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IBERIAN DAILY 11 MAY + 1Q’23 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AMADEUS, TELEFÓNICA.

At the end of today’s report, and during the entire results season, we will include a presentation with previews for the 1Q’23 results to be released over the coming days in Spain.

Markets not quite convinced by inflation slowdown
After the slight volatility caused by the US inflation data, the European stock markets maintained their negative tone, with banks penalised by the fact that the market is pricing in the imminent end of rate hikes, which, by contrast, benefited Technology companies. Within the Euro STOXX, the best-performing sectors were Technology and Real Estate vs. Insurance and Household Goods, which saw the bigger losses. On the macro side, in Spain, the Bank of Spain called for a fiscal adjustment this year and a pension reform, although it revealed that it will raise its 2023 GDP forecast to ~2% (1.6% previously) to reflect the better performance seen in the 1H’23. In the US, inflation unexpectedly slowed by a tenth in April to 4.9%, showing a slowdown in monthly rates. In spite of this, J. Williams, from the New York Fed, warned that hikes are not officially over and will ultimately depend on macro performance. On the other hand, the fiscal surplus plummeted in April due to lower revenue collection and the deficit from the first 7 months of the tax year, doubling that of the previous year. In China, April’s inflation slowed more than expected (0.1% YoY vs. 0.7% previously), with core inflation flat at 0.7%, whereas production prices fell more than expected to their lowest level since May 2020. In US business results, Walt Disney disappointed, whereas Steris came in better.
What we expect for today
European markets would open with slight gains of +0.2%. Currently, S&P futures are up +0.18% (the S&P 500 ended +0.26% higher vs. the European closing bell). Volatility in the US dropped (VIX 16.94). Asian stock markets are mixed (China’s CSI 300 +0.10%, Japan’s Nikkei -0.05%).
Today the BoE will hold its meeting. Also we will learn in the US the weekly jobless claims and production prices for April. In US business results, News Corp and Gen Digital, among others, will release their earnings. In debt auctions: Germany (€ 2.5 Bn in bonds due 2050 and 2053).


COMPANY NEWS

TELEFÓNICA. 1Q’23 results above expectations in sales and EBITDA, with Spain very much in line. BUY.
The company has released 1Q’23 results beating expectations in sales and higher than the consensus estimate in EBITDA (+1.3% vs. consensus), although worse than our numbers due to Hispam. In the Spanish market, sales came in slightly below expectations (-0.2% vs. the consensus), but in line in EBITDA. We highlight the growth acceleration in revenue per service in Retail (+1.7% vs. +1.1% in 4Q’22) thanks to improved ARPU (+1.7%). FCF came in somewhat below expectations (€ 413 M and € 480 M consensus). Thus, we expect no impact from these 1Q’23 results considering that the stock has outperformed the IBEX by +6% YTD.