Author: Kenley Scott

Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

KEY FUNDAMENTAL POINTS

  • Taiyo Holdings is a Japan-based global chemical manufacturer known for its leadership in solder resist (SR) materials used in printed circuit boards (PCBs). The company holds >53% of the entire global market for liquid-type solder resist. It is also nearly monopolistic in dry film solder resist market with at least 84% global share.
  • The company operates under three main business segments: Electronics (68%); Medical and Pharma (28%) and ICT/Sustainability (4%). 64% of its total revenue comes from international markets.
  • Taiyo’s electronic segment is expected to benefit from surging global demand for advanced PCBs in AI, EVs, HPC, and IoT applications, alongside its ongoing expansion into non-SR electronic materials.
  • The company is expanding beyond the cyclical electronics business. It is capitalizing on high demand for long-listed drugs in Japan, driven by healthcare cost pressures and supply shortages.
  • It aims to become a key player in the growing Contract Development and Manufacturing Organization (CDMO) sector, providing end-to-end solutions in drug development and manufacturing.
  • The company has also significantly increased its R&D expenditure by ~40% to reinvest into next-gen materials, pharmaceuticals, and green tech- all high-growth, high-value sectors

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

FedEx Corp. (FDX) – reported Q3 FY24 results and cut its full-year earnings forecast for the third consecutive quarter.
Adjusted EPS came in at $4.51, missing estimates of $4.57, while revenue of $22.2B beta estimates by 1%. The company
lowered its FY24 adjusted EPS guidance to $18.0-$18.6 (previously $19.0-$20.0), and capital expenditure outlook to $4.9B from
$5.2B. Operating income fell slightly short of expectations at $1.51B vs. estimates of $1.52B, while the adjusted operating
margin of 6.8% missed estimates by 26 bps. The company continues cost-cutting efforts under its DRIVE initiative but cited
macroeconomic weakness, lower fuel surcharges, and reduced shipment volumes as headwinds. FedEx is moving forward
with its Freight segment spin-off, while the Express segment benefited from cost savings and volume growth. The stock
declined ~6.5% and is trading below all its key moving averages. It is 22% off its 52-week highs. Weak money flows with strong
selling pressure over the last nine weeks.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

ZTO Express (ZTO), reported mixed Q4 FY24 results with revenue (+22% y/y) beat of 12% and EPS (+21% y/y) missing estimates
by 3%. Parcel volume grew by 11% y/y. Revenue was driven by an increase 6in express ASP by 13 cents driven by strong account
mix, offset by lower per parcel weight and higher incentives. The management expects FY25 parcel volume in the range of 40.8B to
42.2B, representing a growth of 20-24%. The stock is forming a stage-one consolidation base and is 27% to pivot. It is currently
testing support at its 100-DMA with next support at its 50-DMA (-3%). Strong technical metrics indicate healthy money inflow and
positive demand for stock. Strong Fundamental Profile: EPS Rank of 87 and best-in-class SMR rating of A. RS Line pulled back from
recent lows with an RS Rating of 68

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

Sector News
NRG Energy (NRG), an integrated energy and consumer services company, agreed to acquire six Texas-based power generation
facilities from Rockland Capital for $560M, adding 738 MW of natural gas-fired capacity to its portfolio at $760/kW, which is
significantly below new construction costs. The acquisition will be primarily funded through corporate debt without affecting NRG’s
capital allocation plan and is expected to close in Q2 FY25. The stock retook its 200-DMA on above average volume with next
resistance at its 100-DMA (+5%). It is still 21% off highs. Decent fundamental profile- EPS Rank 70; SMR Rating of C. Technical
metrics are constructive reflecting healthy money inflow and positive demand for the stock. RS line is consolidating sideways with an
RS Rating of 89. Acc/Dist Rating of C+.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

FL Updates for the Last Three Weeks

 

