Market Snapshot
briefing.com
| Dow | 35102.55 | +150.71 | (0.43%) | | Nasdaq | 14366.75 | +12.73 | (0.09%) | | SP 500 | 4571.17 | +14.92 | (0.33%) | | 10-yr Note | +26/32 | 3.74 |
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| | NYSE | Adv 1860 | Dec 1007 | Vol 899 mln | | Nasdaq | Adv 2482 | Dec 1941 | Vol 5.1 bln |
Industry Watch
| Strong: Real Estate, Utilities, Health Care, Consumer Discretionary, Communication Services |
| | Weak: Materials, Industrials, Information Technology |
Moving the Market
-- Carryover upside momentum
-- Digesting a slate of corporate news that received mostly positive reactions
-- Notion that the market can avoid a hard landing
-- Short covering activity
-- Fear of missing out on further gains drawing money in from the sidelines
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Closing Summary
19-Jul-23 16:30 ET
Dow +109.28 at 35061.12, Nasdaq +4.38 at 14358.40, S&P +10.74 at 4566.99
[BRIEFING.COM] The major indices saw some choppy action action today, but finished with modest gains and showed a continued aversion to negative territory. The Nasdaq oscillated around its flat line, underperforming its peers due to relative weakness from some mega cap names and amid some hesitation in front of earnings reports after the close from Tesla (TSLA 291.26, -2.08, -0.7%) and Netflix (NLFX 477.59, +2.79, +0.6%).
By and large, market participants continued to trade off the notion that the economy will avoid a hard landing and that earnings growth will return in the second half of the year. The lack of concerted selling interest, despite calls for a pullback after the big run to start the year, has continued to act as an added support, sparking short covering activity and drawing in money from the sidelines due to a fear of missing out on further gains.
There was a slate of corporate news today that revolved around earnings results; however, Apple (AAPL 195.10, +1.37, +0.7%) garnered some added attention following a Bloomberg report that the company is internally testing AI tools.
On the earnings front, Goldman Sachs (GS 340.55, +3.28, +1.0%) outperformed despite missing on Q2 EPS estimates, as did J.B. Hunt (JBHT 195.23, +7.06, +3.8%), which logged a sizable gain despite mentioning a freight recession but some improvement in customer destocking.
Northern Trust (NTRS 81.28, +9.58, +13.4%), M&T Bank (MTB 138.10, +3.34, +2.5%), Western Alliance (WAL 46.42, +3.35, +7.8%), and U.S. Bancorp (USB 38.91, +2.36, +6.5%) were notable winners following their earnings reports. Other financial stocks outperformed in solidarity. The SPDR S&P Regional Banking ETF (KRE) rose 3.1% and the SPDR S&P Bank ETF (KBE) rose 2.7%.
Only three S&P 500 sectors closed with losses -- materials (-0.5%), information technology (-0.3%), and industrials (-0.1%) -- while the real estate (+1.1%) and utilities (+1.0%) sectors saw the largest gains.
Treasuries settled with gains. The 2-yr note yield fell one basis point to 4.75% and the 10-yr note yield fell five basis points to 3.74%, aided by some friendly inflation data out of the UK and some weaker than expected housing starts and building permits data for June. On a related note, today's $12 billion 20-yr bond reopening was met with lukewarm demand.
- Nasdaq Composite: +37.2% YTD
- S&P 500: +18.9% YTD
- Russell 2000: +12.7% YTD
- S&P Midcap 400: +12.2% YTD
- Dow Jones Industrial Average: +5.8% YTD
Reviewing today's economic data:
- The weekly MBA Mortgage Applications Index rose 1.1% after a 0.9% increase last week with refinancing applications up 7.0% and purchase applications down 1.0%.
- Total housing starts declined 8.0% month-over-month to a seasonally adjusted annual rate of 1.434 million (Briefing.com consensus 1.475 million), with single-family starts down in all regions except the West (+4.6%), following a downwardly revised 1.559 million (from 1.631 million) for May. Building permits decreased 3.7% month-over-month to a seasonally adjusted annual rate of 1.440 million (Briefing.com consensus 1.472 million), with permits for single-family units flat to positive in all regions, following an upwardly revised 1.496 million (from 1.491 million) for May.
- The key takeaway from the report is that higher financing costs are creating headwinds for builders and preventing activity from being stronger in a supply-constrained housing market.
