Gapping up
In reaction to earnings/guidance:
- AXGN +18%, FDX +9%, BRC +4.1%, ADBE +2.1%, TRTN +1.5%
Other news:
- AMCX +16.8% (exec chairman departs; also plans to commence modified Dutch auction for up to $250 mln; James Dolan named Non-Exec Chairman),
- TLSA +15.2% (announces planned spin out of StemPrintER into a new publicly listed company, Accustem Sciences)
- ARWR +9.5% (announced positive interim 24-week liver biopsy results in four subjects from AROAAT2002 as a treatment for the rare genetic liver disease associated with alpha-1 antitrypsin deficiency)
- BRC +6.8% (increases dividend)
- MDWD +6.2% (announces FDA accepted for review BLA for NexoBrid for eschar removal (debridement) in adults with deep partial-thickness and/or full-thickness thermal burns)
- AVEO +6.1% (announces publication of Phase 3 TIVO-3 study)
- UPS +4.3% (in sympathy with strong FDX earnings)
- WPRT +2.5% (to sell assets of Rohan BRC Gas Equipment), GM +2.3% (aiming to manufacture family of electric car drive systems and motors, according to Reuters)
- VSTO +2.1% (updated results from the ongoing investigator-initiated Phase 1/2 FRAME study evaluating VS-6766, its RAF/MEK inhibitor, in combination with defactinib)
- LLY +1.9% (announces proof of concept data for neutralizing antibody LY-CoV555 in the COVID-19 outpatient setting)
- HST +1.8% (provides update on 3Q20 business trends)
- OI +1.7% (provides investor update in presentation)
- TAK +1.3% (to divest TachoSil for €350 mln)
- APDN +1.1% (to launch clinical trial for veterinary use of linear COVID-19 vaccine candidate)
- MSFT +1% (increases dividend)
Analyst comments:
- VECO +9.2% (upgraded to Buy from Neutral at Goldman)
- CVET +4.8% (upgraded to Buy from Hold at Stifel)
- TPR +4.5% (upgraded to Buy from Hold at Deutsche Bank)
- NGD +2.7% (upgraded to Sector Outperform from Neutral at CIBC)
- DAVA +1.5% (upgraded to Buy from Neutral at Citigroup)
- DLR +1.2% (upgraded to Outperform from Market Perform at BMO Capital Markets)
- EXK +0.9% (upgraded to Neutral from Sector Underperform at CIBC)
- KBH +0.8% (upgraded to Outperform from In-line at Evercore ISI)
- LEN +0.8% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
Early premarket gappers
- Gapping up:
- AXGN +20%, AMCX +15.7%, TLSA +15.2%, FDX +10.3%, AVEO +9.9%, BRC +5.1%, APDN +4.8%, UPS +4.7%, WPRT +3.1%, SPOT +2.7%, ADBE +2.7%, TACO +2.6%, HST +1.8%, OI +1.7%, TRTN +1.5%, MSFT +1.1%, GOOG +0.9%, HRC +0.9%, USFD +0.9%, TAK +0.8%
- Gapping down:
- ADT -8.3%, NEE -2.8%, SYNH -2.5%, CAAP -1.8%, SHOP -1.1%, RUSHA -1%
Hitachi blames Covid-19 for pullout from UK nuclear project
Japanese conglomerate’s decision will cast a shadow over future of UK energy policy
Hitachi has pulled the plug on its nuclear power station project at Wylfa in Wales, blaming the global pandemic for a decision that will cast a shadow over the future of UK energy policy.
The formal announcement, which followed a board meeting on Wednesday, is the latest blow to the UK’s ambitions on climate change as it aims to achieve net zero carbon emissions by 2050.
In a statement, the Japanese industrial conglomerate said the decision came after “the investment environment has become increasingly severe due to the impact of Covid-19”.
While describing the decision as “disappointing,” a UK government spokesperson said it was open to discussing new nuclear projects with any viable companies and investors that are willing to develop sites in the UK, including in North Wales.
“Nuclear power will play a key role in the UK’s future energy mix as we transition to a low-carbon economy, including through our investments in small and advanced modular reactors,” the spokesperson added.
Hitachi bought the site in Anglesey, an island off the coast of north Wales — dubbed Horizon Nuclear — from two German utility companies for £697m in 2012.
