(MS) Eq. Strat. Earning Season Monitor - Sales Beat but EPS Miss

Earnings Season Monitor - Initial results show Sales beat but EPS miss

We publish the initial readings on the 4Q results so far. Weighted EPS has come in 0.6% ahead of consensus so far, but more companies have missed than beaten for the first time since 4Q14. Sales results have been much stronger however, while price reaction has been negatively skewed.

* Europe has so far seen more earnings misses than beats for the first time since 4Q14. 
Weighted earnings have come in fractionally ahead of expectations, but so far we have seen 8% more companies miss consensus than beat. This would be the first quarter in three years where Europe has seen more misses than beats, and to date the worst quarter on this basis since 2008. We would note however that it is still early days in the European results season, and only Financials and Industrials have seen 10 or more companies report EPS in MSCI Europe.

* Sales have been much better than earnings. 
In general top-line results have been much better than EPS - a complete reversal of the trend seen in 3Q results. 13%
more companies have beaten sales estimates than missed, weighted sales have beaten by 3.6% and the median stock 0.2% ahead of expectations.

* The median stock is seeing EPS growth of 8%. 
Weighted earnings growth in Europe currently stands at 38% YoY in 4Q, but this is heavily distorted by base effects in Financials. More representative is the growth in the median stock, where earnings are up 7.8% year-on-year. Sales are in aggregate growing by 3.7%, while the median stock is seeing top-line growth of 3.0%.

* Price reaction has been negatively skewed. 
So far there has been a clear negative skew in performance around results. On the day of results, stocks beating EPS estimates have outperformed by 1%, while misses have underperformed by 2%. The negative skew in performance around results is even more pronounced on sales.

* Earnings revisions neutral. 
Earnings revisions in Europe are currently flat, but there is a wide range at the sector level. Commodities are currently seeing a very strong pace of earnings upgrades while Financials and Cyclicals have also seen modest upgrades. Defensives have been the laggard and have seen a renewed acceleration in earnings downgrades.

>>> Europe Pre Market indication

CS
Daimler M/P Press spec Geely is said to be buying shares in Daimler
DKSH M/P FY net sales CHF11bn, cons 11bn, outlook ok
Fiat -3-5% Reports US DOJ has offered to settle its emissions lawsuit
Galp M/P Production good-99.1 kboepd for Q4. guidance FY was 90-95k
Miners -0.5% Copper +0.60%, Brent -0.30%, Iron Ore +1.05%, China UNCH
Randgold +1% Q4 small beat on Net Income, divi ahead, guidance inline
Ryanair -2-3% Q3 revs €1.40bn vs cons €1.40bn, cautious on 2019
Sandvik +2% Q4 revs 4% ahead, adj op profit 9% beat, orders 4% beat
Tesco M/P Management change, profit forecasts inline
Vestas M/P Entered an agreement for acquisition of Utopus Insights Inc
Wizzair -1-2% Traffic stats - load factor 87.7%, passenger numbers +24%
MainFirst Pre Mkt Indications
*DKSH-FY Sales 11b(11),OP 297m(298.5),OG 3.7%(4.4),Div 1.65.........-1% *IFX-CEO sees no need for spin offs,can finance aqc's - Press.......-1%
*RYANAIR-Q3 Rev 1.4b(1.4),PAT 106m(95),FY18 Net 1.4-1.45b(1.42).....-2% *VONOVIA-Launches public offer for Buwog shs(cash €29.05)...........U/C *VESTAS-To buy Utopus Insights for $100m(Energy Analytics)..........U/C *VOESTALPINE-Chief warns on surplus steel capacity in Europe........-2% *AIR FRANCE,BRITISH AIRWAYS,LUFTHANSA-Eying XL Airways(low cost)....-0.5% *NESTLE-Said to pull out of Merck KGAA consumer bid - Rtrs..........-0.5% *CAPGEM-Buys LiquidHub,says acq price around 2 times Rev €400m......+1%
*STABILIUS-Q1 Rev 230.6m(229),Ebit 33.9m(34),Margin 14.7%(14.9).....U/C
*SANDVIK-Q4 Rev 23.94b(23.08),Orders 24.11b(23.2),OP 4.07b(3.7).....+2% *WIRECARD-CEO talks about mkt grth,Reits '20 tgts as conservative...-2.5%
*NEMETSCHEK-Q4 Rev 105.7m(105.8),Ebitda 31.5m(28.3),Margin 29.8%....+1.5%

