The Dawn Patrol – 14.02.13

Bonjour,

European stocks are seen flat in morning trade on Thursday, halting a two-day recovery ahead of GDP figures for euro zone countries that are set to show contraction in the fourth quarter, and as investors comb through a raft of corporate earnings.

Today, we’ll monitor 4Q GDP (French, German, Italian, Eurozone), French Non-Farm Payrolls, German Unemployment, ECB publishes Monthly Report and the initial jobless claims in the US.

France’s GDP Contracts 0.3% Q/q in 4Q; Est. Contracts 0.2% Q/q

Permira Advisers and KKR selling a stake in PROSIEBENSAT.1 Media worth EU497m

APPLE shares dip after SEC filing shows Leon Cooperman liquidated his position

CSCO reports 2Q sales $12.10Bln, est $12.06Bln; 2Q adj. gross margin about 62.3%, est. 61.77%. Higher-than-expected sales. Excluding some items, EPS is 51c vs 48c estimated. Revenues in line. Shares are down 2.1% in after-market.

WHOLE FOODS EPS $0.78 vs $0.77 estimated, lowers 2013 revenues guidance, Q1 comp store sales +7.2% vs 7.7% expected. Shares are down 5.8% in post-market.

NVIDIA -1.5%, Q4 adj eps 35c vs 30c, rev guidance weaker than exp.

APPLIED MAT +2.8%, Q1 adj eps above est, eps forecast in line, sales better

RESULTS

ABB 4Q Net Beats Estimates. ABB 4Q Net $604 Mln; Analyst Estimate $570 Mln.

ACTELION FY Core EPS Misses Est.; 2013 Core Earnings Seen Flat

BNP Paribas Profit Misses Estimate on Italian Impairments. 4Q net down 33% Y/y to EU514m ($690m) vs est. EU921.6m (9 analysts).

Clariant (Continuing Businesses) 2012 Net CHF211m, Div. +10%

EDF Sees 2013 Organic Ebitda Growth Unchanged to 3% Ex-Edison

KBC 4Q Net of EU240m Beats Estimates, Dividend Raised to EU1/Shr

NESTLE’s organic growth at 5.4% vs 5.9% expected. Sales in line at CHF92.2bn. Cash flow much better and margins improving. Stock may come down on lower growth, but it’s not bad.

Randstad 4Q, 2012 Sales Match Ests; 2012 Net Income Beats. RANDSTAD in-line with consensus

RENAULT FY Profit Beats Est., Sees 2013 Positive Auto Cash. EBIT ex-items EU729m, est. EU628m. Rev EU41.3b, est. EU40.3b.

RIO’s numbers look OK this morning. Better on top line, EDBITDA at $19,125m vs $19,008m expected, EPS at $5.03 vs $5.05 expected. Dividend increased by 15%.to $1.67. CApex is reduced by $1.5bn.

SBM Offshore FY Loss $79.5m Matches Est.; Takes Panuke Charge

Solvay 4Q Ebitda EU430m vs Est. EU418.8m; Savings Ahead of Plan. 4Q Ebitda ex-items EU430m vs est. EU418.8m

Zurich Insurance 4Q Net $983m vs Est. $521.1m; Div. CHF17. Zurich Insurance 4Q business op. profit $569m vs est. $560m.

Pernod 1H Ebit ex-items EU1.46b, est. EU1.43b (median of 11).
• 1H organic sales up 3%, est. up 2.2% (median of 11); in 1Q up 5%
• 1H rev. EU4.91b, est. EU4.87b
• 1H organic Ebit growth up 1%, est. +0.5% (median of 10)
• Confirms FY13 outlook of FY organic profit from recurring ops. growth close to 6%
• 1H gross margin 63.1% vs 61.7% Y/y

Publicis FY organic growth +2.9%; div. up 29% to EU0.9/shr vs BDVD forecast EU0.85; says 2012 organic growth achieved in difficult year due to co.’s exposure to digital sector, high growth countries.
• FY rev. up 14% to EU6.6b vs est. EU6.57b (21 ests.)
• FY operating margin 16.1% vs 16% Y/y
• Diluted EPS +27% to EU3.36
• Says LBi acquisition, combination with Digitas have strengthened co., boosted digital operations
• Sees 2013 being “even more difficult” on economic conditions, Europe weakness; targets higher growth than mkt average in 2012, moderate improvement in margin

Air Liquide 2012 Net EU1.61b vs Est EU1.60b; Reiterates Forecast 7:22
Air Liquide 2012 net profit EU1.61b vs est. EU1.60b.
• Recurring operating profit EU2.56b vs est. EU2.54b.
• Rev. EU15.32b vs est. EU15.29b

CURRENT STUFF

Japan’s recession continued in Q4, with data released today showing a 0.1% contraction for October – December, in contrast to median forecasts that growth would increase. It’s the third quarter of GDP contraction. (Bloomberg)(Reuters).

On Germany
Gross domestic product fell 0.6 percent from the third quarter, when it gained 0.2 percent, the Federal Statistics Office in Wiesbaden said today. That’s more than the 0.5 percent contraction predicted in a Bloomberg News survey of 47 economists. The French economy also shrank more than forecast, with GDP falling 0.3 percent in the fourth quarter.

