US equities finished lower in choppy trading on Tuesday. The market remained largely fixated on the headlines out of Washington. The path to a deal to end the fiscal stalemate seemed more complicated as the focus shifted back to the House following the recent progress on bipartisan negotiations in the Senate. The economic calendar was once again relegated to the backburner as a directional driver despite the recent dearth of data and the first look at October manufacturing trends. The corporate calendar received some heightened attention today, though takeaways from the early batch of Q3 reporters remained largely company specific in nature.
European stocks to open flat or slightly higher in what could be a volatile session as a deal could be struck to solve the U.S. debt crisis on the last day before the deadline.
Sorry, there is a lot about earnings, but as we’re left without the US economic data, it’s key to focus on what the real economy tells us. So far we’ve got something like 21 profit warnings in Europe and in the US, out of the 40 S&P 500 constituents, 27 are above estimates, 10 are below and 3 in line. This is not great. Stay focus on domestic Europe.
Today, we’ll clearly focus on these earnings again with Danone (bad), ASML (poor) and Publicis (OK), then we get Bank of America, BNY, Blackrock and Stanley Black&Decker. In Washington talks are still ongoing and markets hope for a solution before tomorrow’s expiration. Even if we have a solution, I’m not sure it paves the way for an extension of the rally…
European new car registrations are up 5.4%, Renault gains 1% market share, PSA loses 1%.
US rating put on negative watch on default fears
Merkel Bloc, Greens Couldn’t Agree on Tax, Aide Says
Alcatel-Lucent Must Cut Costs to Survive, CEO Tells Lawmakers
Allianz CEO Says Inflated U.S. Yields Underprice Default Risk
ASML Third-Quarter Net Income Declines 30% on Higher Expenses
Danone 3Q LFL Sales Growth Misses Ests., Lowers 2013 Forecast
Fiat Trial Over UAW’s Chrysler Shares Set for September 2014
Intesa Sanpaolo to Subscribe to EU26 Alitalia Capital Increase
LVMH Growth Misses Estimates as Fashion and Leather Goods Slow
Publicis Keeps Full Year Forecast; Omnicom Merger Going to Plan.
Ubisoft Says Delayed Games Will Cause Full-Year Operating Loss
Intel 4Q Rev. View Midpoint Below Est.; 3Q EPS, Rev. Beat (-2%)
Yahoo’s Profit Tops Estimates as Mayer’s Turnaround Gains Steam (glat)
Twitter losses widen ahead of IPO
Earnings (All Bloomberg)
ASML sees 4Q sales ~EU1.8b vs est.EU1.77b, gross margin 43% – 44% vs est. 41.4%.
• Sees 1H 2014 sales at similar levels to 2H 2013, excl. EUV
• Says EUV integration progressing “steadily,” remains on track to deliver systems with throughput of 70 wafers per hour next year, upgradeable to 125 p/h in 2015
• Says customers have intensified cooperation, allocating resources focused on insertion of EUV at 10nm logic node
• Expects to recognize revenue for one EUV shipment in 4Q
• Reports 3Q sales EU1.32b vs est. EU1.33b, 3Q gross margin 40.3% vs est. 40.5%
• 3Q net income EU193m vs est. EU192m, EPS EU0.44 vs est. EU0.45
• 3Q net bookings excl. EUV EU1.42b vs EU831m Y/y
• Has seen “healthy” bookings from memory customers, driven by DRAM upgrades and additional NAND capacity
• Conf. call 3pm CET, 480-629-9856
Publicis 3Q rev. up 3% to EU1.68b; est. EU1.7b (2 ests); Reiterates 2013 organic growth forecast of +3.5%-+3.6%, says 2014 “holds greater promise”.
• Says 4Q difficult to predict due to “volatility” at yr-end.
• Says is confident about 2013, confident on growth, margin performance and merger with Omnicom.
• Organic growth +3.5% vs 2% y/y; Nomura est. +4.2%, HSBC est. +3.8%
• 9-mo. organic growth +3.3%
• Says performance in digital activities grew 12.3%
• Europe 3Q rev. EU469m vs EU429 y/y; organic growth +0.4%
• North America 3Q rev. EU825m vs EU805m y/y; organic growth +4.5%
• BRIC+MISSAT 3Q rev. EU217m vs EU220m y/y; organic growth +1.5%
• Rest of the World 3Q rev. EU164m vs EU173m y/y; organic growth 10.1%
Danone overall 3Q LFL sales growth up 4.2%, est. up 4.8% (median of 15).
