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The Q3 earnings season comes charging in with companies like Citigroup (C), Delta Air Lines (DAL), Domino’s Pizza (DPZ), JPMorgan Chase (JPM), Morgan Stanley (NYSE:MS), PepsiCo (NASDAQ:PEP), UnitedHealth (UNH) and Walgreens Boots Alliance (WBA) all set to report. The economic calendar is also busy with updates on the NFIB small-business index, initial and continuing jobless claims, retail sales data, and consumer sentiment – although the primary focus will be on hot reads on inflation with the producer prices report and consumer prices report due in. The September PPI report on October 12 is expected to show a 0.1% month-to-month drop. After stripping out food and energy costs, PPI is forecast to rise 0.3% from August and 7.3% compared to a year ago. Bank of America forecasts a below-consensus flat PPI reading following two consecutive monthly declines, which could tamp down some inflation fears. However, any optimism will be tested when CPI comes in on the next day. BofA forecast a decline in the year-over-year inflation to 8.1% from 8.3% in August, while a modest acceleration in monthly headline CPI is anticipated to reflect a slower decline in energy prices (-3.5% M/M), continued elevated food inflation (+0.7%), and strong core inflation (+0.4%). The firm thinks core goods inflation will advance by 0.2% and core services will rise by 0.5%. While rent prices have moderated, that is not expected to impact the CPI print this month.
Earnings spotlight: Tuesday, October 11 – VOXX International (NASDAQ:VOXX)
Earnings spotlight: Wednesday, October 12 – PepsiCo (PEP) and Duck Creek Technologies (DCT)
Earnings spotlight: Thursday, October 13 – BlackRock (BLK), Delta Air Lines (DAL), Domino’s Pizza (DPZ), Fastenal (FAST), Taiwan Semiconductor (TSM), and Walgreen Boots Alliance (WBA).
Earnings spotlight: Friday, October 14 – Citigroup (C), JPMorgan Chase (JPM), Morgan Stanley (MS), Wells Fargo (NYSE:WFC), U.S. Bancorp (USB), and UnitedHealth Group (UNH).
IPO preview: IPOs that could start trading next week include biopharma Genelux Corporation (GNLX) and tech firm Beamr Imaging Ltd (BMR). The quiet periods on Corebridge Financial (CRBG), Third Harmonic Bio (THRD), and Linkbancorp (LNKB) to free up analysts to post ratings. The IPO lockup periods expire on blocks of shares of Excelerate Energy (EE), Applied Blockchain (NASDAQ:APLD), Genius Group (NYSE:GNS), and Netcapital (NCPL).
Bank earnings report preview: The Q3 earnings season begins next week with major banks reporting on October 14. Citigroup has predicted a strong earnings beat and share price pop for JPMorgan Chase (JPM) off better-than-expected net interest income. In addition, the bank’s guidance for NII is expected to be revised higher as JPM is said to have been more disciplined than others on deploying cash, and now has the opportunity to extend duration at higher rates. The firm also upgraded Bank of New York Mellon (BNY) shares to a buy rating ahead of the earnings blitz because of the bank’s relatively lower exposure to loan losses and strong return outlook. Oppenheimer is generally positive on bank stocks due to cheap valuation. The firm also noted that in in two of the last three recessions, bank stocks bottomed relative to the market either at the beginning or well before the recession began. Oppenheimer’s favorite names are Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Jefferies (JEF), Morgan Stanley (MS), and U.S. Bancorp (USB). In its bank preview, Morgan Stanley warned that inflation plus QT is a recipe for volatility. “Throw in rapidly rising, higher for longer rates and higher capital requirements and you get an accelerating credit cycle,” noted MS. With defense seen as the best offense in the current backdrop, the firm recommends leaning into M&T Bank (NYSE:MTB), Regions Financial (RF), Wells Fargo (WFC), and First Republic Bank (FRC).
PepsiCo earnings preview: The consumer staples sector will get a major test on October 12 when PepsiCo (PEP) reports. Consensus expectations are for PepsiCo to report revenue of $20.8B and EPS of $1.84. Impressively, PepsiCo has beaten revenue and EPS estimates in 8 straight quarters. On Wall Street, Morgan Stanley is positive on PepsiCo (PEP) and expects the food and beverage giant to top expectations. PepsiCo is noted to have very strong pricing power and is further decoupling favorably vs CPG peers, which is increasingly evident in recent U.S. scanner data. Strong organic sales guidance is anticipated from the food and beverage giant. Importantly, PEP is also said to have less FX macro risk than mega-cap peers, positioning it well in the current environment.
Eyes on gaming: The casino sector will have its focus on the Global Gaming Expo event next week. Speakers include Wynn Resorts’ (WYNN) Craig Billings, FanDuel’s (OTCPK:PDYPY) Amy Howe, Bally’s Corporation (NYSE:BALY) Soo Kim, DraftKings’ (NASDAQ:DKNG) Jason Robins, Circa Resort and Casino’s Derek Stevens, and Penn Entertainment’s (PENN). Other companies making an appearance include Agilys (AGYS), Light & Wonder (LNW), Galaxy Gaming (OTCQB:GLXZ), TransAct Technologies (TACT). Everi Holdings (EVRI), PlayAGS (AGS). In a recent look at the sector, Roth Capital Partners said investors continue to overlook regional gaming resiliency, where Q3 gross gaming revenue is tracking higher year-over-year for the seventh consecutive quarter. During the Global Gaming Expo, the firm expects management teams to echo recent commentary towards consistent GGR trends from July to September. Meanwhile, Macquarie warned that the broader macro deceleration “canaries” are chirping louder, particularly related to the low-end consumer. However, with gaming stocks down 31% YTD, the firm believe there’s already a revision cut assumed in the names. Casino operators are noted to now be trading at 8X and casino suppliers at 6X to 7X EV/EBITDA estimates for two years out.
Corporate events: A vote is scheduled on extending the deadline on the Digital World Acquisition Corp. (NASDAQ:DWAC) SPAC deal with Truth Social on October 10. The two-day Robin Hood conference begins in New York on October 11. The event will feature stock picks and investing discussions. Participants include J.P. Morgan, Citadel, BlackRock, Coatue, Bridgewater Associates, Greenlight Capital, and Glenview Capital Management. AppFolio Inc. (NASDAQ:APPF) and Planet Labs PBC (NYSE:PL) will hold investor events on October 12. Braze (BRZE) and Nexa Resources S.A. (NYSE:NEXA) have investor events scheduled for October 13. The week ends with Avalara (AVLR) shareholders voting on the 48.4B buyout by Vista Equity. The deal has attracted mixed reactions from investors and proxy firms. Check out Seeking Alpha’s Catalyst Watch for a more detailed breakdown on next week’s big events.
Barron’s mentions: Professional sports teams are worth more than ever, but one of the few public plays on the sector is languishing at a big discount to the value of its teams. It’s time to buy Madison Square Garden Sports stock. Madison Square Garden Sports (NYSE:MSGS) is highlighted as an attractive pick. The math could be pretty simple wit the value of the New York Knicks ($5.8B) and New York Rangers $2.0B) sitting at well over the $3.6B market cap of the stock and enterprise value of $3.8B, less than half the estimated value of those teams. The bullish take on the stock is that it is a cheap play on pro sports teams, whose value keeps rising. There is also a debate on if the stock is being held down by a “Dolan discount” or the perception that the family will destroy value and will not monetize the teams. However, the Dolans have not ruled out selling a minority stake in the company, which could boost shares.
Sources: EDGAR, Bloomberg, CNBC, Reuters
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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