>>> Abertis bidder Atlantia to consult shareholders over raising offer by EUR 1

Abertis bidder Atlantia to consult shareholders over raising offer by EUR 1 or EUR 2 to about EUR 20 per share

Atlantia [BIT:ATL] plans to consult its shareholders about an improved offer for Abertis [BME:ABE] at the EGM called for on 21 February, ABC reported, citing sources privy to the discussions. Atlantia may improve by EUR 1 or EUR 2 the counter bid made by ACS [BME:ACS] (bidding through its German unit Hochtief [FRA:HOT]), currently at EUR 18.76, thus raising its offer to almost EUR 20 per share of Abertis, according to the report.
At present, Atlantia has offered EUR 16.5 per share of Abertis.
ABC cited knowledgeable sources as saying that Atlantia will improve the cash component of its offer.
Abertis' stock closed on Friday at EUR 19.6, the Spanish-language paper noted.

>>> What to look at today - 5th of February 2018

Asian equities fell and U.S. stock futures headed lower, extending the biggest selloff for global stocks in two years as investors adjusted to a surge in global bond yields. Shares sank across the region, with Japan’s benchmarks falling the most in 15 months. S&P 500 Index futures pared a drop of as much as 0.9 percent, signaling Friday’s rout won’t extend for another day. Shares in Hong Kong and Shanghai trimmed declines after China’s securities regulator urged brokerages to help stem the rout. Australia’s 10-year bond yield surged as the 10-year Treasury yield neared 2.87 percent after solid jobs data on Friday showed rising wages. The yen advanced.

Nikkei -2.55% Hang Seng -1.09% CSI +0.07% Shanghai +0.73% Shenzen -0.84%

Eur$ 1.2460 CNH 6.3043 CNY 6.2964 JPY 109.99 GBP 1.4112 CHF 0.9306 RUB 56.53 WTI$ 65 -0.69%

EuroStoxx -0.74% FYSE -0.75% DAX -0.60% SMI -0.55%

Macro :
- Fed’s Kaplan Says He Feels More Conviction in Three 2018 Hikes
- Goldman Says Investors ‘Largely Agreed’ With Bullish Oil View
- May Under Attack Over Brexit With Momentum Behind Rees-Mogg
- Yellen Says Prices ‘High’ for Stocks, Commercial Real Estate
- Iran Can Boost Output Fast If OPEC Ends Cuts, Oil Minister Says
* Stocks May Tumble 10%, But Hang In There, $141 Billion Fund Says