- The weekly EIA crude oil inventories showed a draw of 708,000 barrels following last week's build of 5.95 million barrels.
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 240,000; prior 237,000), Continuing Claims (prior 1.729 mln), and July Philadelphia Fed Survey (Briefing.com consensus -9.0; prior -13.7)
- 10:00 ET: June Existing Home Sales (Briefing.com consensus 4.25 mln; prior 4.30 mln) and June Leading Indicators (Briefing.com consensus -0.6%; prior -0.7%)
- 10:30 ET: Weekly natural gas inventories (prior +49 bcf)
Treasuries settle with gains; econ data on Thursday
19-Jul-23 15:35 ET
Market is Closed
[BRIEFING.COM] The major indices saw a slight pullback over the last half hour.
Treasuries settled with gains. The 2-yr note yield fell one basis point to 4.75% and the 10-yr note yield fell five basis points to 3.74%.
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 240,000; prior 237,000), Continuing Claims (prior 1.729 mln), and July Philadelphia Fed Survey (Briefing.com consensus -9.0; prior -13.7)
- 10:00 ET: June Existing Home Sales (Briefing.com consensus 4.25 mln; prior 4.30 mln) and June Leading Indicators (Briefing.com consensus -0.6%; prior -0.7%)
- 10:30 ET: Weekly natural gas inventories (prior +49 bcf)
Energy complex settles lower
19-Jul-23 15:05 ET
Dow +150.71 at 35102.55, Nasdaq +12.73 at 14366.75, S&P +14.92 at 4571.17
[BRIEFING.COM] The major indices have been climbing somewhat higher over the last half hour.
Energy complex futures settled the session lower. WTI crude oil futures fell 0.4% to $75.29/bbl and natural gas futures fell 1.0% to $2.60/mmbtu. On a related note, the S&P 500 energy sector is outperforming, up 0.5%.
After the close, Tesla (TSLA), IBM (IBM), United Airlines (UAL), Netflix (NLFX), Alcoa (AA), Las Vegas Sands (LVS), and others will report earnings.
AT&T shrugs off downgrade, higher in S&P 500 on Wednesday
19-Jul-23 14:30 ET
Dow +98.57 at 35050.41, Nasdaq -26.89 at 14327.13, S&P +5.23 at 4561.48
[BRIEFING.COM] The S&P 500 (+0.11%) is firmly in second place to this point on Wednesday afternoon, having stepped slightly lower in the last half hour.
S&P 500 constituents AT&T (T 14.51, +1.06, +7.88%), Constellation Brands (STZ 268.25, +13.92, +5.47%), and V.F. Corp (VFC 20.46, +0.96, +4.92%) dot the top of today's standings. AT&T moves higher in spite of a downgrade at Argus this morning while also recouping a bit of recent lead cable report-related weakness, and AT&T's earnings are due out in a calendar week, while STZ last night announced a Cooperation and Information Sharing Agreement with Elliott Investment Management in addition to appointing new independent directors to the Board.
Meanwhile, NY-based marketing firm Omnicom (OMC 86.34, -11.58, -11.83%) is today's top laggard after last night's mixed Q2 print.
Gold unchanged as yield losses offset dollar gains
19-Jul-23 14:00 ET
Dow +117.86 at 35069.70, Nasdaq -0.63 at 14353.39, S&P +10.47 at 4566.72
[BRIEFING.COM] With about two hours remaining on Wednesday the tech-heavy Nasdaq Composite (flat) is hovering near yesterday's close, having moved slightly higher over the previous half hour.
Gold futures settled unchanged at $1,980.80/oz owing in part to opposing action in treasury yields and the dollar.
Meanwhile, the U.S. Dollar Index is up about +0.4% to $100.31.
Feeling the pain
A new day has dawned and the same conjecture has risen with the sun: the stock market is short-term overbought, the mega-cap stocks are the most crowded trade, and a pullback for the market and those stocks is in order.
Other verbal variations of this line of thinking are that investors should "trim positions" in stocks that have made outsized moves and that they shouldn't chase stocks higher.
Well, as prudent and practical as all that sounds, the stock market and the mega-cap stocks have continued to march higher. The Dow Jones Industrial Average has logged seven consecutive winning days; Microsoft (MSFT) hit a new record high yesterday; the S&P 500 hit a new 52-week high yesterday; the Dow Jones Transportation Average set a new 52-week high yesterday; and the Vanguard Mega-Cap Growth ETF (MGK) has risen 3.6% this month and 41.7% for the year.
