EUR 100.00 For Business Accounts Only

IBERIAN DAILY 22 JANUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ARCELOR MITTAL, BANKING SECTOR, OHL, RESULTS HIGHLIGHTS.

MARKETS YESTERDAY AND TODAY

Stock markets fall on profit-taking
It was yet another session of losses in Europe, joined by the US, with all eyes on the coronavirus in China. The Euro STOXX posted mostly losses (-0.26%) led by Basic Resources and Energy, whereas Financial Services and Telecoms were the best relative performers. On the macro side, in the United Kingdom the ILO unemployment rate remained unchanged vs. last month’s figure (3.8%, in line with expectations). In Germany, January’s ZEW index climbed more than expected, backing an increase in the IFO index and recovery in the German economy in 2Q’20. In the Euro zone, the ECB might commit itself to acquiring more green bonds within the framework of its monetary stimulus policy given the growing concern on climate change. On another note, D. Trump took advantage of its participation in the World Economic Forum to criticize the Fed, arguing that it has raised interest rates too fast but lower them too slowly. In US business results, Halliburton and Netflix beat expectations (subscription guidance lowered).
What we expect for today
The major European indices would open with gains of +0.5%. Currently, S&P futures are up +0.45% (the S&P 500 was unchanged vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 12.85%). Asian markets are rising (Japan +0.70% and Hong Kong +1.22%).
Today in the US we will learn the Chicago Fed Nat Act index and the second-hand home sales data. In US business results, Prologis Inc, Abbot Laboratories, and Johnson & Johnson, among others, will release their earnings.

COMPANY NEWS

ARCELOR MITTAL. Normalisation following the 2019 tsunami. BUY.
2019 was a very negative year, affected by a number of one-offs that will result in a reduction of -50% in EBITDA vs. 2018. The situation as of the 2H’19 was worse than expected and thus, we cut our estimates by -17.5% for the 2019-21 period. On the other hand, some of these negative factors are turning around, which gives us optimism (-25% in the price of iron and +25% and +15% in steel prices in the US and Europe, respectively) and leads us to expect an improvement of +25% in EBITDA’20. We set our T.P. at € 18.50/sh. (-20% vs. previously), which yields an upside potential of +27%. In terms of EBITDA/Mt, the stock price is factoring in a scenario of -20% vs. the 2011/19 average and of +10% vs. normalised levels BS(e). We believe that the normalisation of the operating scenario will be key for the stock in the coming months.

4Q’19 Results Highlights next week.
The 4Q’19 earnings release will start with banks. On the positive side, we stress Caixabank, where the bank would beat our estimates and those of the consensus by meeting its 2019 guidance, and we also foresee its 2020 guidance that should confirm its “neutral jaws” expectation that would give rise to upgrades. On the negative side we would highlight Bankia, where we foresee weakness of revenues and higher cost of risk on increased coverage in addition to the poor performance expected in the 1H’20.