LCM Dawn Patrol – 23.04.13 – Earnings (lots) KPN-, SAND-, SU-, ML=, STM=, TOM=, EO=, SWEDA=, SEB-. MS strategy, Tuesday’s gear.

Bonjour,

European stocks are seen flat to slightly higher on Tuesday, halting their two-session recovery rally after data showed growth in China’s big factory sector dipped.

Today is an important day with key data as we get the Eurozone flash PMIs (EZ PMI Composite expected at 47). We also get some earnings from ARM, Sandvik and…. APPLE (tonight).

SX5E Futures: Support at 2509 then 2484. Resistance 2537 (intra day gap) then 2556

Tuesday is gadget day (I’ll have to remember this).
And if you’re like me (all the gear, no idea) you believe that equipment is what makes the athlete faster and stronger…
And this time it comes from a well known european tech stock: TomTom (it doesn’t make it a Buy). I like the design (a bit like the nike+) and depending on the price, could definitely dent Garmin’s market share with its premium 910XT…

 

NEWS

Safran Always Has Eye Out for Worthwhile Acquisitions, CEO Says

EADS Added to Bofa’s Europe 1 List

Richemont Sees FY Net Profit Increasing by 30% on Year on FX

Mediobanca Said to Place 1.1m Cucinelli Shares at EU15.07 Each

Telecom Italia is said to consider 30% network stake sale to CDP

Rolls-Royce wins $1.6b trent engine order from IAG

EARNINGS

KPN missed on Net, 1Q sales EU2.91b vs est. EU2.94b, 1Q adj. Ebitda EU1.01b vs est. EU997m. Says it expects to launch rights issue shortly &no dividend for ’13 and ‘14

STMicro 1Q result inline. Guidance slightly better on sales, inline on margin

TomTom 1Q Rev., Adj. EPS In Line, Reiterates FY Outlook

Sandvik missed sales/net forecasts

Schneider Electric slightly below est : 1Q sales EU5.2b vs est. EU5.32b, 1Q organic rev. down 2.7%

Michelin 1Q Rev. EU4.9b, Est. EU4.97b; Reiterates FY Outlook and Possible restructuring in Europe Stock down 20% since Jan., O/Sold and already close to the most bearish PT. I would not be surprised by a squeeze on confirmed guidance

Safran 1Q sales beat forecasts and 2013 rev. goal raised

Faurecia 1Q Sales Rise 1.7% to EU4.37b

Swedbank 1Q Net In Line With Est.; Sees expenses at Same Level

SEB report below cons : 1Q Net Sk3.01b; Analyst Est. Sk3.11b

CSM 1Q inline (EU780m vs est. EU773m), says continuing sales fell 5.6% to EU180.5m due to volume drop of 2.5%, negative currency effect of 1.8% and price/mix effect of -1.3%.

Ingenico reiterates FY forecasts after 1Q sales rise 24%

Apple Preview

2Q EPS est. $9.98 (range $9.16-$12; avg est. down 1.5% over past four weeks) 2Q rev. est. $42.3b (range $40.6b-$44.1b; avg est. down 1.2% over past four weeks) 2Q gross margin est. 38.5% (range 37.6%-41%) 3Q EPS est. $8.87 (range $7-$10.83; avg est. down 6% over past four weeks) 3Q rev. est. $38.5b (range $33.5b-$43.3b; avg est. down 3.5% over past four weeks) 3Q gross margin 38.8% (range 36.7%-42.5%) Fyi Last qtr, AAPL said changing approach to guidance; will give range that reflects what co. “likely to achieve” instead of “conservative point estimate”

Watch analysts are watching :
Guidance:
2Q likely to beat ests. which may “restore investor interest,” JPMorgan (overweight) says; sees 3Q outlook likely “conservative”
AAPL may meet low end of 2Q rev. view although 3Q rev. forecast likely to be “well below” consensus, as checks indicate iPhone 5S availability in July “at risk” and low-cost iPhone likely delayed until CY4Q: Jefferies (hold) 3Q gross margin guidance key metric; may boost confidence about impact of lower-priced iPhone, Morgan Stanley (overweight)
Capital plan:
AAPL may package good news of a new capital plan with the bad news of weak 2Q results, BTIG (buy) says; AAPL will likely announce “meaningful dividend growth” and “significant increase” in buybacks with earnings: Mizuho (buy) AAPL cash announcement more likely a few weeks after results; co. needs to return 50% of FCF on “ongoing” basis to avoid disappointing investors: Bernstein AAPL may raise current quarterly dividend by 17% to ~$3.10 a share, according to Bloomberg BDVD forecast

CURRENT STUFF

China’s flash PMIs fell in April: China’s manufacturing sector expansion appears to be slowing this month, as preliminary HSBC/Markit PMI was 50.5 for April, compared to 51.6 in March and below the 51.5 consensus forecast of economists surveyed by Bloomberg. This month’s survey was being watched particularly closely for signs of Q2 economic momentum, after the Q1 GDP growth reported last week missed expectations. (Bloomberg)

