LCM Dawn Patrol – 17.01.14 – MS on cap goods (big) and software, INTC poor, ESSILOR bad, NINTENDO terrible, WEEK END and more…

Bonjour,

US equities finished narrowly mixed on Thursday. A busy day on the US economic calendar failed to provide any meaningful direction. The notion of dampened macro influences on the early 2014 price action also received some attention in the press today. The corporate calendar continued to drive a lot of the outsized moves in the market. Takeaways seemed more cautious today, particularly as some of the focus reverted back to the difficult environment for retailers following the holiday update from Best Buy. In addition, earnings out of the banking sector were not particularly well received, removing one of the more recent tailwinds for market and recovery sentiment. Despite the lack of overall direction in stocks, Treasuries were underpinned by what seemed to be some deterioration in overall risk appetite.
Asian equity markets traded broadly lower Friday morning. Movement was relatively muted throughout Asia as markets lacked clear directional drivers. Shares of Neway Valve surged more than 30% on its debut today. However there continued to remain some concern over liquidity ahead of the Lunar New Year holiday. In India, the ruling Congress party surprised markets by announcing the son of party matriach would not run as the party’s Prime Minister this year

Today: U.K. retail sales including auto fuel probably rose in Dec. at fastest yearly rate in 5 months, according to economists. U.S. industrial production data are due.

WEEK END

KINO. American Hustle (translated as American Bluff in French, because WE KNOW BETTER!). Saw it. It’s a bit too much, actors are over acting (I’m a pro), but still worth watching.
RESTO. Napoleone, 25 av Champs Elysees. With Chef Etchebest, good place for Business lunches.

SPORT. Wengen, Ski. Downhill tomorrow and Slalom on Sunday. (And there are some football games too).

KIDS. Take your tickets now: STAR WARS à la cité du cinéma. http://www.starwarsidentites.com/#!/

NEWS

*NINTENDO CUTS FY WII U SALES FORECAST TO 2.8M UNITS FROM 9M
*ESSILOR CUTS FULL-YEAR SALES FORECAST
*COEURE SAYS ECB MAY NOT ADD LONG-TERM LOANS AS GROWTH RECOVERS

Portugal Affirmed BB at S&P, Removed From Creditwatch Negative
• Poland Has Met 65% of 2014 Forex Borrowing Needs After USD Bond
• Jordan Says Franc Cap Will Be SNB Focus for Foreseeable Future

China Investment Corp. to Invest EU70m in Irish Fund: Times
Fiat Heir Elkann Reshapes Family Legacy With Chrysler Deal
• Ardian Said to Seek Bids Next Month for $1.6b Diana Sale
• KKR, Permira Selling 16.6% Stake in Broadcaster ProSiebenSat.1
• Spain Approaches Swap Deal With Ceiss Investors: Official
HapagLloyd Said to Discuss All-Stock Takeover of Chile’s CSAV
J&JBayer Fail to Win U.S. Panel Vote for Wider Xarelto Use
Nokia Search for Elop’s Successor Is Said to Focus on Insiders
Alstom Said to Name Bank of America, Deutsche Bank for Rail Sale
Regeneron Says Bayer Barred From Buying More Than 20% Stake
Telecom Italia to Create Controls on Eventual Brazilian Deals
Deutsche Telekom, Orange Puts EE Listing Plan on Hold: FT
UBS Said to Boost Bonuses for Asia Investment Bankers by 10%
Boeing Short-Circuiting 787 Shows Skills Gap: Norwegian Air

Accor 4Q Rev. In Line With Ests., Raises 2013 Forecast
Accor 4Q total rev. EU1.40b, est. EU1.40b (median of 10).
• Raises 2013 Ebit forecast to ~EU530m, had seen EU510m-EU530m (Bloomberg est. EU523.4m)
• 4Q total LFL sales up 3.4%, est. up 3.8% (median of 8)
• 4Q Upscale & Midscale hotels LFL sales up 3.3%, est. up 4% (median of 7)
• 4Q Economy hotels LFL sales up 4.1%, est. up 4.1% (median of 7)
• In 4Q had very robust demand in all key mkts, particularly in Europe
• In emerging mkts demand remained very strong in Latin America, Africa-Middle East region
• Asia-Pacific region was satisfactory overall, had lower business in China, in Australia Economy hotels remains under pressure
• Call 6:30pm CET +44 (0)20 3367 9453

Essilor Cuts 2013 Sales Growth Forecast to 5.4% Ex Currencies
Co. had forecast 2013 like-for-like revenue growth of about 6%.
• Organic growth held back by “fierce” competition and a slowdown in the eyecare market in some regions as a result of the economy, co. says
• Co. estimates 4Q sales increased organic 3.0% to EU1.252B
• Full-year contribution from operations will be slightly higher than in 2012
• Final revenue figure to be published on Feb. 27.

