VIDEO: Let's Review Our Plan for Apple Tonight

In today’s Daily Rundown video, Chris Versace revisits our plan for Apple AAPL shares and discusses what we’ll be looking for in tomorrow’s jobs and Service PMI reports. 

He also touches on Vulcan Materials VMC and four other positions in the portfolio. 

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here. Thursday, May 2, the day after the Fed policy decision. And as we talked with you in some comments yesterday, obviously, the market is feeling a little better. The fact that the Fed does not see additional rate hikes on the table, even though the market does have to realize that rates are going to be higher for longer for all the reasons that we've been talking about.

And that means that even though we don't have a lot of economic data today and there are no Fed speakers on tap for today, tomorrow, we will be getting several pieces of key economic data. And I believe we have at least one Fed head speaking. So our thinking is that we're going to break down the data. What we want to see is that the service PMI data for April shows that that that part of the economy continues to carry the overall economy, but we're also going to want to take a look at job creation, wage gains.

The wage gains that we saw according to the ADP report were still very rich on a year-over-year basis. The positive, as I said yesterday, is more people working, more real wage growth. That's obviously good for consumer spending. But at the same time, it does denote other inflationary pressures out there. As I wrote to you in the alert, the prices component of the April ISM manufacturing PMI hit one of the highest levels that we have seen going all the way back to early 2022.

And, of course, that is going to bother some folks, especially if we see a repeat on the trend line for the prices subindex with tomorrow's services PMIs from ISM, S&P Global. In other words, we'll be parsing the data to see if we see the same upward pressure that we saw yesterday in the manufacturing PMIs. This will tell us that, more likely than not, rate cuts are going to get bumped out even further.

Remember, coming into this week, there were expectations for at least around one rate cut in December. As we get through this week's data, we'll have a better sense as to whether that's falling by the wayside, potentially slipping into 2025. We also have the April employment jobs data out tomorrow. So, of course, back to job creation and wages, like I said. All of that is going to factor into rolling GDP expectations for the current quarter. And we'll be revisiting them once we see those updates.

But all in all, expectations so far for the current quarter are a re-acceleration from what we saw compared to that initial 1.6% GDP print for the first quarter, kind of keeping the current market narrative on tap. Remember, that narrative centers around the economy being strong enough to deliver earnings growth. The question we'll continue to wrestle with, is there no landing, soft landing? And more data will help inform us of that.

And, of course, as we come around and understand that data and its implications, we'll continue to tinker with the portfolio as needed. And speaking of the portfolio, I just want to run through a couple different things here. Earlier today, Vulcan Materials reported very nice results. EPS beat. Revenues were very strong as well. Company reiterated its outlook, calling for double-digit profit growth in the coming year. No surprise.

Look, the overall demand picture, whether it's infrastructure, non-residential construction, or perhaps even later this year, the start of the Chips Act, demand for concrete and aggregates continues to improve. Vulcan shared that the pricing environment remains rather positive. And remember, we're going into probably one of the seasonally strongest times of the year for overall construction. That means we should see very good year-over-year comparisons not only for Vulcan Materials, United Reynolds as well, and of course, as we talked about yesterday too, Waste Management.

And, yes, even though our positions on United Rentals and Vulcan Materials are rather full, we are interested in picking up more shares of Waste Management. That is one of the items on our shopping list, along with several others. Also, too, I just want to talk about Coty real quick. Earlier this week, Estée Lauder reported their quarterly results. And, again, while there are some overlapping lines of business, we know Coty does not have their exposure to China and that Coty's business is predominantly fragrance and skincare.

And when we look to what Estée Lauder said about that, very positive things. Its domestic business for both skincare and fragrance were positive. Positive trends in Europe as well. We think that sets Coty up rather nicely when they report earnings next week. In addition to the top line drivers, we will be paying close attention with Coty's report, looking to see about the debt reduction and what that's doing, lowering interest expense, and how much incremental EPS is falling to the bottom line. We'll also be looking to see if management alters its debt reduction path for 2024, potentially accelerating that. That would be some positive news.

Also want to quickly touch on the IPO market. Yesterday, the Viking IPO priced. Coming into this week, we said this was the next higher-profile IPO that we would be watching. And so far, the shares are performing rather well. That's another positive indication that the IPO window or the IPO market is improving. We, of course, watch this closely for our shares of Morgan Stanley, as well as Bank of America.

We do have two smaller IPOs yet to price this week, but we have four IPOs next week. So as we get through this next round and we approach some of those more higher-profile IPOs that we've written with you about Skims, Panera, and others, we'll start to revisit our price targets for Bank of America and Morgan Stanley.

And then, of course, after the close, we not only have Apple and Universal Display. Shared my thoughts with you in our opening comments, so please check those out. But we also have Motorola Solutions. And this report is timely for a couple of reasons. First, it is probably the best competitor out there for Axon. So we, of course, watch what Motorola Solutions has to say about the environment for public safety spending. Typically, it's been a very positive and leading indicator for what Axon reports several days later.

That brings me to my second point. Axon will report early next week, so we'll take what we learn from Motorola Solutions and their outlook. But then also, too, when we look into what Axon says, remember, we are really focused on that mix shift towards recurring revenue and cloud that's driving margin expansion. So those will be the things that we're looking for. And with that, we'll be back with you later today. We will have some follow-up comments on Qualcomm. We'll be revisiting our price target.

But, again, after the close, remember, we have Apple. We have Universal Display. Remember that when we take a look at what Qualcomm, Corvo, and Skyworks had to say about their June quarter sequentially down from the March quarter, this gives us some concern about Apple's guidance. We do want to own more Apple shares ahead of the AI on device upgrade cycle.

After Apple reports, if it does stub its toe, deliver disappointing guidance, call it what you will, we're going to let the shares settle. And then odds are we will make our next move. So with that, I would just ask, please, remember to check your emails, check your alerts. We want to make sure you're getting our latest thinking and, of course, any portfolio moves. And, hey, I look forward to seeing you at office hours today between 12:00 PM and 1:00 PM in the forum. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long AAPL and VMC.