Europe may have hit the political limits of how far it can go with austerity policies because of the growing opposition in the eurozone’s recession-hit periphery, European Commission president Jose Manuel Barroso said on Monday. While such policies were “fundamentally right”, they may have reached a limit of social and political acceptance. (Financial Times)(Reuters)

UPS & DOWNS

Dufry (GS, Uthayakumar) Buy: Structural growth at attractive valuation, add to Conviction Buy List
We reiterate our Buy on Dufry and add it to our Conviction List. In our view the current valuation of 7.9x EV/EBITDAR does not reflect the group’s attractive growth potential.

Spanish Utilities (MS, Dores) Energy reform here we go again?
Regulatory risk is on the rise again in Spain: ahead of the long-awaited July energy review, we would avoid utilities with high exposure to electricity. Gas Natural seems to us best placed, vs Red Electrica most at risk. The risks are rising too at Iberdrola and Endesa, we think, but are priced in.

AUTOLIV CUT TO HOLD VS BUY AT NORDEA
BANKINTER RAISED TO NEUTRAL VS SELL AT UBS
BETFAIR RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
BOOKER GROUP CUT TO NEUTRAL VS BUY AT GOLDMAN
DIXY GROUP RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
ELECTROCOMPONENTS RAISED TO OUTPERFORM VS SECTOR PERFORM AT RBC
FIAT RAISED TO BUY VS NEUTRAL AT UBS
Freenet Cut to Hold vs Buy at Deutsche Bank
GENEL ENERGY RAISED TO BUY VS HOLD AT LIBERUM
INVESCO RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
MOSTOTREST RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
NATIONAL GRID CUT TO NEUTRAL VS BUY AT BOFA MERRILL
NORILSK NICKEL CUT TO UNDERWEIGHT AT MORGAN STANLEY
SANTANDER RAISED TO NEUTRAL VS SELL AT UBS
SAVILLS RAISED TO BUY VS NEUTRAL AT UBS
SCA CUT TO NEUTRAL VS BUY AT SWEDBANK
SPECTRIS RAISED TO BUY VS NEUTRAL AT CITI
SPECTRUM ASA RAISED TO TO BUY VS SELL AT NORDEA
SSE CUT TO NEUTRAL VS BUY AT BOFAML
SWEDISH MATCH RAISED TO BUY VS NEUTRAL AT NOMURA
TELEFONICA DEUTSCHLAND CUT TO NEUTRAL VS BUY AT NOMURA

STRATEGY

MS (Secker, Carr) European Equity Strategy.
Benchmarking the soft patch and the outlook for cyclicals

Weak economic newsflow means it is too soon to go overweight cyclicals despite relative valuation and performance being close to the trough levels seen in the 2011 and 2012 soft patches.
The pullback in leading economic indicators and commodity prices is consistent with that seen in the soft patches of 2011 and 2012.
Cyclicals are approaching two-year relative valuation and performance lows; however, it is too soon to go back overweight as weak macro newsflow will put further downward pressure on earnings revisions in the short term.
The cyclical sectors with the best combination of relatively low valuations and already weak earnings revisions are Autos and Transport. Cyclical sectors with the biggest scope for earnings downgrades from here are Capital Goods, Materials and Media.

OVERNIGHT MARKETS: DOWN

Asian markets
Nikkei 225 down -26.90 (-0.20%) at 13,541
Topix up +0.32 (+0.03%) at 1,146
Hang Seng down -270.65 (-1.23%) at 21,774

US markets
S&P 500 up +7.25 (+0.47%) at 1,563
DJIA up +19.66 (+0.14%) at 14,567
Nasdaq up +27.49 (+0.86%) at 3,234

European markets
Eurofirst 300 up +1.81 (+0.16%) at 1,155
FTSE100 down -5.97 (-0.09%) at 6,281
CAC 40 up +0.17 (0.00%) at 3,652
Dax up +18.15 (+0.24%) at 7,478

Currencies
€/$ 1.30 (1.31)
$/¥ 98.57 (99.21)
£/$ 1.53 (1.53)

Commodities ($)
Brent Crude (ICE) down -0.63 at 99.76
Light Crude (Nymex) down -0.51 at 88.68
100 Oz Gold (Comex) up +24.30 at 1,424
Copper (Comex) down -0.50 at 312.70

10-year government bond yields (%)
US 1.69%
UK 1.67%
Germany 1.23%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.96bps at 98.03bp
Markit iTraxx Europe -2.44bps at 111.05bp
Markit iTraxx Xover -7.94bps at 450.1bp
Markit CDX IG -1.23bps at 83.75bp

Sources: FT, Bloomberg, Markit

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