Report by Trivariate Research

Trivariate analysed earnings-call language from January 2011 onwards across the 1,000 largest US equities by m/cap to identify which communication patterns contain investable information. Management has become increasingly “flowery”, but mainly because numerical references have fallen sharply rather than adjective use rising. The strongest signal is that “numbers speak louder than words”: companies with high adjective-to-number ratios subsequently tend to underperform, with the effect particularly strong in Industrials and Materials and driven mainly by the outperformance of low-ratio companies. Forward-looking and positive Q&A commentary can also be constructive. Quantitatively derived stock ideas include Boeing, Corning, Parker-Hannifin, Starbucks and Cummins on the long side, while IBM, Valero, Constellation Energy, HCA and Grainger appear among the shorts.

Report by Quantitative Partners with Phil Erlanger Research

Geoff Garbacz thinks this might be the most important data point to follow to determine if we continue to see a stock market rally. Stocks vulnerable to tax selling include Boeing, Intel, Rio Tinto, Stellantis and UPS. Click here to watch the video which also includes the key levels to monitor on the S&P 500.

Industrials

Report by Northcoast Research

Channel reads through June provide greater backing to Northcoast’s bearish near-term call on the aerospace supply chain. As a result, they maintain their lower investment ratings for the upstream suppliers and the specialty materials group, and they anticipate a reset of estimates to a lower level in the next twelve to eighteen months. Based on the responses from contacts, the survey data clearly shows a negative demand environment (or downward momentum in 2Q24), which is in line with what other channels have said. Early warning signals also seem to be spreading beyond the problem areas Northcoast identified in their last market update, such as jet engine manufacturers, European-based suppliers, the Boeing supply chain and premium forgers.

Industrials

Report by Northcoast Research

BA lowers its FCF target for 2024 to the negative $1-2bn range as Chinese customers are currently unwilling to accept the new 737 MAX aircraft. The latest corporate dilemma, which seemingly adds to the weak balance sheet narrative, relates to an ongoing Chinese regulator review of batteries that power the 25-hour cockpit voice recorder. However, there is growing speculation to suggest BA has, once again, become a casualty of renewed US / China trade tensions. Northcoast updates their model to account for fewer commercial aircraft deliveries in the current quarter, driving a larger earnings loss forecast for 2024. Their TP of $140 still offers 20%+ downside.