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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (94076)

3/25/2025 11:00:44 PM

From: Return to Sender

2 Recommendations

Recommended By
Julius Wong
kckip

Respond to of 95367

Market Snapshot

Dow	42587.50	+4.18	(0.01%)
Nasdaq	18271.86	+83.26	(0.46%)
SP 500	5776.65	+9.08	(0.16%)
10-yr Note	+3/32	4.31

NYSE	Adv 1177	Dec 1521	Vol 1.1 bln
Nasdaq	Adv 1674	Dec 2650	Vol 6.4 bln

Industry Watch

Strong: Communication Services, Consumer Discretionary, Financials, Materials

Weak: Utilities, Consumer Staples, Real Estate

Moving the Market

-- Not a lot of conviction amid ongoing uncertainty around trade policy

-- Still some buying interest under the surface due to market being oversold on short-term basis

-- Gains in some mega caps helping broader market

Closing Summary
25-Mar-25 16:30 ET

Dow +4.18 at 42587.50, Nasdaq +83.26 at 18271.86, S&P +9.08 at 5776.65
[BRIEFING.COM] The major equity indices closed higher for a third consecutive session. This price action pushed the S&P 500 further above its 200-day moving average (5,754). The moves were modest, however, and mostly driven by gains in the mega cap space.

There was an overall negative bias under the index surface as participants continue to weigh worries about US trade policy and economic growth. The latter was piqued by this morning's economic releases.

The Consumer Confidence Index showed a fourth consecutive decline, and the Expectations Index fell to its lowest level (65.2) in 12 years, with worries about future employment prospects and inflation pacing that downturn. Separately, new home sales increased a modest 1.8% month-over-month in February, yet higher-priced homes made up a smaller percentage of sales than the prior month.

In housing market-related news, KB Home's (KBH 58.57, -3.22, -5.2%) disappointing earnings and guidance contributed to the downside bias today. Shares hit a 52-week low after the homebuilder reported below-consensus Q1 earnings and lowered its FY25 housing revenue outlook, piling onto concerns of an intensifying housing market slowdown. This comes less than one week after competitor Lennar (LEN 117.74, +0.18, +0.2%) issued soft 2Q25 EPS and deliveries guidance.

Treasuries settled higher in another manifestation of growth concerns. The 10-yr yield dropped two basis points to 4.31%, and the 2-yr yield dropped three basis points to 4.00%. On a related note, today's $69 billion 2-yr note sale met strong demand.

Dow Jones Industrial Average: +0.1% YTD
S&P 500: -1.8% YTD
S&P Midcap 400: -3.6% YTD
Nasdaq Composite: -5.4% YTD
Russell 2000: -6.0% YTD

Reviewing today's economic data:

January FHFA Housing Price Index 0.2%; Prior was revised to 0.5% from 0.4%
January S&P Case-Shiller Home Price Index 4.7% (Briefing.com consensus 4.6%); Prior 4.5%
March Consumer Confidence 92.9 (Briefing.com consensus 94.2); Prior was revised to 100.1 from 98.3
- The key takeaway from the report is that the drop in confidence was guided primarily by the decline in consumers' outlook, which was driven by worries about inflation and future employment prospects, the latter of which hit a 12-year low. This can be a combination for a pullback in discretionary spending.
February New Home Sales 676K (Briefing.com consensus 680K); Prior was revised to 664K from 675K
- The key takeaway from the report is that new home sales in February were aided by the drop in mortgage rates, yet affordability constraints remained a headwind as sales of higher-priced homes accounted for a smaller percentage of new home sales in February than the prior month.

Wednesday's economic lineup features:

7:00 ET: Weekly MBA Mortgage Index (prior -6.2%)
8:30 ET: February Durable Orders (Briefing.com consensus -1.2%; prior 3.1%) and Durable Orders ex-transport (Briefing.com consensus 0.1%; prior 0.0%)
10:30 ET: Weekly crude oil inventories (prior +1.75 mln)

Econ data fuels some selling under the surface
25-Mar-25 15:30 ET

Dow -77.84 at 42505.48, Nasdaq +43.56 at 18232.16, S&P -2.15 at 5765.42
[BRIEFING.COM] The Dow Jones Industrial Average (-0.2%) and S&P 500 (-0.1%) are lower heading into the close while the Nasdaq Composite (+0.2%) remains above its prior close, propelled by gains in some mega caps.

Today's economic data contributed to some selling interest under the index surface after the Consumer Confidence Index showed a fourth consecutive decline, and the Expectations Index fell to its lowest level (65.2) in 12 years, with worries about future employment prospects and inflation pacing that downturn. Separately, new home sales increased a modest 1.8% month-over-month in February, yet higher-priced homes made up a smaller percentage of sales than the prior month.

Wednesday's economic lineup features:

7:00 ET: Weekly MBA Mortgage Index (prior -6.2%)
8:30 ET: February Durable Orders (Briefing.com consensus -1.2%; prior 3.1%) and Durable Orders ex-transport (Briefing.com consensus 0.1%; prior 0.0%)
10:30 ET: Weekly crude oil inventories (prior +1.75 mln)

GME, DLTR trade down ahead of earnings
25-Mar-25 15:05 ET

Dow -86.86 at 42496.46, Nasdaq +43.13 at 18231.73, S&P -2.17 at 5765.40
[BRIEFING.COM] The major indices trade near their worst levels of the session, sporting slim gains or losses, with about one hour left in the session.

