Signs of the End of Inflation's Evil Reign

🔮 Welcome back to Finsights, fellow financial wizard. Let’s get you up to speed on the market with a flick of your finger!

• 💸 Companies cutting prices, price wars begin in used car land!

• 👜 Michael Kors is falling out of the fashion loop.

• ✈️ Americans are flying far and wide, the travel bug is real!

• 💼 There's a buffet of jobs in the U.S., time to seize the opportunity!

• 😭The Fed might just raise rates again…

Price wars begin, starting in auto parts. 🏎️🏎️

🔧 $AAP (Advanced Auto Parts), the ‘car contenders’, surpasses Foot Locker as the biggest stinker this earnings season 💩. The horrendous $AAP results this morning were driven in part by “higher than planned investments to narrow competitive price gaps in the professional sales channel,” which is code for slashing prices.

Whether this is the start of a broader trend remains to be seen, but it's a notable shift, especially considering that autos have been driving inflation forward at a near breakneck speed 🚗💨. Last week, AutoZone (AZO) gave us a hint of this change in the wind, signaling a moderation in price trends. Meanwhile, Advance Auto Parts (AAP) reported results that make AZO's look like a walk in the park.

The details - 🔧 $AAP (Advanced Auto Parts) stumbled over a rusty nail this earnings season, reporting horrible results. Comparable store sales were okay at -0.4%, just slightly lower than Wall Street's forecast of +0.7%. But margins were horrible. Gross margins came in at 43%, 200bps below the Street, and their EPS rolled in at just $0.72, far short of the Street's guess of $2.65. Seems like Advanced Auto is in need of a tune-up itself. They even had to slash the dividend from $1.50 to a mere $0.25.

To quote a famous racer, they're not first, so does that make them last?

🔮 The Finsight 🔮: The higher you rise (auto parts) the harder you fall (auto parts).

Blackstone ($BX), the private equity firm that basically owns everything in this country, is saying the same thing.

Blackstone's President and COO, Jonathan Gray, has given the financial terrain an encouraging once-over. He's saying inflation, that pesky hitchhiker we've been carrying, is gradually getting off at the next stop, especially here in the US:

• Shipping costs have slid back to their pre-COVID comfort zones.

• Company input costs are putting less pressure on our wallets, having risen by a mere 2% in Q1.

• Labor, the stickiest of them all, has dialed down its demands from 7% in Q322 to a more modest 5.5% 📉. It's like watching the price tags slowly shrink in a supermarket.

But fear not, using a ski slope analogy, Gray suggests this current economic slowdown is more of a leisurely green slope 🟢 than a hair-raising double black diamond ⚫⚫. So, buckle up, and let's enjoy the ride! 🎿💵📉

🔮 The Finsight 🔮: Blackstone owns a lot of companies. Trust what they say.

Consumer

🐾 $CHWY (Chewy), the online fairy godparent of pet parents, clawed its way past expectations with a solid FQ1. Revenue purred to a satisfying $2.78B, beating Street's $2.71B estimate. Looks like Chewy's magic recipe includes less discounts, more orders, and cost-cutting on freight and packaging. They're marking their territory for the year with an upgraded revenue target of $11.15-11.35B and EBITDA margins growling around ~3%.

🔮 The Finsight 🔮: Paw-rents spend in any environment.

👗 $JWN (Nordstrom), the high-end fashion hub, has managed to keep the wolves of Wall Street at bay with their FQ1 results. EPS stood at 7c, debunking Street's forecast of a 13c loss. From Rack to runway, their sales trends picked up late in the quarter with a grand finale in April. Gross margins sashayed were up by 110bps, and operating costs were kept on a tight leash. Looks like they're sticking with their full-year forecast.

🔮 The Finsight 🔮: Luxury brands don’t discount (only sometimes).

👔 $PVH (PVH Corp.), the parent of fashion-forward Calvin Klein and Tommy Hilfiger, wrapped up FQ1 in style. EPS clocked in at $2.14, beating Street's $1.93 forecast. Despite a lukewarm reception at Calvin and a cheer at Tommy, overall revenues matched expectations. They're holding the line on their full-year forecast, but the Q2 catwalk looks a bit shaky, with an EPS of $2.08 vs. Street's hopeful $2.25.

🔮 The Finsight 🔮: Not all retail brands are made equal.

👙 $VSCO (Victoria's Secret), the intimate apparel trailblazer, failed to allure in their earnings report with a large EPS miss of 28c, a far cry from the Street's 56c estimate. Excessive promotions turned out to be a villain in their story. Their Q2 forecast dims the spotlight further, suggesting an EPS of just 10-40c against Street's $0.92, and operating margins projected at 5-6% vs. Street's 9%. Ouch. A silver lining in the cloudy forecast was a decline in inventory and a glimmer of growth in their international business, especially in China.

🔮 The Finsight 🔮: Even bras and panties need to be put on sale.

👜 $CPRI (Capri Holdings), the high-end fashion trio of Michael Kors, Jimmy Choo, and Versace, strutted their stuff on the Q4 runway, beating the Street's EPS estimate at $0.97 against $0.93, and grossing revenues of $1.335B, outdoing the Street's guess of $1.278B. However, their forecast for Q1 looked like a fashion faux pas, with an expected EPS of only $0.70, far less glamorous than the Street's expected $1.41. It seems that even the fashion world can't always keep up with the trends.

