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IBERIAN DAILY 19 APRIL + 1Q’23 RESULTS. HIGHLIGHTS AND PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKING SECTOR, TALGO.

At the end of today’s report, and during the entire results season, we will include a presentation with with positive and negative results highlights and previews for the 1Q’23 results to be released over the coming days in Spain.

The good US results fuel stock markets
It was a positive session for Europe, with the Ibex exceeding the 9,400-point level, fuelled by the recovery of Chinese growth and the good US earnings season, which resulted in the better generalised performance of cyclical vs. defensive sectors. Thus, in the Euro STOXX, the best-performing sectors were Banks and Travel&Leisure vs. Pharma and Energy that saw the worst relative performance. On the macro side, in Germany, April’s ZEW moderated unexpectedly and even though the current conditions heading improved more than expected it remained in negative territory. In the UK, February’s ILO unemployment rate and wages climbed more than expected. In the US the number of housing starts rose more than expected in March whereas construction permits dropped more than expected. On another note, the Fed members Bullard and Bostic were in favour of raising Fed Funds by additional 50bps and 25bps, respectively. In US 1Q’23 Results, Goldman Sachs and Bank of America came in better than expected, Bank of NY in line, Netflix released disappointing revenues and subscriptions figures.
What we expect for today
The European stock markets would see some profit-taking at the opening bell. Currently, S&P futures are down -0.15% (the S&P 500 ended +0.25% higher vs. the European closing bell). Volatility in the US fell (VIX 16.83). Asian markets are sliding (China’s CSI 300 -0.4% and Japan’s Nikkei -0.25%).
Today in the euro zone and UK we will learn March’s final inflation. In 1Q’23 US business results, Morgan Stanley, IBM and Tesla, among others, will release their earnings. As for auctions, Germany will issue € 4 Bn in bonds due 2033.


COMPANY NEWS

1Q’23 Results highlights and rest of previews
Of the stocks releasing their earnings over the coming days, on the positive side we highlight Santander (25/04), where we expect a good performance of capital and significant progress, meaning around € 2.6 Bn of Operating Net Profit, near the € 2.8 Bn quarterly needed to meet the 15% RoTE in 2023.

TALGO. Contract with DSB extended with 8 additional trains. BUY
The company announced at yesterday’s closing bell that the Danish company DSB has approved to execute the option to extend the contract signed in 2020 (the initial order included 8 trains totalling € 134 M) with 8 additional Intercity Talgo 230 trains (and parts for their maintenance) for a total of € 184 M. The contract extension is subject to approval by the Danish Parliament. Positive news although of limited impact since, despite the substantial size of the contract extension (~6% of the backlog’22), it is not surprising. We understand that the price difference vs. the first order (+37%) is due to the fact that the current trains will have a higher capacity and inflation is passed on. However, we are still waiting for possible extensions of the contracts with Deutsche Banh and Saudi Arabia (€~1.8 Bn in total BS(e)/~60% of the backlog), as well as the contract with LeTrain (10 very high speed trains for € 300 M BS(e)/~10% of the backlog’22).