GameStop (GME 25.30, -0.30, -1.2%), Dollar Tree (DLTR 67.46, -2.31, -3.3%), Chewy (CHWY 33.88, -0.13, -0.4%), and Cintas (CTAS 192.38, -2.19, -1.1%) trade down ahead of their earnings reports. GME reports this afternoon while the other names report tomorrow morning.

Elsewhere, the 10-yr yield is at 4.31%.

S&P 500 wavers as Int'l Paper, CrowdStrike, Freeport-McMoRan lead; UPS slumps
25-Mar-25 14:30 ET

Dow -62.82 at 42520.50, Nasdaq +47.08 at 18235.68, S&P +0.03 at 5767.60
[BRIEFING.COM] The S&P 500 (flat) is in the middle of figuring out a trading level this afternoon, having changed places between gains and losses a few times this last half hour.

Briefly, S&P 500 constituents Int'l Paper (IP 55.97, +3.14, +5.94%), CrowdStrike (CRWD 385.71, +13.07, +3.51%), and Freeport-McMoRan (FCX 42.96, +1.35, +3.24%) pepper the top of the standings. IP is higher after upside guidance from this morning's Investor Day slides, CRWD caught an upgrade out of BTIG Research this morning, while FCX jumps on gains in copper futures.

Meanwhile, UPS (UPS 110.17, -5.63, -4.86%) is one of today's worst performers, breaking through support near the 112.25 level.

Nasdaq holds gains as gold rises on trade concerns; dollar slips
25-Mar-25 14:00 ET

Dow -44.88 at 42538.44, Nasdaq +34.50 at 18223.10, S&P -1.20 at 5766.37
[BRIEFING.COM] With about two hours to go on Tuesday the tech-heavy Nasdaq Composite (+0.19%) holds up fairly well, the lone major average now in positive territory.

Gold futures settled $10.30 higher (+0.3%) at $3,025.90/oz, as concern regarding U.S. trade policies continues to fuel safe-haven demand for the yellow metal.

Meanwhile, the U.S. Dollar Index is down about -0.2% to $104.10.

UniFirst sells off; marks lows on the year after Cintas (CTAS) ends acquisition discussions (UNF)

While Cintas (CTAS) endures modest losses today, UniFirst (UNF -14%) is selling off to its worst levels of the year after CTAS terminated discussions with UNF surrounding its January proposal to acquire the firm for $275.00 a share, a 46% premium to UNF's 90-day average price. Shortly after CTAS, a prominent business equipment supplier, announced its proposal to purchase UNF, a similar uniform rental firm, UNF rejected the unsolicited offer.

However, many investors were confident that a deal would ultimately be made, keeping shares of UNF over 30% higher from its closing price immediately before the proposal. Nevertheless, as time passed and few details emerged, doubt started to creep in, causing UNF to steadily slide lower in the following weeks, only to sink toward levels from before the January proposal today after CTAS terminated the M&A discussions.

Why are investors fleeing UNF today? The potential deal with CTAS offered considerable appreciation; $275 represented an 8% premium from UNF's record closing highs reached in 2021 and a 63% premium to levels closed prior to the January proposal.
It also seems more likely that the two parties will not be reconvening for any future discussions. While CTAS has offered to acquire UNF in the past, proposing a $255/share buyout in 2022, the current deal was met with fierce rejection from the start. In November 2024, CTAS first delivered its updated proposal to UNF's Board, increasing its initial $255 offer to $275 despite UNF refusing to meet. UNF's cold reception led to CTAS publicly publishing its intent to acquire the firm, hoping enough pressure could be placed on UNF to finally accept the terms.
Nevertheless, even after these actions, UNF's Board unanimously rejected the offer almost immediately. Frankly, it is surprising that investors kept shares trading at elevated levels despite UNF's clear unwillingness to budge from going it alone.

Where does UNF go from here? Financials are in good shape; UNF has no long-term debt, which provides it with ample flexibility to tackle its operational goals. Speaking of which, UNF commented in January that it was encouraged by the pipeline of large account opportunities it was working on. However, some incremental weaknesses have cropped up compared to this time last year. During Q1 (Nov), net wearer levels for UNF's existing customers contracted yr/yr. Still, UNF showcased the progress it has been making regarding margins, driving decent improvements in operating income and adjusted EBITDA during Q2 despite posting a sluggish +1.9% bump in consolidated revenue yr/yr.

Overall, the proposed deal between CTAS and UNF falling through is unfortunate news for both companies, albeit to a lesser extent for CTAS. UNF is confident in extracting more value as an independent company than being absorbed by CTAS. However, in the current climate, which remains subject to economic and competitive pressures, it could take time before UNF reaches levels near CTAS's proposed price.

KB Home misses Q1 expectations, cuts outlook as spring sales slow amid affordability issues (KBH)
Less than one week after competitor Lennar (LEN) issued soft 2Q25 EPS and deliveries guidance, KB Home (KBH) reported downside 1Q25 results and lowered its FY25 housing revenue outlook, providing further evidence of an intensifying housing market slowdown. Similar to LEN, KBH experienced lower than expected demand as the spring season began to unfold with high mortgage rates and rising macroeconomic uncertainties mainly to blame. Once again, KBH relied heavily on incentives such as rate buy downs in order to stimulate demand, putting pressure on margins and EPS, which decreased by 15% yr/yr to $1.49.