But the group suspended the £20bn scheme in January 2019 after the company failed to secure a financial agreement with the UK government. It later wrote off nearly ¥300bn ($2.8bn) of work in progress.
Analysts had said Hitachi was likely to walk away from the project following its $6.4bn deal in late 2018 to buy an 80 per cent stake in Swedish-Swiss conglomerate ABB’s power grids division — a business that has also been hit by a decline in electricity consumption due to coronavirus lockdowns.
Still, as recently as August, Horizon executives remained hopeful that the Wylfa site could be revived and held detailed discussions with UK officials — but the optimism was not shared by Hitachi’s management.
On Wednesday, Duncan Hawthorne, chief executive of Horizon, said: “Wylfa Newydd on Anglesey and Oldbury on Severn are highly desirable sites for new nuclear build. We will do our utmost to facilitate the prospects for development which will bring the major local, national and environmental benefits that nuclear can uniquely deliver.”
Stephen Crabb, the former work and pensions secretary who chairs the Welsh affairs committee, said the breakdown of the largest energy project in Wales was a hit to UK’s energy policy. “With the nation’s remaining nuclear plants ageing and the need for low-carbon, high yield plants needed to replace them urgent, it has never been more important than now to ensure energy security,” he said.
FAA, Boeing Blasted Over 737 MAX Failures in Democratic Report
Transportation Committee’s findings blame design errors, flawed aircraft certification system for fatal errors
House Democrats issued a sharply worded report revealing new details of how the combination of Boeing Co. BA -1.12% design errors, lax government oversight and lack of transparency by the plane maker and regulators set the stage for two fatal 737 MAX crashes.
The 238-page document, written by the majority staff of the House Transportation Committee, calls into question whether the plane maker or the Federal Aviation Administration has fully incorporated essential safety lessons, despite a global grounding of the MAX fleet since March 2019.
After an 18-month investigation, the report, released Wednesday, concludes that Boeing’s travails stemmed partly from a reluctance to admit mistakes and “point to a company culture that is in serious need of a safety reset.”
“We have learned many hard lessons as a company from the accidents of Lion Air Flight 610 and Ethiopian Flight 302, and from the mistakes we have made,” Boeing said in a written response to the report, referring to the two fatal MAX crashes. The Chicago-based aerospace giant added: “We have been hard at work strengthening our safety culture and rebuilding trust with our customers, regulators, and the flying public.”
The findings released Wednesday also questioned whether pending changes inside the FAA would be sufficient to end what the report describes as fundamentally inadequate government reviews of new aircraft designs. Engineering and management errors on the MAX, according to the report, reflect a flawed approval process in which agency managers often undercut the authority of lower-level FAA engineers, giving industry undue influence over the process.
The report blames “grossly insufficient oversight by the FAA,” leaving the agency unable to appropriately meet its responsibilities and ensure passenger safety.
Rep. Peter DeFazio, the Oregon Democrat who is the committee’s chairman, said the 737 MAX saga highlights the need for major changes to U.S. air-safety regulation. “The problem is: It was compliant and not safe, and people died,” Mr. DeFazio said of the aircraft in a press briefing Tuesday. “Obviously, the system is inadequate.”
Responding to the report, the FAA said it is “committed to continually advancing aviation safety and looks forward to working with the committee to implement improvements identified in its report,” adding that voluntary initiatives already are under way based on lessons learned. The statement added that its focus is on “improving our organization, processes and culture.” The agency reiterated that it has mandated design changes to the MAX and “continues to follow a thorough process, not a prescribed timeline, for returning the aircraft to service.”
The report provides more specifics, in sometimes-blistering language, backing up preliminary findings the panel’s Democrats released six months ago, which laid out a pattern of mistakes and missed opportunities to correct them. Misfires of an automated flight-control system, called MCAS, overpowered pilots and led to two MAX crashes in less than five months that took 346 lives.
Fresh details in the report, however, show that various Boeing employees recognized and repeatedly flagged some of those hazards years before the FAA in 2017 certified the MAX as safe to carry passengers, though their warnings failed to prompt high-priority reviews by either the company or the agency.
Republican staffers participated in some interviews, including with two high-ranking Boeing executives who defended the plane maker’s design process. But none of the panel’s GOP members signed off on the report.
