Decoding lululemon's High P/E Ratio: Bargain Buy or Overpriced Risk?

Savers Value Village (SVV) came out with quarterly earnings of $0.15 per share, missing the Zacks Consensus Estimate of $0.17 per share. This compares to earnings of $0.16 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -11.76%. A quarter ago, it was expected that this retailer of second-hand merchandise would post earnings of $0.20 per share when it actually produced earnings of $0.14, delivering a surprise of -30%.

Over the last four quarters, the company has not been able to surpass consensus EPS estimates.

Savers Value, which belongs to the Zacks Textile - Apparel industry, posted revenues of $394.8 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.78%. This compares to year-ago revenues of $392.7 million. The company has not been able to beat consensus revenue estimates over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Savers Value shares have lost about 37.9% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for Savers Value?

While Savers Value has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Savers Value: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.12 on $397.47 million in revenues for the coming quarter and $0.51 on $1.54 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Textile - Apparel is currently in the bottom 41% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Lululemon (LULU), another stock in the same industry, has yet to report results for the quarter ended October 2024.

This athletic apparel maker is expected to post quarterly earnings of $2.73 per share in its upcoming report, which represents a year-over-year change of +7.9%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Lululemon's revenues are expected to be $2.35 billion, up 6.8% from the year-ago quarter.

Zacks Investment Research

The S&P 500 Index Thursday closed up +0.74%, the Dow Jones Industrials Index closed unchanged, and the Nasdaq 100 Index closed up +1.54%.

Stocks on Thursday extended their post-election rally, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 posting new all-time highs. Stocks are climbing on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation. The strength of chip stocks also boosted the overall market, led by a +4% jump in ARM Holdings Plc after it reported Q2 earnings and revenue above consensus. JPMorgan Chase fell more than -4% to weigh on the Dow Jones Industrials after being downgraded to underperform at Baird.

Stock indexes raced to their highs Thursday afternoon when the FOMC, as expected, lowered the fed funds target range by -25 bp to 4.50%-4.75% from 4.75%-5.00% and said risks to goals remain "roughly in balance."

Thursday’s US economic news was mixed. Weekly jobless claims and Sep consumer credit rose less than expected, but Q1 nonfarm productivity rose less than expected, and Q1 unit labor costs rose more than expected.

US weekly initial unemployment claims rose +3,000 to 221,000, showing a stronger labor market than expectations of 222,000.

US Q3 nonfarm productivity rose +2.2%, weaker than expectations of +2.5%. Q1 unit labor costs rose +1.9%, stronger than the expectations of +1.0%.

US Sep consumer credit rose +$6.002 billion, weaker than expectations of +$12.173 billion.

Fed Chair Powell said that while inflation has moved closer to the Fed's goal, core inflation is still "somewhat elevated." He added, "We don't think it's a good time to be doing a lot of forward guidance," and "we don't know what the timing or substance" of economic policy changes will be going forward.

Global equity markets have carryover support from Thursday’s +2% jump in China’s Shanghai Composite stock index to a 4-week high on signs of strength in China’s economy that is positive for global growth prospects. Today’s news showed China Oct exports rose +12.7% y/y, stronger than expectations of +5.0% y/y and the biggest increase in 2-1/4 years. However, China's imports fell -2.3% y/y, weaker than expectations of -2.0% y/y.

Of the companies in the S&P 500 that have released Q3 earnings so far, 78% surpassed estimates. According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% y/y increase in quarterly earnings in Q3, down from the +7.9% y/y growth consensus seen in July.

The markets are discounting the chances at 71% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets Thursday settled mixed. The Euro Stoxx 50 closed up +1.07%. China's Shanghai Composite Index climbed to a 4-week high and closed up +2.57%. Japan's Nikkei Stock 225 fell back from a 3-week high and closed down -0.25%.

Interest Rates

December 10-year T-notes (ZNZ24) Thursday closed up by +20.5 ticks. The 10-year T-note yield fell -12.0 bp to 4.312%. Dec T-notes rallied Thursday after the FOMC cut the fed funds target range by -25 bp. T-notes also rose on short covering from bond dealers covering short hedges they placed on T-notes during this week’s quarterly refunding, where the Treasury auctioned $125 billion of T-notes and T-bonds.