Homes delivered decreased by 9% to 2,770, missing analysts' estimates, reflecting the muted spring demand and delayed community openings due to the wildfires in Southern California. Mortgage rates have hovered in the high-6% range causing affordability issues, but another headwind has emerged. Buyers are taking longer to make decisions now, resulting in lower absorption rates early in the quarter. The good news is that net orders began rebounding after a mid-February pricing adjustment, but KBH's reduced FY25 housing revenue forecast of $6.60-$7.00 bln (from $7.00-$7.50 bln) is clouding over that development.
Housing gross profit margin has become a closely watched metric in the homebuilder industry as companies ratchet up costly incentives to support demand. Last quarter, KBH reported a surprise 20-bps bump in adjusted housing gross profit margin to 20.9%, bolstered by lower building costs and pricing discipline. Although direct costs were lower again in Q1, and average selling price (ASP) was up 4% yr/yr to $500,700, adjusted housing gross profit margin slipped lower this time, contracting by 130 bps yr/yr to 20.2%. A combination of homebuyer concessions, higher land costs, and reduced operating leverage weighed on margins.
KBH has done well to protect ASPs, but the affordability issues and slipping consumer confidence levels are now taking too big of a toll. Therefore, the company is anticipating ASPs to fall to $480,000-$495,000 in FY25 due to selective price adjustments, down from its prior guidance of $488,000-$498,000. Likewise, KBH anticipates FY25 housing gross profit margin in the range of 19.2-20.0%, down from its prior outlook of 20.0-21.0%.
From a longer-term perspective, the same positive dynamics that have been in place for many years still remain, including favorable demographics, the chronic undersupply of available homes in the U.S., and the accumulated wealth built up from home price appreciation. Once mortgage rates do decline, KBH should see a potent upswing in the market.

KBH's Q1 results revealed weaker-than-expected demand during the start of the spring selling season as consumer confidence declined and buyers hesitated to make purchases due to high mortgage rates. To stimulate sales, the company once again implemented price reductions and increased incentives, which helped drive late-quarter order improvements, but also pressured margins and reduced profitability.

McCormick heads slightly lower on EPS miss, but seems slightly more positive on QSR and China (MKC)

McCormick (MKC -1%) is trading lower after kicking off FY25 on a down note. This supplier of spices, seasoning mixes, and condiments reported its first EPS miss after eight consecutive quarters with in-line or upside results. Revenue for Q1 (Feb) rose 0.2% yr/yr to $1.61 bln, which was generally in-line but followed four consecutive upside quarters, so this was a slight letdown. Probably the best part was MKC reaffirming FY25 guidance despite lackluster Q1 results.

MKC operates two segments: Consumer (57% of FY24 revs; 69% of operating income) and Flavor Solutions (43%; 31%), which caters to food manufacturers and food service customers. Its Consumer segment tends to sport better margins than its FS segment. Total organic sales growth in Q1 was +2% driven by volume and product mix.
Consumer segment sales were flat yr/yr (+1% organic) at $919 mln. Organic sales reflected a 3% increase in volume/mix, offset by a 2% decrease in pricing. Importantly, MKC made some price gap management investments last year, so it was lapping a tougher comparison. MKC also made some targeted incremental promotions in the Americas. China consumer sales improved slightly, which is more optimistic than what MKC said on the Q4 call.
FS segment sales increased by 1% (organic +3%) to $686 mln. Organic sales saw a 2% increase in volume and product mix and a 1% increase in pricing. MKC said its FS results reflect a strong performance with faster-growing Flavor customers and improved QSR growth, which was partially offset by soft CPG (consumer packaged goods) customer volumes.
In terms of the macro environment, MKC said there is increasing consumer uncertainty and concern over returning to more inflation. This has impacted consumer sentiment, particularly in the last month. As such, consumers, especially lower-income consumers, are more cautious and are exhibiting more value-seeking behavior and tightening their budgets. Many are worried about the future, job security, and rising costs. MKC is seeing this not just in the US, but across its key markets.
MKC addressed tariffs on the call. MKC plans to offset costs related to US import tariffs on China with cost savings and some very targeted price adjustments. MKC's focus remains on safeguarding the health and competitiveness of its brands. In terms of guidance, MKC continues to expect FY25 sales growth of +0-2% (+1-3% CC). Its outlook assumes a gradual recovery, and it expects China consumer sales to improve slightly yr/yr.

Overall, the Q1 results were a bit of a letdown as they continue to reflect a cautious consumer. While it is good for MKC that consumers are eating at home more, they are still value-conscious. Two comments on the call stood out to us: improved QSR growth and China sales are improving slightly. MKC was quite bearish on both counts in Q4, so that was good to see. Also, we view MKC's decision to reaffirm despite the Q1 EPS miss and lackluster sales growth as a positive sign. We think that is why the stock is holding up well.

Tesla ticks lower as European sales plunge and rivals leap ahead; shares may be bottoming (TSLA)

European sales plunge and rivals leap ahead, creating selling pressure on Tesla (TSLA) today. According to FT.com, the U.S.-based EV maker posted a 40% yr/yr drop in sales across Europe in February, giving up 1 pt of overall market share to 1.8%. At the same time, China-based EV maker BYD (BYDDF) reported year-end results today, ending 2024 with revenue surpassing that of TSLA's for the first time since 2018.

