EUR 100.00 For Business Accounts Only

IBERIAN DAILY 10 NOVEMBER + 3Q’22 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ALMIRALL, ARCELOR MITTAL, CELLNEX, IBERDROLA, NATURGY.

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’22 results to be released over the coming days in Spain.

US mid-term elections halt bullish streak on stock markets
European stock markets suffered slight losses over the course of the session, and the US market opened in the red with the excuse of the inconclusive mid-term election results, and although this could take days to sort out, it does not mean a Democrat defeat. The market appeared to price in a clear victory for the Republicans and a balance of power to the Democrat presidency, which historically has been positive for the market. In the Euro STOXX, the best-performing sectors were defensive ones such as Utilities, Household Goods and Real Estate, which continue to recover after the poor performance over the past months. On the negative side was Leisure due to the drop in Flutter (the results were disappointing despite solid figures being presented). In the US, the Republicans took a majority in the House of Representatives but not in the Senate, where 3 States still need to report in the coming weeks and/or months. On the macro side, in Mexico, October’s inflation fell slightly, in line with expectations. On the geopolitical front, Russia ordered the withdrawal of its troops from Kherson (on the coast of the Black Sea and near the Crimean peninsula), meaning a defeat for Russia, but it could also raise international pressure on Ukraine to stop its counter-attack and sit down at the negotiating table. In China, Covid-19 restrictions have intensified in cities like Beijing and Chongqing. In 3Q’22 US business results, Dr. Horton released disappointing earnings and Wynn Resorts was in line.
What we expect for today
The European stock markets would open with losses of around -1.0% awaiting the inflation data in the US. Currently, S&P futures are up +0.3% (the S&P 500 ended -1.3% lower vs. the European closing bell). Volatility in the US increased (VIX 26.1). Asian markets are falling (China’s CSI 300 -0.7% and Japan’s Nikkei -0.95%).
Today in the US and Brazil we will learn October’s inflation and in Mexico the CB will meet (+75bps increase expected). In US business results, Ralph Lauren, among others, will release its earnings.


COMPANY NEWS

IBERDROLA. 2023-25 CMD&ESG: Maintains pace of investment and financial prudence, and raises guidance. BUY.
IBE will maintain the investment pace over the period (€ 47 Bn, with PNM), with a special focus on Networks (57% total) and on the US rather than on Renewables (it will be more selective and will have greater offshore weight). For the 2023-25 period, on the operating level, the company improved its guidance for EBITDA (+8%/+9% CAGR vs. +6%/+7% previously, BS(e) and consensus) and Net Profit (+8%/+10% vs. +6%/+7% previously, consensus and BS(e)), and commits to a growing dividend (2025e DPS of between € 0.55/sh. and €-0.58/sh. vs. € 0.53/sh./€ 0.56/sh. previously; 6% yield). Financial strength will continue to be priority (3.4x NFD/EBITDA’25e), meaning that the plan will be financed with robust cash generation, debt, asset rotations and strategic partnerships. After we have included all the variables announced in our estimates (with an average increase in EBITDA of ~+7%), we would expect a positive impact of ~+9% on our T.P. (vs. our current T.P. of € 11.75/sh.). IBE remains our top pick within the Spanish integrated utilities and thus, we reiterate our BUY recommendation.

ALMIRALL, BUY
The 3Q’22 results were in line on the operating level (€ 39 M EBITDA vs. € 40 M BS(e) and consensus), in both sales (+3% vs. +4% BS(e) and 4.3% consensus) and margins (19.7% vs. 20% consensus). Below in Net Profit (€ -19 M vs. € 4 M expected), due largely to the impact from the equity swap valuation (€ -17 M; no impact on cash) and better than expected in NFD, which fell -18% to € 159 M (0.8x NFD/EBITDA; vs. € 188 M BS(e)). The company has kept its guidance’22 unchanged (mid-single-digit growth in sales and EBITDA between € 190-210 M vs. € 195 M BS(e) and € 197 M consensus).
The results were very much in line with forecasts, and thus we do not expect a significant impact. The stock has fallen -18% YtD (-10% vs. IBEX).

ARCELOR MITTAL, BUY
The results came in above expectations in EBITDA (US$ 2.66 Bn vs. US$ 2.38 Bn BS(e) and US$ 2.37 Bn consensus), although it continues to decline due to the negative cost-price spread, the de-stocking process and the impact from energy costs (especially in Europe, 35% EBITDA in 3Q’22). On the bottom line of the P&L statement, Net Profit came in far below expectations due to an accounting effect on inventories. However, the company lowered the guidance (vs. 1Q’22) for apparent consumption by ~-4% in its main markets (US, Brazil and Europe), all of them in negative territory.
Positive results on the operating but that continue to show the current deterioration of the sector and the lack of visibility in the short term. However, debt is under control and working capital should encourage cash generation in 4Q.