FT : Mercedes-Benz puts forward China pragmatist to chair supervisory board

Mercedes-Benz puts forward China pragmatist to chair supervisory board
Carmaker set to appoint BASF chief Martin Brudermüller who last year warned against ‘China bashing’

Mercedes-Benz has proposed the chief of chemical group BASF as the next chair of its supervisory board, choosing an executive widely regarded as a China pragmatist.

The German carmaker has put forward Martin Brudermüller, the former head of BASF’s China business who last year warned against “China bashing”. He is expected to start his new role when he steps down from the helm of the chemical group next year.

Brudermüller knows the car industry well with the chemical group being an important supplier of paints and plastics. He is set to succeed Bernd Pischetsrieder, who previously held the same post at Volkswagen, and who is not standing for another term.

Under the German system, there are two boards: the executive board that runs the company day-to-day and the supervisory board that oversees the work of the former and advises on strategy.

Brudermüller has been criticised by some investors for his decision to build a €10bn chemical factory in China amid increasing geopolitical tension. Mercedes’ decision to hire Brudermüller comes a few days after its chief executive Ola Källenius said it would be “unthinkable for almost all of German industry” to cut ties with China. The company sells more than a third of its cars in the country.

About a fifth of the company is owned by Chinese carmakers Geely and state-owned BAIC, which have acquired stakes in German carmakers in recent years.

“The appointment of Brudermüller might be a compromise, it might be a chair that [the Chinese shareholders] are supporting because he knows China very well,” said Daniel Schwarz, an analyst at Stifel.

He said that China was strategically important for the carmakers as the “transition towards electric and autonomous cars is clearly faster in China than other regions”, adding that US and European industry might very well find itself having to follow Chinese technological advancements.

The announcement comes as Berlin is increasingly concerned about German industry’s reliance on China, amid Beijing’s growing tensions with the west.

Germany is still reeling from having to cut its ties with Russia after the war in Ukraine, with companies writing off their investments linked to the country. BASF is among the companies to have suffered the most from big bets on Russia and reported a €6.5bn writedown of its Russian assets a few months ago.

Mercedes’ German rivals Volkswagen and BMW on Thursday announced results for the first quarter, beating analysts’ expectations with strong sales.

Schwarz said all three of the big German car companies had built up stock from when supply chain issues left many cars standing unfinished, which would leave them more vulnerable to price pressures in the second half of the year.

In China, prices have come under pressure as leaders in the electric segment, such as BYD and Tesla, have been lowering prices to boost market share.

Mercedes has since 2019 been betting on the premium end of the market, which Schwarz said had moved the German group further away from rivalry with Tesla and BYD. “That doesn’t make them immune [to price pressure] but leaves them at less risk,” he said.