While by no means uplifting, the unfavorable headlines are not surprising. For instance, earlier this month, Bloomberg mentioned that TSLA's sales in Germany nosedived by 76% yr/yr in February. A week after that development, Bloomberg reported that shipments sunk by 49% over that same period in China. Combining these reports with a souring macroeconomic backdrop amid tariff uncertainty underpinned a 53% stock wipeout from December 17 highs to March 10 lows.

There is certainly no shortage of headwinds facing TSLA, from tariffs and weakening consumer sentiment to an eroding brand image and intensifying competition. However, there are silver linings surrounding TSLA that are worth discussing.

TSLA said it would release its self-driving feature in China yesterday after completing regulatory approval, launching a free trial of its FSD service in the region sometime between now and April 16. TSLA is aiming for a full rollout of FSD this year. The development sparked a rally yesterday as intense competition in China has had plenty to do with technological superiority.
- EV rivals BYD, NIO (NIO), XPeng (XPEV), and Li Auto (LI) are launching Level 2 autonomous driving systems (vehicles can steer, accelerate, and decelerate), with reports finding that an estimated 15 mln new cars sold in the region will have at least Level 2 autonomous capability. Consumers may have been gravitating toward other OEMs in China out of fear that TSLA will not have self-driving anytime soon.
CEO Elon Musk recently held an "all-hands" meeting to make the long-term vision of the company clear. Part of this includes building on the success of the Model Y, which has been the best-selling SUV globally for two straight years. The Model Y is incredibly popular in China when stacked against the competition. The updated Model Y started local deliveries at the end of February, which could explain why sales slumped during the month as consumers awaited the newer model. As such, deliveries in March could quickly reaccelerate.
- Reports have noted that during the second week of March, China's new vehicle registrations rose to the highest in Q1, underpinned largely by Model Y shipments.
The stock's substantial decline has given it a more palatable valuation, going from a forward P/E of 145x to around 91x. Similarly, TSLA's forward sales multiple stands at around 7.5x, which is more attractive than the 13.0x valuation from December.

TSLA still has a lot of work to do to reengage buyers and spark a more aggressive rally. Economic hurdles will not be easy to clear, nor will overcoming the recent deterioration in brand image. However, with the stock already slashed in half, plenty of these concerns may already be priced in, limiting the downside.

Avnet confident in mitigating tariff impacts; possible signs of stabilization outside Asia (AVT)

Avnet (AVT) has crossed both of our Value and Yield Leader Rankings in recent weeks, showcasing its attractive 14x forward earnings valuation and decent 2.8% dividend yield. Avnet is a global electronic component distributor, working with manufacturers in all major electronic component segments. Essentially, if they use a chip, Avnet can supply that business, serving organizations of all sizes, from startups to enterprises and electronic manufacturing services (EMS) providers. Like EMS providers, AVT's margins are slim; in Q2 (Dec), the company posted adjusted operating margins of just 2.8%, down 100 bps yr/yr. However, AVT operates on volume, supporting its steady ~$5.6 bln in revenue over the past four quarters.

There are headwinds present in the semiconductor space as tariff-related uncertainty spurs concerns over how organizations will offset potentially higher costs and lower customer spending. Earlier this month, AVT touched on the subject, noting that during the first round of tariffs in 2017, it handled the higher costs, successfully passing them along to the customer with no impact from a P&L perspective. While this time around the picture has changed, AVT's confidence in managing the matter has not. The company stated that its relationship with suppliers will help mitigate impacts, allowing it to source some products from certain countries without tariffs. Ultimately, AVT believes that its systems in place will lead to virtually no impact on its bottom line.

Over the past several quarters, AVT has been dealing with a clear downturn. Inventories have piled up as demand softens across most sectors outside of AI. The EMEA region, AVT's most lucrative market from a margin standpoint, has seen outsized weakness compared to the Americas and Asia. However, aerospace and defense end markets displayed moderate sequential growth in Q2. Given the EU's current defense push, these markets may see accelerated growth over the coming months, potentially supporting stabilization in the region and propping up AVT's margins.
Similarly, aerospace and defense end markets enjoyed sequential growth in the Americas in Q2. Revenue still fell by double-digits yr/yr in the region, largely due to customer hesitation regarding upcoming tariffs. However, only around 8% of AVT's business in the Americas is coming out of China. Also, AVT's customers may need a little time to move their supply chains and gear up for tariff impacts.
Asia was a highlight in Q2, being the only region to post yr/yr sales growth. However, Asia commands the lowest margins, which weighed on AVT's consolidated margins in the quarter. Still, Q2 marked the second straight quarter of yr/yr growth in Asia, an encouraging sign that the region's economies are holding up relatively well. AVT noted that this tends to be a bullish sign for what is to come in the balance of all its other regions.

Tariffs remain a near-term concern as they cloud businesses' plans. This is leading to an issue surrounding the timing related to demand stabilization in EMEA and the Americas. However, given that Asia has started to show signs of growth, a recovery in the West could occur sooner rather than later. Also, despite tariff concerns, shares of AVT have held up relatively well, slipping by just 11% from January highs. As such, we like AVT at current levels for buy-and-hold investors. As always, a 15-20% stop loss limit should be used.

