What You Need To Know For April 24th

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Welcome back - and happy NFL Draft Day to everyone who needs their team to pick up a new star player tonight. 🏈 

Over the past few days, we’ve started to get more relief from the Trump Administration regarding tariffs. Based on messaging, particularly from the closed-door conversation Scott Bessent had with a bunch of hedge funder managers, the Administration seems to be admitting that an aggressive and lengthy trade war is unsustainable. Still, we operate in an investing environment where it’s very tough to spike the football and declare victory. What’s true one day regarding trade policies, can change on a dime a day later. But - it still seems like Trump and his administration are willing to pull back certain tariffs if they get enough uproar, which is constructive for stocks.

What we do know is that business and consumer confidence is in the toilet, and there are likely going to be near-term inventory shortages that main street hasn’t felt quite yet. But we’ve started to see decent back-pedaling from Liberation Day claims.

Let’s get into it more below.

Earnings Corner 📜 

Trending Up 📈 

Tesla (TSLA): Tesla reported results that missed on the top and bottom lines, but the stock rallied on the news of a favorable timeline for a low-cost vehicle line and Elon Musk’s statement that he will reduce the time he spends with DOGE starting in May. Revenue of $19.34B was down 9% y/y (vs. $21.11B expected) and EPS was $0.27 (vs. $0.39 expected). Automotive revenue was down 20%, which mgmt. attributed to factory slowdowns related to producing the revamped model Y and lower average vehicle selling prices. However, mgmt. reaffirmed plans to begin producing a low-cost Tesla in the first half of 2025 – contrary to a Reuters report from last Friday, which suggested the line would be delayed until 2026. The stock was up 5.4%

Lockheed Martin, RTX, Northrop Grumman, and General Dynamics: Four major U.S. defense contractors reported earnings Tuesday, with LMT, RTX, and GD beating estimates, and NOC falling short. Tariffs and resulting strained relationships with ally nations have led to uncertainty in the defense industry, with some foreign nations reviewing their dependency on American defense companies. Canada is currently reconsidering a C$19B F-35 order from Lockheed Martin. Yet, continued demand due to war in the Middle East and Ukraine has helped sustain sales. LMT was up 0.3%, RTX was up 5.7%, NOC was up 1.9%, and GD was down 3.3%

Boeing (BA): Boeing reported earnings that beat estimates, as the company narrowed losses to $31MM, versus $355MM a year ago. Aircraft deliveries rose 60% y/y, and cash burn was reduced from $4B to $2.3B. Mgmt. also announced that they will seek FAA approval to ramp up 737 Max production this year. The stock was up 6.6%

Philip Morris International (PM): PM reported earnings that beat estimates, as Zyn continues to carry the stock to all-time highs. The firm shipped 200MM cans in the quarter, up 53% y/y, due to new manufacturing capacity being brought on-line. The company raised its 2025 outlook, forecasting EPS of $7.36-$7.49 (vs. $7.04-$7.17 previously). The stock was up 2.4%

GE Vernova (GEV): GE Vernova reported earnings that beat estimates and affirmed its guidance despite the impact of tariffs. Mgmt. described the energy-focused company as “well-positioned to navigate the current dynamic environment” and projected EPS of $0.91 on revenue of $8.03B (vs. $0.73 on $7.53B expected). The stock was up 3.7%

GE Aerospace (GE): GE Aerospace reported earnings that beat estimates. The manufacturer saw an uptick in revenue and orders in both their commercial engine and defense segments. The stock was up 2.4%

ServiceNow (NOW): The software maker reported earnings that beat estimates, with revenue up 18.5%. Mgmt. delivered a strong outlook. The stock was up 10.1%

Trending Down 📉 

AT&T and Verizon: Telecom giants AT&T and Verizon both reported earnings that beat estimates, but AT&T saw strong subscriber gains, while Verizon faced steep losses. AT&T added 324K new postpaid phone customers and 261K fiber accounts, while Verizon lost 289K postpaid accounts (vs. 114K expected). Verizon was able to add 339K broadband customers, however. AT&T’s management attributed the outperformance to consumers upgrading their phones ahead of tariffs on China. T was up 0.9% while VRZ was down 1.1%

