LCM Dawn Patrol – 18.07.13 – Earnings: SAP-, Ericsson:-, Carrefour=, Hermes+…. JPM on Umicore, MS on ASML, Intel.

Bonjour,

Europe to open slightly lower today and tech should be under pressure as Intel cut its FY sales guidance and capex on lower sales. The US markets finished higher on the slightly dovish comments from Bernanke, although the September meeting is still seen as the beginning of tapering. The weaker than expected housing data didn’t really affect the markets as Bernanke commented that the recent hike in mortgage rates was on his radar. Asia traded sideways this morning with housing prices in China still going up and the IMF saying that the Chinese growth model is not sustainable.

Today: lots of earnings, Spanish bonds, EZ current account and UK retail sales. In the US: more Bernanke, jobless claims, Philly Fed and the Leading indicators.

NEWS

Atos, Cap Gemini May Move as IBM 2Q Beats, Raises Outlook (but SAP bad…).
EADS May Merge Defense and Space Units, Change Name, Welt Says.
eBay -5.7% on its 2Q earnings miss and blames poor trading conditions in Europe and Korea
All French banks ex BNP were downgraded by Fitch overnight

Actelion 2Q EPS, Rev. Beat Ests; Raises FY Forecast
Akzo Nobel 2Q Sales Miss Estimates
Carrefour 2Q Rev. In-Line With Est.
Ericsson 2Q Gross Margin, Sales Miss Estimates
Hermes 2Q Rev. EU910.4m; Analyst Est. EU897m
Norsk Hydro’s 2Q EBIT Misses Estimates; Maintains 2013 Outlook
Publicis 2Q Organic Growth 5%; Says Started 2H in Confident Mood
Remy 1Q Total Rev. Beats Est., Organic Cognac Growth Misses
SAP 2Q Earnings Miss; Changes 2013 Software, Services Outlook. This is bad. In theory, they should preannounce. They’ve done the same thing in the past (can’t remember when). Q2 licenses are low (vs street avg), HANA numbers low too at €102 vs €120e. US and Asia suffer. SSRS below estimates as well. They lower their guidance on software as well. EPS in line, sales below, margins OK, EBIT below.
Tele2 2Q Ebitda in Line; Cuts FY Capex, Kazakhstan Sales Outlook
Ziggo Sees 2013 Organic Rev. Growth of 1%; Unchanged Adj. Ebitda

After Hours
Trading Higher:

+5.5% PLXS (Plexus Corp) — earnings
+4.2% SLM (SLM Corp) — earnings, $400M repurchase
+3.0% XLNX (Xilinx) — earnings
+2.6% IBM (IBM) — earnings
+0.2% SNDK (SanDisk) — earnings

Trading Lower:

-6.7% ONVO (Organovo Holdings, Inc.) — $100M mixed shelf
-4.4% EBAY (eBay) — earnings
-3.5% ACRX (AcelRx Pharmaceuticals) — offering for holders of indeterminate size
-1.5% INTC (Intel) — earnings
-0.7% AXP (American Express) — earnings

CURRENT STUFF

Q2 US earnings season metrics continue to improve: With another 13 S&P 500 companies reporting yesterda, the EPS beat rate ticked up to 74% from 73% the day before and continues to run ahead of the 70% four-quarter trailing average. In the aggregate, companies are now beating consensus EPS by 7.6%, up from 5.5% the day before and the four-quarter trailing average of 4.3%. According to FactSet, the blended growth rate for Q2 S&P 500 EPS currently stands at 1.3%, up from 0.9% the day before and the 0.6% seen at the end of last week.

Junk bond yields are falling fast: Average yields have fallen by nearly 60 basis points in the past week, and are falling towards the 6% mark. (Financial Times)

Troika report warns of more uncertainty on Greek debt servicing: “Downside risks have increased significantly compared to the second review, particularly as regards privatization proceeds,” the report said. (Bloomberg)

Schäuble flies to Athens with SME loans: The German finance minister travels to Athens today where he will offer €100m ($132m) in loans to small and medium-sized businesses through state-owned lender KfW Group. Yesterday the Greek government scraped through a vote on a bill to sack public sector workers, whose passage was required to unlock nearly €7bn ($9.2bn) in aid from the EU and IMF. (Bloomberg)(Reuters)