To: Return to Sender who wrote (94076)

3/26/2025 4:51:43 PM

From: Return to Sender

2 Recommendations

Recommended By
Julius Wong
kckip

Read Replies (1) | Respond to of 95367

Market Snapshot

Dow	42454.79	-132.71	(-0.31%)
Nasdaq	17899.01	-372.84	(-2.04%)
SP 500	5712.20	-64.45	(-1.12%)
10-yr Note	-2/32	4.341

NYSE	Adv 951	Dec 1741	Vol 980 mln
Nasdaq	Adv 1353	Dec 2965	Vol 9.1 bln

Industry Watch

Strong: Consumer Staples, Energy, Utilities, Real Estate

Weak: Technology, Consumer Discretionary, Communication Services, Health Care

Moving the Market

-- Muted action at the index level due to lack of conviction from buyers or sellers

-- Uncertainty around US trade policy after President Trump said he doesn't want too many exceptions for reciprocal tariffs, but that he would probably be more lenient than reciprocal, according to Bloomberg

-- Digesting news that President Trump is expected to announce tariffs on auto imports

-- Losses in mega caps acting as limiting force

Closing Summary
26-Mar-25 16:25 ET

Dow -132.71 at 42454.79, Nasdaq -372.84 at 17899.01, S&P -64.45 at 5712.20
[BRIEFING.COM] The equity market closed with losses in the major indices. The Dow Jones Industrial Average declined 0.3%, the S&P 500 dropped 1.1%, and the Nasdaq Composite fell 2.0%.

Today's price action led the S&P 500 back below its 200-day moving average (5,756) and led the Dow Jones Industrial Average, which turned positive on the year in yesterday's advance, back into the red for 2025.

There were some indications of buying interest in the early going, but losses in the mega cap space kept a cap on index performance. Selling increased in the space, and the broader equity market, following news that President Trump is expected to announce tariffs on auto imports.

Tesla (TSLA 272.06, -16.08, -5.6%) was an influential loser, giving up some ground after a solid recovery in response to a weak start to 2025. Shares are still 9.4% higher this week, yet show a 32.6% decline since the start of the year.

NVIDIA (NVDA 113.76, -6.93, -5.7%) and other chipmakers also registered outsized losses. Reports indicated that the U.S. placed more than 50 Chinese companies on a blacklist of export restrictions for advanced computing capabilities; meanwhile, FT reported that Chinese environmental regulations could hurt NVIDIA's sales in the country.

The PHLX Semiconductor Index (SOX) closed 3.3% lower than yesterday. The selling interest contributed to the underperformance of the S&P 500 information technology sector, which was the worst performers by a wide margin. The communication services (-2.0%) and consumer discretionary (-1.7%) sectors were the next worst performers.

The defensive-oriented consumer staples (+1.4%) and utilities (+0.7%) sectors were the top gainers, reflecting a more risk-off tone in today's trade.

Elsewhere, Treasuries settled with modest losses. The 10-yr yield settled three basis points higher at 4.34% and the 2-yr yield settled one basis point higher at 4.01%. On a related note, today's $70 billion 5-yr note auction met weaker demand than yesterday's 2-yr note offering, but the market reaction was limited.

Dow Jones Industrial Average: -0.2% YTD
S&P 500: -2.9% YTD
S&P Midcap 400: -4.2% YTD
Nasdaq Composite: -7.3% YTD
Russell 2000: -7.0% YTD

Reviewing today's economic data:

Weekly MBA Mortgage Applications Index -2.0%; Prior -6.2%
February Durable Orders 0.9% (Briefing.com consensus -1.2%); Prior was revised to 3.3% from 3.1%, February Durable Goods - ex transportation 0.7% (Briefing.com consensus 0.1%); Prior was revised to 0.1% from 0.0%
- The key takeaway from the report is that durable goods orders were stronger than expected; however, that understanding was clouded by the added realization that there was a downturn in business spending, evidenced by the 0.3% decline in nondefense capital goods orders, excluding aircraft.

Looking ahead to Thursday, market participants receive the following data:

8:30 ET: Q4 GDP -- third estimate (Briefing.com consensus 2.3%; prior 2.3%), Q4 GDP Deflator -- third estimate (Briefing.com consensus 2.4%; prior 2.4%), Weekly Initial Claims (Briefing.com consensus 225,000; prior 223,000), Continuing Claims (prior 1.892 mln), advance February goods trade balance (prior -$153.3 bln), advance February Retail Inventories (prior -0.1%), and advance February Wholesale Inventories (prior 0.7%)
10:00 ET: February Pending Home Sales (Briefing.com consensus 2.9%; prior -4.6%)
10:30 ET: Weekly natural gas inventories (prior +9 bcf)

Losses building ahead of the close
26-Mar-25 15:35 ET

Dow -211.56 at 42375.94, Nasdaq -419.66 at 17852.20, S&P -76.29 at 5700.36
[BRIEFING.COM] Losses are mounting ahead of the closing bell. The S&P 500 is down about 75 points from yesterday.

Treasuries settled with modest losses. The 10-yr yield settled three basis points higher at 4.34% and the 2-yr yield settled one basis point higher at 4.01%. On a related note, today's $70 bln 5-yr note auction met weaker demand than yesterday's 2-yr note offering, but the market reaction was limited.

