Wall Street Breakfast
Walgreens plunges as it preps to shutter stores
Shares hit multi-year-low on weak guidance. (0:16) Levi's shares fade fast. (3:47) Uber offers cash to ditch your car for 5 weeks. (4:26)
Show Notes
Durable goods orders edge up in May
The S&P 500 is the ‘perfectly constructed index’ - Goldman Sachs
Episode transcripts seekingalpha.com/wsb
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- Duration:
- 6m
- Broadcast on:
- 27 Jun 2024
- Audio Format:
- mp3
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action news and analysis. Good afternoon, today's Thursday, June 27th, and I'm your host, Kim Kong. Our top story so far. Wall Green's Boots Alliance plunged to a multi-year low after lowering its flier outlook due to a tough overall backdrop for retail. In addition, the Wall Street Journal reported that it plans major store closures this year. The report indicated that the company hasn't settled on a final number of locations to close, as it is still reviewing about a quarter of its stores that aren't profitable. CEO Tim Wentworth said, "We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics, which have eroded pharmacy margins. We recognize that we need to be focused on what are the parts of the business that we believe are contributing and have a future and some of those that need to change." Wall Green said it now sees full-year EPS of $2.80 to $2.95 down from prior guidance of $3.20 to $3.50 and below the consensus estimate of $3.20. Also in the drugstore arena, Rite Aid is seeking approval from a bankruptcy court for its restructuring plan that will cut $2 billion in debt and emerge from Chapter 11 owned by a group of investors. The company argues that the restructuring plan is the best option to pay its creditors and resume operations. The economic calendar was busy today, but while a little hot, the figures didn't move the needle on fed expectations. The market is still pricing in a 65% chance that rates will be lower after the September meeting. Treasury yields move lower, but the action is more likely to be driven by positioning ahead of the Big Core PCE inflation report on Friday. The final Q1 GDP estimate came in at an annual rate of 1.4%, slightly higher than the second estimate of 1.3%, but lower than Q4's strong print of 3.4%. The upward revision mainly reflected a downward revision to imports and upward revisions to non-residential fixed investment and government spending. Durable goods orders for May unexpectedly rose 0.1%, topping the consensus for a drop of 0.5%, but Core Orders X Transportation fell 0.1% with a forecast for a 0.1% rise. As Fargo economists said, "We're ultimately braced for a dull second half of the year in terms of CapEx demand and looked for the industrial side of the economy to progress within its recent narrow range over the course of the year. CapEx conditions are unfavorable, and even if the Fed is able to lower rates later this year, we're unlikely to see a reprieve in terms of borrowing costs until next year." And jobless claims fell for the second straight week, but there was likely some noise in the numbers due to the Juneteenth holiday. On active stocks in today's session, micron technology fell after the memory chip maker issued guidance that was in line with estimates. Micron expects to earn between $1.16 per share on an adjusted basis, with revenue expected to be $7.6 billion, plus or minus $200 million. Adjusted gross margins are forecast to be between 33.5% and 35.5% with the estimate at 34.5%. Apple's analyst Tom O'Malley says, "Results came in largely as expected, and to be honest, what could the company possibly have done to impress with where expectation/the stock had gone? He has an overweight rating and $145 price target on the stock." On its earnings call, micron said its high bandwidth memory opportunity is worth multi-billions, which is larger than what some on Wall Street were expecting. On paper tumble, after Brazilian pulp and paper company Susana dropped its takeover pursuit, Susana said it was never able to draw international paper into serious engagement and wasn't willing to increase its offer. And with apologies to Chris Cressofferson, Levi's Strauss shares are looking just as faded as their jeans. After a mixed Q2 earnings report and a hike in its quarterly dividend, the stock is looking at a record-setting drop, tumbling through support at its 50 and 100-day moving averages. The drop comes despite a beat on earnings, an 8% improvement in sales, and 100 basis-point expansion in its gross margin to a record 60.5%. The reaction seems to be generated by the disconnect between what the company is saying about demand for denim and what they are projecting for full year 2024. The company left revenue guidance unchanged, where the bottom of the range was below consensus. In other news of note, Uber said it will pay 175 people in seven U.S. and Canadian cities $1,000 to ditch their cars for five weeks and use alternative transportation in a promotion called One Less Car. The challenge is open to car owners in Los Angeles, Chicago, Washington, D.C., Miami, San Francisco, Toronto, and Vancouver. The carless trial will run from July 22 to August 25. The company said, "Based on the average monthly cost of vehicle ownership in the U.S., we will provide selected participants with $1,000 to use alternative transportation options to get around instead of relying on their private car." These options will include car-free offerings like public transit, lying e-bikes and e-scooters bookable on the Uber app, plus car rentals and rideshare. Uber said it is out to show that it is possible to make the switch to a car-light lifestyle saving both money and emissions while contributing to a more livable city. Even in the Wall Street research corner, Goldman Sachs called the S&P 500 the "perfectly constructed index" where you need either the top five names going higher or the other 495 names higher. Goldman tactical strategist Scott Rumner says, "They just can't both be down a lot at the same time." If an investor allocates a dollar in the S&P, 28 cents goes into the top five stocks. Microsoft, Nvidia, Apple, Amazon, and Meta. Similarly, if the investor allocates a dollar into the NASDAQ, 36 cents goes into the top five stocks. Meanwhile, leveraged single-name ETFs are trading at a higher dollar value than multiple blue chip companies. For example, the granite shares two times long NVIDIA daily ETF, which has $4 billion in assets under management, has traded $10 billion worth of shares in the past five days. That's all for today's Wall Street lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com/WSB. And for a full suite of news, analysis, ratings, and data on stocks and ETFs, go to SeekingAlpha.com/subscriptions.