IBM (IBM): IBM reported earnings that beat estimates. IBM said 15 contracts worth about $100MM (<1% of their backlog) were impacted by DOGE cost cuts. The company still expects 5% revenue growth in Q2. The stock was down 6%

Chipotle Mexican Grill (CMG): Chipotle reported earnings that missed on the top line, as the restaurant saw comparable sales fall for the first time since 2020. Mgmt. blamed the underperformance on slowed consumer spending and adverse weather. The announcement comes after Monday’s poorly received news that the chain plans to open a restaurant in Mexico. The stock was down 2.1%

Southwest Airlines (LUV): Southwest beat on earnings but announced plans to reduce capacity in the second half of 2025 and pulled its 2025 & 2026 EBIT forecasts due to macroeconomic conditions. Mgmt. expects revenue from domestic bookings to be down 0%-4% in Q2. The stock was down 2.6%

O’Reilly Automotive (ORLY): The auto parts supplier reported results that missed on the top and bottom lines. The stock was down 1.7%

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Today’s Headlines 🍿 

• Jay Powell is here to stay (for now): President Trump made a big reversal and stated he will not fire the Fed Chair. Reportedly, Howard Lutnick dissuaded him. Although Trump has repeatedly assailed the Fed’s refusal to rush to slash rates, he said he has “no intention” to remove Powell. Historically, when tariffs drive slowdowns, the Fed moves to cut rates and buoy the economy. However, Powell and his colleagues have suggested they will likely need to prioritize the inflation side of their mandate with projected rising costs thanks to the White House trade policy

• Trump begins a pullback on China Tariffs: The President said that levies on Beijing will “come down substantially, but [they] won’t be zero” and are set to be finalized in the next 2-3 weeks. So, it seems like, the staggering 145% tariffs won’t last — this isn’t too surprising given Scott Bessent told a private markets conference this week that a trade war was unsustainable

• Trump says he’s not considering automaker concessions, despite reports that he was considering it: Trump has denied that he was considering changes to automobile and auto part tariffs. Just hours before this statement, FT reported he was planning to exempt Chinese car parts from tariffs. That’s now off the table for now, sending auto stocks back in the red after hours

• Bessent vs. Musk: The Treasury Secretary and DOGE head got into a shouting match related to who should head the IRS and have previously argued over DOGE’s authority.

• High Yield Harry’s deep dive on Bending Spoons: Harry wrote up an article on Bending Spoons, a mobile app rollup strategy that takes a private equity approach towards growth. You can read it here

• Sam Altman de-nuclearizes: The OpenAI chief is stepping down from nuclear fission company Oklo. The 2015 vintage startup, which Altman helped take public last year via SPAC, is exploring a potential power deal with an AI company

• Amazon is reportedly pausing some AWS datacenter leases. This follows a bit of a hyperscaler pullback from Microsoft a while back, but according to an Amazon VP on LinkedIn, this is just capacity management

• Ken Griffin has said the trade war is nonsensical: The Citadel founder has said: “President Trump has an incredibly good sense of where problems lie. But we’re moving too quickly, we’re moving too haphazardly, and we’re breaking a lot of glass in trying to solve some very real problems.” He also noted people aren’t going to race to build manufacturing in the U.S.

• CFA Level III Pass Rates Rise: Pass rates for the final round of CFA testing have risen to 49%. Test-takers were the first to pick from “specialized pathways,” testing options

• Student Loan Default Notices: The U.S. Department of Education will start collection of defaulted student loans effective May 5th. 5.3mm student loans will be referred to debt collection, which will include garnishment of wages and end leniency that started during the pandemic.