The pullback that a lot of pundits think should be happening has still not happened with any conviction. A down day here and there has been met quickly with buying interest that has resulted most weeks in an up week.
The resilience to selling interest is exactly why the stock market has kept pressing higher. A pullback of any note has been elusive, and, consequently, short sellers have been forced to cover positions and sidelined investors have felt compelled to put cash to work in a so-called "flat squeeze," as part of what everyone considers to be a pain trade.
The pain seeps in when the stock market does the opposite of what many think it should be doing. In this case, the pain trade is witnessing a market that won't succumb to selling interest, leaving sidelined participants unable to bear the pain of watching stocks continue to move higher without them.
This pain is starting to feel palpable watching the tape, which is oftentimes the point -- or very close to it -- that the fever breaks. Notably, this palpability has arisen in front of earnings reports tonight from Tesla (TSLA) and Netflix (NFLX), which are up 12% and 7.8%, respectively, this month, and up 138% and 61%, respectively, this year.
Alas, both stocks are indicated higher in pre-market trading; whereas, the major indices themselves are not indicated to be at risk of any concerted selling interest to start the session.
Currently, the S&P 500 futures are up one point and are trading fractionally above fair value, the Nasdaq 100 futures are up 32 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down two points and are trading fractionally above fair value.
Goldman Sachs (GS) has been a drag on the Dow futures. It is indicated 1.5% lower after coming up shy of the consensus Q2 EPS estimate. The financials of course had a very good outing yesterday following better-than-expected results from Bank of America (BAC), Morgan Stanley (MS), and Charles Schwab (SCHW), so we'll have to wait and see if Goldman's weakness ends up as a company-specific issue today or an industry issue.
Several regional banks, including U.S. Bancorp (USB), Western Alliance (WAL), and M&T Bank (MTB), also reported results that have been met with mixed reactions.
In other news, the FTC and DOJ have issued a draft update laying out new guidelines for their approach to merger reviews, JPMorgan upgraded Cisco (CSCO) to Overweight from Neutral, and Carvana (CVNA) is surging on word of an agreement with noteholders that will reduce its total debt outstanding by over $1.2 billion.
On the economic front, the UK reported some weaker-than-expected June CPI data, which is good news, and housing starts and building permits for the U.S. in June were also weaker than expected, which is regarded as good news for the interest rate outlook.
The 2-yr note yield is down three basis points to 4.73% and the 10-yr note yield is down five basis points to 3.74%.
Total housing starts declined 8.0% month-over-month to a seasonally adjusted annual rate of 1.434 million (Briefing.com consensus 1.475 million), with single-family starts down in all regions except the West (+4.6%), following a downwardly revised 1.559 million (from 1.631 million) for May. Building permits decreased 3.7% month-over-month to a seasonally adjusted annual rate of 1.440 million (Briefing.com consensus 1.472 million), with permits for single-family units flat to positive in all regions, following an upwardly revised 1.496 million (from 1.491 million) for May.
The key takeaway from the report is that higher financing costs are creating headwinds for builders and preventing activity from being stronger in a supply-constrained housing market.
-- Patrick J. O'Hare, Briefing.com
J.B. Hunt Transport's uplifting comments overpower downbeat Q2 headline results (JBHT)
J.B. Hunt Transport (JBHT +2%) shares enjoy an open road today despite the intermodal and trucking transportation giant missing top and bottom line estimates in Q2 by a reasonable margin on continually weak volumes. It is worth pointing out that the market initially sold the news, sending shares roughly -2.2% lower in after-hours trading. However, the stock quickly shifted into turbo drive once JBHT's conference call started around 5:00 p.m. ET.
Management acknowledged what the market likely already priced in, i.e., macroeconomic uncertainty. Specifically, unfavorable dynamic shifts within the transportation industry, such as depressed consumer spending, which JBHT has touched on over the past several quarters, continued to weigh on overall results in Q2. Nevertheless, CEO John Roberts III was encouraged by resilience across many areas of the business, including Dedicated Contract Services (DCS), as well as meaningful growth opportunities in Intermodal, ultimately setting the stage for positive long-term growth.
- In the interim, however, economic conditions clipped sales by 18.4% compared to the year-ago period to $3.13 bln, caused operating income to sink by 23% yr/yr, and led to a third consecutive earnings miss.