>>> US Research Calls

Research Calls

  • Upgrades:
    • Blackbaud (BLKB) upgraded to Outperform from Neutral at Robert W. Baird; tgt raised to $84
    • CEMEX S.A. (CX) upgraded to Buy from Neutral at Goldman; tgt raised to $9
    • Cerevel Therapeutics (CERE) upgraded to Overweight from Equal Weight at Wells Fargo; tgt $30
    • Design Therapeutics (DSGN) upgraded to Neutral from Sell at Goldman; tgt $6
    • Deutsche Bank (DB) upgraded to Buy from Neutral at Citigroup
    • Ionis Pharma (IONS) upgraded to Neutral from Sell at Citigroup; tgt raised to $36
    • Neurocrine Biosciences (NBIX) upgraded to Buy from Neutral at Guggenheim; tgt $145
    • Procore Technologies (PCOR) upgraded to Buy from Neutral at Goldman; tgt raised to $75
    • Qorvo (QRVO) upgraded to Buy from Hold at Summit Insights
    • Verisk Analytics (VRSK) upgraded to Buy from Underperform at BofA Securities; tgt raised to $243
    • Weave Communications (WEAV) upgraded to Outperform from Mkt Perform at Raymond James; tgt $6
    • Wix.com (WIX) upgraded to Outperform from Mkt Perform at Raymond James; tgt $96
  • Downgrades:
    • Builders FirstSource (BLDR) downgraded to Neutral from Outperform at Robert W. Baird; tgt $96
    • DHT (DHT) downgraded to Hold from Buy at Jefferies; tgt lowered to $10
    • Fulcrum Therapeutics (FULC) downgraded to Neutral from Buy at Goldman; tgt lowered to $3
    • Incyte (INCY) downgraded to Neutral from Buy at BofA Securities; tgt $84
    • QuinStreet (QNST) downgraded to Hold from Buy at Craig Hallum
    • Revolve Group (RVLV) downgraded to Mkt Perform from Outperform at Raymond James
    • Spirit Aerosystems (SPR) downgraded to Market Perform from Outperform at TD Cowen; tgt lowered to $28
    • TriplePoint Venture Growth (TPVG) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $10
    • Upwork (UPWK) downgraded to Neutral from Buy at BofA Securities; tgt $9
    • Wingstop (WING) downgraded to Neutral from Buy at Citigroup; tgt raised to $224
  • Others:
    • HomeTrust Bank (HTBI) assumed with an Overweight at Piper Sandler; tgt $25
    • Vertex Pharma (VRTX) assumed with an Overweight at Piper Sandler; tgt $385
    • ZoomInfo (ZI) initiated with a Buy at DA Davidson; tgt $30

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • EVA -44.7%, SYNA -19.5% (also authorizes new $500 mln share repurchase program), OPCH -19.2% (also to acquire AMED), UPWK -18.3%, HOUS -17.7%, PRVA -17%, PARA -14.8%, RVLV -10%, FARO -8.4% (also CEO to retire), TNDM -8.3%, ECVT -7.8%, QCOM -7.7%, ARDX -7.5%, SITM -7.2%, ALKT -7.1%, TRIP -6.4%, LESL -5.3%, RGR -5%, CORT -5%, NVCR -5%, NVST -4.9%, QNST -4.9%, AMWL -4.7%, NVO -4.4%, REGN -4%, IRWD -3.9%, AGIO -3.8%, WD -3.7%, PENN -3.7%, FNF -3.6%, ULCC -3.5%, WCC -3.5%, ACEL -3.3%, ICE -3.2%, MAC -3%, CCOI -2.7%, PZZA -2.7%, CDAY -2.6%, GEL -2.6%, ATUS -2.5%, GNK -2.3%, DEN -2.3%, MLM -2.3%, KRO -2.2%, IBP -2.2%, MTG -2%, FORM -2%, WERN -2%, ARHS -2%, JLL -2%, REZI -1.9%, BWA -1.9%, RCM -1.9%, ECPG -1.8%, ARGX -1.8%, CARS -1.8%, GIL -1.7%, OUT -1.7%, IMXI -1.7%, OGN -1.6%, RUN -1.5%, MOS -1.5%, ATO -1.5%, MT -1.5%, INFA -1.4%, INFA -1.4%, BHC -1.4%, MGY -1.3%, BDX -1.3%, STAA -1.2%, MET -1.2% (also authorizes new $3 bln share repurchase program), EVH -1.2%, SWK -1.2%, CG -1.2%, STWD -1.2%, BCE -1.2%, HII -1.2%, ANSS -1.1%, SRE -1.1%, TXG -1%, ZTS -1%

Other news:

  • FHN -41.5% (Toronto-Dominion Bank and First Horizon (FHN) agree to terminate their previously announced merger; TD to make a $200 mln payment to FHN)
  • PACW -37.2% (issues updated financial information; mulling strategic options including sale according to Bloomberg)
  • OPCH -19.2% (OPCH to acquire AMED in all-stock deal) ZYXI -19% ($50 mln convertible note offering; also CEO commences 2 mln share offering)
  • RPHM -15.9% (prices offering of 6.875 mln shares of common stock at $8.00 per share)
  • WAL -14.8% (issues updated financial information)
  • MCB -14% (in sympathy with PACW news)
  • RYI -3.8% (prices offering of 2630700 shares of common stock)
  • VCYT -3.1% (announces data published in journal)
  • SCHW -1.5% (in sympathy with PACW news)
  • AAPL -1.5% (in sympathy with QCOM earnings)