Gains in T-notes were limited after weekly US jobless claims rose less than expected, which is a sign of labor market strength that is hawkish for Fed policy. Also, Q1 nonfarm productivity rose less than expected and Q1 unit labor costs rose more than expected, bearish factors for T-notes. In addition, Thursday’s rally in the S&P 500 to a new record high curbed some safe-haven demand for T-notes.

European government bond yields on Thursday were mixed. The 10-year German bund yield climbed to a 3-1/2 month high of 2.498% and finished up +4.0 bp to 2.445%. The 10-year UK gilt yield fell -6.4 bp to 4.498%.

Eurozone Sep retail sales rose +0.5% m/m, stronger than expectations of +0.4% m/m, and Aug was revised upward to +1.1% m/m from the previously reported +0.2% m/m.

German trade data was better than expected as Sep exports fell -1.7% m/m, stronger than expectations of -2.4% m/m. Also, Sep imports rose +2.1% m/m, stronger than expectations of +0.6% m/m.

German Sep industrial production fell -2.5% m/m, weaker than expectations of -1.0% m/m.

As expected, the Bank of England (BOE) cut its benchmark interest rate by -25 bp to 4.75% from 5.00%. BOE Governor Bailey said we can't cut rates "too quickly or by too much" and that interest rates are likely to fall "gradually from here."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 14% for a -50 bp rate cut at the same meeting.

US Stock Movers

ARM Holdings Plc rose more than +4% to lead chip stocks higher after reporting Q2 revenue of $844 million, stronger than the consensus of $810.9 million. Also, Intel closed up more than +4% to lead gainers in the Dow Joines Industrials. In addition, Applied Materials , Advanced Micro Devices , Marvell Technology , and Lam Research closed up more than +3%. Finally,

Nvidia , KLA Corp , NXP Semiconductors NV , and Broadcom closed up more than +2%.

EPAM Systems closed up more than +14% to lead gainers in the S&P 500 after reporting Q3 revenue of $1.17 billion, better than the consensus of $1.15 billion, and forecasting Q4 revenue of $1.21 billion-$1.22 billion, well above the consensus of $1.15 billion.

Warner Bros Discovery closed up more than +11% after reporting Q3 total subscribers of 110.5 million, well above the consensus of 109.01 million.

McKesson is up more than +10% after reporting Q2 adjusted EPS of $7.07, better than the consensus of $6.88, and raising its 2025 adjusted EPS forecast to $32.40-$33.00 from a previous forecast of $31.75-$32.55, stronger than the consensus of $32.00.

Vistra Corp closed up more than +7% after it boosted its full-year ongoing operations adjusted Ebitda forecast to $5.00 billion-$5.20 billion from a prior forecast of $4.55 billion-$5.05 billion.

Take-Two Interactive Software closed up more than +7% after reporting Q2 net bookings of $1.47 billion, above the consensus of $1.44 billion.

Ralph Lauren closed up more than +6% after raising its 2025 revenue growth estimate to +3% to +4% from a previous estimate of +2% to +3%, above the consensus of +2.92%.

Lyft closed up more than +22% after reporting Q3 gross bookings of $4.11 billion, stronger than the consensus of $4.08 billion, and forecasting Q4 gross bookings of $4.28 billion-$4.35 billion, well above the consensus of $4.23 billion.

Match Group closed down more than -17% to lead losers in the S&P 500 after reporting Q3 revenue of $895.5 million, below the consensus of $900.9 million, and forecasting Q4 revenue of $865 million-$875 million, weaker than the consensus of $905.9 million.

MercadoLibre closed down more than -16% to lead losers in the Nasdaq 100 after reporting Q3 adjusted Ebitda of $714.0 million, well below the consensus of $927.7 million.

