IBERIAN DAILY 04 NOVEMBER + 3Q’21 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CELLNEX, ENDESA, FLUIDRA, IBERDROLA, INDRA, SACYR, TELEFÓNICA.

MARKETS YESTERDAY AND TODAY

At the end of today’s report, and during the entire results season, we will include a presentation with previews for the 3Q’21 results to be released over the coming days in Spain.

The Ibex jeopardises the 9,000 points
It was a stable session for European stock markets, with slight gains in the Euro STOXX 50, awaiting the Fed’s decision that announced in the end, as expected, a US$ 15 Bn cut (10 Bn Treasury and 5 Bn MBS) in monthly purchases (US$ 120 Bn) to be finalised in June’22 and insisting that the first rate rise will take place at the end of 2022 . Within the Euro STOXX, growth sectors, such as Household and Technology were the best performers while Energy (after oil prices dropped sharply due to the US pressure to the OPEC+) and Retail ended with the biggest drops. On the macroeconomic level, in Spain, October’s employment data provided a surprise with a drop in unemployment while social security affiliation rose up to 19,690,590 people, the highest level of the historical series. In the euro zone, September’s unemployment rate moderated to 7.4%, in line with expectations. As for the monetary policy, C. Lagarde was very sceptical about a rate rise in 2022 while F. Villeroy stressed that the economic situation is very far from stagflation. In the US, ADP private employment rose unexpectedly, as well as October’s non-manufacturing ISM. In US business results, Evergy, QUALCOMM and Electronic Arts came in better while Discovery released disappointing results.
What we expect for today
The European stock markets would see a slightly bullish opening after the S&P 500 hit new all-time highs, with a good performance of Technology and Energy stocks, penalised by the drop in Brent prices ahead of the OPEC+ meeting. Currently, S&P futures are up +0.02% (the S&P 500 ended +0.75% higher vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 15.15). Asian markets are climbing (China’s CSI 300 +0.92% and Japan’s Nikkei +0.93%).
Today OPEC+ meeting, in the euro zone we will learn October’s services PMI, in the UK BoE meeting, in the US weekly jobless claims, 3Q’21 productivity and September’s trade balance. In US business results, Moderna, Citrix Systems, Kellogg, Motorola, Dominion Energy, PayPal, Sysco Corp and Walt Disney among others, will release their earnings. In debt auctions: Spain (€ 4.5 Bn in bonds due 2028 and 2046) and France (€ 10 Bn in bonds 2031, 2041 and 2053).

COMPANY NEWS

ENDESA. 3Q’21 results above expectations thanks to one-offs. Guidance’21 reiterated. BUY.
At yesterday’s closing bell, ELE released 3Q’21 results above our expectations and those of the consensus in adjusted EBITDA (€ 1.24 Bn vs. € 1 Bn BS(e) and € 1 Bn consensus). The 3Q’21 results improved vs. 2Q’21 (+45% vs. 2Q’21) thanks to one-offs (derived from commodities, the hydro tax and CO2 regulations) that offset the complicated market scenario, where the high pool prices penalise its short position in electricity in the Generation and Commercialisation division (+52% vs. 3Q’20). The Distribution division remained stable, reporting € 476 M of EBITDA, in line with our estimates (€ 480 M). Adjusted EBITDA as of 9M’21 also improved vs. 9M’20 (+4%). Positive news of limited impact. With these 3Q’21 results, the company is on track to meet its guidance’21: € 4 Bn of EBITDA (vs. € 3.75 Bn consensus and € 4.08 Bn BS(e)) and € 1.7 Bn of Net Profit (vs. € 1.59 Bn consensus and € 1.89 Bn BS(e)). From now on, the key will lie in the extent of the impact on the sector’s revenues, with all eyes on the 25th of November, when ELE will update its 2022-24 Strategic Plan.

TELEFÓNICA. Results above expectations in EBITDA thanks to higher one-offs and Hispam, although worse in Spain. BUY.
Results came in above expectations thanks to one-offs (around € 800 M vs. € 600 M expected; tower sales in Germany to ATC, sale of Costa Rica and network operations in Brazil and Chile) and better EBITDA in Hispam, with Spain showing lower results. 3Q’21 sales fell -11.1% (vs. -15% expected). 3Q’21 EBITDA totalled € 3.734 Bn, marked by one-offs, leaving the underlying 3Q’21 EBITDA at € 3.034 Bn (-13.7% vs. 3Q’20), slightly above expectations on account of Hispam and with Spain being slightly below (€ 1.182 Bn of EBITDA, -8.9%, with a 38% margin vs. € 1.224 Bn expected with a 39.6% margin due to higher content costs vs. 3Q’20 and energy costs). NFD came in at € 25 Bn (vs. € 24.9 Bn expected). The company reiterated its 2021 guidance. These results could have a negative impact given the worse EBITDA data in Spain.