Analyst comments:

  • FULC -4.1% (downgraded to Neutral from Buy at Goldman)
  • SPR -2.1% (downgraded to Market Perform from Outperform at TD Cowen)
  • INCY -1.5% (downgraded to Neutral from Buy at BofA Securities)
  • WING -0.9% (downgraded to Neutral from Buy at Citigroup)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • SHOP +17.2%, FROG +12.9%, SEDG +11%, LMND +10.7%, W +10.3%, PCOR +9.8%, LNTH +9.1%, SHAK +7.9%, UDMY +7.7%, QRVO +7.4%, RSI +6.6%, HUBS +6.5%, INFN +5.9%, BALL +5.8%, CPE +5.6% (also to acquire Core Delaware Basin assets and Exit Eagle Ford), DDOG +5.5%, CFLT +5.2%, PGRE +5%, BPMC +4.8%, HST +4.5%, CTSH +4.4% (also increases dividend), EQNR +4.3%, ZG +4.2%, TIXT +4.2%, OCSL +3.9%, MELI +3.8%, RACE +3.8%, NE +3.4%, CSGS +3.4%, APG +3.4%, OPK +3.3%, AMED +3.3% (also to be acquired by OPCH), NFE +3.3%, OLED +3.2% (also acquires Phosphorescent OLED Emitter IP assets of Merck), AUPH +3.2%, BRKR +3.2%, CODI +3%, QGEN +3%, VNT +3%, OWL +2.9%, KLIC +2.8%, PH +2.7%, VMEO +2.5%, CTVA +2.2%, NGVT +2.2%, NSTG +2.2%, NSTG +2.2%, DINO +2.1%, COMM +2.1%, DFH +2.1%, PLMR +2%, RGNX +2%, SRI +2%, SUM +2%, AEIS +2%, WRK +2%, CWEN +2%, PLTK +1.8%, RGLD +1.7%, RGLD +1.7%, HCC +1.6%, SHEL +1.6%, GOLF +1.6%, ACLS +1.5%, FOUR +1.4%, FATE +1.3%, ALL +1.3%, AG +1.3%, FUN +1.2%, MKSI +1.1%, AVT +1.1%, BUD +1.1%, TFX +1.1%, APA +1%, FLT +1%, SBH +1%

Other news:

  • ARNC +28.2% (to be acquired by funds managed by Apollo Global Management (APO) at $30/share)
  • OPTN +5.1% (FDA accepted for review its supplemental new drug application requesting approval of XHANCE as a treatment for chronic rhinosinusitis)
  • AMED +3.3% (OPCH to acquire AMED in all-stock deal)
  • BTBT +2.4% (reports April production)
  • GFI +2.4% (Q1 operations) IMGN +2.2% ($200 mln stock offering)
  • TD +2.1% (Toronto-Dominion Bank and First Horizon (FHN) agree to terminate their previously announced merger; TD to make a $200 mln payment to FHN)
  • LEV +1.8% (launches the Lion5 medium-duty all-electric truck)
  • NOVA +1.7% (teaming up with Amica Insurance to expand services)
  • PAC +1.4% (reports April traffic)
  • TTMI +1.4% (authorizes new $100 mln share repurchase program)

Analyst comments:

  • WEAV +3.3% (upgraded to Outperform from Mkt Perform at Raymond James)
  • CX +1.7% (upgraded to Buy from Neutral at Goldman)
  • VRSK +1.6% (upgraded to Buy from Underperform at BofA Securities)
  • NBIX +1.1% (upgraded to Buy from Neutral at Guggenheim)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • LMND +11.8%, SEDG +11.3%, FROG +10.2%, UDMY +7.7%, PCOR +7%, CPE +6.9%, RSI +6.6%, QRVO +6.3%, OCSL +6.2%, AUPH +6.1%, CFLT +6%, INFN +5.9%, AVT +5.5%, HUBS +5.3%, OPK +5.2%, BALL +5.2%, PGRE +5%, EQNR +4.6%, HST +4.5%, NFE +4.4%, CTSH +4.3%, ZG +4.2%, GFI +3.9%, HCC +3.8%, MELI +3.4%, CSGS +3.4%, OLED +3.2%, AMED +3%, CODI +3%, IMGN +2.9%, VMEO +2.8%, ETSY +2.7%, DINO +2.6%, BTBT +2.4%, IR +2.4%, LEV +2.3%, CTVA +2.2%, NGVT +2.2%, NSTG +2.2%, QGEN +2.1%, PLMR +2%, RGNX +2%, SRI +2%, SUM +2%, AEIS +2%, GL +1.9%, SHEL +1.9%, NE +1.8%, MKSI +1.8%, RGLD +1.7%, TD +1.6%, GOLF +1.6%, QNST +1.5%, PAC +1.4%, FATE +1.3%, ALL +1.3%, KLIC +1.2%, FUN +1.2%, APA +1%, FLT +1%
  • Gapping down:
    • FHN -40.3%, PACW -39.1%, ZYXI -22.8%, MCB -19.4%, WAL -18.8%, HOUS -18.4%, UPWK -18.1%, SYNA -17.2%, OPCH -16.7%, RPHM -15.8%, RVLV -12.6%, TNDM -11.7%, FARO -8.4%, ECVT -7.8%, ALKT -7.1%, ARDX -6.8%, QCOM -6.8%, EVA -6.3%, TRIP -5.7%, LESL -5.3%, NVO -5.1%, RGR -5%, CORT -5%, NVST -4.9%, OUT -4.8%, AMWL -4.7%, SITM -4.2%, FNF -4.1%, ACEL -3.3%, ARGX -3.2%, VCYT -3.1%, STAA -3%, RYI -2.9%, ANSS -2.9%, ATUS -2.9%, CDAY -2.6%, GEL -2.6%, DEN -2.3%, SCHW -2.2%, KRO -2.2%, ECPG -2%, MTG -2%, FORM -2%, WERN -2%, REZI -1.9%, GIL -1.7%, IMXI -1.7%, MT -1.6%, ATO -1.5%, INFA -1.4%, MGY -1.3%, MET -1.1%, ALB -1%, TXG -1%

FT : Maersk warns of ‘radically changed’ world as profits tumble

Maersk warns of ‘radically changed’ world as profits tumble
Shipping group signals industry’s pandemic-driven boom is over as demand and freight rates fall

AP Møller-Maersk warned of a “radically changed business environment” as profits plunged at the world’s second-largest container shipping line due to a sharp drop in demand and freight rates.

The Danish shipping and logistics group beat analyst expectations in the first quarter but cautioned that earnings for the rest of the year would be weaker even as it forecast demand to improve in the second half.

“We delivered a solid financial performance in a challenging market with lower demand caused by a continued destocking. Visibility remains low for the remainder of the year,” said chief executive Vincent Clerc.

Container shipping went through an extraordinary boom after the first wave of the Covid-19 pandemic in 2020, with the industry making more money in three years than in the previous six decades.

But companies such as Maersk and market leader Mediterranean Shipping Company are braced for a tough 2023 as businesses reduce their inventories and freight rates fall from record highs.

Operating profit at Maersk fell by more than two-thirds to $2.3bn in the first quarter compared with a year earlier but was ahead of analyst expectations of $2bn. Revenues were down by a quarter to $14.2bn.

Maersk stuck by its full-year guidance of $2bn-$5bn of operating profits but said the first quarter was likely to be the strongest of the year.

Nevertheless, the company expected the inventory correction to be over by the end of the first half and volumes to pick up in the final six months of the year.

Volumes in its core ocean business fell by 9.4 per cent in the first three months of the year while freight rates dropped by 37 per cent. Revenues in ocean fell by more than a third to $9.9bn while operating profits plunged by almost three-quarters to $2bn.