Keep an eye on :
- ABE SM : Abertis May Seek AGM Backing for Hispasat Sale: Expansion
- ABE SM : Atlantia Studies Raising Bid for Abertis to Better ACS’s: ABC
- AZA IM : Delta to Join Air France-Easyjet in Alitalia Bid: Corriere
- AF FP : Air France, British Airways, Lufthansa Eying XL Airways: JDD
- AF FP : Delta to Join Air France-Easyjet in Alitalia Bid: Corriere
- AAPL US : Apple Music U.S. User Growth Is Said to Outpace Spotify’s: WSJ
- ASH LN : Ashland Gains 5% as S&P Drops 1.8%, Dow Falls 568 Points
- BPOST BB : Bpost to Raise Domestic Mail Prices by About 4.7% on Average
- CAP FP : Capgemini To Buy Liquidhub For About 400 Million Euros
- CA FP : Carrefour Plans to Expand Beyond Kenya in Africa: Bus. Daily
- CPI LN : Capita May Draw Takeover Interest on Low Valuation: Woodford
- CRG IM : Carige Board Confirms Targets of Industrial Plan 2017-2020
- CLLN LN : Greybull Is Said to Study Bids for Carillion Assets: FT
- DAI GY : Daimler attracts interest of Geely; aims for up to 5% stake - FAZ
- DPB GY : Deutsche Bank Postbank Suit Delayed as Ex-CFO Called as Witness
- EDF FP : EDF CEO Says Flamanville Schedule Tight But on Track: AFP
- ENGI FP : Engie to Name New Independent Board Member as Future Chairman
- ECP FP : EuropaCorp Says All Discussions in Preliminary Stage
- ERF FP : Eurofins Scientific Announces Acquisition of Labo Van Poucke
- FCA IM : Fiat Said to Get U.S. Demand for Fine, Recall to Settle Suit
- GALP PL : Galp 4Q Average Net Entitlement Production 99.1 Kboepd
- GKN LN : GKN in talks with Onex amid attempt to escape Melrose bid
- HMB SS : H&M’s Billionaire Owners Seen Tightening Grip With Share Plan
- ICE US : ICE Is Said to Boost Stake in Settlement Giant Euroclear to 10%
- IFX GY : Infineon CEO Sees No Need for Spinoffs, Euro Am Sonntag Reports
- INGA NA : ING Polish Unit to Wind Up Part of Brokerage Arm: Parkiet
- ISP IM : Intesa Aims For 70% Dividend Payout in Business Plan: Messaggero
- LEG GY : LEG Immobilien to Adhere to Strict Acquisition Criteria: BZ
- MAU FP : Maurel & Prom FY Sales Rise 14% to $400M on Higher Oil Prices
- NESN VX : Nestle Is Said to Pull Back From Merck KGaA Unit Buy: Reuters
- QCOM US : Broadcom Is Said Planning to Boost Qualcomm Bid to ~$120b
- RYA LN : Ryanair Q3 Profit Jumps 12%; Says ‘Cautious’ Over FY Guidance
- RYA LN : Ryanair CFO Says Optimism on Summer-Fare Growth Isn’t Warranted
- SAN FP : Sanofi Rejects Philippine Request to Refund Used Vaccine: CNN
- SAND SS : Sandvik Full Year Dividend Per Share 1.2% Above Estimates
- SAP GY : SAP CFO Confident of 2018 Profitability Boost: Euro Am Sonntag
- SPOTIFY IPO : Apple Music U.S. User Growth Is Said to Outpace Spotify’s: WSJ
- TSCO US : Tesco Plans to Close 18 Loss-Making Stores in Poland
- VWS DC : Vestas Agrees to Buy Energy Analytics Provider Utopus Insights
- VOD LN : A Vodafone/Liberty Global Asset Swap Would Make Sense: Jefferies
- VOW3 GY : Volkswagen Legal Department Had Influence on Primate Tests: HB
- XRX US : Icahn Reports Sale of 1.16M Xerox Shares From Jan. 31 - Feb. 2

>>> Europe : Brokers Upgrades & Downgrades - 5th of February 201

>>> Up
* Accenture Upgraded to Overweight at Morgan Stanley
* Countryside Upgraded to Overweight at Barclays; PT 3.79 Pounds
* Dassault Systemes Upgraded to Neutral at MainFirst; PT 105 Euros
* Informa Upgraded to Overweight at Morgan Stanley
* Kone Upgraded to Reduce at AlphaValue
* Norwegian Cruise Upgraded to Overweight at JPMorgan; PT $70
* Standard Chartered Upgraded to Buy at Berenberg
* Tele2 Upgraded to Buy at New Street Research; PT 119 Kronor
* Vedanta Upgraded to Overweight at JPMorgan; PT 10 Pounds
* Zardoya Upgraded to Reduce at AlphaValue

>>> Down
* Atea Downgraded to Neutral at SpareBank; Price Target 120 Kroner
* Beni Stabili SpA SIIQ Cut to Neutral at MedioBanca; PT 78 Cents
* Deutsche Bank Downgraded to Sell at AlphaValue
* Hexpol Downgraded to Sell at DNB Markets; PT 65 Kronor
* Leonardo Downgraded to Reduce at AlphaValue
* Metso Downgraded to Sell at ABG; PT 25 Euros
* Oriflame Cut to Sell at DNB Markets; Price Target 331 Kronor
* Philips Lighting Cut to Equal-weight at Barclays; PT 33 Euros

>>> Initiation
* Polymetal Rated New Buy at Renaissance Capital; PT 10 Pounds

>>> Asian Update

Asia Market Update: Equities across the region lower tracking US Friday session; Broadcom may raise bid for Qualcomm