Corteva closed down more than -5% after cutting its full-year net sales forecast to $17.0 billion-$17.2 billion from a previous forecast of $17.2 billion-$17.5 billion, weaker than the consensus of $17.21 billion.

Rockwell Automation closed down more than -5% after forecasting 2025 adjusted EPS of $8.60-$9.80, well below the consensus of $10.57.

JPMorgan Chase closed down more than -4% to lead losers in the Dow Jones Industrials after Baird downgraded the stock to underperform from neutral with a price target of $200.

Steris Plc closed down more than -5% after reporting Q2 healthcare revenue of $944.2 million, below the consensus of $944.8 million, and Q2 life sciences revenue of $127.9 million, weaker than the consensus of $130.7 million.

KeyCorp closed down more than -4% after Citigroup downgraded the stock to neutral from buy with a price target of $19.

Earnings Reports (11/8/2024)

Advanced Drainage Systems Inc (WMS), Baxter International Inc (BAX), CNH Industrial NV (CNH), Dillard's Inc (DDS), Flowers Foods Inc (FLO), Fortrea Holdings Inc (FTRE), Lamar Advertising Co (LAMR), NRG Energy Inc (NRG), Paramount Global (PARA), RB Global Inc (RBA).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

Inter Parfums, Inc. IPAR reported impressive third-quarter 2024 results, showcasing strong year-over-year growth in the top and bottom lines. While sales matched the Zacks Consensus Estimate, the company outperformed expectations on earnings. Sales benefited from continued momentum in the fragrance market, the strength of legacy and new brands, effective advertising and promotional efforts and an extensive global distribution network.

The quarter’s record-breaking sales were driven by continued demand across global markets, particularly in North America, Western Europe and Asia/Pacific, where sales rose 12%, 25% and 15%, respectively. Central and South America also posted strong growth of 20%, while Eastern Europe rebounded with a 23% increase after a soft start earlier in the year due to supply-chain challenges. Although sales in China remain modest, plans are underway to boost promotional activities next year, with a gradual expansion targeted for 2026.

In addition to regional growth, the inclusion of new brands such as Roberto Cavalli and Lacoste has been a notable success, contributing 10% to quarterly sales. The company is confident that sales from these brands will exceed $100 million in 2024.

Inter Parfums remains optimistic about the final quarter and finishing 2024 on a solid note. Management has reiterated its full-year guidance. The company also informed that distributors and retailers have responded favorably to its 2025 product lineup, which is encouraging as the fragrance market shows signs of moderation.

IPAR Q3 Performance in Detail

Inter Parfums posted earnings of $1.93 per share, up 16% from the year-ago quarter’s figure. The metric surpassed the Zacks Consensus Estimate of $1.83 per share.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Quarterly net sales reached $424.6 million, reflecting a year-over-year increase of 15%. The growth was fueled by established and newly introduced fragrance brands.

Sales in European-based operations surged 21% to $282 million. This growth was propelled by the exceptional performance of the Jimmy Choo and Montblanc brands, which saw sales increases of 17% and 10%, respectively. Jimmy Choo’s sales acceleration was fueled by the launch of “I Want Choo Le Parfum”, while Montblanc’s sales were boosted by the continued success of the “Explorer and Legend” lines.

Coach, one of the company’s largest brands, maintained sales levels comparable to the third quarter of 2023, a period when Coach sales rose by 32%. This solid sales performance was also complemented by the debut of the “Lacoste Original” line.

IPAR’s U.S. operations sales rose 9% year over year to $146 million in the third quarter. The company’s largest U.S. brand, GUESS, saw a 16% rise in sales during this period, driven by the ongoing popularity of its legacy fragrances and the successful launch of GUESS Iconic.

Sales from the second-largest brand, Donna Karan/DKNY, grew 4%. Now in its third year with the company, the brand has introduced “DKNY 24/7”, which started a global rollout in September after a successful limited release over the summer.

Interparfums, Inc. Price, Consensus and EPS Surprise

Interparfums, Inc. price-consensus-eps-surprise-chart | Interparfums, Inc. Quote

Focus on IPAR’s Margins

IPAR’s consolidated gross profit rose 15.4% year over year to $271.2 million, whereas the gross margin remained flat at 63.9%.

