| | | Market Snapshot
| Dow | 42051.06 | -89.37 | (-0.21%) | | Nasdaq | 19146.81 | +136.72 | (0.72%) | | SP 500 | 5892.58 | +6.03 | (0.10%) | | 10-yr Note |
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| | NYSE | Adv 874 | Dec 1783 | Vol 1.1 bln | | Nasdaq | Adv 1594 | Dec 2822 | Vol 11 bln |
Industry Watch
| Strong: Technology, Communication Services, Consumer Discretionary |
| | Weak: Materials, Utilities, Real Estate, Energy, Industrials |
Moving the Market
-- Taking a pause after a big run in recent sessions
-- Digesting mixed corporate news
-- Reacting to the 10-yr yield reaching 4.50%
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Closing Summary
14-May-25 16:25 ET
Dow -89.37 at 42051.06, Nasdaq +136.72 at 19146.81, S&P +6.03 at 5892.58
[BRIEFING.COM] The stock market settled in mixed fashion. The Dow Jones Industrial Average closed fractionally lower, the Nasdaq Composite logged a 0.7% gain, and the S&P 500 settled little changed from yesterday.
The outperformance of the Nasdaq was driven by ongoing buying in mega caps, chipmakers, and growth stocks. NVIDIA (NVDA 135.34, +5.41, +4.2%) was an influential winner in that regard.
The Vanguard Mega Cap Growth ETF (MGK) was 0.8% higher, the PHLX Semiconductor Index (SOX) logged a 0.6% gain, and the Russell 3000 Growth Index closed 0.6% higher.
There was less enthusiasm for other areas of the equity market. The equal-weighted S&P 500 registered a 0.6% decline. Participants were lacking conviction on either side of the tape due to an emerging view that stocks are overbought in the short-term.
Market participants are also closely watching the Treasury market. The 10-yr yield settled three basis points higher at 4.53% and the 2-yr yield settled three basis points higher at 4.05%, contributing to some selling pressure for equities.
Outsized moves in either direction were limited to stocks with specific catalysts. Super Micro Computer (SMCI 45.00, +6.11, +15.7%) is sharply higher following a $20 billion deal with Saudi Arabia's DataVolt to expedite delivery of GPU platforms.
Shares of American Eagle Outfitters (AEO 11.90, -0.82, -6.5%) declined after retracting financial guidance due to economic uncertainty.
Dow component Boeing (BA 204.72, +1.30, +0.6%) was another individual standout after Qatar Airways announced that the carrier will purchase up to 210 widebody jets, which sets new records as the largest widebody order for Boeing.
- S&P 500: +0.2% YTD
- Dow Jones Industrial Average: -1.2% YTD
- Nasdaq Composite: -0.9% YTD
- S&P Midcap 400: -2.3% YTD
- Russell 2000: -6.6% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 1.1%; Prior 11.0%
- Weekly EIA Crude Oil Inventories showed a build of 3.45 million barrels versus last week's draw of 1.11 million barrels
Looking ahead to Thursday, market participants receive the following economic data:
- 8:30 ET: April PPI (Briefing.com consensus 0.3%; prior -0.4%), Core PPI (Briefing.com consensus 0.3%; prior -0.1%), April Retail Sales (Briefing.com consensus 0.2%; prior 1.4%), Retail Sales ex-auto (Briefing.com consensus 0.5%; prior 0.5%), May Empire State Manufacturing (Briefing.com consensus 1.0; prior -8.1), May Philadelphia Fed (Briefing.com consensus -6.0; prior -26.4), weekly Initial Claims (Briefing.com consensus 226,000; prior 228,000), and Continuing Claims (prior 1.879 mln)
- 9:15 ET: April Industrial Production (Briefing.com consensus 0.3%; prior -0.3%) and Capacity Utilization (Briefing.com consensus 77.9%; prior 77.8%)
- 10:00 ET: May Business Inventories (Briefing.com consensus 0.2%; prior 0.2%) and May NAHB Housing Market Index (Briefing.com consensus 40; prior 40)
- 10:30 ET: Weekly natural gas inventories (prior +104 bcf)
Treasuries settle with losses
14-May-25 15:30 ET
Dow -94.23 at 42046.20, Nasdaq +93.03 at 19103.11, S&P -1.41 at 5885.14
[BRIEFING.COM] The S&P 500 dipped below its prior close with about 30 minutes left in the session.