***Headlines/Economic Data***
General Trend: Energy, Real Estate and Materials companies underperform
- (US) US 10-year Treasury yield higher by 2bps, after rising over 5bps on Friday’s session; yield at 2.86% vs 2.88% for Australia 10-year yield
- Australia 10 year yield rises over 9bps amid gain in Treasury yields and weaker bid to cover at bond auction
- Taiwan sells 10-year bonds at lower bid to cover, despite rise in yield
- Broad dollar strength, rising 1% against the KRW

Japan
-Nikkei 225 opened -1.5%; closed -2.6%
- TOPIX Real Estate Index -3%, Electric Appliances -2.2%, Iron & Steel -2%, Securities -2%
- Mitsubishi UFJ [8306.JP] Declines over 3%: Reported flat 9-month pretax profits
- Softbank [9984.JP]: -2%: Expected to report earnings on Wed, Feb 7th
- Toyota [7203.JP] -1.5%: Expected to report earnings on Tuesday Feb 6th
- Fast Retailing [9983]: Declines over 3%: Jan domestic SSS -2.4% y/y
- Honda [7267.JP] Gains over 1.5% after raising FY outlook
- (JP) PM Abe backed candidate Taketoyo Toguchi said to defeat incumbent Susumi Inamine in the Nago mayoral elections – Japanese Press
- (JP) Japan PM Abe expected to ask the US and South Korea o conduct a planned joint military drill after the Pyeongchang Winter Olympics without scaling it down so as to keep pressuring North Korea to give up its nuclear and missile development – Nikkei
- (JP) Japan cryptocurrency exchange Coincheck, has not been successful tracking stolen funds, were transferred to anonymous e-wallets; not sure when they will resume withdrawals – Nikkei
- (JP) Japan Jan PMI Composite: 52.8 v 52.2 prior; PMI Services: 51.9 v 51.1 prior
-(JP) Japan PM Abe: 2% inflation is a global standard, market environment has greatly changed due to 2% target - Parliament
-(JP) BoJ Iwata: Companies raising prices has not progressed 'far'
-(JP) Bank of Japan (BOJ) Gov Kuroda: No change in approach to QE; maintaining 2% inflation target is very important - Parliament

Korea
-Kospi opened -1.5%
- Continued weakness in chip sector: Samsung Electronics and Hynix drop further after Friday’s over 2% declines
- Samsung: 005930.KR South Korea Appeals Court: Samsung's support of equestrian sport constitutes bribery in the Jay Lee case
- (KR) South Korea Dec Current Account Balance: $4.1B v $7.4B prior; Balance of Goods (BOP): $8.2B v $11.5B prior
- (KR) North Korea military parade on Thursday is not targeted at the Olympics
- (KR) Bank of Korea (BOK) sells KRW720B in 6-month bonds at 1.62%
- (KR) According to Statistics Korea, 2017 online shopping in South Korea reached KRW78T, +19.2% y/y - Korean press
-(KR) North Korea official: North Korea's nuclear capabilities will deter Trump from 'showing off on the Korean peninsula' - UK press
- (KR) South Korea sells KRW1.65T in 3-yr Govt bonds: avg yield 2.275%

China/Hong Kong
-Hang Seng opened -2.7%, Shanghai Composite -1.5%
- Hang Seng Energy Index -3%, Information Tech -2.7%, Materials -2.1%, Consumer Goods -2%, Financials -2%
- (CN) Yuan (CNY) ‘internationalization’ may accelerate in 2018 – China Economic Info Daily
- (CN) Chinese Academy of Social Sciences (CASS): China is likely to leave its benchmark interest rate unchanged in the near future amid reasonable inflation rises and a stable yuan, even with the higher likelihood of US Fed interest rate rise next month - China Daily
- (CN) China Ministry of Commerce (MOFCOM): to launch anti-dumping investigation into US sorghum imports
- (CN) China urges the US to drop its "Cold War mentality" earnestly assume its special disarmament responsibilities, correctly understand China's strategic intentions and objectively view China's national defense and military build-up
- (CN) China PBoC: Skips OMO (8th straight session) v skipped prior; Net drain CNY40B v CNY90B prior
- USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT 6.3019 v 6.2885 PRIOR
- (CN) CHINA JAN PMI SERVICES: 54.7 V 53.5E (highest since May 2012); PMI COMPOSITE: 53.7 V 53.0 PRIOR
-(CN) China securities regulator CSRC said to ask brokerage firms to help 'avert sharp stock crashes' - US financial press

