LCM Dawn Patrol – 08.02.14 – Week End. JPM stays bullish. Arcelor OK, Earnings by Barclays, MS likes Air Liquide, GS on Grifols, MORE….

Ciao,

Seemed like a long week…

US equities finished higher on Thursday with the S&P 500 posting its biggest one-day percentage gain since 18-Dec. Despite the magnitude of the move, there did not seem to be any meaningful drivers behind today’s price action. While monetary policy grabbed a lot of headlines today, commentary from both the BoJ and ECB seemed fairly hedged. The US economic calendar remained on the backburner ahead of today’s release of January nonfarm payrolls. While there were questions about the credibility of today’s move, there were some positive takeaways from the leadership on the part of the deeper cyclical pockets of the market, particularly in the consumer discretionary sector.
Asia-Pacific markets are largely positive today ahead of the US jobs report. China is the exception to this, as it came back online after the Lunar New Year holiday during which emerging markets took a battering. The AUDUSD rose directly following the RBA’s quarterly statement on monetary policy, but rebounded not long after. The statement was largely in line with expectations.

It’s payroll day today… Consensus is looking for 180k, markets talk about a lower number and some strategists believe December was mostly low because of the weather. Yesterday’s jobless claims was rather strong. Get ready… Please also note that the budget ceiling talks are coming back to haunt us…

In Europe, we’ll get the German, French and UK’s trade balance as well as the German IP.
STL 4Q net below cons while MT reports better Ebitda, Tele2 inline and Nokian number look light but keep dvd, ABB is seeking to sell several units, Minmetal said to buy Las Bambas from Glencore, TIT appoints Minucci as chairman

WEEKEND

May the force be with the NFPs

May the force be with the NFPs

KIDOS: Taking kids to the Star Wars exhibition. Will let you know.
EXPOS: Mark Curran: The Market. Some exhibition about the people who really are the market (as in stock market).
KINOS: I liked Dallas Buyers Club, not American Hustle or 12 years a slave.
SPORT: Rugby France – Italy, Scotland – England, Ireland – Wales.
RESTO: The best hamburgers in Paris (again…). I like Le Dépanneur best.

NEWS

*ARCELORMITTAL 4Q EBITDA $1.91 BLN; EST. $1.81 BLN

Italian Banks Raised to Neutral vs Underweight at Citi
Daimler to Extend CEO Zetsche’s Contract in 2015: Handelsblatt
Tele2 4Q Ebitda SK1.46b, Est. SK1.44b
Nokian Renkaat 4Q Sales Miss, Loss Exceeds Ests.; Keeps Dividend
ArcelorMittal 4Q Ebitda Beats Estimates, Sees 2014 Profit at $8b
Minmetals Said to Be Near Deal to Buy Glencore Peru Mine
Peugeot Board Sticking With $4.1b Capital Increase Plan
Shire Says Vyvanse Didn’t Meet Endpoint on Depression
SoftBank Said to Seek Decision on T-Mobile Bid Within Weeks
• Poland’s Lotos in Talks to Buy Norway Offshore Oil Field: CEO
Aperam 4Q Ebitda Beats Estimates; Sees Higher 1Q Profit q/q
Danske Said to Plan 600 Irish Homes Sale as Retreat Gathers Pace
Codere Says Continues Bondholder Talks For Restructuring Deal
IBM is exploring a sale of its semiconductor business

ArcelorMittal 4Q Ebitda Beats Estimates, Sees 2014 Profit at $8b  7:06
• 4Q Ebitda $1.91b vs est. $1.81b.
• 4Q sales $19.8b vs est. $20.1b
• FY Ebitda $6.9b vs est. $6.78b
• Sees 2014 Ebitda ~$8b
• Net debt at yr end of $16.1b, decrease of $5.7b in 2013; maintains medium term net debt target at $15b
• FY 2013 steel shipments of 84.3Mt (+0.6% y/y); 4Q 2013 steel shipments of 20.9Mt up (+4.4% y/y)
• FY 2013 iron ore shipments of 59.7Mt (+9.6% y/y)
• Div. maintained at $0.20/shr
• Conference call details, 3.30pm CET: 44 207 970 0006, code 837814#

