EUR 100.00 For Business Accounts Only

IBERIAN DAILY 08 NOVEMBER + 3Q’21 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, ELECTRICITY SECTOR, NEINOR HOMES, OHLA, ROVI, SIEMENS GAMESA, TELEFÓNICA.

MARKETS YESTERDAY AND TODAY

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

Stock markets resume gains after the Fed and BoE meetings
It was a week of gains for European stock markets, underpinned by the S&P500 new record highs and the BoE’s decision of keeping its reference interest rate unchanged, which was a surprise for most of the market that expected a slight rise. Thus, in the Euro STOXX, Consumer Goods and Household were the best-performing sectors last week whereas Travel & Leisure and Basic Resources ended with the worst performance. On the macroeconomic level, in Germany, September’s industrial output fell unexpectedly (as bottlenecks in raw material supply continued) and in Spain industrial production also dropped more than expected in September. In the US, non-farm employment and salary gains rose more than expected in October, whereas the unemployment rate dropped more than expected. Separately, the House of Representatives passed the US$ 1 Tn infrastructure package, while the US$ 1.75 Tn solical package is put on hold, awaiting the CBO report on debt. In China, imports sped up unexpectedly in October, whereas exports fell less than expected. In US Results Kimco came in below expectations, Dominion Energy and Ventas beat expectations, among others.
What we expect for today
European stock markets would open with slight losses, with the oil and airline sectors recovering ground in a week marked by US inflation. Currently, S&P futures are down -0.2% (the S&P 500 ended 0.1% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 16.48). Asian markets are mixed (China’s CSI 300 +0.15% and Japan’s Nikkei -0.35%).
Today in the EMU we will learn November’s Sentix index and Eurogroup meeting, and in Mexico August’s fixed investment. In US business results, Viatris, PayPal and International Flavors among others, will release their earnings. As for auctions, Germany will issue € 4 Bn in 6M T-bills.

COMPANY NEWS

SIEMENS GAMESA. Better FY2021 results on the debt level, but with an uncertain 2022. SELL
The FY2021 results were poor, although very much in line with expectations on the P&L level and better than expected in net debt (€ 207 M vs. € 951 M BS(e) and € 724 M consensus) thanks to the improved working capital. The company has announced a guidance’22 with sales between -7% and -2% vs. 2021 (vs. -15% BS(e) and -4% consensus) and an adjusted EBIT margin of between 1% and 4% (vs. -7.2% BS(e) and -3.0% consensus). Separately, the long-term targets have been pushed back (sales growth above the market estimates and adjusted EBIT margin between 8% and 10%) to 2024-25. After underperforming the IBEX by -56% YtD, we think these results and the uncertainty reflected in the guidance going forward should already be largely priced in, although we would not rule out the possibility of some additional correction.

CHANGES IN OUR SPANISH 5-STOCK PORTFOLIO: We remove Grifols and include IAG. In the case of the former, despite the fact that we continue to see strong upside, we do not see momentum, even more so bearing in mind that the company does not release Q3 results and that we will have to wait until Feb’22 to have newsflow. In IAG, our T.P. of € 2.70/sh. has +30% upside and assumes recovery to 2019 traffic levels by 2024. In this regard, the outlook for capacity given by the company on Friday for 2022 (90%) is far above expectations, and if achieved would mean reaching our estimate 2 years early. Meanwhile, even against the current backdrop of 40% capacity vs. 2019, IAG has enough cash for at least 12 months. We do not rule out the possibility of the share price being volatile due to Covid-19 and the rumours of new restrictions, but we do not expect airspace to be closed off again, and there is pent-up demand that should result, in the short term, in a rise in long-haul traffic (the most profitable for IAG).