• Google’s declines OpenAI partnership: Last July, the ChatGPT powerhouse reached out to Alphabet, hoping to use GoogleSearch data to power its SearchGPT product. Google rejected the request, but recent antitrust lawsuits may force the company to share data with other companies

• Trump meets with retail CEOs: On Monday, executives from Target, Walmart, and Home Depot met at the White House to discuss the impact of tariffs on their import-heavy business models. After the meeting, all three companies issued almost identical statements - that it was a “productive meeting” and “insights” were shared

• The U.S. is investing in India: The Trump administration is planning a push into the country to pave the way for American e-commerce giants like Amazon and Walmart. Right now, the U.S. firms are only allowed to operate marketplaces where outside sellers list their products

• Jack in the Box weighs selling Del Taco: The fast food chain may be valued as much as $200mm in a sale, well off from the $585mm Jack in the Box acquired it for in 2022 

• Jane Street reports $20.B in net trading revenue, nearly doubling the $10.6B the high frequency trading shop generated last year

• Elliott’s new stake in BP: The hedge fund has taken a 5% stake in the gas giant. Pushing for more cost cuts, Singer’s firm wants the company to boost free cash flow from $8B last year to $20B by 2027. Elliott owns equity swaps which do not provide it with voting rights

• Beacon Roofing may save the debt markets: QXO’s $11B acquisition of Beacon Roofing Supply is in the leveraged loan market, with $4B in senior secured financing. MS and GS are leading the syndication and it is reportedly well oversubscribed

• Pretium Partners pulled a $778mm MBS refinancing. The firm is one of the most active mortgage-backed securities issues. Pretium is withdrawing its planned offering backed by 2,020 single-family rentals

• UBS and General Atlantic are in talks for a private credit partnership: The two firms could make an announcement as soon as next week and could make loans up to $500mm to borrowers with >$50mm of EBITDA

• KKR is raising $1.7B in debt to support its $3.1B buyout of OSTTRA, an OTC trade services company. Barclays, Citi, and KKR are leading the 1L and 2L financing package

• The European HY Market is open again: Italian gaming firm Lottomatica Group is offering 600mm in senior secured notes, the first high-yield bond in Europe in a few weeks

  • Meanwhile, KKR is turning to the private credit market for a 1.1B Unitranche loan (at E+475) for the acquisition of Karo Healthcare

• LME Activity: Clearlake’s Ivanti Software reached a new deal with some lenders, securing $350mm in new debt and extending existing maturities

• HIG’s $1.1B in Hung Debt: The Private Equity Sponsor’s buyout of Converge has led to sponsors like BMO saddled with hung debt.

• Harvard is suing the Trump Administration. After the federal government announced a $2.2B grant freeze, the university accused the White House of flouting the First Amendment

• Josh Allen, the VC: Buffalo Bills QB Josh Allen is joining VC firm Cashmere as a Partner. Allen won’t be involved in the investment decisions but will use his profile to support portfolio companies.

• Intel is laying off 20% of its staff: The struggling chipmaker is expected to fire more than 20,000 of its 108k workforce. Their workforce peaked at 131k back in 2022

• The Latest Lutnick Grift: Cantor Fitzgerald is in talks with starting a $3B crypto SPAC with Tether and SoftBank. The team is looking at recreating a MicroStrategy styled strategy

• Citi shuts down the Malaga office they opened in 2022 to manage Spanish banker burnout

M&A Transactions💭 

Thoma Bravo has entered into a definitive agreement to acquire the Digital Aviation Solutions Business of Boeing for $10.55B. Apollo and Blackstone are leading a $4B unitranche loan at S+475.

Paragon 28 (BER: 7GQ), a medical device company, was acquired for $1.196B by Zimmer Biomet Holdings (NYS: ZBH). EV/Revenue was 4.67x. Innisfree M&A and Piper Sandler advised on the sale.

Orogen Royalties (TSX: OGN), a royalty and mineral exploration company, has reached a definitive agreement to be acquired for $307.62M by Triple Flag Precious Metals (TSE: TFPM).

Moss Adams, provider of accounting, tax, and advisory services, has entered into a definitive agreement to be acquired for $7.0B by Baker Tilly, via its financial sponsors Hellman & Friedman and Valeas Capital Partners. EV/Revenue was 5.56x. Deutsche Bank advised on the sale.

