LCM Dawn Patrol 23.07.13 – Earnings, JPM upgrades Philips and a new note on media. Apple preview and TuesGear.

Bonjour,

European markets to open up this morning following Asia and softer US housing data (which means that the Fed may be a bit more accommodative in the short term…you know the story anyway).
US markets finished slightly higher (almost reached the 1700points level) on low volumes, most moves were company specific. Managed Care, Banks, and Steel stocks outperformed while Homebuilders, Semi Equipment, and Rails underperformed. Semi Equipment stocks were lower, as were semis, following last week’s disappointing tech earnings (INTC and AMD most notably).
Asia is higher (China up 2%) as the Chinese Premier said he would intervene if growth failed below 7%. Tech rebounding in Taiwan.

Today: Richmond Fed manufacturing index. US Senate committee hearing on banks and commodities. Tons of earnings including Apple tonight … Eurozone consumer confidence.

Looking at Technicals: Eurostoxx future struggling to clear the 2725 resistance… A nervous long here but today’s price action important, S&P future rallied nicely of the 1685.75 support yesterday & Gold holding under the 1338 downtrend and resistance.

TUESGEAR

(this important section is about gadgets, tech and sports gear).

The Leap Motion controller will make you computer work like the one in the movie Minority Report. Is the mouse dead?? I’m waiting for mine so in the meantime…
Full review here: http://engt.co/19eTkEz

NEWS

Air France: to announce new cost cuts July 26 (Dagblad)
Dialog Semi 2Q Rev. In Line; Sees 3Q Sales at Lower End of Ests.
Enagas 2Q Net Profit Rises 8.4% to EU107.2m
GDF: wants to bid with EDPR for two 500-megawatt French offshore wind project in a partnership that also includes Areva
KPN 2Q Sales in Line With Estimates, Ebitda Beats
KPN to Sell E-Plus to Telefonica Deutschland, Receive EU5b Cash
RBC Sees 10% YoY Ebitda Growth at Atlantia in 1H
STMicroelectronics 2Q Adj. Loss 6c/Shr, Est. EPS 2c
Swatch 1H Operating Profit, Sales Rise; Positive on Outlook thanks to Harry Winston (rather bullish as co had managed down expectations previously).
Telenor 2Q Sales Beat; Reiterates FY Guidance; To Buy Back Shrs
Vivendi in Talks to Sell 53% Maroc Telecom Stake for EU4.2 Bln to Etisalat. This would represent an EV of €4.5bn or 6.2x EV/EBITDA (more or less in line with consensus valuations).
Vivendi Starts Talks to Share SFR Mobile Network With Bouygues (Another small positive).

After Hours
Netflix
fell more than 6 per cent in after-hours trading following a warning that content costs could rise further as competitors bid for distribution rights to television and feature film programming.
Texas Instruments posted earnings excluding items of 42 cents per share beating forecasts by a penny. Revenuecame in at $3.05 billion versus forecasts for $3.06 billion, and down 9 percent from a year earlier. For the third quarter, TI forecast earnings of 49 to 57 cents per share on sales of $3.09 billion to $3.35 billion.

CURRENT STUFF

Chinese premier Li Keqiang said growth below 7% wouldn’t be tolerated, Chinese news outlets reported. (Bloomberg)

Foreign capital is again leaving China: The net outflow of foreign capital in June was the first since November. The PBoC and financial institutions sold a net Rmb41.2bn ($6.71bn) worth of foreign currency in June compared with net purchases of Rmb66.86 in May, according to WSJ calculations based on PBoC data. (Wall Street Journal)

No early election for Portugal. President Anibal Cavaco Silva said that the current government should stay in power through the end of its term in 2015 after the country’s three main parties failed to reach a national salvation agreement. He stated that an early election, which has been called for by the opposition Socialists, would not solve Portugal’s problems and could create market turmoil. The president has the authority to dissolve parliament and call for an election at any time.
Apple Preview
June is widely viewed as a transitional quarter for Apple. However, there were some mixed thoughts in the previews regarding how results would fare vs company guidance and consensus expectations. The more positive commentary revolved around the better takeaways from Verizon activations, less aggressive channel inventory reduction, seasonal support (education) for the iPad and gross margin support from lower warranty accruals and manufacturing costs.
A number of previews also discussed the downside risks surrounding the quarter. Much of the focus revolved around the sluggish demand environment for higher-end smartphones, with analysts highlighting product fatigue, saturation in developed markets and a lack of compelling new features. There were also concerns about iPad production cuts and gross margin headwinds from the mix-shift to the lower-end iPhone 4S and higher component costs.
Outlook: While unlikely to be specifically addressed on the call, the Street is looking for more color on a number of the usual suspects, particularly the upcoming product launches in the iPhone and iPad categories and the accompanying cannibalization dynamics. The timing surrounding the introduction of larger screen iPhones is another fairly high-profile issue, as is the company’s potential entry into the watch category. There was little discussion about television.
Consensus Metrics: (FactSet):
Q3 Revenue: $35.02B vs guidance $33.5B-$35.5B, EPS: $7.33
Q4 Revenue: $37.59B, EPS: $8.00