The 10-yr yield settled three basis points higher at 4.53% and the 2-yr yield settled three basis points higher at 4.05%, creating some selling pressure for equities.
Looking ahead to Thursday, market participants receive the following economic data:
- 8:30 ET: April PPI (Briefing.com consensus 0.3%; prior -0.4%), Core PPI (Briefing.com consensus 0.3%; prior -0.1%), April Retail Sales (Briefing.com consensus 0.2%; prior 1.4%), Retail Sales ex-auto (Briefing.com consensus 0.5%; prior 0.5%), May Empire State Manufacturing (Briefing.com consensus 1.0; prior -8.1), May Philadelphia Fed (Briefing.com consensus -6.0; prior -26.4), weekly Initial Claims (Briefing.com consensus 226,000; prior 228,000), and Continuing Claims (prior 1.879 mln)
- 9:15 ET: April Industrial Production (Briefing.com consensus 0.3%; prior -0.3%) and Capacity Utilization (Briefing.com consensus 77.9%; prior 77.8%)
- 10:00 ET: May Business Inventories (Briefing.com consensus 0.2%; prior 0.2%) and May NAHB Housing Market Index (Briefing.com consensus 40; prior 40)
- 10:30 ET: Weekly natural gas inventories (prior +104 bcf)
Small and mid caps trade down while large cap tech leads
14-May-25 15:00 ET
Dow -65.40 at 42075.03, Nasdaq +116.83 at 19126.91, S&P +7.29 at 5893.84
[BRIEFING.COM] The major equity indices moved mostly sideways over the last half hour.
Small and mid cap stocks are under selling pressure while large-cap tech outperforms. The Russell 2000 trades 0.7% lower and the S&P Mid Cap 400 shows a 0.1% decline.
NVIDIA (NVDA 135.26, +5.33, +4.1%) continues to lead in the tech space, sitting on a big gain today that brings its increase this week to 16.0%. Shares are up 24.2% since the start of the month.
S&P 500 flat; ENPH, AMD, CMG outperform while IQV sinks on subtle R&DS concerns
14-May-25 14:30 ET
Dow -85.41 at 42055.02, Nasdaq +109.02 at 19119.10, S&P +2.71 at 5889.26
[BRIEFING.COM] The S&P 500 (+0.05%) holds a narrow gain, little changed over the last half hour.
Briefly, S&P 500 constituents Enphase Energy (ENPH 48.09, +2.46, +5.39%), Advanced Micro Devices (AMD 116.95, +4.49, +3.99%), and Chipotle Mexican Grill (CMG 52.28, +1.63, +3.22%) pepper the top of the standings. ENPH rises as a Goldman note suggested proposed IRA changes were less damaging than feared, preserving clean energy incentives that support ENPH's growth, AMD announced a new $6 bln share buyback this morning, while CMG gains despite a dearth of corporate news.
Meanwhile, IQVIA (IQV 143.44, -7.24, -4.80%) is one of today's worst performers, under pressure despite a seemingly positive analyst fireside chat, where the CFO emphasized the company's strong performance and differentiated TAS business. However, the focus on TAS may have signaled softness in the core R&DS segment, raising investor concerns about broader market weakness. With no new catalysts or guidance updates, the commentary may have been interpreted as cautious, prompting the negative reaction.
Gold drops 1.8% as easing U.S.-China trade tensions weaken safe-haven demand
14-May-25 14:00 ET
Dow -99.16 at 42041.27, Nasdaq +105.75 at 19115.83, S&P +2.95 at 5889.50
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.56%) is in first place on Wednesday afternoon, up about 105 points.
Gold futures settled $59.50 lower (-1.8%) at $3,188.30/oz, attributed in part to easing U.S.-China trade tensions, which diminished gold's appeal as a safe-haven asset. The U.S. government's decision to reduce tariffs on low-value Chinese imports and ongoing trade negotiations fostered market optimism, leading investors to shift toward riskier assets.
Meanwhile, the U.S. Dollar Index is narrowly lower at $100.95.
Everus Construction rebounds from Q4 miss with huge Q1 upside (ECG)
Everus Construction (ECG +18%) is surging today following its robust Q1 earnings last night. This provider of construction services, which was spun off from MDU Resources (MDU) in October 2024, reported an EPS miss in Q4, its first quarter as an independent company. That led to a sell-off in the stock in February. However, it bounced back with huge upside in its Q1 report.
