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

NEWS SUMMARY: ACS, ROVI, TÉCNICAS REUNIDAS.

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.

Support levels remain unchanged
European stock markets ended with sharper gains in the peripheral segment, in a session where the S&P500 neared record highs after the better start to the earnings season in the past two years. In the Euro STOXX, Utilities and Pharma were the best-performing sectors while Technology and Travel&LEisure ended with the biggest drops. On the macroeconomic level, in the UK, September’s inflation slowed down unexpectedly although remaining above the BoE target. In the euro zone, September’s (core) inflation confirmed the 3.4% YoY data (1.9%), as expected. In Germany, the Bundesbank chairman, J. Weidmann (hawkish) announced his resignation on 31/12 to leave a free election to the coming government, warning about the secondary effects of inflation on the financial stability. In the US, the Fed Beige book suggest between lacklustre and moderate growth but also warns about the slowdown in view of the supply problems and the shortage of labour. In US Results Verizon, Biogen, Anthem and Abbott Laboratories beat expectations, Tesla, IBM and Baker Hughes released disappointing figures and Nasdaq in line. In China, Evergrande collapses after the failed sale of its real estate services subsidiary and the imminence (next Saturday) to meet the grace period after the default.
What we expect for today
European stock markets would open with drops of around -0.5%. Currently, S&P futures are down -0.3% (the S&P 500 ended practically unchanged vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 15.49). Asian markets are mixed (China’s CSI 300 +0.15% and Japan’s Nikkei -1.7%).
Today in the euro zone we will learn October’s consumer confidence, in the US weekly jobless claims, October’s Philadelphia Fed and September’s existing home sales. The European Council will start today. In US business results, A&T, KeyCorp, Snap-On and American Airlines, among others, will release their earnings. In debt auctions: Spain (€ 5.5 Bn in bonds due 2027 and 2037) and France (€ 9.25 Bn in bonds due 2025, 2026 and bonds indexed to inflation due 2026, 2032 and 2047).

COMPANY NEWS

ACS, BUY.
CIMIC (~80% Hochtief (50.4% ACS) and ~40% of ACS’ EBITDA excl. Cobra) has just released 9M’21 results impacted by the deconsolidation of Thiess (50% CIMIC now, although it is consolidated by equity method) that were very much in line with our sales estimate (+9% vs. 9M’20) and slightly above in EBITDA (+1%; +2% vs. 9M’20), with EBITDA margins decreasing slightly to 9.6% (-40bps vs. 9M’20) due to a weaker 3Q’21 than the previous quarter (-150bps). Net Profit came in at AUD € 303 M, which would stand +10% above our estimate and would be compatible with the company’s guidance of between AUD 400 M and AUD 430 M (confirmed).
On the cash generation side, pre factoring operating cashflow improved significantly, coming in at AUD 11 M (vs. AUD -341 M as of 9M’20 comparable) thanks to the impact from new awardings, and suggest that this improvement will continue in 4Q in view of the quarter’s seasonal nature. Thus, NFD came in at AUD 754 M (vs. AUD 190 M of cash as of YE2020) due, to a great extent, to a € 481 M reduction in factoring and dividend payments.
Order intake came in at AUD 16 Bn vs. AUD 5.1 Bn for the same period of last year, meaning that the backlog increased by +17% (LfL) to AUD~35.1 Bn.
Results very much in line with what we could expect in terms of P&L statement and consistent with the company’s guidance and our FY estimates, where the positive performance in order intake continues (although slowing down to some extent vs. 2Q) and the good evolution of cash stands out vs. 2020. On another note, since the sale of 50% of Thiess in Dec’20, the relative weight of CIMIC in ACS’s accounts has fallen significantly (from 73% to around 40% of ACS’s consolidated EBITDA ex. Cobra), and thus although it should have a positive impact it would be more limited now on ACS. CIMIC ended the Australian session with gains of +6%.

3Q’21 Results highlights and rest of previews
Of the stocks releasing their earnings next week on the positive side we highlight Grupo Catalana Occidente (28/10), where we expect the result of the Traditional business to continue improving at structural levels (with a CR