During the quarter, selling, general and administrative expenses (SG&A) increased 11.7% to $165.2 million. As a percentage of sales, SG&A expenses contracted 130 basis points to 38.9%. Advertising and Promotion (A&P) expenses rose 6% and represented 15.7% of net sales. Management foresees a significant increase in A&P spending in the final quarter owing to the holiday season.

The company’s operating income came in at $106 million, up from the $87.2 million reported in the year-ago quarter. The operating margin expanded 130 basis points to 25%.

A Sneak Peek Into IPAR’s Financial Aspects

Inter Parfums ended the quarter with cash and cash equivalents of $78.4 million, long-term debt (excluding the current portion) of $134.6 million and total equity of $985.1 million.

IPAR Maintains 2024 View

With a strategic focus on innovation and product launches, Inter Parfums is well-positioned in the ongoing dynamic. The strength of a diverse brand portfolio, combined with the flexible operating model, should help it gain market share. All said, management reiterated its guidance for 2024.

For the full year, the company continues to anticipate net sales of $1.45 billion and earnings of $5.15 per share. This guidance suggests 10% growth in net sales and an 8% increase in the bottom line from the 2023 levels.

This Zacks Rank #2 (Buy) stock has risen 8.1% in the past six months against the industry’s decline of 13.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks Looking Red Hot

Gildan Activewear Inc. GIL, which manufactures and sells various apparel products, currently carries a Zacks Rank #2. GIL has a trailing four-quarter earnings surprise of 5.4%, on average.

The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales and earnings implies growth of 1.5% and 15.6% from the year-ago reported numbers.

Kontoor Brands, Inc. KTB, a lifestyle apparel company, currently carries a Zacks Rank #2. KTB has a trailing four-quarter earnings surprise of 12.8%, on average.

The Zacks Consensus Estimate for Kontoor Brands’ current financial-year earnings indicates growth of 13.2% from the year-ago reported numbers.

Ralph Lauren Corporation RL, a global leader in the design, marketing and distribution of luxury lifestyle products, currently carries a Zacks Rank #2. RL has a trailing four-quarter earnings surprise of 10.3%, on average.

The Zacks Consensus Estimate for Ralph Lauren’s current financial year’s sales and earnings implies growth of 1.8% and 9.2%, respectively, from the year-ago reported numbers.

Zacks Investment Research

Ralph Lauren Corporation RL posted impressive second-quarter fiscal 2025 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. Results have gained from robust demand and brand strength.

RL reported adjusted earnings per share of $2.54, which surpassed the consensus estimate of $2.43. Also, the bottom line increased from $2.10 per share in the year-earlier quarter.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Net revenues grew 6% year over year to $1,726 million and beat the Zacks Consensus Estimate of $1,673 million. On a constant-currency (cc) basis, revenues were up 6% from the year-ago quarter. The top line witnessed growth across all regions, driven by brand strength, pricing efforts and continued strategic investments.

Global direct-to-consumer comparable store sales (comps) jumped 10%, backed by continued brand elevation, double-digit increases in average unit retail (AUR) and positive retail comps at all regions. The top line benefited by nearly 10 basis points (bps) from foreign currency rates.

Ralph Lauren Corporation Price, Consensus and EPS Surprise

Ralph Lauren Corporation price-consensus-eps-surprise-chart | Ralph Lauren Corporation Quote

Ralph Lauren’s shares have risen more than 10% in the pre-trading session today on impressive quarterly performance and raised outlook for fiscal 2025. The company has raised the revenue and adjusted operating margin view for the current fiscal year, backed by strength in brands and favorable business trends. Shares of this Zacks Rank #3 (Hold) company have gained 5.9% in the past three months against the industry’s 4.1% decline.

Ralph Lauren’s Segmental Details

North America: The segment’s revenues were up 3% year over year to $739.5 million. Comps for North America’s retail channel rose 6% year over year, while the same for brick-and-mortar stores moved up 9%. Digital commerce fell 2%. Revenues from the North America wholesale business dipped 3% year over year.

