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【boatworks at newburyport】Oil Price Fundamental Daily Forecast – Stock Market Weakness Weighing on Crude Prices
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简介U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower o boatworks at newburyport
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday,boatworks at newburyport pressured by renewed concerns over future demand following the release of a report showing a slowdown in China’s factory activity. Traders are also expressing worries about rising U.S. oil production. Stock market weakness and concerns over heightened volatility are also weighing on prices.
At 0818 GMT,
February WTI crude oil
is trading $44.71, down $0.70 or -1.54% and
March Brent crude oil
is at $52.97, down $0.83 or -1.49%.
In China, a private survey showed manufacturing activity contracted for the first time in 19 months in December. This is further proof that the lingering trade dispute between the United States and China is having a negative impact on China’s economy.
The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) fell to 49.7 from 50.2 in November, its first contraction since May 2017. Earlier in the week on Monday, official manufacturing PMI showed a slowdown in activity for the month of December as the sector contracted for the first time in more than two years, dropping below the critical 50 level.
U.S. Production on the Rise
On January 1, an OPEC-led group including Russia began cutting output by 1.2 million barrels per day in an effort to trim the global supply and stabilize prices. This move is not expected to have an immediate impact on prices. In the meantime, traders will continue to focus on U.S. output, which rose to an all-time high of 11.537 million barrels per day (bpd) in October, according to an Energy Information Administration (EIA) report released on Monday. That put the U.S. ahead of Russia and Saudi Arabia to become the world’s biggest oil producer.
Forecast
Given the uncertainty over US-China trade relations, Brexit, as well as political instability and conflict in the Middle East, it’s hard to build a case for a rally. Furthermore, it’s too early to judge the impact of the OPEC-led production cuts and U.S. production is bearish.
With this in mind, we’re looking for further pressure on prices over the near-term. Prices are also being controlled by the heightened volatility in the stock market. Today’s early weakness indicates we could see renewed selling pressure after a three day counter-trend rally. This may be enough to drag oil prices down to last week’s lows.
This
article
was originally posted on FX Empire
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- 5%, led by a 17% increase in average ticket and a slight decline in traffic. Growth in the quarter reflected the impact of households stocking up on essentials like paper goods and cleaning supplies as the pandemic became a nationwide concern, along with strength in discretionary categories as the quarter came to a close and stimulus dollars and tax refunds were disbursed.
As shown below, the results in the quarter materially changed the trend in two-year stacked comps for each of the banners, along with a significant acceleration for consolidated comps.
The increase in consolidated comps was the primary driver of an 8% increase in revenues to $6.3 billion. The company ended the quarter with 15,370 locations, up less than 1% year-over-year. This reflects a 7% increase in Dollar Tree units, offset by a 4% decline in Family Dollar units.
The top-line results at each banner flowed through to their respective income statements, with Dollar Tree gross margins and operating margins declining year-over-year while Family Dollar gross margins and operating margins expanded year-over-year. On a consolidated basis, gross margins contracted by 120 basis points in the quarter to 28.5%, reflective of a shift to lower-margin consumables, tariff costs and the impact of markdowns from the Easter headwinds at the Dollar Tree banner. The company saw slight operating leverage on SG&A from higher comps, with the net result being an 80 basis point contraction in operating margins to 5.8%, with operating income declining 5% to $366 million. This is not adjusted for $73 million of pandemic-related costs, such as PPE supplies.
In the first quarter, the company opened 85 stores (net of closures) and completed 220 Family Dollar renovations to the H2 format. Importantly, comps at renovated Family Dollar stores continue to outpace the chain average by more than 10%. On the call, management indicated that they plan on reducing both the number of new store openings (from 550 to 500) and the number of H2 renovations (from 1,250 to 750) in 2020.
Personally, given the fact that Family Dollar is seeing material benefits to its business from the pandemic with new or lapsed customers coming into its stores, I think the company should try to get more aggressive with its renovation plans, not less. On the other hand, you could argue that renovations cause short-term disruptions and limit their ability to fully capitalize on the business momentum they are currently experiencing.
As a result of fewer new stores and remodels, management now expects 2020 capital expenditures to total $1.0 billion compared to previous guidance of $1.2 billion. In addition, the company has temporarily suspended share repurchases. At quarter's end, the company had $1.8 billion in cash on its balance sheet compared to $4.3 billion in total debt.
Conclusion
In recent years, Dollar Tree has been a tale of two cities. While its namesake banner has generally delivered impressive financial results, Family Dollar has been a persistent underperformer. This quarter, those results flipped, and given what we've seen in the weeks since quarter's end, there's a decent possibility that we will see something similar in the coming months. As the CEO noted, the second quarter is off to a very good start at Family Dollar.
Here's the important question: how useful is that information is in terms of making future predictions about the business? Will recent success at Family Dollar translate into long-term success for the banner? The optimistic take is that new or lapsed customers, especially those visiting the renovated stores, could become recurring business for the banner. The pessimistic take is that they have experienced short-term success out of necessity as people went to any store that was open to try and find essentials like toilet paper and hand sanitizer that were largely out of stock throughout the retail landscape. From that view, many of these customers could abandon the retailer when life returns to normal. As Philbin noted on the conference call, early on [during the pandemic], folks needed us. Will people still shop as much at Family Dollar when it's no longer a necessity?
Personally, I do not place too much weight on the recent results. I will need to see incremental data points that indicate that Family Dollar has truly won sustained business from these new customers. While I still believe that the Dollar Tree banner is a well-positioned retailer with attractive unit returns, I'm not yet willing to say the same thing for Family Dollar. For that reason, along with the recent run-up in the stock price, I plan on staying on the sidelines for now.
Disclosure: None
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