The Dawn Patrol – 24.07.12 – Earnings: DLG not good… On China, Moody’s, the Vix. GS buys Puts on the Dax, MS’ top picks… more…

Goedemorgen,

Hard to say how the markets will react today. Futures pointing upwards despite the Moody’s downgrade as China PMIs were strong. EURUSD flat at 1.2118. Today, we’ll keep an eye on European and US PMIs and the Spanish bills (3m/6m) auction. And Apple earnings tonight…

SAP Strong numbers. We already had the numbers as SAP preannounced positively recently. The good stuff comes from HANA sales which are much better than consensus expectations at €85m. European sales soso… Earnings Call today at 1pm (Paris time): 855 272 3513

DIALOG SEMIS: NOT GOOD… Sales at $159.5m vs $164.2m est. EPS at 12c vs 17c expected… Still waiting for margins improvements. Will disappoint many (including me) despite wekk flagged concerns on the margins by many sell side analysts.

KPN 2Q Sales Beats, Net Misses Ests. ; 2Q sales EU3.19b vs est. EU3.15b ; 2Q Net Eu315mln vs. Est. Eu328 Mln ; 2Q Ebitda EU1.14b vs est. EU1.17b; cuts 2012 dividend forecast to 35c-shr.; Reiterates FY12 forecast of Ebitda EU4.7b – EU4.9b, capex EU2b – EU2.2b, FCF EU1.6b – EU1.8b

Mobistar 2Q Ebitda, Net Beat Estimates; Revenue in Line; 2Q rev. EU403m vs. est. EU403.6m; 2Q net income EU54.7m vs est. EU47.8m; 2Q Ebitda EU136.6m vs est. EU122.8m; Maintains FY2012 guidance of “slightly lower” turnover Y/y, limited to 2%; Ebitda in range of EU460m-500m; net result EU170m-195m

STMicroelectronics 2Q sales $2.15b vs est. $2.16b; 2Q gross margin 34.3%; 2Q Adj. Loss Per Shr 5c, Est. Loss 3c; sees 3Q gross margin about 35.3% plus or minus 1.5 percentage points vs est. 35.9%

Swatch Reports Double-Digit Growth in Sales, Profit; Gross sales rise 14.4% to SF3.8b; Net income rises to SF724m, up 25% in year; Operating profit rises 19.4% to SF903m; Gives positive outlook for 2H

AFTER HOURS

VMW: -4.5% – VMware Acquires Nicira for ~$1.05b; 2Q Adj. EPS Beats
– VMW 2Q adj. EPS 68c vs est. 66c
– Rev. $1.12b vs est. $1.12b
– Sees 3Q rev. $1.11b-$1.15b vs est. $1.14b
– Reiterates sees 2012 rev. $4.54b-$4.64b, est. $4.59b

TXN: -1.5% – Texas Instruments Sees 3Q EPS, Rev. Missing Estimates
– TXN sees 3Q EPS 34c-42c (including 7c restructuring cost) vs est. 43c, 3Q rev. $3.21b-$3.47b vs est. $3.53b.
– 2Q EPS 38c with 6c acquisition and restructuring costs vs est. 34c; 2Q rev. $3.34b vs est. $3.35b (2Q orders fell 5%)
– Orders slowed in June, backlog below normal

SANM: up 12% as it increases its sales target for Q4. Q3 sales/EPS came in at $1.55bn/216c vs estimates of $1.5bn/29c

CURRENT THEMES

On China
The HSBC Flash PMIs came in at 49.5 from 48.2 last month, representing the first increase in four months. The manufacturing output is back above 50 at 51.2.

On Moody’s
Germany, the Netherlands and Luxembourg had the outlooks for their Aaa credit ratings lowered to negative by Moody’s Investors Service, which cited “rising uncertainty” about Europe’s debt crisis.
This shouldn’t change much as demand for Germany’s bonds has been really strong and most of the concerns remain in Spain. This won’t help the sentiment on the entire zone seen from outside, but doesn’t change much.

On the Vix
So far the Vix remained quite low but it moved sharply up yesterday and this may continue for a short while.

STRATEGY

GS (Mueller-Glissman) Strategy Espresso
Time to hedge for another difficult summer?

GS remains constructive (“constructive” should be included in the list of trendy words that come and go… remember “net net”, “paradigm”…) on European equities and sees 15% upside on a 12 months horizon, but is more cautious over a short term horizon (4% downside on 3 months) with many political risks and despite a stabilising macro backdrop.

As volatility is still low and may be too low compared to the current risks (no calculation here), it may be worth hedging through puts. GS highlights that the Euro Stoxx 50 skew is low mostly compared to the US. As there are another batch of selling bans, buying puts on the CAC or the DAX is also worth looking at, as skew is low too.

