EUR 100.00 For Business Accounts Only

IBERIAN DAILY 30 JANUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: FERROVIAL, IAG, LIBERBANK, NATURGY, PRISA, SIEMENS GAMESA, UNICAJA.

MARKETS YESTERDAY AND TODAY

Moderate rise on stock markets awaiting the Fed
In the Euro Stoxx, Industrials and Real Estate were the best performers vs. Media and Personal Consumption that saw the biggest drops. On the macro side, Germany, February’s consumer confidence was disappointing, after falling unexpectedly. In the euro zone, M3 came in slightly above expectations. In the US, the Fed kept interest rates unchanged, it raised reserves (IOER) and repurchases (RRP) by +5bps and extended the purchase of t-bills until at least 2Q’20 and repos until April. In his appearance, J. Powell had a dovish slant, uncomfortable with inflation below 2%. Wholesale inventories and pending home sales rose unexpectedly. In US business results, Microsoft and General Electric beat expectations, AT&T, McDonald’s, Mastercard and Facebook in line and Boeing came in below expectations.
What we expect for today
The markets continue to fall (we expect -1% at the opening bell), awaiting the WHO meeting and its view on the coronavirus. Currently, S&P futures are down -0.60% (the S&P 500 closed -0.41% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 16.39%). The Asian markets that are open are sliding (Japan -1.72% and Hong Kong -2.31%).
Today in Germany we will learn January’s unemployment and preliminary inflation, in the euro zone January’s economic climate indicator, in Mexico, the 4Q’19 GDP, in the UK the BoE interest rate meeting and in the US the first estimate of the 4Q’19 GDP and weekly jobless claims. The WHO Emergency Committee will meet to discuss the coronavirus. In US business results, Dr Verizon, Biogen, Coca-Cola and Westrock, among others, will release its earnings. As for auctions, Italy will issue € 6 Bn in bonds due 2025 and 2023 and € 2.75 Bn in FRN due 2023.


COMPANY NEWS

4Q’19 Results Highlights next week.
Of the companies releasing 4Q’19 results in Spain next week, we expect to see a positive impact in: (i) Arcelor Mittal, which is expected to release poor earnings and where the key will lie in the message to be provided by the company for the 1H’20, which we believe will be positive thanks to the rise in the price of steel since Nov 2019 and considering the stock’s poor performance in the last year (-13%; -12% vs. Ibex); and (ii) Naturgy, the results of which will be marked by the better performance of its liberalised businesses (including positive surprises in GNL), which will help the company meet or even beat its guidance’19.

FERROVIAL. Little news from the presentation of the 2020-24 Strategic Plan. BUY.
We highlight an annual EBITDA growth forecast of +11% (vs. +12.1% CAGR’20-24 BS(e); ~12% consensus through 2022), leveraged (this is the biggest news) on the implementation of a plan to reduce structure costs by €~50 M/year (~5% EBITDA annually) where FER is assuming EBIT margins of 3.5% in the Construction division (~23% of EBITDA’20 and 3% of the T.P.). Although not much new was added, we maintain a positive stance on FER, where we see limited risks (a rate hike would be the main one) and additional upside on the valuation through the opening of new toll roads in the US (the company has extensive experience and resources to this end). We maintain our BUY recommendation.

LIBERBANK. 4Q’19 results far above expectations in all business lines. BUY.
The company has released 4Q’19 results far above expectations in all business lines with operating quality. We highlight the growth registered in NII (growth in performing loans accelerates to +1.7% vs. 3Q’19, which more than offsets the erosion of NII). Commercial dynamism explains the positive performance in fee revenues. Despite this, costs have been reduced. All of this explains the good performance in Operating Income, which the company will use to clean up its portfolio, reducing the NPL ratio to 3.3% vs. 3.9% as of 9M’19. The FL CET1 ratio remains stable at 13%. The company has announced a pay-out of 38% vs. 20% consensus (~4% yield). We expect a positive market reaction. Conference call at 9:30 (CET).

SIEMENS GAMESA. Poor 1Q’20 adjusted EBIT and 2020 guidance cut. SELL.
The preliminary 1Q’20 Results (to be released on 04/02) came in below expectations in sales (-9% vs. BS(e) and -10% vs. consensus) with € -136 M of adjusted EBIT (vs. € 116 M BS(e) and € 118 M consensus) due partially (around € -150 M) to unexpected costs as a result of problems in 5 projects and in routes, among others. As a result, the company cut its adjusted EBIT margin guidance’20 by -100bps to 4.5%-6.0% (vs. the previous target of 5.5%-7% and vs. 6.4% BS(e) and 6.5% consensus). If we only take into consideration the lower EBIT’20, the impact on T.P. would be limited to -1.2% (and SGRE states it maintains the long-term margin), the uncertainty in the long-term and recurring margins is high: assuming -100bps the worst-case scenario for our current estimate would have an impact of -12%. We place our T.P. Under Revision until the release of the full results.

UNICAJA. Worse 4Q’19 results, hit by one-offs but with a positive surprise in the dividend and targets’20-22.
The 4Q’19 results were weaker than expected on the operating level, with a weak NII (-1% vs. expected) and lending, offset by higher trading revenues and investee revenues. Costs (+0.3% vs. 4Q’18) were in line. Net Profit (€ 0 M vs. € 23 M BS(e) and € 57 M consensus) is affected by the € -190 M of provisions and impairments, ahead of the restructurings expected in the new 2020-22 Plan. CET1 reached 14% (+20bps, in line), allowing the bank to raise its payout to 45% (DPS’19 € 0.048/sh.; 2x expected; 5.1% yield). The bank has announced a new 2020-22 Strategic Plan, with a +10% annual target in Net Profit (vs. around +5% BS(e) and consensus). We expect volatility in the share price, but the reaction should be positive.