Looking ahead to Thursday, market participants receive the following data:

8:30 ET: Q4 GDP -- third estimate (Briefing.com consensus 2.3%; prior 2.3%), Q4 GDP Deflator -- third estimate (Briefing.com consensus 2.4%; prior 2.4%), Weekly Initial Claims (Briefing.com consensus 225,000; prior 223,000), Continuing Claims (prior 1.892 mln), advance February goods trade balance (prior -$153.3 bln), advance February Retail Inventories (prior -0.1%), and advance February Wholesale Inventories (prior 0.7%)
10:00 ET: February Pending Home Sales (Briefing.com consensus 2.9%; prior -4.6%)
10:30 ET: Weekly natural gas inventories (prior +9 bcf)

Car makers move lower
26-Mar-25 15:05 ET

Dow -222.07 at 42365.43, Nasdaq -405.00 at 17866.86, S&P -75.35 at 5701.30
[BRIEFING.COM] The major indices remain near session lows.

The White House confirmed that President Trump will hold a press conference at 4:00 p.m. ET today where he will announce auto tariffs. Shares of Tesla (TSLA 270.15, -17.94, -6.4%), General Motors (GM 50.84, -1.74, -3.3%) and Stellantis (STLA 11.94, -0.46, -3.7%) moved lower after the confirmation.

Treasuries were little changed. The 10-yr yield is at 4.34%.

S&P 500 drops 1.12% as SMCI, MRNA, PWR lead declines; CTAS surges on earnings
26-Mar-25 14:30 ET

Dow -147.77 at 42439.73, Nasdaq -364.33 at 17907.53, S&P -64.52 at 5712.13
[BRIEFING.COM] The S&P 500 (-1.12%) is in second place on Wednesday afternoon, down about 65 points.

Briefly, S&P 500 constituents Super Micro Computer (SMCI 37.09, -3.55, -8.74%), Moderna (MRNA 31.50, -2.35, -6.94%), and Quanta Services (PWR 262.35, -13.90, -5.03%) pepper the bottom of the average. MRNA slips after reports the Trump administration plans to end support for child vaccines in developing countries, while PWR gives back some of its recent rebound as the S&P 500 industrials (-0.56%) sector posts a lower half loss.

Meanwhile, Cintas (CTAS 207.28, +13.82, +7.14%) is atop the standings following earnings/guidance.

Gold slips as stronger dollar, tariff concerns weigh on prices
26-Mar-25 14:00 ET

Dow -194.67 at 42392.83, Nasdaq -381.28 at 17890.58, S&P -70.67 at 5705.98
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (-2.09%) is decidedly lower, down now about 380 points.

Gold futures settled $3.40 lower (-0.1%) at $3,022.50/oz, pressured both by a stronger greenback as well as continued concerns regarding President Trump's proposed reciprocal tariff plans.

Meanwhile, the U.S. Dollar Index is up about +0.3% to $104.51.

Chewy exceeds Q4 estimates, projects upbeat Q1 numbers; Autoship remains an X factor (CHWY)

It has been a game of tug-of-war between buyers and sellers of online pet food and supplies retailer Chewy (CHWY +1%) today following its upbeat Q4 (Jan) report and Q1 (Apr) guidance. CHWY produced its fifth straight quarter of bottom-line upside on a rapid uptick in top-line growth during the quarter. The company anticipates sustaining this momentum, projecting Q1 earnings and revenue above consensus.

A central highlight from Q4 was CHWY's 15.0% revenue growth yr/yr to $3.25 bln, well above its $3.18-3.20 bln forecast and representing nearly 10 pts of acceleration over the previous quarter and returning to double-digit growth for the first time since 2Q24 (Jul). The robust growth was underpinned by healthy active customer growth, a slight rebound in CHWY's hard goods merchandise category, and sustained Autoship customer loyalty across consumables and health & wellness categories.
Autoship is a vital component of CHWY's quarterly performance as it creates a dependable recurring revenue stream. Often, customers are slower to switch to a competing pet food supplier when they already have an active Autoship setup on Chewy.com. In Q4, Autoship represented 80.6% of total sales, with revenue growth of 21% yr/yr, which outpaced overall top-line growth.
Also helping push revenue demonstrably above estimates in Q4 was active customer growth, ending FY25 with 20.5 mln active customers, CHWY's first year of yr/yr growth since FY23. Management attributes the long-awaited recovery to its ongoing efforts to bolster and refresh its assortment, enhance mobile app experiences, and refine its marketing strategy. CEO Sumit Singh believes that CHWY reached an inflection point regarding active customer growth, anticipating further gains in 2025.
Turning to profitability, CHWY's adjusted EPS of $0.28 marked its best quarter since the beginning of FY25, fortified by adjusted EBITDA margins tagging the high end of CHWY's guidance of 4.6-4.8%. The company's sponsored ads business, where it allows brands to advertise on Chewy.com, is a major factor in its healthy margins. For the year, this business reached around 1% of net sales, roughly 2 pts away from CHWY's reiterated long-term goal.
CHWY does not anticipate its momentum to cease over the next few months, targeting Q1 adjusted EPS of $0.30-0.35 and revs of $3.06-3.09 bln. Management noted that its sales growth will likely be driven by further active customer growth, expecting low-single-digit gains yr/yr, and minimal price inflation. On profitability, CHWY mentioned that margins will likely follow a similar cadence as last year, with modest sequential declines throughout FY25 due to seasonality and investment timing.