Europe: The segment’s revenues rose 7% year over year to $565.9 million. The metric was up 6% on a currency-neutral basis. Comps for the retail channel in Europe were up 15%, while brick-and-mortar stores grew 15% year over year. Digital sales witnessed a 14% rise. Revenues for the segment’s wholesale business increased 2% on a reported basis and rose slightly on a cc basis.

Asia: The segment’s revenues increased 9% year over year to $380.2 million on a reported basis and 10% on a currency-neutral basis. Comps in Asia were up 11%, backed by 10% growth in brick-and-mortar stores and a 19% increase in the digital business.

A Look at RL’s Margins & Costs

Ralph Lauren's adjusted gross profit margin expanded 160 bps year over year to 67%. This was mainly driven by positive product, channel and geographic mix shifts, reduced cotton costs and AUR growth in all regions.

Adjusted operating expenses rose 7% from the year-ago period to $958 million. Adjusted operating expenses, as a percentage of sales, expanded 60 bps to 55.5%, due to increased marketing investments on planned timing of key campaigns. Excluding marketing expenses, the adjusted operating expense rate was flat year over year.

The company’s adjusted operating income was $197.3 million, up 14.9% from the year-earlier quarter. The adjusted operating margin increased 90 bps year over year to 11.4%.

Ralph Lauren’s Financials

Ralph Lauren ended the quarter with cash and short-term investments of $1.0037 billion, a total debt of $1.1 billion and total shareholders’ equity of $2.4 billion. Inventory fell 6% year over year to $1.1 billion at the end of the quarter.

The company repurchased nearly $100 million of Class A common stock in the quarter. RL returned about $375 million to shareholders via dividend and repurchases of Class A common stock. It paid a regular quarterly cash dividend of 82.50 cents per share in the fiscal second quarter, totaling $98.9 million in the first six months.

The company incurred $75.1 million in capital expenditures compared with $82.4 million in the year-ago period. Management expects capital expenditure to be in the range of $250-$300 million for fiscal 2025.

Ralph Lauren’s Store Update

As of Sept. 28, 2024, Ralph Lauren had 570 directly operated stores and 682 concession shops globally. The directly operated stores included 238 Ralph Lauren and 332 Outlet stores. The company operated 106 licensed partner stores globally as of the same date.

RL’s Outlook For Q3 & FY25

For fiscal 2025, RL continues to anticipate year-over-year revenue growth (at cc) in the band of 3-4% compared with the prior range of 2-3%. This includes 40-60 bps of adverse impacts of currency.

Management now expects the operating margin to grow in the range of 110-130 bps at cc on higher gross margin and leveraged operating costs. Earlier, management had predicted the operating margin to increase in the band of 100-120 bps. The gross margin is likely to increase in the band of 80-120 bps in cc compared with 50-100 bps expected earlier. Foreign currency is anticipated to hurt gross and operating margins by about 20 bps. The fiscal tax rate is likely to be in the range of 22-23%.

For the fiscal third quarter, management anticipates revenues to grow nearly 3-4% on a cc basis. This includes nearly 10-50 bps of positive foreign currency impacts. Operating margin is likely to expand around 100-140 bps in cc on higher gross margins. Foreign currency is likely to have a neutral effect on the gross and operating margins . The quarterly tax rate is likely to be 22%.

Key Picks

Some better-ranked companies are G-III Apparel Group GIII, Gildan Activewear GIL and lululemon athletica LULU.

G-III Apparel sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

GIII Apparel has a trailing four-quarter earnings surprise of 118.2%, on average. The Zacks Consensus Estimate for GIII’s fiscal 2024 sales indicates an increase of 3.3% from the year-ago period’s level.

Gildan Activewear carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.5%, on average.

The consensus estimate for Gildan Activewear’s current financial-year sales and EPS indicates growth of 1.5% and 14%, respectively, from the year-ago levels.

lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS indicates growth of 9.2% and 9.8%, respectively, from the year-ago figures. LULU has a trailing four-quarter earnings surprise of 7.9%, on average.