UPS&DOWNS

How to play the ad cycle in Media (JPM  Lo Franco) PUB/WPP and JCD are our structural buy. Interesting trading idea in FTA TVs. We initiate coverage of RTL Group with OW
Things are getting better: the EU adv outlook is improving, the economic slowdown in EM has limited impact in adspend and US digital adspend continues to grow double digit. In this report we assume a more bullish mid-term scenario for EU advertising and increase companies’ mid-term estimates and PTs. JCD (OW) joins WPP/PUB (both OW/AFL) as our preferred picks in the cyclical media space. In this new bullish scenario these 3 stocks offer both a structural story and exposure to the cycle. We also see interesting trading opportunities in the FTA TV space, in particular: Atresmedia (OW), M6 (OW) and RTL Group which we initiate with an OW rating.

Philips (JPM,  Willi) Upgrade to OW with €28 PT – Healthcare orders turn, better positioned than Industrial EM plays
We are upgrading Philips to Overweight from Neutral. We had a positive near-term bias on Philips for awhile but, given the high valuations elsewhere and some recent rating downgrades, we now see Philips as a preferred large cap name. This expresses our cautious view on the industrial cycle relative to where cyclical valuations now stand. Philips’ EM growth accelerated and we expect it to continue to outgrow the Sector. Our TP goes to €28/Dec 2014 from €24/Dec 2013, based on 8.75x EV/EBIT.

ACCIONA RAISED TO NEUTRAL VS SELL AT GOLDMAN
ASM INTERNATIONAL RATED NEW BUY AT BERENBERG; PT EU31
ASML HOLDING RATED NEW HOLD AT BERENBERG; PT EU73
ATLANTIA RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY
EUROPEAN AUTOS & AUTO PARTS RAISED TO NEUTRAL AT BARCLAYS
GAS NATURAL RAISED TO NEUTRAL VS SELL AT GOLDMAN
KCELL RATED NEW OVERWEIGHT AT MORGAN STANLEY, PT $20
LADBROKES RAISED TO EQUALWEIGHT VS UNDERWEIGHT: MORGAN STANLEY
M6 RAISED TO OVERWEIGHT VS UNDERWEIGHT AT JPMORGAN
NOBEL BIOCARE CUT SELL VS NEUTRAL AT GOLDMAN
PHILIPS RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
RTL RATED NEW OVERWEIGHT AT JPMORGAN; PT EU76.5
SIKA CUT FROM GOLDMAN’S CONVICTION BUY LIST, STILL BUY
STRAUMANN CUT TO SELL VS NEUTRAL AT GOLDMAN
SUESS MICROTEC RATED NEW BUY AT BERENBERG; PT EU9.4

OVERNIGHT MARKETS: UP

 

Asian markets
Nikkei 225 up +81.36 (+0.56%) at 14,739
Topix up +4.51 (+0.37%) at 1,221
Hang Seng up +438.24 (+2.05%) at 21,855

US markets
S&P 500 up +3.44 (+0.20%) at 1,696
DJIA up +1.81 (+0.01%) at 15,546
Nasdaq up +12.78 (+0.36%) at 3,600

European markets
Eurofirst 300 up +1.70 (+0.14%) at 1,211
FTSE100 down -7.50 (-0.11%) at 6,623
CAC 40 up +14.60 (+0.37%) at 3,940
Dax down -0.51 (-0.01%) at 8,331

Currencies
€/$ 1.32 (1.32)
$/¥ 99.54 (99.64)
£/$ 1.54 (1.54)

Commodities ($)
Brent Crude (ICE) up +0.10 at 108.25
Light Crude (Nymex) up +0.11 at 107.05
100 Oz Gold (Comex) down -0.40 at 1,336
Copper (Comex) unchanged 0.00 at 3.19

10-year government bond yields (%)
US 2.49%
UK 2.29%
Germany 1.52%

 

Sources: FT, Bloomberg, Markit

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