While today's price action is muted, CHWY's Q4 report was plenty loud, delivering several highlights as it benefits from the relative price inelasticity of pet food. Demand for hard goods will likely remain somewhat retrained over the next several months as consumers battle compounded inflationary effects. However, CHWY's consistently sound performances showcase that it can still realize meaningful growth despite economic headwinds as it reels in impressive gains from its Autoship program. At the same time, CHWY is improving its margin profile, which should only accelerate once broader demand conditions turn.

Cintas applauded for its beat-and-raise in Q3; remains confident in mitigating tariffs (CTAS)

Investors are applauding a solid beat-and-raise from work equipment and uniform supplier Cintas (CTAS +6%) in Q3 (Feb) today, pushing the stock past early March highs and levels traded before a sizeable gap-down in December following mediocre Q2 (Nov) results. The letdown last quarter was CTAS's trimmed FY25 (May) organic growth guidance, lowering the high end by 40 bps to +7.7%. While CTAS kept this part of its FY25 organic growth forecast unchanged today, it did bump up the lower bound to +7.4% from +7.0%, sufficient to alleviate fears over a less digestible worst-case scenario and trigger a moderate rally today.

Given its footprint as a supplier of numerous items, from work uniforms to cleaning supplies and fire extinguishers, to businesses of all sizes, CTAS's quarterly results often paint a decent picture the the economic health of U.S. companies. Encouragingly, there were no surprises on CTAS's top and bottom lines, exceeding earnings for five years running while delivering revenue a hair above analyst forecasts, a typical trend for the company.
Earnings expanded by 17.7% yr/yr to $1.13 (CTAS conducted a 4:1 stock split last year) supported by a 120 bp jump in gross margins yr/yr to 50.6%.CTAS has put on a show of consistency regarding its margin profile, steadily setting new quarterly records as it benefits from robust volumes, operating leverage, and ongoing operational efficiencies. Impressively, CTAS has been able to grow its margins despite an unfavorable trend of price increases coming down as inflationary pressures ease.
Revenue marched 8.4% higher yr/yr in Q3 to $2.61 bln, lifted by a 7.7% improvement in CTAS's core uniform rental and facility services division and an 11.0% jump in other revenue (consisting of fire protection services and uniform direct sales). Echoing its comments from last quarter and consistent with remarks from peer Aramark (ARMK) earlier this month, CTAS continued to enjoy solid demand during Q3, underpinning the necessity of the company's services. Nearly every business requires something that CTAS offers, from exit lighting to bathroom supplies.
Tariffs remain top-of-mind for investors given the recent stock market shakiness. However, CTAS reiterated its thoughts from last quarter, noting that it remains too early to tell what impacts tariffs will have. However, like ARMK, CTAS sources less than 10% of its products and is in a favorable position to negotiate from that standpoint.
Foreign exchange is clearly acting as more of a headwind than tariffs. For FY25, CTAS sliced $15 mln off the top of its FY25 net sales outlook to reflect FX headwinds, changing it to $10.280-10.305 bln from $10.255-10.320 bln. Conversely, highlighting ongoing efficiencies and volume growth, CTAS raised its FY25 EPS outlook to $4.36-4.40 from $4.28-4.34.

Fears over a recession have kept CTAS trading mostly sideways over the past several weeks leading up to Q3 results. By raising its FY25 guidance, including bumping up the lower bound of its FY25 organic growth outlook, investors are breathing a heavy sigh of relief. We continue to like CTAS given its formidable presence and diversified revenue stream, selling products commanding relatively low price elasticity.

Dollar Tree higher on sale of Family Dollar, new CEO to focus on turning around core brand (DLTR)

Dollar Tree (DLTR +9%) is trading sharply higher following its Q4 (Jan) earnings report this morning. However, the bigger news is that DLTR reached a deal to sell its Family Dollar segment to Brigade Capital and Macellum Capital for just north of $1 bln. DLTR previously announced a review of strategic alternatives for its FD segment. The transaction is expected to close later in Q2.

As we said in our preview, we might get news about a sale and that turned out to be true. We suspect management saw the ending of the fiscal year as a good time to announce a deal, so it heads into the new year with this issue resolved and behind it. Its FD segment has been struggling and this deal now allows DLTR's new CEO to focus on turning around the Dollar Tree segment.
Specifically, Dollar Tree wants to return to its roots while still competing and innovating. It says its merchants consistently provide shoppers with an ever-changing assortment and that no other retailer can reproduce the immediacy and thrill of that signature Dollar Tree treasure hunt. It also wants to run stores that are clean, bright and inviting.
In terms of the rationale, the company said that Dollar Tree and Family Dollar are two different businesses with limited synergies, and each is at a very different stage of its journey. Separating them will enable each banner to focus exclusively on what each banner needs. Also, separating them allows investors to assign proper multiples for each business. We suspect that DLTR may get rewarded with a higher multiple when not dragged down by Family Dollar.
Turning to the Q4 results, they are a bit difficult to analyze because Family Dollar is now considered discontinued operations. As such, DLTR's results are not comparable to consensus estimates. With that said, Q4 revenue increased 0.7% to $5.0 bln. Same-store comps increased +2.0%, in-line with prior guidance of low-single-digit comp growth for the Dollar Tree segment. Looking ahead to Q1 (Apr), the company expects sales from continuing operations to be $4.5-4.6 bln, based on comp growth of +3-5%, which is a nice acceleration from Q4 comps.

