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Last Big Afternoon of Q1 Earnings Season

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Thursday, May 30th, 2024

The second half of May has proven confusing for the markets. After major indices were more or less on a similar trajectory off April’s pullback, we saw the Nasdaq keep climbing higher — largely on the perceptions of the A.I. market following NVIDIA’s (NVDA - Free Report) earnings report a week ago, while the small-cap Russell 2000 started to wane and the blue-chip Dow flatlined before sinking this week.

The S&P 500 has been similarly range-bound over these past couple weeks, as well. Today, the Dow has shed another -330 points, -0.86%, the S&P was -0.60%, the Nasdaq -1.08% (still leading the pack year to date) and the Russell +1.00 for the session, the only index in the green all day.

Interestingly, market participants are selling ahead of tomorrow’s big data release. The April Personal Consumption Expenditures (PCE) report — the Fed’s preferred metric for tracking inflation — is expected to show moderation on year-over-year metrics on both headline and core. The reason this is interesting is because ahead of the Consumer Price Index (CPI) report earlier this month, markets caught a bid in the session ahead of the release. When that bullishness was justified by the numbers, markets kept ramping higher. But it’s the opposite for PCE. Does this mean there is more trepidation for these inflation numbers?

Perhaps, but it’s difficult to see how. After all, PCE numbers include data points from other economic data reported previously for the month, and as such, they usually require fewer and milder revisions in the following months. And with cooler inflation data feeding into these PCE numbers, it would stand to reason that a similar view on the consumer pulling back may be evident in tomorrow’s report. Trading ahead of these figures does not wash out, however. Perhaps we’ll see a pop to the upside on the final trading session of the month?

This is the final busy afternoon of Q1 earnings season. There are so many, in fact, that we’ll organize them generally by sector:

Costco (COST - Free Report) shares are up +1% in late trading. The discount membership warehouse giant posted an 8-cent beat on fiscal Q3 earnings this afternoon to $3.78 per share, while revenues of $58.52 billion easily outpaced the $58.10 billion in the Zacks consensus. Same-store sales were up +6.6% year over year, despite negative impacts in the quarter on gasoline prices and currency headwinds overseas.

Nordstrom (JWN - Free Report) , on the other hand, is down this afternoon. Its Q1 number were mixed, missing significantly on the bottom line — -$0.24 per share versus expectations of -$0.08 — on revenues that came ahead of the Zacks consensus, to $3.34 billion from $3.20 billion anticipated. The company missed gross margin estimates, but Nordstrom Rack grew by an unexpected +8% in the quarter. Shares are down -6.5% at this hour.

Ulta Beauty (ULTA - Free Report) beat on both top and bottom lines in its Q1 report. After lowering guidance last month, Ulta brought in earnings of $6.47 per share versus $6.19 anticipated, while revenues of $2.73 billion edged past the $2.72 billion analysts had been expecting. Shares are up +6% in late trading, despite lower merchandise margins and shrinkage issues at its beauty supply stores. The company has not missed on earnings since 2020.

The Gap (GPS - Free Report) is the best-performing of the retail companies reporting earnings today. After speeding past estimates on both earnings and revenues — 41 cents per share versus 14 cents projected on $3.39 billion in revenues, ahead of the Zacks consensus $3.28 billion — have led shares up +20% in today’s after-market. Guidance was also raised for the current quarter, and same-store sales have improved among Gap stores, Old Navy, Athleta and Banana Republic.

Now for tech companies reporting this afternoon:

Cloud-based enterprise solutions company Zscaler (ZS - Free Report) shares are up nearly +15% at this hour. Fiscal Q3 earnings of 88 cents per share easily surpassed the 65 cents anticipated, while $553 million easily swept past the $535.5 million analysts were looking for. Next-quarter guidance was raised as the company explained how it intends to expand its platform. The shares had been down -26% year to date; this bid-up is filling much of this hole this afternoon.

Dell (DELL - Free Report) beat Q1 earnings by 2 cents to $1.27 per share. Revenues of $22.2 billion outstripped the $21.70 billion expected, on record revenue gains in its servers and networking space. Sales of A.I. servers were strong in the quarter, but shares are tumbling in the after-market: down -18% at this hour. If that sounds surprising to you, notice the stock had been priced for perfection: +127% year to date.

MongoDB (MDB - Free Report) is performing worst of all in the late session. The enterprise database platform company’s shares are down -24% in late trading, even after beating on earnings — 51 cents per share versus 38 cents in the Zacks consensus — and revenues: $451 million versus $438.4 million expected. But forward guidance was disappointing on top and bottom lines, adding to the -19% selloff the shares have experienced year to date. (Over the past one year, shares had been +6% to the positive.)

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