>>> Delta Air Lines beats by $0.05, reports revs in-line; sees Q4 PRASM down 3-5

Delta Air Lines beats by $0.05, reports revs in-line; sees Q4 PRASM down 3-5%; sees 4Q16, FY17 capacity +1%
  • Reports Q3 (Sep) earnings of $1.70 per share, $0.05 better than the Capital IQ Consensus of $1.65; revenues fell 5.6% year/year to $10.48 bln vs the $10.5 bln Capital IQ Consensus, of which $100 million was due to the outage and $70 million was from prior year Yen hedge gains.
  • Passenger unit revenues declined 6.8 percent, including nearly 2 points of impact from the outage and Yen hedges, on a 1.5 percent increase in capacity.
  • Sees Q4 PRASM down 3-5% with operating margin 14-16%, capacity +1%, CASM +1-2%. For the December quarter, Delta is expecting a slight decline in margins year over year, as savings from lower fuel prices and productivity initiatives will be fully offset by declines in unit revenues that the company continues to address through its capacity actions and revenue management initiatives. The projections for the December quarter do not include any estimates for the company's potential agreement with its pilots.
  • "While we were encouraged by our unit revenue trends through the September quarter, we have more work ahead of us to achieve our goal of positive unit revenues," said Glen Hauenstein, Delta's president. "With further slowing of our capacity growth in the December quarter and additional traction on our revenue management initiatives, we should make progress against that goal and we expect our December quarter unit revenues to decline by 3 -- 5 percent year over year."
  • "With our focus on building a more sustainable and durable business, we will be taking a cautious approach to 2017 by keeping our capacity in line with the December quarter's 1 percent growth level."

(Exane) Nokia /Ericsson : Further deterioration in EMs, European mix worsens

Further deterioration in EMs, European mix worsens

Ericsson issued a major sales and profit warning
Ericsson pre-announced Q3 Sales down 14% y/y to SEK51.1bn (4% below cons.) with Networks
down 19%. Gross margin declined c4pp seq. to 28%. We believe a third of this GM slip is due to a
worsening Networks v. Services mix. Low spending on capacity in Europe and EMs, and lower
scale likely explain the rest of GM deterioration. Op. income reached SEK0.3bn v. SEK4.5bn cons.

Current environment likely to prevail until mid-2017 according to Ericsson
Ericsson cited Brazil, Russia, and the Middle East as the chief culprits. To a lesser extent, capacity
sales declined in Europe y/y. Ericsson highlighted that market conditions deteriorated quickly in
September, notably demand for software-rich capacity additions.

We lower our dividend expectations
We lower our estimates to reflect softer sales and gross margin (see inside). We now expect FCF
to reach SEK6.0bn in 2016 and SEK6.3bn in 2017 before rebounding to SEK15.4bn in 2018 (cost
reductions). ERIC could still afford to cash out cSEK11.5bn of dividends next year equating to DPS
of SEK3.5 in 2016 v. SEK3.70 in 2015. This would leave ERIC with SEK30bn net cash at end-17.

Nokia likely affected as well: we lower our estimates
Nokia generates c15% of its sales from Brazil/Russia/ME v. 20%+ for ERIC. Nokia’s main
customer in Brazil was already weak in Q2 and management indicated that they had passed on
some aggressively priced deals in ME. Russia could still hurt. Also, gross margin could suffer from
slow capacity additions in Europe. We lower our estimates (inside) and TP (-5% to EUR5.3).

Ericsson could be pushed to radical decisions; we still believe Nokia is safer short term
Tough market conditions and weak performance had already pushed Ericsson to up its
restructuring ambitions in July, and to let go of the CEO. With demand worsening further and
reference shareholders increasingly disgruntled, ERIC might decide to radically refocus on its core
activities, thereby kicking off a turnaround story. Shorter term, we continue to prefer Nokia.

(GS) Nokia - Off Conv. Buy List - Still a Buy

Global wireless capex declines further; NOK off CL; lower ERIC ests

We introduce 2017 Global wireless capex forecasts
We remove Nokia from the Conviction List (but retain our Buy rating) and remain Neutral on Ericsson with lower estimates following its profit warning on October 12, 2016, and based on our updated Global wireless capex estimates. Our aggregation of GS analysts’ estimates for Global wireless capex points to a further decline in global wireless capex of 3% in 2017, following on from our estimate of a 10% decline this year. We remain of the view that 4G rollouts are relatively advanced in several markets, and that growth will be scarce given large-scale spending associated with 5G is
not expected until 2019/20. While commentary from several vendors and ecosystem participants suggests 4.5G solutions, small cells and public safety could provide a certain level of support to the market in 2017, we expect few regions to see growth overall. GS expects wireless capex in China and Europe (combined c.40% of Global wireless capex) to decline 13%/5% next year, with Japan flat and growth in the US largely due to normalisation to 2015 levels (post declines in 2016). In this environment we favour cost-cutting stories with fixed-line exposure and remain Buy on Nokia.

Lowering estimates to reflect expectations for wireless market
We lower our Nokia Networks revenue estimates by 1.6%/2.1% in 2017/18 driven by our new wireless capex forecast for 2017 (which causes us to forecast a decline in the wireless segment next year), and hence Networks EBIT falls by 6.1%/5.4% in 2017/18. We lower Networks revenue estimates for Ericsson by 2.9%/5.8%/5.8% in 2016/2017/18 and Networks EBIT by 14%/26%/23%, following ERIC’s profit warning and commentary suggesting it will experience persistent weak margins in the next 2-3 quarters.