• Sees 2013 LFL sales growth 4.5%-5%, had seen at least 5%
• Sees 2013 trading op. margin down 80bps, had seen down by 30bps to down 50bps
• Sees 2013 FCF EU1.5b-EU1.6b ex-items, had seen FCF ~EU2b ex-items
• 3Q overall vol. up 1.6%, est. up 3.2% (median of 12)
• 3Q total rev. EU5.23b, est. EU5.4b (median of 13)
• 3Q Dairy LFL sales growth up 4.6%, est. up 4.7% (median of 12)
• Says LFL sales growth highest in past 9 qtrs; Europe still declined, confirmed signs of stabilization seen in 2Q
• 3Q Waters LFL sales growth 16.9%, est. 12.8% (median of 12)
• 3Q Baby nutrition LFL sales down 8.6%, est. down 2.8% (median of 12)
• 3Q Medical nutrition LFL sales growth up 5.8%, est. up 6% (median of 11)
• 3Q pricing/mix effect up 2.6%
• Call 9am CET +44 203 427 19 06, pw 856 9698
LVMH 3Q total rev. EU7.02b, est. EU7.24b (median of 15).
• 3Q overall organic sales growth up 8%, est. 10% (median of 15)
• In 3Q Wines & Spirits, Watches & Jewelry units both accelerated growth rates vs 1H, performance of other groups comparable to start of 2013
• Outlook: Remains “confident” for 2013
• 9-mo. total rev. EU20.7b, est. EU20.93b (median of 14)
• 9-mo. overall organic sales growth 8%, est. 9% (median of 13); in 1H up 8%
Fitch placed the triple A credit rating of the US on negative watch, as efforts to end the budget impasse faltered during a day of drama on Capitol Hill capped by the reopening of talks in the Senate late on Tuesday. The chances of the US missing Thursday’s deadline to raise its $16.7tn borrowing capacity increased after House Republican leaders earlier scrapped a plan to raise the debt ceiling until February and reopen the government until mid-December. One-month Treasury bills maturing on October 31 shot up 21 basis points to a new debt ceiling peak of 53 bps late on Tuesday, as investors grew alarmed by the lack of a deal. (Financial Times) (WSJ) (And a reminder from Cardiff that the US won’t actually beginning welching for a little while yet)
Bond trading slowdown hurts Citigroup: “Citigroup has missed analysts’ estimates of its net income in the third quarter, reporting a figure of $3.2bn, following lower volumes of fixed-income trading and a drop in mortgage banking. The results come a day before the one-year anniversary of Vikram Pandit’s ousting as chief executive of the banking group, which had followed clashes with the board.” (Financial Times)
Twitter revealed its losses had widened in the third quarter in an updated filing for its $1bn IPO, which it said would take place on the New York Stock Exchange — a blow to rival Nasdaq. (Financial Times)
Yahoo will retain more than half its stake in Alibaba when the Chinese ecommerce site goes public, after agreeing a new deal that will see it sell just 40 per cent of its shares in the much-awaited IPO. JPMorgan had balked at the admission, fearing it would open the door to a slew of cases from private plaintiffs. (Financial Times)
European Autos (MS, Lembke) Q3 ’13 Preview
With W. EU having turned the corner, we expect a cautiously optimistic tone in Q3, but few real surprises. Our top ideas are DAI and RNO, whilst BMW is a plausible yet less obvious candidate.
SKF (Almerud) FX and absence of a short cyclical pickup key issues
Volumes are inflecting positively but the outlook for 4Q is modest and we do not see the pickup we had hoped for. With SKr 1.5bn of cost savings priced in and estimates already reflecting the company reaching its margin target in 2015 we find risk/reward unattractive and stick to our UW.