MS (Carr & Co) European Equity Strategy
European Stocks for the Global Investor – Revisited
MS continues to push Europe vs US as valuation difference reaches a 40y low (on some metrics such as the Shiller PE). European earnings are historically depressed vs the US too. US earnings are on a better trend, but European earnings are at a depressed level too. MS highlights that Corporate Europe generates 49% of sales from outside developed Europe.
This MS list comprise a list of European stocks with geographic diversified sales, strong franchises, strong balance sheets, valuation discounts, OW (or N) rated at MS and so on…


CONTINENTAL, VOLKSWAGEN STAMM LVMH
, INTERCONTINENTAL HOTELS, WPP, RECKITT BENCKISER GROUP , IMPERIAL TOBACCO, DIAGEO, ROYAL DUTCH SHELL B, AEGON, PRUDENTIAL, BAYER, SANOFI, SCHNEIDER ELECTRIC, SIEMENS, EADS, BAE, ASML, ARM , ERICSSON, AKZO NOBEL, BHP BILLITON PLC , VODAFONE GROUP.


 

EUROPEAN EQUITIES

FINANCIALS

News

Barclays will today reveal the terms of its own probe of its business practices and culture, Sky News reported.

Deutsche Bank’s ADRs fall as much as 6.4%; Lowest since 2009; the Bank may have to make 2Q provisions for LIBOR

Scor says that June-July Premiums increased 24% to EU462 Million

Swedish Banking Group Seeks to Boost Principals, says Reuters

Unibail-Rodamco confident of meeting goal of 4% increase in FY recurring EPS, co. says; 1H net rental income EU661m, up 5% Y/y on LFL basis

Reco

AtlantiaPT Cut to EU13.5 vs EU14.2 at UBS; Kept at Buy

HSBC Kept at Buy at Nomura on Absolute and Relative Value

Buy Lloyds, UBS Says Ahead of 1H; Progress in Non-Core Expected

Buy Munich Re for Earnings Momentum, JPMorgan Says

INDUSTRIALs/MINERS/SERVICES

Results

Norsk Hydro Reports 2Q Loss of NK1.6B, Missing Profit Estimates; 2Q revenue nk21.7b vs est. nk23.6b; 2Q net loss nk1.6b vs analyst estimate for profit of nk1.07b; 2Q Ebit nk549m; ‘Weak quarterly results’ reflect low aluminium prices, challenging macro environment; Result helped by reduced opg costs; Sees 2012 aluminium demand growth of about 2% outside China

Volvo 2Q Profit, Rev. Beat Ests.; rev. SK84b vs. est. SK81b; 2Q op profit SK7.3b vs. est. SK6.7b; Reiterates mkt outlook

News

AIR FRANCE’s regional unions say their strike action has ended

Chrysler considers $198 Million plant investment, reports Bloomberg

G4S is replaced for Newcastle Olympic Security as there is concerns of the company’s shortfall in recruiting guards, Bloomberg reports

LINDE & Lincare’s deal has been approved by the US (earlier)

Peugeot is seen to seek state aid to save its French Plant, says Reuters

ThyssenKrupp may consider the sale of steel Europe, Reuters Says

Reco

Eurotunnel PT Cut 5% to Eu7.3 at Exane; Kept at Outperform

Pirelli Price Correction Overdue, Morgan Stanley Says

Saipem Kept on Citi Focus List Europe Ahead of 2Q Results

Thyssenkrupp PT Cut to Eu16.4 VS Eu24.7 at HSBC, Stays Neutral

UTILITIES/OIL/HEALTHCARE/CHEMICALS

News

Arkema is to have ‘Solid’ Earnings this year, CEO Says

BP maintained its plans to start output from Skarv field in Norwegian Sea in 4Q after preparations were delayed by a 16-day strike by oil workers

ENI’s Libyan-held shares have been unfrozen by the Italian court, Reuters says

GDF Suez is considering the sale of a stake in its German natgas storage facilities as the co. seeks to pay off debt

Repsol should try to reach “friendly” agreement with Argentina over compensation for nationalized YPF, Venezuelan President Hugo Chavez says in meeting with Argentinian Planning Minister

ROYAL DUTCH SHELL’s fine in Nigeria will be voted by local lawmakers in September

Reco

Anglo American PT Cut 17% to Gbp25 at Exane, Kept at Neutral; Consensus 20-30% Too High, Credit Suisse Says

TMT

Results

KPN 2Q Sales Beats, Net Misses Ests. ; 2Q sales EU3.19b vs est. EU3.15b ; 2Q Net Eu315mln vs. Est. Eu328 Mln ; 2Q Ebitda EU1.14b vs est. EU1.17b; cuts 2012 dividend forecast to 35c-shr.; Reiterates FY12 forecast of Ebitda EU4.7b – EU4.9b, capex EU2b – EU2.2b, FCF EU1.6b – EU1.8b

Mobistar 2Q Ebitda, Net Beat Estimates; Revenue in Line; 2Q rev. EU403m vs. est. EU403.6m; 2Q net income EU54.7m vs est. EU47.8m; 2Q Ebitda EU136.6m vs est. EU122.8m; Maintains FY2012 guidance of “slightly lower” turnover Y/y, limited to 2%; Ebitda in range of EU460m-500m; net result EU170m-195m

STMicroelectronics 2Q sales $2.15b vs est. $2.16b; 2Q gross margin 34.3%; 2Q Adj. Loss Per Shr 5c, Est. Loss 3c; sees 3Q gross margin about 35.3% plus or minus 1.5 percentage points vs est. 35.9%

Telenor 2Q Sales NK25.4b In Line W/ Est.; Starts Share Buyback; 2Q sales nk25.4b vs est. NK25.5b equating to organic revenue growth of 5%; 2Q Ebitda nk7.8b vs. est. nk8.0b; 2Q EPS nk1.31 vs est. nk1.701; FY organic revenue growth outlook maintained at “more than 4%.”