- Each of JBHT's operating segments experienced declining revs, with its primary business, Intermodal, tumbling 19% to $1.49 bln. The decline was triggered by a 7% dip in volume, as Eastern network loads fell 6% while transcontinental loads slipped by 8%. Lower overall activity from a broad-based inventory destocking cycle weighed volumes. Meanwhile, pricing for domestic Intermodal service landed toward the lower end of prior expectations.
- However, on the plus side, while JBHT was hesitant to suggest the presence of any green shoots, it witnessed evidence from customers in June that the destocking trend moderated. The company also reiterated a significant amount of freight being converted from Highway to Intermodal and detailed promising trends in velocity and on-time service quality from its rail providers.
- The juxtaposition of unfavorable trends denting Q2 results and remarks discussing encouraging developments were prevalent across JBHT's business lines.
- In DCS, where revs edged 2% lower yr/yr, demand moderated, but COO Nicholas Hobbs noted that it is still strong, evidenced by the company's ability to sell new deals, boasting 370 trucks sold, a decent acceleration from the 200 sold in Q1. JHBT is cautiously optimistic about achieving its gross sales target of 1,000-1,200 trucks in FY23.
- In Final Mile Services (FMS), where revs dropped 19%, demand for bulky items continues enduring pressure. However, JBHT saw evidence of additional market capture.
- Integrated Capacity Solutions (ICS) felt the most significant volume decline, plummeting 26% yr/yr, driving a 43% plunge in revenue. However, JBHT commented that there appeared to be a bottoming out on spot rates toward the end of the quarter.
Bottom line, market conditions presented a challenge for JBHT during Q2, spurring declines across the board. However, management's bullish tone during the call and comments regarding promising trends paints a rosier picture than Q2 headlines suggest.
Goldman Sachs' Q2 earnings miss reflects unfavorable institutional financial market (GS)
As one of the last major banks to report Q2 earnings, Goldman Sachs (GS +1%) faced relatively high expectations as most of its peers registered solid upside on their top and bottom lines. Shares of Goldman Sachs received a jolt yesterday following a buoyant reaction to counterpart Morgan Stanley's (MS) Q2 numbers. As a result, despite Goldman Sachs' net revs exceeding analyst expectations, its slight earnings miss initially weighed on the stock today. Investors also likely ignored Goldman Sachs' 10% dividend increase, especially since this was expected following the company's Fed CCAR results last month.
With most of Goldman Sachs' business lines catering to the institutional market, comprising 94% of the company's $10.9 bln sales in Q2, it has struggled on the year stacked against its more-consumer-facing peers like JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC). During periods of uncertainty, institutional clients, such as enterprises, explore fewer mergers and acquisitions, while private firms delay going public.
Even though the market shrugged it off, Morgan Stanley's Q2 report yesterday was a warning sign ahead of Goldman Sachs' earnings today. Morgan Stanley's investment banking arm saw flat growth yr/yr due to a sluggish IPO market and slowing M&A activity. Meanwhile, trading revenue fell short of expectations as market volatility waned.
- Goldman Sachs recorded net sales declines across its primary segments, with its Global Banking & Markets business enduring a 14% dip yr/yr to $7.19 bln and its Asset & Wealth Management business slipping by 4% to $3.05 bln.
- Within Global Banking & Markets, investment banking fees were 20% lower than the year-ago period, reflecting a significant drop-off in M&A transactions and a 46% plunge in Advisory revs. On the trading side, FICC net revs fell 26%, driven by weak net revs in commodities, interest rate products, and currencies.
- Goldman Sachs' Asset & Wealth Management business was hurt by a $(403) mln loss in equity investments, primarily commercial real estate, which may continue to drag down performance, especially if recession fears in this market, sparked by rising interest rates, crystallize.
- Platform Solutions, Goldman Sachs' consumer-oriented division, was the bright spot in Q2, boasting a 17% jump in revs sequentially to $659 mln. However, the company has been steadily shifting away from this segment, maintaining a focus on the institutional side of finance.
- By reducing exposure to Consumer Platforms, which strained Goldman Sachs' bottom line in previous quarters, its expenses are steadily improving. Operating expenses did still tick 12% higher yr/yr in Q2. However, it was primarily related to an impairment charge regarding its planned divestiture of GreenSky, a component of its Consumer Platforms business. As a result, Goldman Sachs registered a single-digit miss on its bottom line.
