Evoqua Water Tech Corp (AQUA; $4B market cap; $31M ADV) is a provider of water treatment solutions, offering services and technologies to support its customers’ full water life cycle needs. The company is a leader in most of the industrial, commercial, and municipal water treatment markets in North America. Evoqua reported its Q2 FY21, with revenue declining slightly by 1.5% y/y and EPS declining 12% y/y, beating estimates by 9%. Revenue was pulled down by the delays in oil & gas and aquatics end-markets as well as the timing of prior year projects in the microelectronics end-market. The company increased the upper end of its FY21 guidance range and now expects revenue and adjusted EBITDA to grow by low-to-mid single digits. The stock is breaking out of a stage-one cup-with-handle base on below average volume. It has strong fundamental ratings – EPS Rank of 81 and Composite Rating of 75 – driven by double-digit earnings growth over the past five years.
Author: Gaghan
WON Europe Today
Yesterday,
- European markets continued to consolidate sideways as inflation dominated market action. We recommend that
investors book profits in extended names and remain open to adding risk coming out of proper bases. - The Stoxx 600 ended flat, narrowly avoiding a distribution day. It continues to trade above its 21-DMA and is in a
Confirmed Uptrend. Among sectors, Technology stocks led the gains, while Mining stocks lost more than 1.5%. - Among the other major indices, France’s CAC and the U.K.’s FTSE 100 recorded distribution days, taking their
counts to six and five, respectively. The U.K.’s FTSE 100 is testing its 21-DMA. Germany’s DAX gave up its early
gains, but is trading above its 10-DMA. - Among the 17 indices we track, Germany, the Stoxx 600, Ireland, Switzerland, Italy, Spain, and the Netherlands
closed in positive territory. However, France, the U.K., and Norway recorded distribution days.
Won Global View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 held the recent retake of its 21-DMA
( 4,155 ) but did fall just over 0.2% on higher than Monday’s volume to pick up its ninth distribution day. The Nasdaq was
roughly flat as it held the recent retake of its 21- and 50-DMA, along with the key level of 13,620, and now it remains 4%
off highs with five distribution days. One distribution day will expire on both indices today after the close.
Eight of 11 sectors fell, most just slightly. Energy ( -1.9% ) and Utility ( -1.2% ) led the decliners, while only Retail and
Consumer Cyclical closed slightly positive. The best performing industry groups over the last five sessions include
Non-Alcoholic Beverages, Solar, Semiconductor Design, Software, Semiconductors, Advertising, Telecom Cable/Satl
Services, Leisure-Travel/Movies, and Internet Content. The worst performing groups include Department Stores,
Mining-Ores, Oil & Gas, Steel, Apparel-Clothing, Leisure Products, Retail-Discount, and Life Insurance.
Won Europe Today
Key points from it include:
- The Stoxx 600 ( Confirmed Uptrend with six distribution days ) continues to trade constructively in an upward
channel, but distribution day count is still rising. - Of the 17 indices we cover, eight are in a Confirmed Uptrend and nine in an Uptrend Under Pressure. We shifted
Belgium and Italy to a Confirmed Uptrend after they reclaimed their prior highs. - Over the past five days, we added two stocks to our European Focus List: Dechra Pharmaceuticals ( DPH.GB;
DPN:LN ) and Fevertree Drinks ( FEVR.GB; FEVR:LN ).
Won Global View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 regained its 21-DMA, albeit on below
average volume, and is within 1% of a new all-time high. We will shift the market status back to a Confirmed Uptrend
should the S&P 500 close at a new high. The Nasdaq broke above resistance at its 21- and 50-DMA and closed near
session highs, however, volume was also below average. The distribution day count declined to eight on the S&P 500
after one day expired and remains at five on the Nasdaq. Another day will expire on both indices tomorrow after the
close.
Ten of 11 sectors posted gains, led by a strong outperformance in Technology ( +1.9% ) and Consumer Cyclical
( +1.5% ). The best performing industry groups over the last five sessions include Solar, Semiconductors, Software,
Leisure – Movies, Beverage, Consumer Loans, Alternative Energy, and Medical – Ethical Drugs. The worst performing
groups include Homebuilders, Home Furnishing, Department Stores, Machinery- Farm, Building-Construction, ApparelClothing, Mining – Metal Ores, Cement, and Trucks.