Australia/New Zealand
-ASX 200 opened -1.4%; closed -1.6%
- ASX 200 Resources Index -2.5%, Energy -2.2%, Telecom -1.6%, Financials -1.4%, REIT -1.3%
- (AU) Australia Jan CBA PMI Composite: 54.2 v 55.5 prior; PMI Services: 53.8 v 55.1 prior
- AWE.AU Board recommends bid from Mitsui at A$0.95/share
- WES.AU Guides H1 non-cash impairment for UK and Ireland Bunnings unit of A$795M resulting in underlying pretax loss A$165M; targeting H1 EBITDA of A$33M
- (AU) Australia AOFM buy backs A$400M in bonds due March and Oct 2019; combined bid to cover 2.95x
- (AU) Australia Jan Melbourne Institute Inflation M/M: 0.3% v 0.1% prior; Y/Y: 2.0% v 2.3% prior
- (AU) Australia sells A$400M v A$400M indicated in April 2033 bonds, avg yield 3.0717%, bid to cover 1.87x
- (AU) Australia Jan ANZ Job Advertisements M/M: +6.2% v -2.3% prior
- (NZ) New Zealand Treasury: Sees annual inflation at ~1.0% in Q1; inflation to gradually pick up in 2018 and 2019

Other Asia
- (ID) Indonesia Q4 GDP Q/Q: -1.7% v -1.7%e; Y/Y: 5.2% v 5.1%e; 2017 GDP Y/Y: 5.1% v 5.1%e
- (MY) Malaysia Central Bank (BNM) Gov: Not on a tightening trend, monetary policy is still accommodative
- (TW) Taiwan Central Bank sells NT$25B in 10-yr bonds at 1.069% v 0.981% prior (1.02-1.05%e); bid to cover 1.73x v 2.20x prior

North America
- On Monday’s session, S&P500 Futures trade lower by more than 0.7% in Asia
- (US) Outgoing Fed Chair Yellen: Asset valuations are generally elevated, but don't want to call what we are seeing a bubble - PBS interview (from Feb 3rd)
- (US) Fed's Williams (moderate, voter): need to continue raising interest rates; hikes will keep the economy on track and avoid overheating (from Feb 2nd)
- (US) Fed's Kaplan (moderate, non-voter): Has more conviction in three rate hikes than six months ago; - There's a chance I'm wrong and we may consider more than three hikes; Jobs report today [Friday] was consistent with his thinking (from Feb 2nd)
- (US) Larry Lindsey said to withdraw from being considered for the Fed Vice Chairman position – US financial media
- (US) White House econ adviser Cohn: White House would like to make individual side of tax reform permanent; We have had a mild backup in Treasury yields ; Stocks are seeing a few days of consolidation after a long rally; Expects strong Q1 GDP in the US; Strong dollar is always in the best interest of the US - Fox Business interview (From Feb 2nd)
-QCOM Broadcom said to raise bid for Qualcomm to $80-82/shr (vs $70/share currently), ~$120B; will also include higher breakup fees - financial press
Looking Ahead: US Jan ISM Non-Manufacturing PMI due for release on Monday

Europe
- (DE) Germany suspends coalition talks, will resume Monday 09:00GMT, failing to meet self imposed Sunday deadline; disputes over healthcare and labor policy remain
- (FR) ECB's Villeroy (France): whether we end QE program in Sept or taper somewhat more gradually is not a deep existential question; We will keep an eye on impact of exchange rate evolution and be prepared to reassess if necessary (from Feb 2nd)
- (UK) UK Official: PM May has ruled out staying in customs union - press [Note: PM May advisers were said to consider a customs union deal covering trade in goods with the EU after Brexit, said a press report from Feb 1st. The possible plan would take effect after the 2-year Brexit transition period.]
- Fiat Chrysler: US regulators reportedly to seek major fines and recall as part of Fiat diesel motor settlement - press
- GKN [GKN.UK]: Onex in talks with GKN on aerospace unit - Uk press
- Carillion [CLLN.UK]: Greybull Capital will be among bidders interested in acquiring parts of Carillion that might be ringfenced following its liquidation - FT
Looking Ahead: UK Jan Services PMI due for release