Senior Republicans on the committee disputed the Democrats’ call for an overhaul of U.S. aircraft certification, dismissing the report as partisan. “Expert recommendations have already led to changes and reforms, with more to come,” they said in a statement setting the stage for debate over an air-safety bill the committee’s Democrats are expected to introduce in coming weeks.
In one section, the Democrats’ report faults Boeing for what it calls “inconceivable and inexcusable” actions to withhold crucial information from airlines about one cockpit-warning system, related to but not part of MCAS, that didn’t operate as required on 80% of MAX jets. Other portions highlight instances when Boeing officials, acting in their capacity as designated FAA representatives, part of a widely used system of delegating oversight authority to company employees, failed to alert agency managers about various safety matters.
The longest portion of the document details previously undisclosed safety concerns raised inside Boeing by lower-level employees about the design and vulnerabilities of MCAS itself, concluding those questions “were inadequately resolved or dismissed.”
In June of 2016, about a year before the FAA certified the MAX’s safety, a Boeing engineer sent a colleague an email that referred to a company test pilot’s difficulty leveling the plane’s nose due to repetitive MCAS activations.
After the engineer questioned whether the pilot’s maneuvering difficulty amounted to a safety issue, the colleague responded it didn’t, but noted that in such a situation, pilots could “find themselves in a large mistrim,” meaning the plane’s nose could be sharply pointed down. That was exactly the scenario that played out in each MAX crash, with cockpit crews unable to regain control after the planes’ noses were forced downward by repeated, erroneous MCAS activations.
In another exchange, a Boeing employee asked how MCAS would react to faulty sensor data—which accident investigators would later identify as a precipitating factor in both fatal crashes—but the issue was dismissed by a colleague.
The report said the internal Boeing design concerns weren’t sufficiently resolved or addressed.
The House panel also highlighted internal Boeing documents spanning 2015 to 2018 that noted a company test pilot’s finding that a slow reaction to an MCAS misfire—one taking longer than 10 seconds—could result in catastrophe.
The report said several Boeing employees working on behalf of the FAA didn’t share the test pilot’s finding with the agency. Boeing has said it relied on industrywide safety principles to assume pilots would be able to respond appropriately to an MCAS misfire in four seconds.
In its statement responding to the report, Boeing highlighted steps it has taken in the wake of the MAX saga, which has cost it billions of dollars, on top of lost revenue and a drop in stock-market value, and significantly damaged its reputation. “We have made fundamental changes to our company,” Boeing said, noting “change is always hard and requires commitment” and adding it is dedicated to doing that work.
Delving into the period between the two crashes, the report said both the FAA and Boeing “seemed more intent on justifying their previous mistakes than in fully confronting the safety issues.” And committee investigators presented a picture of the FAA’s safety chief, Ali Bahrami, as divorced from day-to-day concerns about the MAX. According to the report, Mr. Bahrami told the investigators in an interview that he hadn’t seen Boeing’s bulletin reminding pilots of an emergency procedure days after the first MAX accident in October 2018.
Mr. Bahrami also told House staffers he wasn’t familiar with an internal FAA risk assessment after the first crash, which projected 15 more fatal crashes over the decadeslong lifetime of the MAX fleet if Boeing didn’t add safeguards to MCAS, the report said.
“I’m not familiar with the details of it,” Mr. Bahrami told the committee’s investigators in a December 2019 interview, according to the report. Mr. Bahrami acknowledged he decided fixes to MCAS could wait while the plane kept flying, because he and other FAA officials believed pilots would be able to intervene to avoid a crash. Echoing Boeing’s initial defense of its MCAS design after the first crash, the FAA official said “pilots are part of the system, and we rely on pilots to do certain things.”
The transcript of Mr. Bahrami’s interview with House investigators shows he said he didn’t recall any conversations with Boeing counterparts in the nearly five months between the two accidents. The report, however, cites emails showing he scheduled a call with a high-ranking Boeing executive to discuss the crash in Indonesia, though it wasn’t clear to the committee’s investigators whether the conversation took place. The FAA had no specific comment on Mr. Bahrami’s testimony.
But in a message sent to FAA staff Tuesday, which was reviewed by The Wall Street Journal, Mr. Bahrami alerted them to the House panel’s findings. “While the report is critical of both Boeing and the FAA, it offers valuable insights into how we can improve,” according to the message. After reiterating agency initiatives he supports, Mr. Bahrami’s message also urged employees to “work together to further enhance our safety processes.”
