IBERIAN DAILY 22 JULY + 2Q’22 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, BANKING SECTOR, ENCE, FCC, GLOBAL DOMINION, REPSOL, TELEFÓNICA.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 2Q’22 results to be released over the coming days in Spain.
End of the negative rates era
European stock markets were highly volatile, marked by Lagarde’s speech and the political situation in Italy. The Euro STOXX ended with slight drops, with the best-performing sectors being Media and Technology, whereas Energy (Brent fell sharply after Russia reopened the Nord Stream 1 gas pipeline and the US backed a cap on Russian oil prices in late December) and Travel & Leisure were the worst performers. On the macro side, the ECB meeting confirmed the +50bps rise for the first time after 11 years. Moreover, the new TPI antifragmentation mechanism was announced, not limited ex ante but subject to meeting EU fiscal targets. In Italy, snap elections will be held on 25 September with the right-wing coalition leading in the polls after S. Mattarella dissolved Parliament after accepting M. Draghi’s resignation. In the US macro data was poor, with weekly jobless claims and July’s Philadelphia Fed contracting unexpectedly. President Biden tested positive for Covid-19. In Japan, July’s inflation slowed, whereas core inflation climbed by a tenth, in line with expectations. Separately, July’s manufacturing and services PMIs fell once again. In US business results, Philip Morris and American Airlines beat expectations, with DR Horton, AT&T and Union Pacific in line, whereas Snap-on (which led to another correction in technology stocks) and Domino’s Pizza disappointed.
What we expect for today
The European stock markets would open with slight losses, with the Technology sector again dragged down by the poor reception of Snap’s earnings in the US and awaiting July’s PMIs in the Euro zone. Currently, S&P futures are down -0.45% (the S&P 500 ended +0.81% vs. the European closing bell). Volatility in the US dropped (VIX 23.11). Asian markets are mixed (China’s CSI 300 -0.04% and Japan’s Nikkei +0.34%).
Today in the euro zone we will learn July’s preliminary manufacturing and services PMIs. In US business results, American Express, Verizon and Twitter, among others, will release their earnings.
COMPANY NEWS
2Q’22 Results previews
Of the stocks releasing their earnings over the coming days, on the positive side we highlight IAG (29/07) given the return to positive profitability levels since the onset of the pandemic and the expected confirmation of its 2022 capacity guidance, underpinned by the strength of demand and the positive price scenario, along with the drop in kerosene prices (-22% from highs). We also stress Caixabank (29/07) thanks to the robustness of its fundamentals from NII.
G. DOMINION. 2Q’22 results in line on the operating level. Guidance maintained. BUY
The 2Q’22 results were in line with expectations in EBITDA (€ 29.2 M vs. € 28.9 M BS(e) and € 28.3 M consensus), with higher sales than expected (+9.6% vs. +6.3% consensus) and weaker margins (9.6% vs. 10.6% consensus). We highlight the accelerated organic growth (+11% in 2Q’22 BS(e) vs. +3.4% in 1Q’22 and +>5% guidance) and the unexpected impact from discontinued activities (€ -3.4 M). The company has kept its guidance unchanged, which we welcome against an adverse market climate. Net cash decreased by € -4 M to € 61 M (vs. € 50 M BS(e)) due to project starts and the buyback programme. We do not expect a significant impact after the company has risen +9% since 1Q’22 results (+11% vs. IBEX).
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.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
Global Dominion Access SA is a Spain-based company primarily engaged in the construction and engineering sector. The Company's activities are divided into two segments: Multi-technological Services, which offers design, implementation and maintenance of fixed and mobile telecommunications networks, manages sales and distribution processes for telecommunications carriers, as well as renders of inspection, maintenance, repair and renovation services for industrial and energy firms, and Solutions and EPCs, which executes turnkey Engineering-Procurement-Construction (EPC) projects, provides construction, repair and renovation of industrial heating installations, as well as develops processes and other technological and business solutions in numerous sectors. Its services are provided in three areas: Technology and Telecommunications (T&T), Industry and Renewable energies. It operates worldwide in Europe, the Americas, Asia and Africa. The Company is a subsidiary of CIE Automotive SA.
Repsol is an oil and gas company. Co. is engaged in all the activities relating to the oil and gas industry, including exploration, development and production of crude oil and natural gas, transportation of oil products, liquefied petroleum gas (LPG) and natural gas, refining, the production of a wide range of oil products and the retailing of oil products, oil derivatives, petrochemicals, LPG and natural gas, as well as the generation, transportation, distribution and supply of electricity. Co. operates in more than 40 countries. Co.'s operations are divided into four segments: Upstream, Downstream, LNG and Gas Natural Fenosa.
Telefonica is engaged in the provision of public or private telecommunications services, including ancillary or complementary telecommunications services or related services. Co.'s fixed business includes: traditional fixed telecommunication services, Internet and broadband multimedia services, data and business-aplications services, and wholesale services for telecommunication operators. Co. also provides a range of mobile and related services and products to consumer and business customers, including mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and, trunking and paging.
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