***Levels as of 01:00ET***
- Nikkei225 -2.6%, Hang Seng -1.3%; Shanghai Composite +0.5%; ASX200 -1.6%, Kospi -1.1%
- Equity Futures: S&P500 -0.2%; Nasdaq100 -0.1%, Dax -0.4%; FTSE100 -0.4%
- EUR 1.2466-1.2424; JPY 110.29-109.79; AUD 0.7939-0.7890;NZD 0.7309-0.7278
- Apr Gold -0.2% at $1,334/oz; Mar Crude Oil -0.8% at $64.91/brl; Mar Copper +0.4% at $3.19/lb

Weekend Reading Summary


Weekend Reading Summary

Macro Related
  • Bloomberg profiles reaffirmed comments from Janet Yellen who indicated stock and commercial real estate prices are too high Bloomberg Report.
  • WSJ provides commentary on a stronger than expected earnings season. WSJ Report.
  • Bloomberg details concerns in short term Treasury bond market about upcoming debt ceiling deadline. Bloomberg Report.

Stock Specific

  • Barron's profiles positive views on CSCO, CRM, BBY, INTU, HPQ, TXN, MSFT, OSK, CLX. Barron's Report.
  • Barron's profiles positive view on General Motors (GM). Barron's Report.
  • Barron's profiles positive views on WY, USG, GLW, MMM, UTX. Barron's Report.
  • Barron's profiles positive view on Spirit Airlines (SAVE). Barron's Report.
  • Barron's profiles positive views on CSCO, TXN, UNH, ORCL, ORCL, CMCSA, MMM, ABBV, UNP, BA, BAC, C, WFC, JPM. Barron's Report.
  • Barron's profiles positive view on Dell Technologies (DVMT). Barron's Report.
  • Barron's profiles cautious view on overall market. Barron's Report.
  • Barron's profiles positive view on Danaher (DHR). Barron's Report.
  • Barron's profiles positive views on AAPL and FB and mixed view on INTC. Barron's Report.
  • NY Post details that Amazon (AMZN) has filed for patents related to wristbands that can track workers movements (FIT). NY Post Report.
  • Bloomberg discusses that GKN PLC (GKNLY) and Reckitt (RBGLY) were the only 2 cos that submitted bids for Pfizer (PFE) consumer unit. Bloomberg Report.
  • Sunday Times discusses that Glencore (GLNCY) will be subject of GBP 177 mln tax increase related to its cobalt mine. Sunday Times UK Report.
  • CNN discusses that an Amtrak train has hit a CSX (CSX) train in South Carolina and left 2 people dead and over 100 injured. CNN Report.
  • Telegraph details that aerospace customers are supportive of Melrose takeover of GKN PLC (GKNLY). Telegraph Report.
  • Telegraph discusses that Shell (RDS.A) EUR 3 bln deal for Eneco has hit a roadblock. Telegraph Report.
  • Reuters discusses why UPS (UPS) Boeing (BA) 747 order indicates global trade is on the rise. Reuters Report.
  • Automobilwoche reports that Daimler (DDAIF) will begin self driving car testing soon. Automobilwoche Report.
  • Reuters previews Boeing (BA) decision to sell fighter jets to Canada. Reuters Report.
  • FAS profiles comments from Goldman Sachs (GS) exec who expects more M&A following tax reform. FAS Report.
  • FT details how technology related payment cos could be subject of regulation similar to banking industry (XLK, XLF, PYPL). FT Report.
  • Bloomberg details why S Korea is important to crypto currencies (BTC). Bloomberg Report.
  • WSJ discusses that JP Morgan (JPM) has advised clients that healthcare deal is no threat. WSJ Report.
  • WSJ details that Apple (AAPL) Music will soon overtake Spotify in subs. WSJ Report.
  • MacRumors discusses that Apple (AAPL) will look at potential for incoming call delays on iPhone X. MacRumors Report.
  • FT details how JD.com (JD) plans to compete with Amazon (AMZN) in Europe FT Report.

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