IBERIAN DAILY 15 NOVEMBER + 3Q’23 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, SACYR, SANTANDER, TALGO.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’23 results to be released over the coming days in Spain.
US inflation data spurs the markets
The week’s most important data release did not disappoint, leading to strong rallies in stock markets on both sides of the Atlantic, along with significant drops in sovereign debt yields and a market that is beginning to consider rate cuts by the Fed in May’24. Thus, in the STOXX 600 all the sectors closed with gains, led by Real Estate (+6.5%) and Basic Materials (+4.0%), with Pharma and Energy posting the smallest gains. In the euro zone, the reading of the 3Q’23 GDP confirmed the preliminary figure of 0.1% YoY. In Germany the ZEW index for November brought a positive surprise in the expectations component, rising more than expected for the fourth straight month, although the current situation remains rooted to an annual low. In the UK, job creation recovered unexpectedly in September, while salary gains were disappointing after retaining a sharp rise. In the US, general and core inflation for October fell more than expected to 3.2% and 4.0% YoY (from the previous 3.7% and 4.1%). In Japan, the 3Q’23 GDP contracted more than expected. In China, September’s industrial output and October’s retail sales rose more than expected YoY, while property investments fell more than expected. Separately, the PBoC maintained the 1Y refinancing rate unchanged at 2.5% but injected more than expected (up to 1.45 Bn yuan, the biggest since 2016) in the system in order to stimulate the economy. In US business results, Home Depot released earnings in line with expectations.
What we expect for today
European stock markets would open with slight gains that would result in slight profit taking after the strong gains from the past sessions. Currently, S&P futures are up +0.25% (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US fell (VIX 14.16). Asian stock markets are climbing (China’s CSI 300 +0.57%, Japan’s Nikkei +2.52%).
Today on the political front, J. Biden and Xi Jinping will meet and Spain will hold the investiture debate. In the euro zone we will learn September’s industrial output, in the UK October’s inflation and in the US November’s Empire manufacturing index and October’s retail sales. In US business results, Cisco and Target, among others, will release their earnings.
COMPANY NEWS
TALGO, BUY
At yesterday’s closing bell the company released good 9M’23 Results and better than expected in sales (+3% vs. BS(e) and +8% vs. consensus) and EBITDA (+17% vs. BS(e) and +22% vs. consensus) thanks to the greater industrial activity and one-off revenues (not quantified) stemming from the extension of its contracts with DB (Germany) and DSB (Denmark). The group raised its 2023 guidance for both revenues and margins although also for leverage (2.5x NFD/EBITDA vs. 2.0x previously). If the company manages to meet the guidance, we estimate that the adjusted EBITDA’23 could exceed our estimate by +28% (+18% above the consensus).
Since the company failed to quantify the extraordinary effects from the extension of its contracts and it outlined that the operating margins reported are not recurring, drawing conclusions about a possible impact on valuation is complicated. However, we understand that the positive messages stemming from greater activity levels, along with the better results and the need to raise estimates by the market consensus for 2023 could suggest at least a slightly positive reaction. TLGO’s share price has slid -2% vs. IBEX YtD. Conference call at 12:00 (CET), where the key will lie in the messages leading to quantify and understand the extraordinary impact from the contract extensions.
ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.
Banco Santander is a holding company, providing a range of financial products. Co.'s products and services include: retail banking business that covers all customer banking businesses; wholesale banking business; as well as asset management and insurance business. Co.'s principal operations are in Spain, the U.K., Portugal, Germany, Italy and Latin America. As of Dec 31 2014, Co.'s total assets amounted to Euro1,266,296,000,000 and total customer deposits amounted to Euro647,627,000,000.
Sacyr is the parent company of a group engaged in the acquisition, development and construction of urban properties for their subsequent rental or resale. Co. primarily leases and sells office buildings and complexes, housing units, and shopping centers. Co. is also engaged in the operation of urban car parking facilities. Co. offers services related to the real estate industry such as technical assistance in energy savings, inventory management, architectural design, telecommunications management, property maintenance, as well as gardening and landscaping. Co. also provides consulting services in the real estate fund management sector.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
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