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IBERIAN DAILY 15 JULY + 2Q’21 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ELECTRICITY SECTOR, LIBERBANK, RED ELÉCTRICA, REPSOL, SIEMENS GAMESA, TELEFÓNICA, TOURISM SECTOR, UNICAJA.

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

MARKETS YESTERDAY AND TODAY

Powell underpins the market
Yesterday’s session saw an increasing performance after J. Powell’s speech before the Congress, where he outlined that the progress of the recovery is not sufficient to lower debt purchases, also insisting on the temporality of inflation and dispelling signs of a premature tapering. In the Euro STOXX, the best-performing sectors were Basic Materials and Technology, whereas Construction and Travel&Leisure saw the biggest drops. On the macro side, in Spain, June’s final inflation climbed one tenth more than expected (2.7%), although the core data remained close to zero. In Brazil, May’s economic activity index moderated more than expected. In the US, June’s production prices rose more than expected, underscoring specific inflation pressures over the coming months. The Fed’s Beige Book showed the economy is growing at a moderate pace, with inflationary pressure above normal levels. In China, the 2Q’21 GDP saw its YoY rise slow more than expected, whereas retail sales and industrial output for June rose more than expected. In US business results, Bank of America, Delta Air Lines, Citigroup and Wells Fargo beat expectations and BlackRock was in line.
What we expect for today
European stock markets would fall less than -0.5% with worse performance by cyclical sectors in view of the underlying concerns surrounding possible disappointments in growth. Currently, S&P futures are down -0.1% (the S&P 500 ended +0.28% higher vs. its price at the closing bell in Europe). Volatility in the US decreased (VIX 16.33). Asian markets are trading with mixed results (China’s CSI +0.5% and Japan’s Nikkei -1.2%).
Today in the UK we will learn May’s ILO unemployment rate, in the US weekly jobless claims, Empire index, July’s Philadelphia Fed and June’s industrial output. In US business results, Bank of New York, US Bancorp, Morgan Stanley and Alcoa, among others, will release their earnings. In debt auctions: Spain (€ 6 Bn in bonds due 2024, 2028, 2031 and 2037) and France (€ 12.25 Bn in bonds due 2024, 2026, 2027, 2028 & I/L 2031 and 2036).


COMPANY NEWS

SIEMENS GAMESA. Poor preliminary 3Q’21 results and guidance cut for the year. SELL
At yesterday’s closing bell the company pre-released preliminary 3Q’21 results, with sales in line with expectations (€~2.7 Bn), although with negative adjusted EBIT once again (€ -150 M vs. € 79 M BS(e) and € 95 M consensus) due to € -229 M of provisions, affected by the high raw material prices and the increase in rollout costs of the 5.X platform (onshore). As a result, the company has lowered its guidance’21 as follows: (i) sales would stand at the low end of the previous guidance range (€ 10.2-10.5 Bn; vs. € 10.82 Bn BS(e) and € 10.41 Bn consensus) and (ii) the adjusted EBIT margin between -1% and 0% (vs. the previous 3-5%; 4.2% BS(e) and 3.0% consensus). Bearing in mind the outperformance over the past month (+14% vs. IBEX and -24% on the year), we expect a negative reaction on the share price, as it is not only another negative surprise in operating margins, but also the new guidance means in 4Q’21 SGRE will also generate negative adjusted EBIT. Conference call at 8:00 (CET).

2Q’21 Results highlights and rest of previews.
Among the companies releasing their earnings over the coming days, on the positive side we highlight Bankinter (release date 22/07), where we foresee a good market reaction bearing in mind that the operating trends remain robust without indications hinting at a deterioration of credit quality on the quarter; and Dominion (release date 22/07), where the strong recovery of sales (+18% vs. 2Q’19) and margins (+90bps on a sequential basis to 10.7%) would allow the company to continue beating the targets of its Strategic Plan, which, in addition to a stable cash performance (€ 90 M PNT vs. € 87 M as of YE’2020), should lead to a positive share price reaction, despite the stock’s recent good performance (+3% since its 1Q’21 results; +5% vs. IBEX).