FAA, Boeing Blasted Over 737 MAX Failures in Democratic Report
Transportation Committee’s findings blame design errors, flawed aircraft certification system for fatal errors
House Democrats issued a sharply worded report revealing new details of how the combination of Boeing Co. BA -1.12% design errors, lax government oversight and lack of transparency by the plane maker and regulators set the stage for two fatal 737 MAX crashes.
The 238-page document, written by the majority staff of the House Transportation Committee, calls into question whether the plane maker or the Federal Aviation Administration has fully incorporated essential safety lessons, despite a global grounding of the MAX fleet since March 2019.
After an 18-month investigation, the report, released Wednesday, concludes that Boeing’s travails stemmed partly from a reluctance to admit mistakes and “point to a company culture that is in serious need of a safety reset.”
“We have learned many hard lessons as a company from the accidents of Lion Air Flight 610 and Ethiopian Flight 302, and from the mistakes we have made,” Boeing said in a written response to the report, referring to the two fatal MAX crashes. The Chicago-based aerospace giant added: “We have been hard at work strengthening our safety culture and rebuilding trust with our customers, regulators, and the flying public.”
The findings released Wednesday also questioned whether pending changes inside the FAA would be sufficient to end what the report describes as fundamentally inadequate government reviews of new aircraft designs. Engineering and management errors on the MAX, according to the report, reflect a flawed approval process in which agency managers often undercut the authority of lower-level FAA engineers, giving industry undue influence over the process.
The report blames “grossly insufficient oversight by the FAA,” leaving the agency unable to appropriately meet its responsibilities and ensure passenger safety.
Rep. Peter DeFazio, the Oregon Democrat who is the committee’s chairman, said the 737 MAX saga highlights the need for major changes to U.S. air-safety regulation. “The problem is: It was compliant and not safe, and people died,” Mr. DeFazio said of the aircraft in a press briefing Tuesday. “Obviously, the system is inadequate.”
Responding to the report, the FAA said it is “committed to continually advancing aviation safety and looks forward to working with the committee to implement improvements identified in its report,” adding that voluntary initiatives already are under way based on lessons learned. The statement added that its focus is on “improving our organization, processes and culture.” The agency reiterated that it has mandated design changes to the MAX and “continues to follow a thorough process, not a prescribed timeline, for returning the aircraft to service.”
The report provides more specifics, in sometimes-blistering language, backing up preliminary findings the panel’s Democrats released six months ago, which laid out a pattern of mistakes and missed opportunities to correct them. Misfires of an automated flight-control system, called MCAS, overpowered pilots and led to two MAX crashes in less than five months that took 346 lives.
Fresh details in the report, however, show that various Boeing employees recognized and repeatedly flagged some of those hazards years before the FAA in 2017 certified the MAX as safe to carry passengers, though their warnings failed to prompt high-priority reviews by either the company or the agency.
Republican staffers participated in some interviews, including with two high-ranking Boeing executives who defended the plane maker’s design process. But none of the panel’s GOP members signed off on the report.
Senior Republicans on the committee disputed the Democrats’ call for an overhaul of U.S. aircraft certification, dismissing the report as partisan. “Expert recommendations have already led to changes and reforms, with more to come,” they said in a statement setting the stage for debate over an air-safety bill the committee’s Democrats are expected to introduce in coming weeks.
In one section, the Democrats’ report faults Boeing for what it calls “inconceivable and inexcusable” actions to withhold crucial information from airlines about one cockpit-warning system, related to but not part of MCAS, that didn’t operate as required on 80% of MAX jets. Other portions highlight instances when Boeing officials, acting in their capacity as designated FAA representatives, part of a widely used system of delegating oversight authority to company employees, failed to alert agency managers about various safety matters.
The longest portion of the document details previously undisclosed safety concerns raised inside Boeing by lower-level employees about the design and vulnerabilities of MCAS itself, concluding those questions “were inadequately resolved or dismissed.”
In June of 2016, about a year before the FAA certified the MAX’s safety, a Boeing engineer sent a colleague an email that referred to a company test pilot’s difficulty leveling the plane’s nose due to repetitive MCAS activations.
