The Dawn Patrol – 24.01.13 – AAPL-, NFLX+, JPM u/g AKZO, MS on EU banks, GS- on Oil services, China PMI strong…


European stocks are seen edging lower on Thursday, trimming some of the previous session’s gains, as disappointing results from tech giant Apple eclipsed data showing accelerating growth in China’s

factory sector.

Today, we’ll watch the EC composite flash PMI (10:00), then the French and German ones. US jobless claims, US Markit PMI prel, Leading Indicators…


Actual Consensus
EPS 13.81 13.53
Sales 54.4bn 54.88bn
GMs 38.6% 38.6%
iPads 22.9m 21.4m
iPhones 47.8m 47m
Macs 4.1m 5.1m

Guidance Q2 Actual Consensus
Sales 41-43bn 45.5bn
GMs 37.5-38% 39/40%

AAPL results were mixed bag, with sales little below estimates, and margins and EPS in line. Product sales exceeded estimates except for Macs, which are subject to self inflicted cannibalization from iPads.
Sales guidance was light, as many were expecting. Margin guidance also light, which raises concerns that AAPL has not yet been able to control margin pressure.

Catalysts begin in June quarter (MS): 1) iPhone launch in summer 2013 which could include a lower priced version,similar to iPad Mini, 2) new iPads, including iPad Mini with Retina Displayaround mid-year, 3) expanded carrier partnerships with T-Mobile in the US, NTT Docomo in Japan, and/or China Mobile in 2H13/ 2014, 4) increased share repurchase (every $5B buyback lowers share count by 1% vs. our flat forecast).

APPLE IS NOT DEAD, but will stay around the 450s level for a while… I was wrong…


Fitch revises outlook on Belgium to stable from negative; affirms at ’AA’

Siemens shareholders approve spinoff of Osram lighting unit. BBG

Tod’s Sales headline came in line : +7.8% reported sales growth to Eur 963m, +4.9% organic, this implies Q4 on +9.6% reported, +9% organic

EU Earnings : LONN Sales & EBIT inline, confirms 2015 target .US Earnings : AAPL missed on guidance, WDC reported EPS and revs ahead exp.
NFLX Shares of Netflix zoomed up 33% to $136.91 after the company said it earned $8 million, or 13 cents a share, in the fourth quarter. Wall Street had expected a loss of 12 cents a share.
Veolia / Suez shortlisted for Australia Gas Contract, around 1bn eur – set to finalize the contract in the second quater this year (Echos)
Barclays cutting around 70 employees across Asia
Shell, Ukraine to sign record gas deal: “Ukraine is expected to sign a potential $10bn-plus natural gas exploration and production deal on Thursday with Royal Dutch Shell, marking the biggest investment to date in “unconventional” gas in Europe.”
awarded important contract by JBF Petrochemicals Ltd. for a world-scale petrochemical plant in India
FDA approves Roche’s Avastin With chemo for colorectal cancer.
Novartis’s Exjade gets broader FDA approval to treat excess iron


China manufacturing growth rate rises: China’s preliminary HSBC manufacturing PMI was 51.9 for January, the highest level in two years. The final figure for December was 51.5. (Reuters)(FT Alphaville)

House passes debt extension bill: The US House of Representatives passed a Republican plan that suspends limits on the federal government’s ability to borrow until May 19. However John Boehner, who unveiled the short term extension plan last week, said he and fellow House Republicans were committed to passing a budget that would be balanced in 10 years. House budget committee chairman Paul Ryan said he would submit a 10-year balanced budget plan that would involve only cutting spending, and no tax rises. (Reuters)(Wall Street Journal)

To read:
· Fear drove David Cameron to promise a referendum on EU membership. Spiegel

· Merkel and Hollande seem to get along after all. Spiegel

· Davos is no conspiracy – it is infotainment. FT


RRS raised to Buy at ML, SKYD cut to Neutral at Barcap, Geophysique/PGS cut to Sell at GS as Supply growth looms in 2014/15 and reiterate Conv. Buy on SAP (MS reiterate OW and Berenberg raised pt 71eur too), JPM like Aviva, Croda and upgrade AKZA to Neutral.
MS cut MNOD to Neutral and raise Evraz to OW, stay cautious on SSE. MS has a tactical SELL on BT as they see some risk that BT stock settles back into Feb1s release

Oil Services (GS, Rae) Supply growth looms in 2014/15; PGS and CGG down to Sell
We take a more cautious stance on the European seismic companies in the context of a flatter oil price environment, more cash flow constraints for the major oils and a gradually building supply picture for seismic vessels.We downgrade PGS and CGG to Sell.

MS on European Banks:
Within European wholesale banks, we prefer CS, BARC, and UBS over DB as it faces greater ringfencing, regulatory, and litigation risks while capital remains below peer average despite skew to i-bank. On 0.85x TNAV 12e for ~12% underlying ROTE 13e, we think discount is justified.

Akzo Nobel (JPM, Tyler) Upgrade to Neutral with focus on strategic opportunities over earnings risk.
Demand recovery now needed to drive upside
We raise our ‘13e/14e EPS estimates by 16%/19% to reflect lower fixed costs in European Deco (we est. €150m of new savings), easing raw material costs and an improving demand outlook in Asia. Though we continue to view price/mix (in Spec Chems/European Deco) as sources of earnings risk, the 20 Feb strategy update will likely draw focus towards medium-term strategic opportunities and away from short-term earnings trends. Much of the potential from these opportunities is now discounted in the share price, in our view, although an eventual recovery in European construction could still provide further earnings upside.


Asian markets
Nikkei 225 up +84.77 (+0.81%) at 10,572
Topix up +8.53 (+0.96%) at 896.32
Hang Seng down -46.82 (-0.20%) at 23,588

US markets
S&P 500 up +2.25 (+0.15%) at 1,495
DJIA up +67.12 (+0.49%) at 13,779
Nasdaq up +10.49 (+0.33%) at 3,154

European markets
Eurofirst 300 up +2.16 (+0.19%) at 1,168
FTSE100 up +18.47 (+0.30%) at 6,198
CAC 40 down -14.84 (-0.40%) at 3,726
Dax up +11.33 (+0.15%) at 7,708

€/$ 1.33 (1.33)
$/¥ 89.08 (88.59)
£/$ 1.58 (1.58)

Commodities ($)
Brent Crude (ICE) down -0.02 at 112.78
Light Crude (Nymex) up +0.30 at 95.53
100 Oz Gold (Comex) unchanged 0.00 at 1,686
Copper (Comex) unchanged 0.00 at 367.10

10-year government bond yields (%)
US 1.83%
UK 2.01%
Germany 1.55%

CDS (closing levels)
Markit iTraxx SovX Western Europe +0.5bps at 99.39bp
Markit iTraxx Europe +1.37bps at 105.37bp
Markit iTraxx Xover +2.08bps at 425.22bp
Markit CDX IG -0.21bps at 86.24bp

Sources: FT, Bloomberg, Markit


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