News

ASML’s CEO bought 12,000 shrs in co. on July 20 for EU20.39 apiece and then sold them for EU45.03 each today, reports Bloomberg

Royal KPNis drawing interest from infrastructure investors, buyout firms for its German mobile- phone towers, reports Bloomberg

SAP may report higher quarterly profit

WPP Digital acquires majority stake in Acceleration Holdings in Guernsey and Acceleration eMarketing in South Africa, reports Bloomberg

Reco

Philips PTRaised to Eu17.60 VS Eu16 at Morgan Stanley

Publicis Raised To Overweight From Equalweight at Barclays

UBS Still Neutral on STM, Waits for Structural Cost Reduction

Tf1 Raised To Overweight From Equalweight at Barclays

Ziggo Cut To Neutral VS Buy at Citi

RETAIL/CONSUMER/LUXURY

Results

Swatch Reports Double-Digit Growth in Sales, Profit; Gross sales rise 14.4% to SF3.8b; Net income rises to SF724m, up 25% in year; Operating profit rises 19.4% to SF903m; Gives positive outlook for 2H

Reco

Ahold Raised to Overweight from Equalweight at Barclays

Beiersdorf 2Q lfl consensus expectations (+1.5%) look “a tad ambitious,” Exane says

Unilever May Not Deliver on Expectations, Nomura Says After HUL

SMALL/MIDCAPS

Results

Dialog Semiconductor Misses 2Q Rev., Net Ests; 2Q sales $158m ; 2Q rev. $159.5m vs. est. $164.2m ; 2Q net $8.5m vs. est. $12m ; 2Q Ebit $13.4m vs. est. $16.4m ; 2Q EPS 12c vs. est. 17c ; Sees Margin Rise; Sees 3Q sales $170m-$180m; Remains confident in ability to meet current market rev. expectations for FY

Kontron 2Q Net Falls to a Third; 2Q rev. EU138.3m vs. est. EU143.8m; 2Q Ebit EU3.8m vs. est. EU6.2m; 2Q net EU2.3m ; will likely fail to reach FY targets; won’t give new guidance, cites debt crises, global economy

Mercialys1H Net EU47.6m vs EU55.3m Y/y; sees 8% growth in adj. FFO-shr in 2012, vs. target range of 6%-8% set in Feb.

PRISA 1H Loss EU61.1 Mln Vs EU11.1 Mln Profit Year Ago; 1H sales falls 5.4% to EU1.3b; 1H Ebitda drops 5.1% to EU209.1m; says exposure to ad market is limited

Software posts 46% BPE Licence growth ; 2Q rev. EU258.6m vs. est. EU258.75m; 2Q net EU37.5m vs. est. EU40.9m; 2Q Ebit EU57.1m vs. est. EU57.7m; 2Q EPS 43c vs. est. 46c; raises ETS FY Forecast

TomTom 2Q Consumer Rev Drops by 26% to EU155m; maintains 2012 rev. guidance of ~EU1.1b, adj. EPS of EU0.09

News

Almirall & Forest Labs, win FDA approval for New COPD Treatment

Banca Generali saysGiorgio Girelli resigns as Board Chairman

Celesio’s 3PL Business in Europe is to be bought by Owens & Minor for ~$158m

Dexia is close to selecting a final bidder for asset management unit as New York Life Insurance and Macquarie vie for the business

Galapagos says that it identified pre- clinical osteoarthritis candidate compound in alliance with Servier which triggers undisclosed milestone payment, Bloomberg reports

Faurecia Cuts FY Op Profit Target, Raises Sales Target (Earlier);

Interparfums raises its year sales target to EU420m vs. Est. EU415m

Stratec Confirms FY Sales Forecast & Ebit Margin Forecast

Reco

Aberdeen Asset Raised To Buy From Hold at SocGen

African Barrick PT Cut to 680p VS 740p at HSBC

Binckbank PT Cut to Eu8.5 VS Eu10.90 at ING, Kept at Buy

Cove Energy Cut To Underweight From Overweight at Barclays

Prisa PT Cut 17% to Eu0.39 at Exane; Kept at Neutral

Stagecoach Cut To Neutral VS Buy at UBS

Savills Cut To Neutral VS Buy at UBS

Wereldhave PT Cut to Eu52.86 VS Eu62.72 at ING, Stays Buy

Max Kamir

Louis Capital Markets UK,LLP

Authorised and regulated by the FSA and Banque de France

39-41 rue Cambon

75001 Paris

T +33 (0)1 53 45 10 74

E mkamir
I http://www.louiscapital.com

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