America votes, 23 TSX companies report earnings, Palantir pops, Ferrari hits the brakes
Well, today is the day. Americans are heading to the polls in an election that has had no shortage of curveballs. Accents changed, garbage trucks were mounted, and, as Bespoke pointed out in their weekend note, a Cheney campaigned for the Democrats and a Kennedy campaigned for the Republicans.
Nauseously optimistic: Futures are a little higher after a modest sell-off yesterday. Aside from the election we will get a read of US ISM services sector at 10amET which is expected to decelerate. There are 23 TSX composite companies reporting today including Fortis, Pet Valu and Restaurant Brands. There are 18 companies on the S&P 500 reporting today. Of course, election is front and centre. “The markets will be fine whoever wins,” wrote David Lutz of Jones Trading in his morning note, “But won’t be fine if we don’t have a winner announced this week.” That feels comforting, but is the first part of the sentence true? As Scotia points out this morning, equity valuations were lower back in 2016 than they are now. Back then the S&P500 trailing P/E ratio stood at about 19.1x earnings and the 1-year forward P/E ratio was at about 18.1x in early November 2016. “Today, those same ratios are at 26.1 and 24.3x respectively,” Scotia wrote in their economics note, “Bubble risk is a more serious factor this time.” Chart below.
Success is the best revenge: Shares of Palantir are up 15% in the pre-market after earnings bested results. Palantir does huge business with the US government as well as industries that use their AI driven technology to analyze data and predict outcomes. Sales grew 30%, profit reached a record, and the company boosted its forecast for the year. The stock is poised to open at a record high but still has its fair share of haters. Despite gaining 140% so far this year, there are only four buy ratings, 10 holds and six sells which is high for any stock let alone one that is directly in the AI wheelhouse.
Unappetizing: Shares of Restaurant Brands International are a little lower right now after the parent company of Tim Hortons and Burger King showed slower than expected sales growth. Timmys was actually a bright spot, it was the only chain to post sales growth while Burger King and Popeyes saw sales decline. Yum Brands owner of KFC and Taco Bell in the US isn’t doing much better. Sales dropped 2% system-wide at Yum with KFC in particular posting its third straight quarterly decline.
Pump the brakes: Share of Ferrari are down as quarterly results prove they are not immune to the slowdown in luxury spending or in vehicle sales. Shipments of its luxury cars declined in the third quarter with a nearly 30% drop in China. Remember, Ferrari has held up very well compared to other automakers and other luxury goods stocks. While today’s results show they are not immune to issues in China or luxury in general, it is worth noting they maintained their financial forecasts. The stock is down about 4% this morning but would likely be down more if they warned about future results. This morning’s decline barely dents the 40% rally in the stock so far this year.
Insurance: I’ll watch shares of Sunlife this morning. The insurance company reported last night with earnings beating expectations. Their US group and dental business rebounded after weakness last quarter and they are boosting their dividend 4%. Sunlife shares of lagged Manulife over the past year, we will see if this quarter convinces investors to take a look.