Overall, the unfavorable macroeconomic environment proved to be a meaningful headwind for Goldman Sachs in Q2. Consolidated net revenue may have edged just 8.1% lower yr/yr, better than analyst forecasts. However, a string of weaknesses emerging from heavy reliance on the institutional finance market are keeping shares relatively in check today, as they pull back after flirting with resistance around $348.
Broadcom's acquisition of VMware clears another regulatory hurdle as FTC decision looms (AVGO)
When Broadcom (AVGO) announced its intention to acquire leading virtualization software provider VMware (VMW) in May of 2022, the blockbuster $61 bln cash and stock deal seemed like a long shot to receive regulatory approval due to antitrust concerns. In the past week, though, the odds of AVGO and VWM closing on the deal -- now valued at about $80 bln based on VMW's current stock price -- have improved dramatically. Accordingly, shares of VMW have shot higher by about 18% since July 11, the day that the Financial Times reported that EU regulators were set to clear the acquisition.
- In the wake of AVGO confirming on July 12 that it received conditional approval from the EU to complete the acquisition, the UK's regulatory branch followed suit this morning. Specifically, after conducting an in-depth investigation, The Competition and Markets Authority (CMA) panel stated that the deal would not substantially reduce competition in the supply of server hardware components in the UK.
- One of the initial concerns surrounding the merger was that AVGO could alter VMW's software so that it's incompatible with its competitors' hardware. VMW's platform requires chips and hardware to run on servers. However, the CMA panel found that the costs and lost business associated with changing VMW's software would likely outweigh any financial benefit to AVGO, thereby lessening that concern.
- With clearances from the EU and CMA in the books, the final hurdle is gaining regulatory approval from the U.S Federal Trade Commission (FTC). The FTC certainly could take an opposing stance, especially since the U.S. government is taking a more hardline approach against megamergers.
- It may be more difficult to make the case, though, that the merger is restricting competition and/or innovation after two regulatory agencies overseas gave it a green light. On that note, VMW CEO Rangarajan Raghuram has maintained that he still expects the deal to close on schedule this fall.
- Although shares are down a bit today, AVGO has also rallied as the probability of completing the acquisition has increased. The addition of VMW would be a game changer, transforming AVGO into a major enterprise software company.
- Currently, AVGO's software segment accounts for about 25% of total revenue. That figure would jump to nearly 50% with the addition of VMW as total pro forma revenue launches to more than $40 bln.
- By lessening its dependence on hardware sales, which can fluctuate wildly during up and down cycles, AVGO's business would become more predictable. Additionally, AVGO anticipates the acquisition could add approximately $8.5 bln in pro forma adjusted EBITDA within three years of closing the transaction.
The main takeaway is that AVGO's acquisition of VMW, which once seemed highly unlikely to make it to the finish line, now looks destined to close, transforming AVGO into an enterprise software powerhouse.
Carvana up big today following a return to positive adjusted EBITDA and a debt restructuring (CVNA)
Carvana (CVNA +37%) has been on a roller coaster over the past 24 hours. After rising 9% during the regular session yesterday, it fell 10% after hours after the online used car giant spooked investors by moving up its Q2 reporting date from August 3 to this morning. Investors were fearing a bad quarter or some other announcement. Then today, the stock is up big following the Q2 results and, perhaps more importantly, Carvana was able to restructure some debt.
- Let's start with earnings. Revenue fell 23.6% yr/yr to $2.97 bln, but that was well ahead of analyst expectations. Its GAAP loss narrowed to $(0.55) from $(2.35) last year. Also, Q2 adjusted EBITDA returned to positive territory at $155 mln vs $(216) mln last year and $(24) mln in Q1. Carvana conceded that its Q2 EBITDA number benefitted by about $70 mln from non-recurring items, but it was still in positive territory. Carvana also guided to another positive adjusted EBITDA result in Q3.
- Retail units sold totaled 76,530 in Q2, down 35% yr/yr. The large decrease was expected and was caused by a set of factors. CVNA has been slashing inventory to be more in step with demand. It reduced inventory by 12% sequentially and 55% yr/yr. Another factor was a 56% yr/yr reduction in ad spend to cut costs. Higher rates for borrowers also slowed sales. Looking forward, CVNA expects Q3 retail units to be similar to Q2.
