EUR 100.00 For Business Accounts Only

IBERIAN DAILY 01 AUGUST + 2Q’24 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CAIXABANK, CAF, ENAGÁS, ENCE, FLUIDRA, MELIÁ HOTELS.

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

The market expects a rate cut from the Fed in September
European markets saw gains ahead of the Fed meeting. In the STOXX 600, Technology and Basic Resources were the best performing sectors, whereas Retail and Autos ended with the worst performance. On the macro side, in Germany, July’s number of unemployed moderated less than expected. In the euro zone, July’s inflation climbed one tenth whereas the core data remained stable. In the US, the Fed meeting maintained rates at 5.25%-5.50% and Powell suggested a rate cut in September in view of the risks on the job market, as long as inflation does not rise. As for data, July’s (ADP) private employment survey showed lower job creation than expected. In Brazil, the unemployment rate fell in line with expectations, and the BoB meeting kept the Selic rate at 10.50%. In US business results, Meta, DuPont and T-Mobile beat expectations, Mastercard and eBay were in line and Boeing and Kraft Heinz released disappointing figures.
What we expect for today
Stock markets would open with gains, with growth (cyclicals) outperforming value (financials and defensive stocks). Currently, S&P futures are up +0.61% (the S&P 500 ended down -0.1% vs. the European closing bell). Asian stock markets are falling (China’s CSI 300 -0.3%, Japan’s Nikkei -2.7%).
Today in the euro zone we will learn July’s final manufacturing PMI and June’s unemployment rate, in the UK the BoE meeting, in the US weekly jobless claims, June’s construction spending and July’s manufacturing ISM. OPEC+ will hold its meeting. In US business results, Moderna, Booking, Intel, Amazon.com, Motorola and Apple, among others, will release their earnings.

COMPANY NEWS

ARCELORMITTAL, OVERWEIGHT
The 2Q’24 results beat expectations in EBITDA (-37.9% vs. -40.0% BS(e) and -40.9% consensus), although the business remains pressured and came in below Q1 figures (-4.8%) due to slightly lower EBITDA/t and the effect from the strike in Mexico. By regions, the dynamic in North America is lacklustre (for the situation mentioned), whereas Europe and Brazil have performed well. On the bottom line, Net Profit was hit by the negative accounting effect from the mark-to-market of the Vallourec shares. On the guidance level, the company suggests that it would not yet be seeing restocking, and it has lowered its forecast for aggregate apparent demand ex-China to +2.5%/+3% (vs. the previous +3%/+4%).
Results lacking drivers where, apart from the reasonable figures, the challenging current backdrop for the business is once again apparent.

CAF, OVERWEIGHT
The 1H’24 sales reached € 2.08 Bn, meaning +10.8% growth (speeding up vs. 1Q’24, with +15.9% growth in 2Q’24). Rail sales (79% sales) in 1H’24 rose +15% due to a -3% drop in Solaris (21% sales, -11% in 1Q’24). 1H’24 EBIT totaled € 102 M (+20% vs. 1H’23), with the margin increasing to 4.9% (from 4.5% in 1H’23), thanks to the strong boost from Solaris, offsetting the expected deterioration in Rail. CF over the period is negative (€ -28 M) due to the strong investment in working capital (€ -85 M) to finance the strong growth. For this reason, NFD rose to € 284 M (vs. € 256 M in 2023), with a NFD/EBITDA ratio of 0.9x.
The results saw a lukewarm reception (-1.5% CAF vs. -1.3% IBEX), while the messages from the presentation focused on highlighting the positive commercial momentum and that in 2H’24 the improvement will continue (profitability, Solaris sales, order intake, etc.), with the company confident it will meet the guidance’24.

CAIXABANK. We reiterate our bet after 2Q’24 Results. OVERWEIGHT.
After beating Net Profit by +6% yesterday and revising its 2024 guidance (NII up to high single digit, ROTE’24 >17% and 2.7% NPL), we raise our T.P. by +12% up to € 6.62/sh. (+22% upside). Our new EURIBOR scenario (3.5% 2924 vs. 3.34% previously and 3% from 2025) leads us to revise NII’24-26 by +5% and Net Profit by +4.4%. Our valuation means 1.33x P/TE’25 and 10x P/E for a 13.6% ROTE’26. Despite the good share price performance over the past 3 months (+10% vs. +3% sector), CABK is an appealing bet as it continues to offer higher ROTE’24 (17.6%).

FLUIDRA, UNDERWEIGHT
Sales reached € 1.17 Bn (-1.3% vs. -1.6% BS(e) and -1.8% consensus) and EBITDA € 296 M (+2.8% vs. +1.0% BS(e) and +0.7% consensus). The gross margin grew +340bps vs. 1H’23 due to the effect from the simplification programme and the price hikes passed on to clients, although the EBITDA margin rose only +100bps (+66bps BS(e)) due to cost inflation.
The results are slightly better than what we expected in EBITDA, which we consider positive, given that the market was pricing in negative results following the profit warnings issued by other sector companies. The company has reiterated the midpoint of its target range for 2024, which we also see as positive.

MELIÁ. Robust Results with debt reduction. Positive outlook and 2024 guidance reiterated. OVERWEIGHT.
2Q’24 Results were very much in line with expectations in sales (+1.2% vs. +0.8% BS(e) and +2.9% consensus) and EBITDA (+1.3% vs. +2.3% BS(e) and +1.5% consensus). The dynamics remain unchanged and the quarterly performance was underpinned by a € 123.00/room RevPAR (owned and lease), meaning +11.4% vs. 2Q’23; in line with BS(e)), and with prices rising +8.4%. NFD fell by € -305 M due to asset rotation and organic cash generation (around € 70 M). As for prospects, the trend is positive, with bookings exceeding 2023 levels by double digit rates, with rises in prices and occupancy. The company reiterated its 2024 targets. We expect a positive market reaction following the share price underperformance from 2024 highs (-10% vs. Ibex 35).