Zacks Investment Research

The S&P 500 Index today is up +0.65%, the Dow Jones Industrials Index is up +0.07%, and the Nasdaq 100 Index is up +1.22%.

Stocks today are moderately higher, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 posting new all-time highs. Stocks today added to their post-election gains on speculation President-elect Trump will boost corporate profits through his pro-growth policies. The strength of chip stocks is also boosting the overall market, led by a +5% jump in ARM Holdings Plc after it reported Q2 earnings and revenue above consensus. Today’s US economic news was mixed. Weekly jobless claims rose less than expected, but Q1 nonfarm productivity rose less than expected, and Q1 unit labor costs rose more than expected.

US weekly initial unemployment claims rose +3,000 to 221,000, showing a stronger labor market than expectations of 222,000.

US Q3 nonfarm productivity rose +2.2%, weaker than expectations of +2.5%. Q1 unit labor costs rose +1.9%, stronger than the expectations of +1.0%.

Global equity markets have carryover support from today’s +2% jump in China’s Shanghai Composite stock index to a 4-week high on signs of strength in China’s economy that is positive for global growth prospects. Today’s news showed China Oct exports rose +12.7% y/y, stronger than expectations of +5.0% y/y and the biggest increase in 2-1/4 years. However, China's imports fell -2.3% y/y, weaker than expectations of -2.0% y/y.

The markets are focused on (1) the results of the FOMC meeting today (-25 bp rate cut expected) and post-meeting comments from Fed Chair Powell, and (2) Q3 corporate earnings results with nearly 20% of the S&P 500 companies scheduled to report this week.

Of the companies in the S&P 500 that have released Q3 earnings so far, 78% surpassed estimates. According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% y/y increase in quarterly earnings in Q3, down from the +7.9% y/y growth consensus seen in July.

The markets are discounting the chances at 100% for a -25 bp rate cut at today's FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed. The Euro Stoxx 50 is up +1.13%. China's Shanghai Composite Index climbed to a 4-week high and closed up +2.57%. Japan's Nikkei Stock 225 fell back from a 3-week high and closed down -0.25%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +16 ticks. The 10-year T-note yield is down -7.1 bp to 4.361%. Dec T-notes are moderately higher on expectations for the FOMC later today to cut the fed funds target range by -25 bp. T-notes are also climbing on some short covering from bond dealers covering short hedges they placed on T-notes during this week’s quarterly refunding, where the Treasury auctioned $125 billion of T-notes and T-bonds.

Gains in T-notes are limited after weekly US jobless claims rose less than expected, which is a sign of labor market strength that is hawkish for Fed policy. Also, Q1 nonfarm productivity rose less than expected and Q1 unit labor costs rose more than expected, bearish factors for T-notes. In addition, today’s rally in the S&P 500 to a new record high has curbed some safe-haven demand for T-notes.

European government bond yields today are mixed. The 10-year German bund yield climbed to a 3-1/2 month high of 2.498% and is up +1.3 bp to 2.417%. The 10-year UK gilt yield is down -7.5 bp to 4.487%.

Eurozone Sep retail sales rose +0.5% m/m, stronger than expectations of +0.4% m/m, and Aug was revised upward to +1.1% m/m from the previously reported +0.2% m/m.

German trade data was better than expected as Sep exports fell -1.7% m/m, stronger than expectations of -2.4% m/m. Also, Sep imports rose +2.1% m/m, stronger than expectations of +0.6% m/m.

German Sep industrial production fell -2.5% m/m, weaker than expectations of -1.0% m/m.

As expected, the Bank of England (BOE) cut its benchmark interest rate by -25 bp to 4.75% from 5.00%. BOE Governor Bailey said we can't cut rates "too quickly or by too much" and that interest rates are likely to fall "gradually from here."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 17% for a -50 bp rate cut at the same meeting.