🔮 The Finsight: American luxury continues to lose share to European counterparts. 🔮

✈️ $AAL (American Airlines), the transcontinental transporters, caught a favorable tailwind, raising their Q2 guidance due to lower fuel costs and increased demand. They're now expecting an EPS of $1.45-$1.65, a notch above their prior estimate of $1.20-$1.40. However, don't expect a flight upgrade just yet - their unchanged full-year view indicates they're buckled in for any turbulence ahead.

🔮 The Finsight 🔮: Travel has exceeded pre-COVID levels.

Financials

🏦 At a conference, the CEO of Truist Financial ($TCF), the financial powerhouse resulting from a BB&T and SunTrust merger, reported that their clients are showing caution, leading to a pullback in loan demand. This slight wobble may make them feel more like a rollercoaster than a stable financial institution.

🔮 The Finsight 🔮: Borrowers may wobble, but the great tumble isn’t here yet.

Tech, Media, and Telecom

💻 $INTC (Intel), the silicon-based stalwarts of computing, are the hot topic in the tech world, riding high in the S&P 500. Reassuring remarks from their CFO and a shoutout from Nvidia's CEO have given their shares a performance boost. They're expecting a great Q2 with the launch of their new AI-linked products, showing us that they're not yet ready to be outpaced by their GPU-equipped rivals. It's the CPU's time to shine, and Intel is holding the spotlight.

🔮 The Finsight 🔮: Intel just got the Nvidia big bro nod of approval.

💻 CRM (Salesforce), the cloud-based software giant, had a solid FQ1 with earnings per share (EPS) of $1.69, beating the estimated $1.61. It might not be a mega-AI fest like Nvidia, but it's doing well. They're even increasing their operating margin goal to 28% for the year, which is around 110bp ahead of the street.

🔮 The Finsight: Slow and steady wins the race. 🔮

🔒 CRWD (CrowdStrike), your personal cybersecurity bouncer, reported a bang-up FQ1 with stronger than expected EPS, revenue, and Annual Recurring Revenue (ARR). It's like a triple-threat pop star but for cybersecurity. They're so confident they're raising their revenue and EPS guidance for the year to $2.32 - $2.43 from $2.21 - $2.39.

🔮 The Finsight 🔮: Everyone needs cybersecurity, right?

🏦 NCNO (nCino), the cloud banking squad, reported a slight FQ1 EPS beat. However, they're seeing some clouds on the horizon with a decrease in their full-year revenue forecast to $474 - $479M from $476 - $483M. Ouch!

🔮 The Finsight 🔮: Cloud banks still need real customers.

💾 NTAP (NetApp), the data storage mavens for corporations, brought in solid FQ4 results with revenue down 4% but beating the street at $1.58B. However, their FQ1 forecast is a bit of a let-down. For F24, they see the sun coming out again with better projections. Mixed bag.

🔮 The Finsight 🔮: Companies are still storing their data, just not with NetApp.

🔑 OKTA (Okta), the identity security guardians, saw a neat FQ1 beat in terms of EPS and revenue. Still, investors are giving them the side-eye due to their Current Remaining Performance Obligation (cRPO) shortfall. Despite this, their full-year EPS and revenue guidance is on the rise.

🔮 The Finsight 🔮: Who else can confirm it’s you when you log in?

💽 PSTG (Pure Storage), the digital storage aficionados, reported a great Q1 with higher revenue, EPS, and margins than expected. While their FQ2 forecast is glowing, they haven't changed their full-year outlook.

🔮 The Finsight 🔮: Are companies storing their data with Pure Storage instead of NetApp?

💊 VEEV (Veeva), the cloud solutions provider for the global life sciences industry, had a healthy FQ1 with EPS of 91c, beating the estimated 79c. They're feeling so good they're raising their yearly guidance.

🔮 The Finsight 🔮: Pharma tech is always a good spot to be.

The JOLTS report (Job Openings and Labor Turnover Summary) is a monthly report that tracks job openings, hirings, and separations (oops!). It's like a health check for the job market. 💼📊

Now, for April, the JOLTs report was on fire 🔥, with job openings at 10.1M. That's up from 9.74M in March and way above the Street's 9.4M forecast. Jobs in retail trade (+209,000), healthcare and social assistance (+185,000), and transportation, warehousing, and utilities (+154,000) were particularly plentiful.

What does this all mean? Well, it's like a sudden cold shower 🚿 for stocks - a knee-jerk negative. It's suggesting that the economy could be hotter than the Fed would like, which could mean interest rates may rise again to keep inflation in check 🤦. The chatter about a possible June rate hike is now a full-blown conversation 📢 - at least until we get the next big news, the Friday jobs report.

🔮 The Finsight 🔮: 25 bps hike or not, markets will overcorrect pre-announcement.

🔮 With Finsights, you get Wall Street wisdom delivered straight to your pocket. Subscribe today and spread the wealth by forwarding this email to a friend who deserves it.

Fin-specto Revelio!