Intel sees 1Q rev. $12.8b, plus or minus $500m, est. $12.79b.
• Sees 1Q gross margin 59%, plus or minus a couple of percentage points, est. 59%
• Shrs down 2.3%
• 4Q GAAP EPS 51c, est. 52c
• 4Q rev. $13.83b, est. $13.73b
• 4Q gross margin 62%, est. 61.1%
• Still sees 2014 rev. flat y/y, est. $53.2b
• Sees 2014 gross margin 60%, plus or minus a couple of percentage points, est. 59.6%
• Sees 2014 capex ~$11b, plus or minus $500m

CURRENT STUFF

Correlation breakdown spells end for broad stock market gains.  A study of the daily fluctuations between the 50 largest stocks on the S&P 500 over a rolling three-month period showed that the relationship between their movements reached its lowest mark since 2007 this week. (Financial Times).

US banks take on more risk as new rules bite: US banks shrank their holdings of safe securities by more than 3 per cent last year, a development that is likely to further stoke the debate about whether new rules are encouraging them to buy riskier assets. At the end of last year, America’s banks held $1.81tn worth of US Treasuries and mortgage-backed securities (MBS) that are guaranteed by the US government, down from $1.87tn at the beginning of 2013. (Financial Times)

Wall Street’s earnings season has dashed hopes the sector would bounce back from its post-crisis doldrums, with Goldman Sachs posting weak results in fixed income trading and Citigroup missing analysts’ forecasts for the second consecutive quarter. Financial stocks suffered a significant sell-off. Citi fell more than 4 per cent and Goldman more than 2 per cent, after the two banks reported lacklustre fourth-quarter and full-year results. JPMorgan Chase and Bank of America reported mediocre results earlier in the week. (Financial Times)

IBM plans rapid cloud expansion as it races to make up for lost time and prevent internet companies such as Amazon from cornering the fast-growing cloud computing market. The US technology group said late on Thursday that it would spend $1.2bn in 2014 to add 13 new data centres, taking the total to 40. The move follows its $2bn purchase last year of SoftLayer, whose software is a building block for running cloud services, and signals the latest step in Big Blue’s rethink of its position in cloud computing. (Financial Times)

Intel’s revenue crept up by 3 per cent to $13.8bn in the final quarter of last year, its best growth in six quarters, as the slide in global PC sales showed signs of slowing. However, its profits fell short of forecasts. The chipmaker’s shares dropped back by nearly 5 per cent in after-market trading, reversing part of their recent rally. (Financial Times)

UPS&DOWNS

Capital Goods (MS, Uglow) 2014 – Capex Resumption Likely to Drive EPS Cycle
The results of our in-depth work on capex surprised us, boosting our conviction in end-market growth in 2014. Performance in 2013 was driven exclusively by multiple expansion, but EPS upgrades are the key for 2014. We highlight ABB, Kion, Prysmian & Rexel as the best stocks to play this theme.
Related Stock Research:
ABB: Key Beneficiary of a Capex Recovery – Upgrade to OW
Siemens: Near-Term Momentum to Moderate – Move to EW
Rotork PLC: Oil & Gas Exposure Reduces Growth Profile – Move to UW
SKF: Margin expansion about to accelerate; up to EW
Zumtobel AG: Reached our PT – Move EW

European Software & Services (MS, Wood) CY14 Outlook: Looking for Catalysts and Surprises
Amadeus
: OW to EW, PT €28 to €32
Aveva Group: OW to EW, PT 2,558p to 2,300p
After two strong years of sector re-rating, a return to EPS upgrades looks priced in here. We focus on companies where EPS can still surprise or where we see catalysts to change investor perception. Atos is our top pick, with Temenos and Telecity the best potential surprises in the mid-cap space.

▼Diageo (JPM, Dhillon) European beverages: China distilled spirits: no reason for cheer. Downgrade Diageo to Neutral

AHOLD CUT TO HOLD VS BUY AT ING
AMADEUS CUT TO EQUAL WEIGHT VS OVERWEIGHT AT MORGAN STANLEY
DEUTSCHE WOHNEN CUT TO NEUTRAL VS BUY AT UBS
DS SMITH RATED NEW BUY AT BERENBERG; PT 400P
INTER RAO RATED NEW BUY AT UBS
INTERTEK CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
KCELL CUT TO NEUTRAL VS BUY AT UBS
MEGAFON RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN ST…
OCADO RATED NEW SELL AT DEUTSCHE BANK, PT 440P
OMV CUT TO SELL VS HOLD AT DEUTSCHE BANK
PETROFAC RAISED TO BUY VS NEUTRAL AT NOMURA
POLARCUS CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
REDROW CUT TO NEUTRAL VS BUY AT UBS
SYNTHOMER CUT TO NEUTRAL VS BUY AT UBS
TENCENT RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
TOTAL RAISED TO BUY VS NEUTRAL AT CITI
TYMAN RATED NEW BUY AT BERENBERG; PT 327P

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