EUR 100.00 For Business Accounts Only

IBERIAN DAILY 19 FEBRUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, BANKINTER, GRIFOLS, MEDIA AND TMT SECTOR, RESULTS HIGHLIGHTS, TELEFÓNICA.

MARKETS YESTERDAY AND TODAY

Gains come to an end in stock markets
Profit taking in global stock markets. In the Euro STOXX, cyclical sectors, such as Automobiles and Basic Resources saw the biggest drops while Telecoms and Utilities were once more the best performers. On the macroeconomic level, in Spain, the public debt ended 2019 at 95.5% of GDP, slightly below the government estimates but +1.3% above 2018 levels. In Germany, February’s ZEW index dropped more than expected, questioning the 0.1% YoY GDP growth expected by the consensus in the 1Q’20. In the UK, January’s ILO unemployment rate remained at 3.8%, in line with expectations. In the US, the real estate sector NAHB confidence index dropped slightly while February’s Empire index climbed to 12.9 vs. 4.8 previously. In Japan, January’s trade deficit came in lower than expected thanks to the better performance of exports. In China, the government would cut 2020 growth target to around 5.5% due to the coronavirus. In US Results, Walmart and Devon Energy released disappointing figures.
What we expect for today
The main indices in the euro zone would open with gains of +0.3%. Currently, S&P futures are +0.19% higher (the S&P 500 closed +0.43% higher vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 14.83%). The Asian markets that are open are climbing (Japan +0.89% and Hong Kong +0.34%).
Today in the UK we will learn January’s inflation, and in the US housing starts and January’s production prices. In US Results, Garmin, Pioneer Natural and Mosaic, among others, will release their earnings. As for auctions, Germany will issue € 1.5 Bn in 30Y bonds and Portugal € 1.5 Bn in in 3 & 12M T-bills.


COMPANY NEWS

4Q’19 Results Highlights next week.
Of the companies releasing 4Q’19 results in Spain next week, we expect to see a positive impact in Grifols, where the strong sales growth and positive performance of margins should continue. We also expect positive results from Técnicas Reunidas, which is expected to reiterate its guidance of improved margins’20 following its recent negative performance (-12% vs. Ibex YTD). On the negative side, we stress the weak 4Q’19 Results of Iberpapel due to the current environment of weak prices and where the prospects for 2020 are not entirely favourable. In the case of Red Eléctrica, we believe that the consolidation of Hispasat from the 4Q’19 could be disappointing and the resignation of its chairman generates uncertainty on the strategic level.

ACS. Mixed FY2019 results: EBITDA slightly below expectations, but working capital above. BUY.
At yesterday’s closing bell the company released a mixed bag of FY2019 results, with sales in line with expectations but with EBITDA -2% below our estimate (+3% above the consensus, which we do not see as credible) due to the negative surprise from Dragados (16% of T.P.) in 4Q’19 (2.2% EBITDA margin vs. 8.1% in 4Q’18). Although working capital came in above expectations (€+200 M better than expected) and the results were already to some extent known following the release by Hochtief (59% of ACS’s EBITDA), we think the surprise from Dragados could lead to a slightly negative reception (despite underperforming the IBEX by -16% on the year). There will be a conference call at 12:00 (CET).