- Everus reported a 32.1% yr/yr increase in revs to $826.6 mln, which blew away analyst expectations. The EPS upside was significant as well. It seems that analyst models were caught off guard following the Q4 miss, so maybe analyst estimates were much more conservative heading into Q1. Regardless, this was a very good redemptive quarter for Everus.
- Revenue was driven by continued strength in its electrical and mechanical (E&M) segment and across each of its E&M end markets, including its data center business. While revenue declined slightly in its Transmission and Distribution (T&D) segment due to some weather-related delays, the company said its T&D project execution was solid.
- Looking ahead, Everus is pleased to see momentum from favorable secular demand trends continuing into 2025. Its total backlog at the end of Q1 was up 10% sequentially and 41% yr/yr with growth in both E&M and T&D. Everus continues to see favorable trends in key submarkets, including data center, hospitality, and high tech reshoring. As it relates to data center work, there has been a lot of noise in the market. However, Everus continues to see very strong demand trends and has not seen any meaningful change in customers' plans.
- Regarding tariffs and trade, ECG feels well-equipped to manage through these challenges just as it did during the pandemic. In response, ECG is increasing dialogue with customers and it seeks early material procurement to lock in pricing when possible.
Overall, this was a great bounce back quarter for Everus. It is not unusual for it to take several quarters for analysts to get their models right since there is little history to go by. That is likely why we saw the Q4 miss, then analysts overcorrected with very conservative estimates for Q1, which Everus subsequently blew away. This is not a name that is widely followed given that it was a spin-off and not an IPO and is low profile. However, we suspect this report will get it on some radar screens. On a final note, this report follows big Q1 upside last week from its construction peer Tutor Perini (TPC).
KinderCare Learning Companies tops Q1 EPS estimates, but enrollment slump has shares reeling (KLC)
KinderCare Learning Companies (KLC) is experiencing a steep selloff despite beating 1Q25 EPS expectations and reaffirming FY25 guidance, underscoring investors' concerns beyond the main headline numbers. While the EPS beat was positive, sluggish revenue growth, enrollment trends, and a cautious outlook are likely sources of disappointment. Higher tuition rates (+6% in recent quarters) implemented to offset inflationary pressures and rising labor costs, in addition to cost containment efforts, are bolstering KLC's earnings, but also played a role in same-center occupancy rates dipping by 50 bps in 1Q25.
- Adjusted EBITDA grew by a healthy 12% yr/yr to $83.6 mln, driven by pricing adjustments at educations centers and a decrease in SG&A expenses as a percentage of revenue to 10.7% from 13.8/% in the year-earlier period. One of the more notable factors underlying KLC's cost containment efforts is the reduction in cost reimbursements from COVID-19 stimulus programs. In Q1, reimbursements related to COVID-19 stimulus was less than $1.0 mln compared to nearly $19.5 mln in the year-earlier period.
- Operational efficiency via optimizing center utilization and reducing non-volume related expenses has also been a cornerstone of KLC's cost containment strategy. Although these factors contributed to the solid EPS beat, soft demand-oriented metrics are raising concern among investors.
- The childcare industry faces demographic challenges, including declining birth rates, which could limit enrollment growth, and regulatory uncertainties, such as potential changes in federal childcare subsidies or state-level policies. Macroeconomic factors, such as inflation and interest rate fluctuations, also pose risks, particularly for a company reliant on both organic expansion and acquisitions. These issues were evident within KLC's Q1 results, such as a slight decrease in enrollment.
- Revenue from early childhood education centers increased by 1.6%, of which approximately 2% was from higher tuition rates, partially offset by slightly lower enrollment. KLC's Q4 earnings report, released on March 20, noted similar trends, with CEO Paul Thompson emphasizing the company's strategy to grow market share despite industry headwinds. The company's expansion strategy, including opening five new centers and completing five acquisitions in 1Q25, was aimed at offsetting these pressures, but the immediate impact on enrollment appears to have been limited.
- Despite topping Q1 EPS expectations, KLC opted to reaffirm its FY25 guidance, reflecting a cautious outlook amid several headwinds. The reaffirmed guidance, while within expectations, may have failed to inspire confidence, especially given the stock's recent volatility and the industry's competitive dynamics.