Maersk said it expected economic growth to be “muted” and the container market — a proxy for global trade — to most likely contract.

“As we adjust to a radically changed business environment, we continue to support our customers in addressing their supply chain challenges,” Clerc said. “We are pleased to note that customers continue to value the integrated logistics solutions and close partnership we provide.”

>>> Europe : Brokers Upgrades & Downgrades - 4th of May 2023 V3(++)

>>> Up
* ACS Raised to Buy at AlphaValue/Baader
* Arcadis Raised to Buy at Bank Degroof Petercam; PT 52 euros (++)
* CRH Raised to Buy at Kepler Cheuvreux; PT 51 euros (++)
* Deutsche Bank Raised to Buy at Citi; PT 13.50 euros
* EFF GR Raised to Speculative Buy at SMC Research; PT 2.10 euros (++)
* ING Raised to Buy at Redburn
* Lassila & Tikanoja Raised to Accumulate at Inderes; PT 11 euros
* M&G Credit Income Investment Trust Raised to Buy at Stifel (++)
* Metso Outotec Raised to Accumulate at Inderes; PT 11.50 euros
* NTG Nordic Transport Group Raised to Buy at Danske Bank Markets
* Pandora Raised to Buy at Jyske Bank; PT 720 kroner (++)
* Paradox Interactive Raised to Buy at Handelsbanken
* UniCredit Raised to Outperform at Oddo BHF (+)

>>> Down
* Beiersdorf Cut to Market Perform at Bernstein (+)
* Biocartis Cut to Accumulate at KBC Securities; PT 1 euro
* Clasquin Cut to Hold at Kepler Cheuvreux; PT 76 euros (++)
* Demant Cut to Hold at Jyske Bank; PT 300 kroner (+)
* Deutsche Post Cut to Hold at M.M. Warburg; PT 47 euros (++)
* Estee Lauder Cut to Hold at CFRA; PT $200
* Estee Lauder PT Cut to $210 from $250 at Consumer Edge Research
* Flutter Cut to Equal-Weight at Wells Fargo; PT 16,600 pence
* Iberdrola Cut to Hold at Jefferies; PT 12 euros
* Know IT Cut to Hold at Handelsbanken
* L'Oreal Cut to Market Perform at Bernstein (+)
* Medcap Cut to Hold at ABG; PT 275 kronor (++)
* New Work Cut to Hold at M.M. Warburg; PT 170 euros (++)
* Orkla Cut to Hold at Pareto Securities; PT 80 kroner (++)
* Teleperformance Cut to Equal-Weight at Morgan Stanley
* YIT Cut to Sell at DNB Markets; PT 1 euro

>>> Initiation
* Comet Rated New Buy at Kepler Cheuvreux; PT 270 Swiss francs (++)
* LAIQON AG Rated New Add at AlphaValue/Baader
* NTG Nordic Transport Group Rated New Buy at Carnegie (++)

>>> Call
* AMG Revenue Beats, Guidance Now Appears Conservative, Citi Says
* BAE Update Sugggests Good Operational Performance: Jefferies (++)
* Iberdrola Cut to Hold at Jefferies With Attractions Priced In
* ISS Organic Growth Boosted by Pricing and Volumes, MS Says
* Maersk Falls on Lower Rates, Volumes, Miss in Non-Ocean: Stifel (++)
* Norsk Hydro May Need to Raise Price for Poland’s Alumetal: Erste (+)
* SIG Group Consensus to Rise After Beat, Reiterated Outlook: Citi (+)
* Swiss Re Beat to Help Stock, Casualty Reserving a Worry: MS (+)
* Teleperformance Cut at Morgan Stanley on Lack of Catalysts
* Telenor 1Q Numbers Show Improvement, Norway Strength, MS Says
* Valneva Gains; 1Q Sales Get Boost From Travel, Kempen Says (+)
* Vicat 1Q Revenue Beats, Consensus Should Rise, Citi Says
* Vonovia’s Disposals Show Management Delivering: RBC (+)
* Zalando’s Elevated Inventory Offsets Cost Control: Citi (+)