JPM on European Building Materials (Elodie Rall) Remain cautious ahead of Q3 results; downgrading Holcim to UW from N
We reiterate our cautious stance on the cement sector going into Q3 given headwinds on FX and emerging markets (EM), and our negative view on the underlying price-cost spread. Although consensus has fallen materially recently, we expect a further leg of downgrades and cut our EBITDA estimates further by 6% and 9% in 2013/14E, leaving valuations trading on a premium to historical average. EM and especially India should continue to be a headwind and we downgrade Holcim to Underweight, while reiterating our relative preference to Heidelberg (OW) on a better exposure to European and US recovery and retain OW on SGO, UW on Italcementi, and N on Lafarge, CRH and Buzzi.
JPM on Telecom Services (Carl Murdock-Smith) Q3 preview – Telecoms stocks to watch
This report provides our Q3 previews and short-term trading calls (which can depart from our longer-term recommendations). Our large-cap (>€3bnmarket cap) positive trading calls are Elisa, Iliad, Telenet, Swisscom and Ziggo, while we are cautious on Orange, Eutelsat, Inmarsat and SES. We are cautious on all of the satellite names due to accentuated concerns around US government spending delays, growth guidance risk (at Eutelsat and SES), and revenue trends likely to deteriorate sequentially. For the European incumbents, whilst M&A and regulator hopes remain, we expect operational momentum to remain challenging in Q3.
BALOISE HOLDING CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
BOUYGUES CUT TO NEUTRAL VS BUY AT GOLDMAN
GL EVENTS CUT TO HOLD VS BUY AT SOCGEN
HOLCIM CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
IPSOS RAISED TO BUY VS HOLD AT SOCGEN
JAZZTEL CUT TO NEUTRAL VS BUY AT GOLDMAN
KBC RAISED TO BUY VS HOLD AT SOCGEN
LIBERTY GLOBAL CUT FROM CONVICTION BUY AT GOLDMAN, STILL A B…
LVMH CUT TO NEUTRAL VS BUY AT BOFAML
MEGAFON RESUMED EQUAL WEIGHT AT MORGAN STANLEY, PT $38
NEXANS CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
NOVATEK CUT TO MARKET PERFORM VS OUTPERFORM AT BERNSTEIN
PEARSON RAISED TO HOLD VS SELL AT SOCGEN
POLYMETAL INTL CUT TO NEUTRAL VS BUY AT NOMURA
RTL GROUP RAISED TO BUY VS HOLD AT SOCGEN
SWISSCOM CUT TO NEUTRAL VS BUY AT GOLDMAN
SWISSCOM RAISED TO BUY VS NEUTRAL AT CITI
TELECOM ITALIA ADDED TO CONVICTION BUY LIST AT GOLDMAN
TELENOR CUT FROM CONVICTION BUY AT GOLDMAN, STILL A BUY
TELIASONERA ADDED TO SELECTED LIST AT KEPLER CHEUVREUX
VIMPELCOM RAISED TO OVERWEIGHT AT MORGAN STANLEY, PT $14.5
WOLTERS KLUWER RAISED TO BUY VS HOLD AT SOCGEN
Nikkei 225 up +23.92 (+0.17%) at 14,465
Topix down -1.16 (-0.10%) at 1,196
Hang Seng down -89.99 (-0.39%) at 23,247
S&P 500 down -12.08 (-0.71%) at 1,698
DJIA down -133.25 (-0.87%) at 15,168
Nasdaq down -21.26 (-0.56%) at 3,794
Eurofirst 300 up +10.78 (+0.86%) at 1,263
FTSE100 up +41.46 (+0.64%) at 6,549
CAC 40 up +33.06 (+0.78%) at 4,256
Dax up +80.63 (+0.92%) at 8,804
€/$ 1.35 (1.35)
$/¥ 98.49 (98.10)
£/$ 1.60 (1.60)
Brent Crude (ICE) up +0.06 at 110.02
Light Crude (Nymex) down -0.05 at 101.16
100 Oz Gold (Comex) unchanged 0.00 at 1,273
Copper (Comex) unchanged 0.00 at 3.30
10-year government bond yields (%)
CDS (closing levels)
Markit iTraxx SovX Western Europe -1.89bps at 73.45bp
Markit iTraxx Europe -3.42bps at 88.85bp
Markit iTraxx Xover -12.82bps at 356.35bp
Sources: FT, Bloomberg, Markit