The sharp selloff in KLC following its 1Q25 earnings report can be attributed to concerns over revenue growth and enrollment trends, despite the company beating EPS expectations and reaffirming its FY25 guidance. The reaffirmed guidance, while consistent, may have disappointed investors by highlighting ongoing headwinds such as demographic shifts, regulatory risks, and macroeconomic uncertainty. A rebound in the stock is possible if KLC demonstrates stronger-than-expected enrollment growth or operational efficiency in subsequent quarters, particularly given its expansion into Idaho.
Tesla to ship Chinese parts for Cybercab and Semi, Board eyes new pay deal for Musk (TSLA)
Two key developments have emerged for Tesla (TSLA): the resumption of shipping components from China for Cybercab and Semi truck production, and Tesla's board exploring a new compensation package for CEO Elon Musk. These moves, as reported by Reuters and the Financial Times respectively, come amid deepening financial challenges for TSLA, but are positively impacting the stock today.
According to Reuters, starting at the end of the month, TSLA plans to resume shipping these components, following a tariff truce between the two countries. This reverses a suspension reported last month, triggered by President Trump's tariff hike to 145% on Chinese goods, which had disrupted TSLA's plans. The tariff truce involves rolling back most tariffs, easing the cost burden on TSLA as it plans to launch the Cybercab for under $30,000.
- The resumption of component shipments from China should benefit TSLA's financials, particularly in key metrics such as automotive revenue, profits, and automotive gross margin. Lower component costs from China would improve gross margins, especially for these new models, which are critical for future growth. The de-escalation also mitigates supply chain risks, enhancing TSLA's ability to meet production targets and potentially reverse the revenue decline seen in 1Q25 (-9.2%), aligning with Musk's focus on autonomy and robotics as growth drivers.
- TSLA is already contending with several strong headwinds, including intensified competition from rivals like BYD (BYDDY), particularly in China, high interest rates that have dampened demand for EVs, and Musk's proximity to Trump, which has hurt TSLA's popularity. The impact of these factors was evident in TSLA's downside 1Q25 results, as illustrated by the 9% revenue decline and the automotive gross margin contraction to 16.2% from 18.5% in the year-earlier period.
- The trade war, with tariffs at 145%, had also disrupted supply chains, as highlighted in the Q1 earnings call, where CFO Taneja noted challenges in bringing equipment from China for domestic production lines. For the time being, this headwind had dissipated, but the trade situation remains fluid and unpredictable.
- The board's consideration of a new pay package for Musk is directly tied to TSLA's financial struggles and leadership stability. The 2018 pay package, comprising 304 mln stock options worth $56 bln at the 2024 ruling, was struck down by Chancellor Kathaleen McCormick, citing excessive compensation and board conflicts, and remains under appeal despite shareholder reapproval in June 2024. If reinstated, Musk's ownership would increase from under 13% to over 20%, a critical threshold for maintaining control.
- Given TSLA's recent downturn, with shares down 32% from its December peak and financials under pressure, the board's move to explore a new package, potentially contingent on financial, operational, and share price targets, aims to incentivize Musk. This is particularly important as TSLA pivots to new models like Cybercab and Semi, and invests in autonomy and robotics, areas Musk has emphasized as future growth drivers.
TSLA's decision to resume shipping components from China, following the tariff truce, is a strategic move to reduce costs and support new model production, potentially improving financial metrics like gross margins. The board's consideration of a new pay package for Elon Musk addresses leadership stability during a challenging period, crucial for TSLA's long-term vision.
American Eagle losing flight after withdrawing guidance, makes us nervous for peers (AEO)
American Eagle Outfitters (AEO -7%) is under pressure today following Q1 (Apr) guidance last night, which was roughly in-line. And while it did not guide for EPS, it did say it expects a Q1 adjusted operating loss of approximately $(68) mln whereas analysts were looking for a profitable quarter. Even more troubling was AEO withdrawing prior guidance for FY25 due to macro uncertainty.
- AEO said its operating guidance reflects higher than planned promotional activity in Q1 and an inventory charge of roughly $75 mln related to a write-down of spring and summer merchandise. We can assume that the higher promotional activity pressured margins. So while revenue was generally in-line, actually slight upside, some of those sales were at reduced prices just to move merchandise, which takes some of the shine off the top line result.