US Stock Movers

ARM Holdings Plc is up more than +6% to lead chip stocks higher after reporting Q2 revenue of $844 million, stronger than the consensus of $810.9 million. Also, Intel is up more than +3% to lead gainers in the Dow Joines Industrials. In addition, Applied Materials , Advanced Micro Devices , Marvell Technology , and Broadcom are up more than +2%. Finally, Nvidia , KLA Corp , and Lam Research are up more than +1%.

EPAM Systems is up more than +14% after reporting Q3 revenue of $1.17 billion, better than the consensus of $1.15 billion, and forecasting Q4 revenue of $1.21 billion-$1.22 billion, well above the consensus of $1.15 billion.

Warner Bros Discovery is up more than +15% to lead gainers in the S&P 500 and the Nasdaq 100 after reporting Q3 total subscribers of 110.5 million, well above the consensus of 109.01 million.

Vistra Corp is up more than +10% after it boosted its full-year ongoing operations adjusted Ebitda forecast to $5.00 billion-$5.20 billion from a prior forecast of $4.55 billion-$5.05 billion.

McKesson is up more than +10% after reporting Q2 adjusted EPS of $7.07, better than the consensus of $6.88, and raising its 2025 adjusted EPS forecast to $32.40-$33.00 from a previous forecast of $31.75-$32.55, stronger than the consensus of $32.00.

Take-Two Interactive Software is up more than +5% after reporting Q2 net bookings of $1.47 billion, above the consensus of $1.44 billion.

Ralph Lauren is up more than +5% after raising its 2025 revenue growth estimate to +3% to +4% from a previous estimate of +2% to +3%, above the consensus of +2.92%.

Lyft is up more than +27% after reporting Q3 gross bookings of $4.11 billion, stronger than the consensus of $4.08 billion, and forecasting Q4 gross bookings of $4.28 billion-$4.35 billion, well above the consensus of $4.23 billion.

Match Group is down more than -17% to lead losers in the S&P 500 after reporting Q3 revenue of $895.5 million, below the consensus of $900.9 million, and forecasting Q4 revenue of $865 million-$875 million, weaker than the consensus of $905.9 million.

MercadoLibre is down more than -14% to lead losers in the Nasdaq 100 after reporting Q3 adjusted Ebitda of $714.0 million, well below the consensus of $927.7 million.

Corteva is down more than -6% after cutting its full-year net sales forecast to $17.0 billion-$17.2 billion from a previous forecast of $17.2 billion-$17.5 billion, weaker than the consensus of $17.21 billion.

Rockwell Automation is down more than -4% after forecasting 2025 adjusted EPS of $8.60-$9.80, well below the consensus of $10.57.

JPMorgan Chase is down more than -3% to lead losers in the Dow Jones Industrials after Baird downgraded the stock to underperform from neutral with a price target of $200.

KeyCorp is down more than -3% after Citigroup downgraded the stock to neutral from buy with a price target of $19.

Earnings Reports (11/7/2024)

Air Products and Chemicals Inc (APD), Airbnb Inc (ABNB), Akamai Technologies Inc (AKAM), Arista Networks Inc (ANET), Axon Enterprise Inc (AXON), Becton Dickinson & Co (BDX), Consolidated Edison Inc (ED), Corpay Inc (CPAY), Duke Energy Corp (DUK), EOG Resources Inc (EOG), EPAM Systems Inc (EPAM), Evergy Inc (EVRG), Expedia Group Inc (EXPE), Fortinet Inc (FTNT), Halliburton Co (HAL), Hershey Co/The (HSY), Insulet Corp (PODD), Kenvue Inc (KVUE), Mettler-Toledo International Inc (MTD), Moderna Inc (MRNA), Molson Coors Beverage Co (TAP), Monster Beverage Corp (MNST), Motorola Solutions Inc (MSI), News Corp (NWSA), PG&E Corp (PCG), Ralph Lauren Corp (RL), Rockwell Automation Inc (ROK), Solventum Corp (SOLV), Tapestry Inc (TPR), TransDigm Group Inc (TDG), Viatris Inc (VTRS), Vistra Corp (VST), Warner Bros Discovery Inc (WBD).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.