After the engineer questioned whether the pilot’s maneuvering difficulty amounted to a safety issue, the colleague responded it didn’t, but noted that in such a situation, pilots could “find themselves in a large mistrim,” meaning the plane’s nose could be sharply pointed down. That was exactly the scenario that played out in each MAX crash, with cockpit crews unable to regain control after the planes’ noses were forced downward by repeated, erroneous MCAS activations.
In another exchange, a Boeing employee asked how MCAS would react to faulty sensor data—which accident investigators would later identify as a precipitating factor in both fatal crashes—but the issue was dismissed by a colleague.
The report said the internal Boeing design concerns weren’t sufficiently resolved or addressed.
The House panel also highlighted internal Boeing documents spanning 2015 to 2018 that noted a company test pilot’s finding that a slow reaction to an MCAS misfire—one taking longer than 10 seconds—could result in catastrophe.
The report said several Boeing employees working on behalf of the FAA didn’t share the test pilot’s finding with the agency. Boeing has said it relied on industrywide safety principles to assume pilots would be able to respond appropriately to an MCAS misfire in four seconds.
In its statement responding to the report, Boeing highlighted steps it has taken in the wake of the MAX saga, which has cost it billions of dollars, on top of lost revenue and a drop in stock-market value, and significantly damaged its reputation. “We have made fundamental changes to our company,” Boeing said, noting “change is always hard and requires commitment” and adding it is dedicated to doing that work.
Delving into the period between the two crashes, the report said both the FAA and Boeing “seemed more intent on justifying their previous mistakes than in fully confronting the safety issues.” And committee investigators presented a picture of the FAA’s safety chief, Ali Bahrami, as divorced from day-to-day concerns about the MAX. According to the report, Mr. Bahrami told the investigators in an interview that he hadn’t seen Boeing’s bulletin reminding pilots of an emergency procedure days after the first MAX accident in October 2018.
Mr. Bahrami also told House staffers he wasn’t familiar with an internal FAA risk assessment after the first crash, which projected 15 more fatal crashes over the decadeslong lifetime of the MAX fleet if Boeing didn’t add safeguards to MCAS, the report said.
“I’m not familiar with the details of it,” Mr. Bahrami told the committee’s investigators in a December 2019 interview, according to the report. Mr. Bahrami acknowledged he decided fixes to MCAS could wait while the plane kept flying, because he and other FAA officials believed pilots would be able to intervene to avoid a crash. Echoing Boeing’s initial defense of its MCAS design after the first crash, the FAA official said “pilots are part of the system, and we rely on pilots to do certain things.”
The transcript of Mr. Bahrami’s interview with House investigators shows he said he didn’t recall any conversations with Boeing counterparts in the nearly five months between the two accidents. The report, however, cites emails showing he scheduled a call with a high-ranking Boeing executive to discuss the crash in Indonesia, though it wasn’t clear to the committee’s investigators whether the conversation took place. The FAA had no specific comment on Mr. Bahrami’s testimony.
But in a message sent to FAA staff Tuesday, which was reviewed by The Wall Street Journal, Mr. Bahrami alerted them to the House panel’s findings. “While the report is critical of both Boeing and the FAA, it offers valuable insights into how we can improve,” according to the message. After reiterating agency initiatives he supports, Mr. Bahrami’s message also urged employees to “work together to further enhance our safety processes.”
Boeing hid design flaws in Max jets from pilots and regulators
Congressional report into why two 737 aircraft crashed within months of each other finds aerospace manufacturer cut corners
Boeing hid design flaws in its 737 Max jet from both pilots and regulators as it raced to have the aeroplane certified as fit to fly, according to a damning Congressional report into why two of the aircraft crashed within months of each other last year, killing 346 people.
The report by the US House of Representatives transport committee found the US aircraft maker cut corners and pressured regulators to overlook aspects of its new design in its attempts to catch up with European rival Airbus. It also accused US regulators of being too concerned with pleasing the company to exercise proper oversight.
The report said: “[The two crashes] were the horrific culmination of a series of faulty technical assumptions by Boeing’s engineers, a lack of transparency on the part of Boeing’s management, and grossly insufficient oversight by the [Federal Aviation Administration] — the pernicious result of regulatory capture on the part of the FAA with respect to its responsibilities to perform robust oversight of Boeing and to ensure the safety of the flying public.