Intel has cut its financial forecasts for the rest of the year after concluding that the battered PC market would not see the recovery it had been expecting in the second half of 2013. Meanwhile, IBM raised its full-year outlook and beat estimates on its 2Q operating profits, but said an expected asset sale would be delayed. eBay, also reporting yesterday, blamed conditions in Europe and Korea for lower-than-expected 3Q earnings guidance. (Financial Times)

Hilsenrath: What Bernanke means. (Wall Street Journal)

UPS&DOWNS

Intel Corporation (MS, Moore) New CEO Embraces Low-end of PC Market; We Remain Cautious

In-line Qtr. Customer inventory build & share gains  drive slightly better than seasonal 2Q but 3Q guided  softer than seasonal, as expected. Flexibility  around capex, potential Atom upside are positives,  though long-term, margins and FCF remain  pressured. Minor changes to estimates. Still UW.

ASML Holding NV (MS, Meunier) More appetite for EUV, DRAM boost, Cymer GM +ve

We remain Overweight on ASML with a €110 bull  case as 1) the stability of the EUV has increased, 2)  the appetite for EUV has increased, and 3) the  guidance for Q3 GM confirms our view that the  Cymer will be accretive to GMs

Umicore (JPM, Evans) Profits under pressure due to lower metals prices – 2014 especially at risk. Downgrade to Underweight
Much of Umicore’s appeal is future potential. Investments in electric vehicle technology & emissions reduction catalysis, for example, allow potential for environmental led growth. Shorter term reality is more challenging with weak metal pricing this year weighing on returns. The big swing factor remains Recycling, where long term arrangements and the forward hedging strategy will likely lock in lower value contracts today, hitting profits sharply in 2014. We cut 2013/14 EPS by 7%/ 20% and downgrade to Underweight with a Price Target of €27. Our 2014e EBIT forecast is €285m versus current consensus of €343m.

AMLIN RAISED TO MARKET PERFORM VS UNDERPERFORM AT KBW
CREDIT AGRICOLE RAISED TO BUY VS NEUTRAL AT CITI
CREST NICHOLSON RATED NEW HOLD AT JEFFERIES, PT 375P
CRH RAISED TO HOLD VS SELL AT GOODBODY
EASYJET RAISED TO OVERWEIGHT VS UNDERWEIGHT AT JPMORGAN
HOWDEN JOINERY CUT TO HOLD VS BUY AT GOODBODY
KGHM RAISED TO NEUTRAL VS SELL AT GOLDMAN
LUFTHANSA CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
MAGYAR TELEKOM CUT TO NEUTRAL VS BUY AT GOLDMAN
MAN GROUP CUT TO UNDERPERFORM AT RBC CAPITAL
PARTNERSHIP RATED NEW NEUTRAL AT BOFAML, PT 550P
PIRELLI RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
RYANAIR RAISED TO OVERWEIGHT VS UNDERWEIGHT AT JPMORGAN
SMITHS GROUP CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
TALENTUM CUT TO HOLD VS BUY AT NORDEA
TATE & LYLE CUT TO HOLD VS BUY AT SOCGEN
UMICORE CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN

OVERNIGHT MARKETS: MIXED

Asian markets
Nikkei 225 up +123.70 (+0.85%) at 14,739
Topix up +7.38 (+0.61%) at 1,221
Hang Seng up +4.85 (+0.02%) at 21,377

US markets
S&P 500 up +4.65 (+0.28%) at 1,681
DJIA up +18.67 (+0.12%) at 15,471
Nasdaq up +11.50 (+0.32%) at 3,610

European markets
Eurofirst 300 up +7.56 (+0.63%) at 1,199
FTSE100 up +15.58 (+0.24%) at 6,572
CAC 40 up +20.99 (+0.55%) at 3,872
Dax up +53.67 (+0.65%) at 8,255

Currencies
€/$ 1.31 (1.31)
$/¥ 99.97 (99.57)
£/$ 1.52 (1.52)

Commodities ($)
Brent Crude (ICE) down -0.14 at 108.47
Light Crude (Nymex) down -0.23 at 106.25
100 Oz Gold (Comex) unchanged 0.00 at 1,278
Copper (Comex) unchanged 0.00 at 3.14

10-year government bond yields (%)
US 2.48%
UK 2.31%
Germany 1.54%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.43bps at 100.2bp
Markit iTraxx Europe +1.64bps at 113.57bp
Markit iTraxx Xover +9.58bps at 455.56bp
Markit CDX IG +1.12bps at 86.56bp

Sources: FT, Bloomberg, Markit

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