 million due to difficult comparisons with highly-anticipated releases from last year. Pre-owned sales fell 6.2% to $526.20 million, which is roughly what the company expected.

Digital sales increased 3.0% to $44.10 million, but the segment makes up just 2.2% of total revenue. The small digital presence puts GameStop at a disadvantage, considering console and PC users have the option of purchasing many titles for instant delivery through avenues like PlayStation Store, Xbox Store, and Steam, among others.

Technology brands sales jumped 21.5% to $201.40 million thanks to growth at GameStop's AT&T authorized retail stores. Segment adjusted operating earnings declined 2.1% to $18.40 million.

Looking ahead, GameStop reiterated its expectations for full year earnings between $3.10 and $3.40 per share. Comparable store sales are expected between -5.0% and 0.0%.

08:12AM ET
Ulta Beauty Growth Prospects Still Glowing after Impressive Q1 Report

What's wrong with this picture?  Double-digit sales growth, double-digit comparable sales growth against a tough comparison, double-digit earnings per share growth, new store expansion, and increased guidance for the full year.  What's wrong is that you just don't hear that from the retailers these days.  That's why the first quarter earnings report from Ulta Beauty (ULTA 293.04) sounded so right.

Ulta Beauty delivered all of the above when it reported after Thursday's close.

Net sales increased 22.5% in the first quarter to $1.315 billion, comparable sales, which also include e-commerce sales, surged 14.3% on top of a 15.2% increase in the year-ago period, and its adjusted diluted earnings per share increased 31.7% to $1.91, which was ahead of the company's guidance of $1.75 to $1.80 and analysts' average expectation.

During the period, Ulta Beauty opened 18 new locations and closed two stores, which left it with 990 stores and 12% more square footage at the end of the first quarter versus the same period a year ago.

For good measure, Ulta Beauty also demonstrated that it can connect with its customers through the e-commerce channel without necessarily compromising sales at its own brick-and-mortar locations.  

E-commerce sales soared 70.9% to $104.3 million.  That represented approximately 340 basis points of the total company comparable sales increase.  In other words, if e-commerce sales are excluded, Ulta Beauty's comparable store sales still would have been up double digits.

The best reflection that Ulta Beauty is on point with its merchandising and marketing, however, is that the comparable sales increase for the period was driven by 8.7% transaction growth and 5.6% growth in average ticket, which is to say the company saw more business versus the year-ago period and its customers spending more on average than they did in the year-ago period.

Based on the fiscal 2017 guidance provided by Ulta Beauty, it doesn't sound as if the retailer is expecting that trend to change.  Including e-commerce, Ulta Beauty plans to achieve comparable sales growth of approximately 9% to 11% for the full year, compared to previous guidance of 8% to 10%.  E-commerce sales, meanwhile, are projected to grow 50%, versus prior guidance of 40%.

It is Ulta Beauty's plan to open approximately 100 net new stores and to deliver earnings per share growth in the mid-twenties percent range, compared to previous guidance of low-twenties percent range.  

That outlook includes the impact of a 53rd week this fiscal year and approximately $300 million in share repurchases, as well as second quarter sales in the range of $1.257 billion to $1.278 billion, comparable sales growth between 10% and 12%, and earnings per diluted share of $1.72 to $1.77.

Shares of Ulta Beauty, which are up 14.9% year-to-date and up 37.1% over the last 52 weeks, are trading 3% higher in pre-market action.  

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