Lumina Gold (TSX: LUM), a precious and base metals exploration and development company, has reached a definitive agreement to be acquired for $409.17M by CMOC China (HKG: 03993). Moelis & Company and RBC Capital Markets advised on the sale.

Chimerix, a biopharmaceutical company, was acquired for $935.0M by Jazz Pharmaceuticals (NAS: JAZZ). EV/Revenue was 4,410.38x and EV/Cash Flow was 275.97x. Centerview Partners advised on the sale.

Ypsomed Diabetes Care, developer of diabetes care technologies and a subsidiary of Ypsomed (SWX: YSN), has reached a definitive agreement to be acquired for $487.6M by TecMed Medical Technology. Rothschild & Co. advised on the sale.

Wilsgaard Fiskeoppdrett, operator of a salmon farming company, reached a definitive agreement to be acquired for $166.36M by SalMar Farming.

Olympus Energy, provider and developer of natural gas resources, has reached a definitive agreement to be acquired for $1.8B by EQT Production Company (NYS: EQT). The deal includes $500.0M in cash and approximately 26M shares of EQT common stock valued at $1.3B. Jefferies advised on the sale.

Macquarie Management Holdings, operator of a financial services organization and a subsidiary of Macquarie Group, has entered into a definitive agreement to be acquired for $1.8B by Nomura Holdings.

HBI Health & Beauty Innovations, producer of pharmaceutical products and a subsidiary of DCC (LON: DCC), has entered into a definitive agreement to be acquired for $1.39B by Investindustrial.

Enfusion (NYS: ENFN), a software-as-a-service provider, was acquired for $1.5B by Clearwater Analytics Holdings (NYS: CWAN). EV/EBITDA was 85.96x and EV/Revenue was 7.44x. Goldman Sachs and J.P. Morgan advised on the sale.

Donlin Gold, operator of a gold mining project, has reached a definitive agreement to be acquired for $1.0B by Novagold Resources (TSE: NG). CBIC Capital Markets advised on the sale.

Deeplabs, operator of an asset manager, was acquired for $219.69M by Inmobiliaria Colonial SOCIMI (MAS: COL). Cushman & Wakefield advised on the sale.

Converge Technology Solutions, a Canadian company building a platform of regionally focused hybrid IT Infrastructure providers, was acquired for $915.52M by Mainline Information Systems. EV/Revenue was 0.48x. Canaccord Genuity, Houlihan Lokey, and Origin Merchant Partners advised on the sale.

BluePointe Capital Management, provider of wealth advisory services, was acquired for $870.0M by Lido Advisors.

Infocom, provider of information technology services, has reached a definitive agreement to be acquired for $372.96M by NS Solutions (TKS: 2327).

The Rapid Solutions Business of Amentum Services (NYS: AMTM) has reached a definitive agreement to be acquired for $360.0M by Lockheed Martin (NYS: LMT).

Private Placement Transactions💭 

Electra.aero, manufacturer of hybrid-electric aircraft, raised $115.0M of Series B venture funding led by Prysm Capital.

Ocient, operator of a data analytics platform, raised $132.0M of series B venture funding led by OCA Ventures, Greycroft, Allstate Strategic Ventures, and Blue Bear Capital.

Manychat, developer of an automated messaging platform, raised $140.0M of venture funding led by Summit Partners.

Biolinq, developer of a biomonitoring health platform, raised $100.0M of Series C venture funding led by Alpha Wave Global at a pre-money valuation of $305.0M.

Altruist, developer of a digital investment platform, raised $152.0M of Series E venture funding led by GIC Partners at a pre-money valuation of $1.75B.

Odds of the Day 🍒 

Recession Odds have been all over this place

Kalshi traders are now pricing in a 53% chance of a recession this year.

*New Traders on Kalshi receive a $20 bonus of trading credit when depositing $100+ with the code “HYH”.

Noteworthy Chart 🧭

Why to never time the market:

Meme Cleanser 😆 

Until next time!

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