“The facts laid out in this report document a disturbing pattern of technical miscalculations and troubling management misjudgments made by Boeing. It also illuminates numerous oversight lapses and accountability gaps by the FAA that played a significant role in the 737 Max crashes.”
Boeing has been under multiple investigations since last year, when a Max jet operated by Ethiopian Airlines crashed just five months after another owned by Indonesia’s Lion Air plunged into the sea.
Investigators have found that on both occasions, a faulty sensor caused an automatic anti-stall system to kick in erroneously, forcing the aeroplane’s nose downwards. Pilots for both Lion Air and Ethiopian Airlines battled to right their jets, but were overridden by the automatic system each time they did so.
Members of Congress have been conducting their own probe into the accidents since last April. Wednesday’s report marks the culmination of 17 months of investigation, involving five public hearings, 24 interviews and 600,000 pages of documents.
The 238-page report details how Boeing attempted to minimise both the regulatory testing and pilot training required to fly the new Max, which was being rushed out in an attempt to compete with the Airbus A320neo.
It found the company successfully persuaded the US Federal Aviation Administration not to classify the anti-stall system as “safety critical”, meaning that many pilots did not even know of its existence before flying the Max.
In doing so, Boeing concealed from regulators internal test data showing that if a pilot took longer than 10 seconds to recognise that the system had kicked in erroneously, the consequences would be “catastrophic”.
The report also detailed how an alert, which would have warned pilots of a potential problem with one of their anti-stall sensors, was not working on the vast majority of the Max fleet. It found that the company deliberately concealed this fact from both pilots and regulators as it continued to roll out the new aircraft around the world.
Boeing has been working to correct the faults found in the Max for more than a year, and recently said it hoped to begin delivering the jet again in the third quarter.
The company said: “The revised design of the Max has received intensive internal and regulatory review, including more than 375,000 engineering and test hours and 1,300 test flights. Once the FAA and other regulators have determined the Max can safely return to service, it will be one of the most thoroughly-scrutinised aircraft in history.”
While the company cut corners in its attempts to certify the Max, the committee found a compliant regulator in the FAA.
The FAA certifies new aircraft designs by relying heavily on “authorised representatives”, company employees who are authorised by the regulator to validate certain designs and systems. And the report found that on several occasions Boeing did not flag important pieces of information to the regulator.
Members of Congress have introduced legislation that would toughen the FAA’s aircraft certification process, including carrying out regular independent audits on company-employed representatives.
The FAA said in a statement: “The FAA is committed to continually advancing aviation safety and looks forward to working with the committee to implement improvements identified in its report.”
>>> Up
* Ahold Delhaize Raised to Neutral at JPMorgan; PT 23 euros
* Asos Raised to Reduce at AlphaValue
* BAE Raised to Buy at Jefferies; PT 600 pence
* Cellnex Raised to Buy at Grupo Santander; PT 59.50 euros
* Corero Network Security Raised to Buy at Cenkos Securities
* Handelsbanken Raised to Overweight at Morgan Stanley
* ITM Power Raised to Buy at Investec; PT 335 pence (+)
* Lundbeck Raised to Neutral at Goldman; PT 214 kroner
* MBB SE Raised to Buy at Berenberg; PT 100 euros
* RSA Raised to Buy at HSBC; PT 570 pence
* Standard Chartered Raised to Buy at Investec; PT 450 pence (+)
* Telia Raised to Buy at SEB Equities; PT 41 kronor
* VAT Raised to Neutral at JPMorgan; PT 165 Swiss francs
>>> Down
* Amadeus Cut to Sell at Mirabaud Securities; PT 43.40 euros
* Asos Cut to Neutral at CaixaBank BPI; PT 5,014 pence
* Avance Gas Cut to Sell at Cleaves Securities
* Bankia Cut to Neutral at Citi; PT 1.35 euros
* BW LPG Cut to Sell at Cleaves Securities
* Casino Cut to Neutral at JPMorgan; PT 30 euros
* Hurricane Energy Cut to Hold at Stifel; PT 2.50 pence (+)
* Lagardere Cut to Reduce at Oddo BHF; PT 15 euros (+)
* Richemont Cut to Sell at SBG Securities; PT 65 Swiss francs (+)
* Unite Group Cut to Hold at Jefferies; PT 1,070 pence