After Hours

Trading Higher:
+9.4% ATVI (Activision Blizzard) — earnings
+6.6% EXPE (Expedia) — earnings
+4.5% ONNN (ON Semiconductor) — earnings
+4.4% NWSA (News Corp.) — earnings
+4.0% GPS (Gap) — Jan comps, guidance
Trading Lower:
-11.2% LNKD (LinkedIn) — earnings, acquisition
-7.8% NCR (NCR Corp) — earnings
-7.6% ELON (Echelon) — earnings
-6.9% PXLW (Pixelworks) — earnings

CURRENT STUFF

Payrolls in U.S. Probably Expanded at a Faster Pace in January

Templeton’s Mark Mobius Says Emerging-Markets Selloff to Deepen

Investors flee ETFs in “worst week” on record: According to data from Lipper, the week up to February 5 was the worst week ever for ETFs, with investors withdrawing a net total of $22.3bn from their accounts. The figure surpassed the $19.5bn of outflows that were recorded for the week ended June 25, 2008. (FastFT) Investors bolt from stock funds into bonds (WSJ)

Shares in LinkedIn fell as much as 11 per cent in after-hours trading after investors were disappointed by a subdued outlook for 2014. The Silicon Valley-based company met revenue and earnings expectations in 2013 but its first-quarter and full-year forecasts fell short of the average analyst estimate. (Financial Times)

“Apple has bought $14 billion of its own shares in the two weeks since reporting financial results that disappointed Wall Street, Chief Executive Tim Cook said in an interview.” (WSJ)

Google has purchased a 5.94 per stake in Lenovo, just after it sold Motorola Mobility to the China PC maker. The stake was purchased on January 30, according to a stock exchange filing in Hong Kong, where Lenovo is listed. (FastFT)

STRATEGY

Barcap European Earnings Scorecard: Trends in the Q4 reporting season
Explaining the contradiction: With the EPS surprise ratio running at 38% more beats than misses, Q4 is on track to be the most positive since 1Q12 (Fig 7). Companies are beating expectations, but market estimates are still falling (Fig 15). Why? One plausible explanation to this somewhat paradoxical situation is size bias. The surprise ratio is a straight average across the market, whereas estimate revisions are aggregated, naturally giving more weight to larger companies (with a higher profit contribution).



 

JPM (Lee) US Equity Strategy Flash
Stay the Course; HF Likely De-risked; A Down January Unimportant During Bull Markets; 20 Ideas
For the past few weeks, we have written about how we believed that much of the weakness in  equities YTD stemmed from “position  squaring” by funds  that were uncomfortably long (rather than markets anticipating impending weakness). And, as a consequence, we advised investors to stay the course and buy the weakness rather than brace for a larger 7%-10% correction. One measure that we monitor is hedge-fund tracking beta (Figure 4) and as of last week, it was 50% of the way to de-risking.
• HF Beta suggests de-risking is complete.
• JPM Speculative Position Index points to contrarian buy.
• Obviously, incoming economic data needs to improve from the “softish” tone we have seen in recent weeks.
• “Down” January has not been meaningful in Bull markets—since 1901, after  down January (in a bull market) markets gained from 2/1 to YE 81% of the  time (14%  avg. gain)
• What could go wrong? The biggest risk, to our view, is that EM stress broadens to a banking crisis.
We have identified 20 stocks (13 Large Cap, 7 SMid Cap) using the following criteria: i) Stock is in one of the 20 Worst-Performing Industries  YTD; ii) Stock is in  a Cyclical or Near  Cyclical sector (Materials, Industrials, Technology, Consumer Discretionary, Financials and Energy); iii) OW rated by J.P. Morgan analysts; and iv) Upside to J.P. Morgan target price. The Large Cap list (>$6bn market value) has 13 names which are DO, ESV, FCX, DLTR, MET, DHR, NUE, TSCO, PRU, HOG, DG, LB and CBS. The SMid Cap list (<$6b market value) has 7 names, which are VSI, EXPR, RDC, GNC, BURL, STLD and FL.