O’Neil Capital Equipment Sector Weekly
The Commercial Svcs-Document Management industry group has been one of the best performing industry groups in the capital equipment segment this year. This has gained over 40% year-to-date and has an impressive Group Rank of 14. The industry group has good technical ratings, RS Rating of 93 and A/D Rating of B-, and is showing signs of improvement after underperforming the market for the past few years. The leading stock in this industry group is Iron Mountain (IRM), which is extended after breaking out from a stage-one eight-week cup-with-handle base. It has a good set of O’Neil Ratings and Rankings, and we expect EPS Rank of 56 to improve based on current estimates. Pitney Bowes Inc (PBI) is testing resistance along its 50-DMA after finding support along its 200-DMA and has been under distribution in the past few week.
O’Neil Capital Equipment Sector Weekly
The best performing industry group in the past four weeks has been Metal Proc & Fabrication, gaining 10.5%. Eleven stocks in are trading at new highs. The Group Rank has improved to 43 from 80 in the past two weeks. Rising global commodity prices have been the key driver for this segment. Stocks of interest include Harsco Corp ( HSC ), Mueller Industries ( MLI ), Valmont Industries ( VMI ) and Timken ( TKR ). Lagging stocks in the industry group are Barnes Group ( B ) and Omega Flex ( OFLX )
O’Neil Capital Equipment Sector Weekly
Bldg-A/C & Heating Products has gained 7.5% in the past four weeks and has outperformed the S&P 500 by 5%. It has gained 26% year-to-date and has a strong A/D Rating of B-. The Group Rank has improved to 112 from 159 in a short span of four weeks. Four stocks in the industry group are trading at new highs. Comfort Systems (FIX) and Watsco Inc (WSO) have been the best performing stocks but are extended from ideal entry points. Actionable names in this industry group include Carrier (CARR) and Smith AO Corp (AOS). Both have reported better-than-expected Q1 FY21 results in the past two weeks, beating EPS estimates by 30% and 5%, respectively. AAON Inc (AAON) has been lagging the industry group since missing EPS estimates by 7% in Q4 FY20. It is trading below its 200-DMA.
U.S. Economic Summary
Q1 GDP expanded 6.4% :
The U.S. economy grew 6.4% in Q1, according to the advance estimates, 30bps above consensus. Activity and
demand continued to recover after last year’s steep contraction, helped by reopening efforts and vaccination drive.
The expansion for the quarter reflected positive contributions from nonresidential fixed investment, PCE, residential
fixed investment, and federal government spending.
• Personal spending increased 4.2%, above consensus:
Personal spending increased 4.2% m/m in March, 10bps above consensus. It was the largest increase in consumer
spending since June 2020, as households received an additional round of stimulus checks from the government.
Within goods, both nondurable and durable goods contributed to the increase. Within services, the largest
contributor to the increase was spending for food services and accommodations.
Won Europe Today
- European markets continued to climb along their rising 10‐DMA. Markets look stretched from their moving averages and are likely to pullback. However, we remain cautious as volatility has reached record low levels and are open to adding risk ondecisive breakouts coming out of proper bases.
- The Stoxx 600 continues to trade above its 10‐DMA. The index is currently 4.6% above its 50‐DMA and 2.3% above its 21‐DMA. It looks stretched and might have a minor pullback in the coming sessions.
- Among sectors, Health Care stocks gained, while Telecom and Auto stocks lagged. Banks also lost half a percent. Among other major bourses, France’s CAC formed a downside reversal and looks stretched. Germany’s DAX and the U.K.’sFTSE 100 all look extended from their respective 50‐DMA.
- Among the 17 indices that we track, the U.K., Ireland, Norway, Austria, Italy, Portugal, Spain, and the Netherlands closed innegative territory.Dassault Systèmes has turned actionable after breaking out of a stage‐one base. Other actionable names in the Focus List include Ambu B ( AMB.DK; AMBUB:DC ), Carl Zeiss Meditec ( AFXX.DE; AFX:GR ), Interpump Group ( IP.IT; IP:IM ), Schneider Electric ( QT@F.FR; SU:FP ), Trigano ( TRI.FR; TRI:FP ), Straumann Holding ( STMN.CH; STMN:SW ), Eurofins Scientific (EUF.FR;ERF:FP ), Gn Store Nord ( GSN.DK; GN:DC ), and Teleperformance ( ROFR.FR; TEP:FP ).