FL-stock Archrock (AROC) reported better-than-expected Q4 FY24 results. Revenue (+26% y/y) was in line with estimates, while adjusted EPS (+67% y/y) beat consensus by 25%. Revenue growth was driven by the contract operations segment (+34% y/y) but partially offset by the after-market services segment (-14% y/y) due to seasonal delays in service activity. Adjusted EBITDA came in at $184M (+52.8% y/y), beating estimates by 9%. For 2025, the company expects adjusted EBITDA of $750M–790M, beating estimates by 7% at the midpoint. Net income guidance of $253M–293M beat estimates by 11% at the midpoint. Management remains optimistic about 2025, citing sustained high utilization levels, rising energy demand, and increasing natural gas requirements to support LNG exports and power generation. Despite an initially positive reaction, the stock has not held the gains, and is now trading 21% off highs and trending towards the 200-DMA. Strong EPS Rank 99 and SMR Rating of A. RS line is trending downward, with an RS Rating of 90. Decent money flows, with an Up/Down Volume ratio of 1.9 and an Acc/Dist Rating of C+

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

Gold continues to rally in 2025, reaching a new all-time high this week. The surge is driven by economic uncertainty, central bank
policies, and global trade concerns. Recent U.S. tariff plans on steel and aluminum have raised fears of a trade war, increasing
market instability and boosting demand for gold as a safe-haven asset. Additionally, central banks have supported the rally through
gold purchases and monetary policy easing, lowering the opportunity cost of holding non-yielding assets like gold. The ETF tracking
gold prices, GLD, rose 6.8% in January and gained an additional 3.5% as of February 12, reflecting strong investor demand.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

FL stock DSV (DSV.DK) reported mixed Q4 FY24 results Tuesday before market open. Revenue (+19% y/y) beat estimates by 4%,
while adjusted EPS (-5% y/y) missed estimates by 4%. The Air and Sea Division saw strong 32% revenue growth driven by higher
freight rates offset by cost inflation which kept margins flat. The Road Division revenue increased 2% y/y impacted by weak
seasonality and auto sector challenges. The Solutions Division remained flat in revenue but faced margin pressure due to lower
European activity and rising warehousing costs. The company expects FY25 EBIT before special items at DKK 15.5B–17.5B
(estimate: 19.8B), compared with DKK 16.1B in 2024. Air and sea freight are expected to grow by 3% y/y, in line with global GDP, with
stable gross profit yields. It also expects flat to low-single-digit growth in road and low to mid-single digit growth for contract logistics.
The stock is forming the right side of a stage-one consolidation base and is 9% to pivot. It has drifted lower signce breaching the 50-
DMA in November 2024, but is well above support at its 200-DMA (-6%) and the top of a long 2024 consolidation (DKK 1,285). Hold
positions.

Global Sector Strategy

Posted on by Kenley Scott

Last week saw an unusual scenario where a group of stocks fell >20% directly from 52-week or all-time highs with very little prior warning from a technical standpoint. Below are notable >$10B stocks which fit the criteria, with a couple also included from earlier in January (RKLB, ALAB, NVDA), and a couple from late-week earnings related selloffs (NOW, DECK).

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

Key Sector News and Earnings Results

 

Agriculture stocks may finally be turning around after a multi-year downturn. A broad ETF which tracks agriculture (MOO), has rallied about 8% over three weeks and is approaching its 200-DMA. It has been in a downtrend since April 2022, losing about 35% over the 33 month period, versus a 35% gain for the S&P 500. While it still has key resistance levels to contend with, there are several stocks in the space that are further along in their recovery. These include equipment manufacturer Deere (DE), fertilizer providers and CF Industries (CF), ICL (ICL), and seed providers Corteva (CTVA) and Tres Tentos Agroindustrial (TTA.BR), which are all breaking out or nearing breakouts from early-stage bases. Although not the same degree of positive setups, notably Nutrien (NTR), Mosaic (MOS), and SQM (SQM) are back above their respective 200-DMA for the first time in two years.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

Theme Under Spotlight: U.S. Airlines
Context: Delta Airlines CEO, Ed Bastian, during the Q4 FY24 earnings call, emphasized that the company anticipates strong travel
demand to persist and expects 2025 to be the best financial year in Delta’s 100-year history. Against this backdrop, we are analyzing
the recent outperformance of the U.S. airline industry and its outlook for 2025.