Futures down, Walmart plunges, Palantir slips again, TSX earnings parade
Well, now the 5-year old wants her ears pierced. My husband wasn’t thrilled at the idea of the 7-year old getting it done. So when our middle brought it up, he kept making strange faces at me. It was only later I realized it was an attempt at “I-told-you-so” eyes. Having never been right before, he was unpracticed in how to convey that message.
A new episode of In the Money with Amber Kanwar is out now! I speak with Jamie Murray of the Murray Wealth Group who specializes in finding unloved stocks. We talk about which unloved stocks he would take a run at plus names his best three investing ideas right now. Listen on Apple, Spotify or here.
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Iceberg: Most of the action is below the surface this morning with futures indicating a slightly lower open while we see big swings in stocks under the hood. Retailers are getting hit from disappointing Walmart numbers (more on that below). This morning’s pullback comes after the S&P 500 hit a record high yesterday while the TSX remains less than 1% away from an all-time high. Gold is also hitting fresh records this morning. Today’s tape will be guided mostly by earnings, however, there are also four Fed speakers today. Their comments on interest rates could move the markets. Keep on eye on lumber stocks at the open after US President Donald Trump said he will announced tariffs on the sector next month (watch names like Interfor, Canfor and West Fraser Timber).
Consumer reports: Shares of Walmart are down 5.5% in the pre-market after its profit forecast fell short of expectations and it warned that sales growth this year will be lower than last year (3-4% vs 5% last year). The results are sending a chill across the entire consumer complex with shares of Target and Costco also trading down. While Walmart has historically been conservative in its forecast, investors are in no mood given the stock has run up 80% in the last year. It’s not the only laggard in retail this morning. Wayfair is also falling (-6%) after posting a wider than expected loss on no revenue growth. High-flying used car retailer Carvana is also slipping (-10%) as revenue per vehicle dropped. There are some bright spots in retail this morning. Shares of Alibaba are popping (+11%) although the story is less about retail and more about growth in cloud computing. The stock is now sitting at a 3-year high, but still off 60% from the pandemic peak and only just now getting back to where it traded when it went public 10 years ago. Canadian Tire is getting upgraded at BMO following the sale of its HellyHansen unit for $1.28 billion (it rallied +3.5% yesterday on the news). BMO thinks the stock’s recent share price decline (down 9% over the last month) is a buying opportunity and there is more upside than downside for the stock. Evan Mancer of Cardinal Capital also liked this one when he appeared on the podcast this week. You can get his thoughts here at 40:40.
Bears come out: Palantir is slipping again in the pre-market (-2.7%) after dropping 10% yesterday. The best performing stock on the S&P 500 so far this year got hit by headlines that the Department of Defense plans to reduce US military spending by 8% over the next 5 years. Palantir gets about 55% of its revenue from the US government. Investors are nervous about what reduced spending means for the company that trades at 208x forward earnings. Dan Ives of Wedbush says this is a buying opportunity. “The bears which have hated Palantir from $12 to $120 in the last 18 months now have found their latest ‘silver bullet’ negative thesis around (Palantir),” he wrote in a note to clients. He believes spending cuts are an opportunity as the government will turn to Palantir to implement technology that reduces expenses. “Palantir’s unique software approach will enable the company to gain MORE IT budget dollars at the Pentagon….not less despite these initial knee jerk reactions from the Street,” wrote Ives.
Marching to the beat: Manulife beat profit expectations with core earnings increasing 12% from last year supported by share buybacks. Asia was a bright spot, however, many analysts are saying earnings quality was poor due to a big gap between core earnings and reported earnings (this can happen because of one-off insurance losses or market swings). Shares of Cameco are up 2% after the uranium producer beat profit expectations and gave a production forecast that met expectations. I’ll watch Hydro One at the open after it beat profit expectations and boosted its profit forecast for the next 5 years. Consensus was already there, so we will see if it moves the stock. Teck Resources beat earnings per share expectations, demonstrated progress on paying down debt and notched record copper production for the year.
Meet the misses: Nutrien is higher in the pre-market despite profit missing expectations. Margins in its retail business came in stronger than anticipated after a period of weakness. “Overall, we think Q4 results are positive for the shares, as we’re seeing improvements in Retail margins and positive progress in both Brazil and the rest of Latam,” wrote Scotia’s Ben Isaacson. Loblaw missed profit expectations ever so slightly, but still posted healthy growth of 10% from last year. Under the hood, the results look solid with food growth coming in better than expected and strong pharmacy sales. E-commerce was also a bright spot with 18% growth in the quarter. “Loblaw leads publicly-traded peers on e-commerce penetration,” wrote RBC’s Irene Nattel.