* Wm Morrison Supermarkets Cut to Underweight at JPMorgan
* Yara Cut to Equal-Weight at Morgan Stanley; PT 345 kroner
>>> Initiation
* Fluidra Rated New Buy at Berenberg; PT 17.50 euros
* JDE PEET'S Rated New Buy at SocGen; PT 41 euros
* Moncler Rated New Buy at UBI Banca; PT 44.60 euros (+)
* Telenor Reinstated Buy at Danske Bank Markets; PT 185 kroner
* Tenaris ADRs Rated New Sector Outperform at Scotiabank; PT $16
>>> Call
* BAE Well-Placed to Meet Challenges, Upgrade to Buy: Jefferies
* Ferragamo 1H Profitability Beat, Focus on Costs Helps: Jefferies
* Fluidra a Buy as Pandemic Boosts Home Pool Demand: Berenberg
* Handelsbanken Becomes Top Pick, Raised at Morgan Stanley
* Redrow FY20 Had Tough End, But Trading Improving: Peel Hunt (+)
* SoftwareOne Results, Outlook Are ‘Slightly Positive,’ ZKB Says (+)
* U.K. Student Housing Forecasts Pessimistic, Unite Cut: Jefferies
* William Hill PT Hiked After Significant ESPN Deal: Deutsche Bank (+)
* Yara Cut at Morgan Stanley on Gas Prices, FX, China Headwinds (+)
Deloitte Predicts Two Holiday Season Scenarios
Experts forecast a large divide in spending as a K-shaped recovery model emerges.
According to Deloitte’s annual holiday retail forecast, 2020 could be a “tale of two holiday seasons.”
Marked by continued uncertainty, the Deloitte retail and distribution team has predicted that holiday sales will play out in two possible scenarios, a 0-to-1 percent increase or a more significant 2.5-to-3.5 percent increase. Both are notably lower than years prior and will be driven by a K-shaped recovery.
“This year, one of two holiday scenarios will play out. Regardless of the scenario, however, the consumer’s focus on health, financial concerns and safety will result in a shift in the way they spend their holiday budget,” said Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader. “For retailers, this holiday season will continue to push the boundaries on the importance of online, convenience, the role of the store, and the criticalness of safe and speedy fulfillment.”
“The lower projected holiday growth this season is not surprising given the state of the economy,” said Daniel Bachman, Deloitte’s U.S. economic forecaster. “While high unemployment and economic anxiety will weigh on overall retail sales this holiday season, reduced spending on pandemic-sensitive services such as restaurants and travel may help bolster retail holiday sales somewhat.”
According to Bachman, K-shape is very significant to this year’s holiday season. Beyond usual uncertainty, this year’s economic forecast also brings elements of epidemiology and an unusual recession pattern.
“Typical recessions occur through the financial system and hit businesses that are interest-sensitive or sensitive to the financial system, which is more likely to be things like manufacturing,” said Bachman. “In this case, what we did was we just shut down a large chunk of the services sector. Normally services are not as sensitive to recessions as manufacturing this recession is the opposite. And it happens that people who work in the services sector are at a lower-than-average wages so what we are seeing is a kind of bifurcation, or a division, in how the economy is being affected.”
The K-shape, therefore, shows the separation of consumers who are likely to have a strong holiday and those who were more strongly disadvantaged by the pandemic.
In the first scenario, which forecasts 0-to-1 percent year-over-year sales growth, to come true consumers would continue to experience heightened anxieties related to finances and health. This lack of confidence would reinforce trends of consumers reserving funds for nondiscretionary items and less likely to spend on holiday purchases.
At the same time, for scenario two to occur, which predicts 2.5-to-3.5 percent growth, consumers will need to experience increased confidence. According to Deloitte, this confidence could come to life in a number of ways including an effective federal pandemic relief bill with unemployment insurance benefit supplement and the creation of an effective vaccine.
Moreover, with consumers spending dramatically less on experience, travel, and services this holiday season, funds are expected to be redirected to spending on holiday gifts. And e-commerce is predicted to come out on top as consumers continue to show movement toward buying online during the pandemic.
The company predicts e-commerce holiday sales will experience a surge of 25 to 35 percent, year-over-year, while overall the forecast for 2020 holiday sales is just 1 to 1.5 percent.
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