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IBERIAN DAILY 18 OCTOBER + 3Q’21 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACERINOX, ENCE, TELEFÓNICA.

MARKETS YESTERDAY AND TODAY

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 3Q’21 results to be released over the coming days in Spain.

IBEX knocking at the door of 9,000 points
Last week kicked off with losses, dragged down by fears of inflation and supply problems, but the solid start to the results campaign in both Europe and the US has allowed most indices to end the week in positive numbers. Thus, in the Euro STOXX all sectors except Household Goods and Insurance ended the week with gains, led by Technology and Consumer Goods. On the macro side, in Europe vehicle registrations rose +3.4% MoM in September. In the US, September’s retail sales rose more than expected, whereas the Empire manufacturing index for October fell more than expected, as did the U. of Michigan consumer confidence. In Brazil, September’s Economic Activity index slowed more than expected. In China, the 2Q’21 GDP grew less than expected, dragged down by the problems with supply (industrial output grew less than expected) and construction, whereas retail sales beat growth expectations. In US business results, Goldman Sachs and Prologis beat expectations, JB Hunt was in line.
What we expect for today
With Brent prices unstoppable, European stock markets would open with slight drops, with more defensive sectors performing worse vs. Energy and Financials (rising interest rates). Currently, S&P futures are down -0.12% (the S&P 500 ended practically unchanged vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 16.30). Asian markets are sliding (China’s CSI 300 -1.5% and Japan’s Nikkei -0.25%).
Today, in the US we will learn September’s industrial output and October’s NAHB real estate index. In US business results, State Street and Zions Bancorp, among others, will release their earnings.

COMPANY NEWS

ACERINOX, BUY
We highlight the main messages from the interview with Bernardo Alvarez (ACX’s CEO):
(i) Steel demand: Alvarez believes real consumption is slightly higher than in 2019, although apparent consumption would be much higher due mainly to stockpile rebuilding. Additionally, Alvarez states that although the company is seeing some impact from the slowdown in the automotive industry, ACX would be offsetting this effect with other businesses.
(ii) EBITDA’21: Although Alvarez has not specified whether ACX expects record EBITDA (€ >952 M in 2006 vs. € 872 M expected by the consensus currently), he did state that this would not only be a question of improving prices, but also from cost savings over the past few years.
(iii) Shareholder remuneration: Alvarez says that the company would be considering increasing shareholder remuneration (from € 0.50/sh., 4.2% yield), as well as an extraordinary dividend or a share buyback plan.
(iv) Transport costs and antidumping barriers: Alvarez believes transport costs and antidumping barriers in Europe and section 232 in the US would be turning the sector into a more regional model.
We believe that the messages conveyed by ACX’s CEO are highly positive, confirming all the factors we believe are key to the share price: good operating performance, improved competitive scenario in the medium-term and higher shareholder remuneration, which should result in T.P. upgrades and a share price rally.