Overall, we think it is a good thing for the stock to have the Family Dollar sale finalized, so investors can now focus exclusively on Dollar Tree going forward. We think DLTR will eventually be rewarded with a higher multiple. Also, the sale provides a clean slate for new CEO Michael Creedon, Jr., who took the helm in December 2024. The Dollar Tree segment has been the better performing segment, but it still needs improvement. The Q1 comp guidance of +3-5% was quite promising. However, even after the FD sale, DLTR is still navigating a tough macro environment, especially for its lower income core customer. Plus, DLTR sources a lot of merchandise from overseas, so dealing with tariffs will be tricky.

Paychex grows Q3 profits with tech-driven efficiencies; Paycor deal expected to boost growth (PAYX)
Payroll and human capital management (HCM) company Paychex (PAYX) delivered solid 3Q25 results that were mostly in-line with expectations while reaffirming FY25 EPS and revenue guidance. Near-record revenue retention and improved profitability through automation and technology investments were key aspects underlying the steady performance. The company's healthy earnings, which grew by 8% yr/yr to $1.49, also come on the heels of strong earnings reports from competitors Workday (WDAY) on February 25 and Automatic Data (ADP) on January 29, providing more evidence that the U.S. employment situation remains resilient in the face of numerous macroeconomic challenges.

Revenue in the Management Solutions segment, which houses its payroll processing and HCM businesses and accounts for approximately 75% of its total revenue, increased by 5% yr/yr to $1.10 bln. While PAYX experienced lower revenue in ancillary services due to the expiration of the Employee Retention Tax Credit Program, that headwind was more than offset by client growth in the HCM and HR outsourcing businesses. Additionally, enhanced digital capabilities, such as AI and machine learning for automated payroll processing and self-service mobile and cloud platforms, improved PAYX's offerings.
Growth was a little stronger in the Professional Employer Organization (PEO) and Insurance Solutions segment with revenue up 6% yr/yr to $365.4 mln. The growth was driven by a combination of higher average PEO worksite employees and growth in PEO insurance revenues. Rising demand for HR outsourcing, particularly among SMBs, remains a bullish trend for this segment. Due to complex regulatory requirements, an increasing number of SMBs are seeking outsourced HR, compliance, and payroll services.
PAYX's investments in automation and technology are paying off, as illustrated by the 180-bps expansion in adjusted operating margin to 46.9%. A couple examples of PAYX's advancements include the use of automated customer onboarding to streamline enrollments, and the implementation of cloud-based infrastructure to reduce IT maintenance and operational costs.
The positive reaction in the stock is also likely tied to PAYX's updated commentary and financial projections for its recent acquisition of Paycor (PYCR). The acquisition is now expected to close in April so PAYX will see contributions imminently. Strategically, the addition of PYCR will expand the company's cross-selling opportunities and distribution channels, while improving its AI capabilities. What's catching investors' attention, though, is the disclosure that the acquisition will contribute 10-12% revenue growth in 4Q25 and will be accretive to EPS starting in FY26.

PAYX delivered solid results, driven by strong client retention, increased product adoption, and margin expansion from continued investments in automation and digital solutions. The upcoming closing of the PYCR acquisition is expected to enhance long-term revenue synergies and drive over $80.0 mln in cost savings in year one, providing the stock with a meaningful growth catalyst.

UniFirst sells off; marks lows on the year after Cintas (CTAS) ends acquisition discussions (UNF)

While Cintas (CTAS) endures modest losses today, UniFirst (UNF -14%) is selling off to its worst levels of the year after CTAS terminated discussions with UNF surrounding its January proposal to acquire the firm for $275.00 a share, a 46% premium to UNF's 90-day average price. Shortly after CTAS, a prominent business equipment supplier, announced its proposal to purchase UNF, a similar uniform rental firm, UNF rejected the unsolicited offer.

However, many investors were confident that a deal would ultimately be made, keeping shares of UNF over 30% higher from its closing price immediately before the proposal. Nevertheless, as time passed and few details emerged, doubt started to creep in, causing UNF to steadily slide lower in the following weeks, only to sink toward levels from before the January proposal today after CTAS terminated the M&A discussions.

Why are investors fleeing UNF today? The potential deal with CTAS offered considerable appreciation; $275 represented an 8% premium from UNF's record closing highs reached in 2021 and a 63% premium to levels closed prior to the January proposal.
It also seems more likely that the two parties will not be reconvening for any future discussions. While CTAS has offered to acquire UNF in the past, proposing a $255/share buyout in 2022, the current deal was met with fierce rejection from the start. In November 2024, CTAS first delivered its updated proposal to UNF's Board, increasing its initial $255 offer to $275 despite UNF refusing to meet. UNF's cold reception led to CTAS publicly publishing its intent to acquire the firm, hoping enough pressure could be placed on UNF to finally accept the terms.
Nevertheless, even after these actions, UNF's Board unanimously rejected the offer almost immediately. Frankly, it is surprising that investors kept shares trading at elevated levels despite UNF's clear unwillingness to budge from going it alone.