On taxes
The Fed said it opposes plans by 11 European countries to impose a small tax on trades in shares, bonds and derivatives. The European Commission will propose a new financial-transaction tax it says could raise as much as EUR35 billion a year for the 11 participating states, which include Germany, France, Italy and Spain, according to documents to be published Thursday and seen by The Wall Street Journal.

UPS & DOWNS

TNT Express (JPM, Combe) Lifting PT by 17%: cost-cutting / macro upside potential offer hedge against near-term uncertainty
We remain Overweight TNTE given material scope for ‘right-sizing’ the cost base after a year in which management’s latitude to take action was clearly inhibited due to bid-related priorities. While the falling knife of price/mix pressure is the chief risk, we believe c.20-40% upside potential offers an attractive hedge (and that excludes consideration of material macro recovery).

British American Tobacco (GS, Cazzol) Buy: BAT-ing for a potential come-back; add to Conviction Buy List
We see an opportunity to buy a structural leader; following the stock’s derating in 2012, BAT now trades at a 14% discount to staples, despite offering above average EPS growth and dividend yield. We reiterate our Buy rating and add BAT to CL Buy.

Daimler AG (GS, Burgstaler) Buy: Inflection point now visible; reiterate CL Buy
We reiterate our CL Buy on Daimler as we expect the key businesses (MCG and Trucks) will see an inflection point in profitability after the first quarter of 2013. Our 12-month PT decreases slightly to €62 due to higher pension and healthcare obligations.

A.g. Barr Cut To Equalweight VS Overweight at Barclays (I don’t know what this is)
African Barrick Gold Cut To Underweight VS Neutral at JPMorgan
Asos Raised To Overweight VS Neutral at HSBC
Britvic Cut To Equalweight VS Overweight at Barclays
Britvic Cut To Underweight VS Neutral at JPMorgan
Ferrovial Cut To Underperform VS Outperform at RBC
H&M Cut to Underperform vs Market Perform at Bernstein
Infineon Cut To Underweight VS Neutral at HSBC
Next Raised To Overweight VS Neutral at HSBC
Panalpina Raised To Buy VS Sell at Berenberg
Petkim Cut To Underweight VS Overweight at HSBC
Yara Cut From UBS’s Most Preferred List, EMS, Symrise From least

STRATEGY

GS Bulk Commodities Snapshot : China restocking cycle to support iron ore prices into 2H 2013

The restocking cycle in China still has further to go : Despite the recovery in iron ore prices so far this year, inventory levels in China remain low. Specifically, Chinese port stocks fell marginally in early February to 67.5Mt, 27Mt below the 2012 average of 94Mt. We believe that improved market sentiment and demand outlook relative to 2H 2012 will likely continue to encourage the Chinese steel sector to bring iron ore inventory levels back to normal.
Past restocking cycles coincided with high prices
The Chinese steel industry has gone through restocking cycles of a similar scale twice in the past five years. In both instances the increase in port stocks proceeded at a moderate pace (0.75Mt per week) and lasted several months. Both cycles also saw spot iron ore prices strengthen. The average price during the 2010-11 restocking cycle was US$36/t above the pre/post restocking price level. On that basis we expect the seaborne market to benefit from rising Chinese port stock levels in the course of 2013 and believe this will support seaborne iron ore prices at a high level, justifying a modest premium for seaborne imports over domestic concentrate and posing an upside risk to yur 2013 price forecast of US$144/t

OVERNIGHT MARKETS: UP

Asian markets
Nikkei 225 up +48.13 (+0.43%) at 11,300
Topix up +1.97 (+0.21%) at 958.99
Hang Seng up +230.52 (+0.99%) at 23,446

US markets
S&P 500 up +0.90 (+0.06%) at 1,520
DJIA down -35.79 (-0.26%) at 13,983
Nasdaq up +10.39 (+0.33%) at 3,197

European markets
Eurofirst 300 up +4.15 (+0.36%) at 1,166
FTSE100 up +20.73 (+0.33%) at 6,359
CAC 40 up +11.95 (+0.32%) at 3,699
Dax up +51.70 (+0.67%) at 7,712

Currencies
€/$ 1.34 (1.35)
$/¥ 93.49 (93.37)
£/$ 1.55 (1.55)

Commodities ($)
Brent Crude (ICE) up +0.07 at 117.95
Light Crude (Nymex) up +0.10 at 97.11
100 Oz Gold (Comex) up +0.80 at 1,645
Copper (Comex) unchanged 0.00 at 373.40

10-year government bond yields (%)
US 2.05%
UK 2.23%
Germany 1.69%

CDS (closing levels)
Markit iTraxx SovX Western Europe -1.96bps at 102.22bp
Markit iTraxx Europe -1.88bps at 111.42bp
Markit iTraxx Xover -6.27bps at 435bp
Markit CDX IG -1.42bps at 86.03bp

Sources: FT, Bloomberg, Markit

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