- Q1 same store comps were down approximately -3% (American Eagle -2%, Aerie -4%). This was a noticeable step down from Q4 (Jan) comps of +3% (American Eagle comps +1%; Aerie comps +6%). It also follows a solid FY24 comp of +4%. The Aerie comp decline in Q1 is particularly disappointing because it followed robust +6% comps in Q4 and +5% in Q3 (Oct).
- AEO said it was clearly disappointed with its execution in Q1. Merchandising strategies did not drive the results it had anticipated, leading to higher promotions and excess inventory. As a result, it took the inventory write down on spring and summer goods. The silver lining is that AEO says it's entering Q2 (Jul) in a better position, with inventory more aligned to sales trends.
- Withdrawing guidance is particularly unnerving for investors and seems to be the main reason for the big decline today. It is one thing to guide lower, it is quite another to just withdraw guidance altogether. It signals to investors that the company is really navigating a difficult period and is not sure what to expect.
We are wrapping up Q1 earnings season this week, but we are just getting started on the retailers, which typically have an April 30 quarter end. In terms of that this means for other mall-based retailers, it definitely makes us more cautious as they start to report earnings in the next 2-3 weeks.
In fairness, AEO is known for perhaps not always being the best operator and not being on trend. Briefing.com has covered AEO for years and write downs are not entirely unusual for them. Also, AEO is not that large. As such, we do not want to read too much into in terms of what it means for other mall apparel retailers. However, it does make us more nervous, especially its decision to withdraw guidance for the rest of the year.
CyberArk secures a 1Q25 beat on strong machine identity demand, cautious outlook caps gains (CYBR)
Identity security company CyberArk (CYBR) delivered solid 1Q25 results, exceeding top and bottom-line expectations with revenue surging by 43% yr/yr to $317.6 mln, fueled by enterprises prioritizing cybersecurity and rising threats. The identity security market remains a top priority for organizations, with competitors like Okta (OKTA) and SailPoint (SAIL) also reporting robust demand for their Identity and Access Management and Identity Governance and Administration solutions, reflecting a broader industry trend of increased investment in securing human and machine identities.
However, CYBR's cautious guidance for Q2 and FY25 has tempered investor enthusiasm, particularly after the stock had rallied by about 20% since early April. Despite comfortably surpassing Q1 revenue estimates, the company's FY25 revenue was essentially in-line with expectations, signaling some apprehension and uncertainty about its growth prospects for the remainder of the year.
- CYBR's Annual Recurring Revenue (ARR) reached $1.215 bln, a near 50% yr/yr increase, driven by robust net new ARR of $46 mln. This growth rate is slightly below the 51% ARR increase reported in Q4, reflecting a normalization after a milestone of surpassing $1 billion organically in 2024, but it underscores sustained demand for CYBR’s subscription-based model. The $46 mln in net new ARR, consistent with recent quarters, indicates strong customer acquisition and expansion, particularly in machine identity and Secrets Management solutions.
- On that note, momentum behind the machine identity business, bolstered by CYBR's 2024 acquisition of Venafi and increasing contributions from its Secrets Management products, is becoming a key growth catalyst. The $1.54 bln acquisition of Venafi has accelerated CYBR’s capabilities in securing machine identities, a critical area as enterprises manage increasing numbers of non-human identities in cloud and AI-driven environments. Secrets Management, addressing secure storage and rotation of credentials, has also seen strong adoption, driven by heightened awareness of vulnerabilities exposed by recent cyberattacks.
- Additionally, organizations are consolidating cybersecurity spend on CyberArk’s unified platform, indicating high customer loyalty and upselling success. This consolidation trend is supported by CYBR’s integrated approach, combining PAM, IGA, and machine identity security, which reduces complexity and enhances value for enterprises.
- From a profitability standpoint, robust revenue growth, high gross margin of nearly 76%, a subscription-heavy revenue mix, and economies of scale are pushing earnings higher. In Q1, adjusted EPS jumped by 31% yr/yr to $0.98, while non-GAAP operating profit expanded by 3 ppts yr/yr to 18%.
CYBR's 1Q25 outperformance was driven by strong demand for its identity security platform, particularly in machine identity and Secrets Management, bolstered by the Venafi acquisition and a robust 49.8% ARR growth. However, cautious 2Q25 and FY25 guidance, reflecting potential macroeconomic and integration risks, is tempering investor enthusiasm despite the stock’s recent rally, as the market balances near-term uncertainties with long-term growth potential.
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