GS (Maasry) Strategy Matters
Emerging Markets and the impact on European Equities
Focus on emerging markets has increased. We find that EM equity markets have not typically troughed until after current account balances have made major adjustments. At an overall P/B valuation of 2.2x, the most vulnerable EMs do not look cheap. European markets have high EM sales exposure (18% for SXXP). The underperformance of EM exposed companies has been meaningful but remains modest relative to their previous outperformance; valuations are not at a discount to the market. EM industrial and commodity exposed companies are at risk in our view.

UPS&DOWNS

Air Liquide (MS, Mackey) Time to top up the “gases” tank? Upgrade to Overweight
The recent underperformance provides an attractive entry point and favourable risk-reward. Though we trim EPS and see ~2-4% downside to consensus, the stock is trading 13% below its historical avg PE (17.5x) on FY15e EPS. By end 2014, EPS growth, re-rating and divi should drive 19% low-risk TSR.

Grifols (GS, Dubajova) Buy: Growth potential, positioning mispriced; resume coverage as Buy
We resume coverage of Grifols (GRLS.MC; A shares) and initiate coverage of GRLSbn.MC (B shares) with a Buy, but see more upside for the B shares; our 12-month price targets of €42 (GRLS.MC) and €38 (GRLSbn.MC) imply 17% and 40% upside.

Spain: Utilities(GS, Losa) Cutting wind remuneration in Spain; Acciona down to Sell
We have lowered our forecasts and valuations to reflect renewable regulation in Spain as set out in the draft proposal. We downgrade Acciona to Sell and reiterate our Sell ratings on EDP (CL), Iberdrola and Endesa. EDPR and EGPW remain Neutral.

Iron ore (JPM,  Jamieson) Reviewing production additions from the majors
In this report, we review our forecast iron ore supply additions for Vale, RIO, BHP, FMG and Anglo (big 5). Key takeaways are: 1) the big 5 will bring on an additional 126Mt of forecast supply in 2014, a 15% increase on 2013; 2) the largest increase in supply is in 2Q14 & 3Q14 following 1Q14 interruptions, and 3) assuming 5% steel production growth in China, a recovery in consumption ex-China and depletion, we believe the market can absorb the new supply without a detrimental impact on prices. Although near-term price risk remains, this presents a compelling cash flow and valuation outlook for RIO, FMG and Vale where we have Overweight recommendations.

Security stocks (JPM,  Plant) Prefer G4S (OW) to Prosegur (N) and Securitas (UW), mainly as we think new management’s plan may offer upside
As set out in this note in more detail amongst the Security stocks we currently prefer G4S (Overweight) and Prosegur (Neutral) over Securitas (Underweight), mainly because we believe their mix of businesses should lead to higher organic revenue growth. We also think there could be upside at G4S from the range of initiatives introduced by management last year. We prefer G4S over Prosegur as the latter’s exposure to Latin America is likely to weigh upon sentiment. The main positive on Securitas, in our view, is that it is the cheapest stock on 2014E PER of 10.9x, compared to G4S on 13.2x and Prosegur on 13.6x. We have made minor downgrades to our estimates and price targets mainly due to currency moves.

ACCIONA CUT TO SELL FROM NEUTRAL AT GOLDMAN
CHR. HANSEN CUT TO NEUTRAL VS OVERWIEGHT AT JPMORGAN
GRIFOLS A SHARES RESUMED BUY AT GOLDMAN, B SHARES RATED NEW BUY
KERRY GROUP CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
MARSTON’S CUT TO NEUTRAL VS BUY AT NOMURA
MEGAFON CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
MITCHELLS & BUTLERS RAISED TO BUY VS NEUTRAL AT NOMURA
MOBILE TELESYSTEMS RAISED TO OVERWEIGHT AT BARCLAYS
ROTORK RAISED TO BUY VS HOLD AT BERENBERG
SCA RAISED TO BUY VS NEUTRAL AT GOLDMAN
SYNGENTA RAISED TO MARKET PERFORM VS UNDERPERFORM AT BERNSTEIN
TATE & LYLE RAISED TO OVERWEIGHT VS UNDERWEIGHT AT JPMORGAN
TDC CUT TO HOLD VS BUY AT BERENBERG
VIMPELCOM RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s