- More generally, CVNA has been focusing more on overall profitability rather than chasing every unit sold. That was evident in its non-GAAP GPU (gross profit per retail unit), which jumped to $7,030 in Q2 from $4,796 in Q1 and nearly double from $3,683 a year ago. Q2 is seasonally CVNA's strongest quarter of the year so that helped GPU. In fairness, total GPU was positively impacted by non-recurring items that increased Non-GAAP GPU by ~$900. But it still expanded nicely.
- Besides earnings, the other big news was a debt restructuring with its lenders. The deal reduces its total debt by more than $1.2 bln, extends maturities, and lowers required cash interest expense by over $430 mln per year for the next two years. Its high debt load was a big reason why its stock sank sharply in 2H22.
Overall, this was a solid quarter for Carvana. We think the return to positive adjusted EBITDA is being seen as an important milestone for investors. Also, the GPU metric shows that the company is making progress on its goal to focus more on profitability rather than chasing every sale. Online car sales boomed during the pandemic, and we think the company remained overzealous for too long after stores reopened. However, we sort of see CVNA coming back to reality.
Finally, the debt restructuring is likely more responsible for today's big move than its earnings. The deal is being cheered by investors as it takes near term pressure off Carvana and buys the company time to see if its plan of focusing more on profitability can come to fruition. There are also a lot of doubters on CVNA, so the debt deal is likely helping to spur a short squeeze.
Masimo's bearish Q2 revenue forecast sends shares significantly lower today (MASI)
Investors are cutting their Masimo (MASI -18%) holdings today after the medical technology manufacturer projected Q2 revs significantly below analyst forecasts due to order delays and lower-than-expected single-patient use sensor sales. MASI projected Q2 revenue of $453-457 mln, a 20% decline from the $565 mln posted in Q1 and the year-ago period. The company also expects FY23 sales in its healthcare business to slip to $1.30 bln from its prior prediction of $1.45 bln and its non-healthcare unit to see revs of $800-850 mln from $965-995 mln. Stifel downgraded the company today following its Q2 guidance.
MASI manufactures various noninvasive patient monitoring and hospital automation products, selling primarily to hospitals and other care facilities, with 56% of sales stemming from the U.S. Its primary competitor is Medtronic PLC (MDT), which rebounded quickly off intra-day lows of -3% today. However, tech giants like Alphabet (GOOG), Amazon (AMZN), Apple (AAPL), and Samsung (SSNLF), which have not historically operated in the medical device space, have also become meaningful threats in recent years.
Despite the growing competition, MASI was still registering excellent sales growth, boasting four consecutive quarters of +78-88% growth yr/yr. Although MASI was forecasting revs to decelerate considerably in FY23, guiding to around +20% growth yr/yr, it is now expecting nearly flat sales growth, a huge drop-off. Also, MASI's Q2 guidance is surprising given that U.S. health insurance giants UnitedHealth Group (UNH) and Humana (HUM) recently warned of a meaningful uptick in deferred care, underscoring pent-up health care demand following a lengthy pandemic.
- What happened? Within MASI's primary healthcare division, Large orders expected for Q2 were delayed to 2H23. Also, single-patient use sensor sales were lower-than-expected due to soft U.S. hospital inpatient counts and elevated inventories across several customers as previous discounting stopped and the flu season ended abnormally early. At the same time, hospital labor shortages caused new customer conversions to be below expectations while also increasing labor costs, straining hospital budgets, and ultimately lowering demand for capital equipment.
- Meanwhile, in non-healthcare, waning demand previously witnessed purely in lower-end consumer audio categories seeped into the premium market and extended across additional geographic regions.
- Despite the setbacks, management remained bullish on the long-term health of the organization. New hospital customers continue switching to MASI's offerings, spurring additional market share capture. The company also enjoyed record contracting during 1H23 globally, which will materialize as an expected +11-12% yr/yr growth in its Unrecognized Contract Revenue segment in Q2.
- Although MASI conceded it is unclear when softness within the premium consumer categories will improve, it is encouraged by initial demand for a few of its products, including hearables and baby monitors.
Bottom line, MASI's Q2 revenue shortfall is discouraging, especially after the company reiterated its FY23 guidance three months ago and health insurance giants discussed higher-than-anticipated inpatient and outpatient trends in recent weeks. Although the news is being brushed off by MASI's competitors today, it could indicate a broader trend that may adversely impact their earnings results over the next few weeks. If not, then MASI's woes might be related to internal issues.
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