Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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V/MA remain core long term holdings with secular cash to card tailwinds driving strong growth long term, supported by developments such as contactless. Valuation remains reasonable, although newer growth areas such as B2B face greater competition. We remain Overweight V/MA, raise our price targets to $173 and $250 respectively and currently favour V which trades on a PE of 28x, three turns lower than MA.
Market volatility has moderated significantly since the beginning of the year, ceasing to be a tailwind for the banks' trading revenues in 3Q18. Despite the strong IB pipelines (announced M&A is up 40% YTD), fee pools have been affected by timing issues and are down 15-20% across the industry for the current quarter. Medium term, the outlook remains positive thanks to improving GDP growth, benign credit conditions, rising interest rates and a deregulatory focus. We have lowered our 3Q18 EPS...
We cut EPS forecasts (e.g. FY19 by 12%) following HAL's downbeat outlook for near-term onshore US fraccing, its second bearish guide in three months. We forecast a 17% peak to trough decline in US fracc crews, with HAL revenues declining by a proportionate amount. We see a H219 pick-up as E&Ps gear up to fill new oil pipelines from the Permian. We remain Neutral with a $44 price target (from $45).
AZO's Q4 comp proved modestly disappointing, considering the current industry momentum, with company-specific challenges weighing on sales in the middle of the quarter. We estimate that online promotional shifts and out-of-stock issues impacted comps by 60-80bps. We believe the broader backdrop remains robust however, with stronger trends as AZO exited the quarter, but view ORLY/AAP as better positioned to capitalise on these trends. We remain Neutral on AZO.