Implications and valuation for European CommTech
We lower our 12-month PT for Nokia (Buy) to €5.8/US$6.40 (from €6.50/ US$7.20). We reduce our 2017E EV/EBITDA multiple to 7.5x (8.0x) based on lower margin forecasts. Key risks include lower wireless capex, integration risk, pricing. We are Neutral rated on Ericsson and lower our 12-month PT to SKr48/US$5.4 (from SKr57/US$6.7) based on 7.0x 2017E EV/EBITDA. Key risks include better/worse-than-expected cost cutting, patents growth. We value Nokia on a premium to Ericsson (7.5x EV/EBITDA vs. 7.0x for ERIC), given NOK’s exposure to fixed line plus higher growth/margins. NOK’s 11.5x 2017E ex-cash P/E is attractive vs. Ericsson’s 14.6x.

(CS) Nokia : Can Nokia Be Immune to Ericsson Woes?

NOKIA (OP, TP EUR6.75): Given the magnitude of Q3 EBIT miss at Ericsson clearly it raises concerns around demand trends for telecom equipment market, and Nokia in particular. We estimate Nokia has ~10% of sales exposure to these regions where Ericsson saw weaknesses. In fact, we believe there could be multiple company-specific reasons for weak Q3 at Ericsson: a) Material headwind likely in its US business; b) Lack of operational control given CEO departure in July and ongoing changes in organizational structure; c) Negligible exposure to Fixed/Optics Networks, which are seeing increased investments (Nokia's wireless exposure is 60% vs. Ericsson at >90%).

(CS) French Infrastructure : Driving towards value accretion

* We initiate coverage of Vinci with an Outperform rating and an €80 target price. Vinci is the market leader in French toll road concessions where we see upside from traffic growth and new stimulus plans. Margins in construction look to be at troug

* We initiate coverage of Eiffage with a Neutral rating and a €74 target price. Eiffage has a less attractive business mix, in our view, with more construction exposure and less diversification. We estimate that expensive legacy debt maturing over 2015-18E supports a c13% three-year EPS CAGR, but consensus already reflects even more than this

>>> Ubisoft shareholder Vivendi not planning hostile takeover

Ubisoft shareholder Vivendi not planning hostile takeover (translated)
13 OCT 2016
The French media group Vivendi [EPA:VIV] is not planning to make a hostile takeover attempt for French videogames publisher Ubisoft [EPA:UBI], French daily Le Figaro reported.
Stephane Roussel, head of operations at Vivendi, was quoted for the information in the article.
As previously reported, Ubisoft was seeking to prevent attempts of a creeping takeover by 22.72% shareholder Vivendi. The French media group was reportedly asking to have representatives seating at the board of the group.

>>> What to look at today - 13th of October 2016

Dow +0.09% S&P +0.11% Nasdaq -0.15% Russell -0.03% VIX 15.91 (+3.58%) VXX 34.37 (+0,26%)
US Market closed on a flat note on this Yom Kippour Day, even the FED Minutes didn't get any motivation in this market. The minutes from the FOMC's September policy meeting indicated that there were a number of arguments for raising rates in September, but that the committee opted to wait for further data. All in all, there wasn't really any "new" news in the minutes, which essentially reinforced preconceived policy notions held by the market ahead of their release. According to the CME's Fed Watch Tool, the probability of a rate hike at the November meeting is just 9.3% while the probability of a hike at the December meeting sits at 69.9%. All yield plays sector Outperformed today, real estate (+1.3%), utilities (+1.0%), telecom services (+0.6%), and consumer staples (+0.5%). Eight sectors finished in positive territory while three -- health care (-0.6%), energy (-0.4%), and materials (-0.2%) -- ended the day with a loss. energy sector (-0.4%) underperformed amid a 1.1% decline in crude oil futures ($50.15/bbl, -$0.56). Volume were light today on Observance of Yom Kippour with only 655mil shares traded. US After Hours CSX +2.3% on earnings and modestly boosting rail names, WFC +1.7% on Chairman/CEO John Stumpf retirement news... FLDM -18.4% on dismal Q3 sales/suspending 2016 guidance. In Asia, Yen spikes, equities slide on soft China trade data. China trade surplus slows to 6-month lows in both USD and Yuan terms; USD-denominated exports fall -10.0% v -3.3%e, biggest decline in 7 months; Imports fall -1.9% v +0.6%e; Disappointing data sparks selloff in Hong Kong equities as Hang Seng index falls to a 2-month low below 23,200. BOJ speculated to downgrade its FY17/18 CPI forecast to low-1% range from 1.7% when it announces its latest GDP and inflation forecasts on Nov 1st.

Nikkei -0.36% Hang Seng -1.27% CSI -0.03% Shanghai +0.01%

Eur$ 1.1017 CNH 6.7381 CNY 6.7269 JPY 103.78 GBP 1.2180 RUB 63.1563 CHF 0.9885 WTI$ 49.79 -0.78%

S&P -0.68% EuroStoxx -0.57% FTSE -0.32% DAX -0.62% SMI -0.4%

Macro :
- Mifid II Overhaul Will Turn World Upside-Down: T. Rowe’s Brooks
- France PM Valls Says ‘The European Project Is in Trouble’ in FT
- Fed: Several Officials Saw Hike As Appropriate ‘Relatively Soon’
- London Home Presales Slump 14% as Brexit Compounds Tax Woes
- China’s Sept. Exports Fall 5.6% Y/y in Yuan; Est. +2.5%
- Libya Wealth Fund Wants More Board Seats in Italy: Corriere

Keep an eye on :
- AIR FP : Embraer Sees $80b Small-Jet Market Demand in Europe and CIS
- AMZN US : Amazon Germany Head Says Considering Storefronts: Handelsblatt
- ARAMCO IPO : Aramco Still Considering N.Y. IPO Listing, CEO Tells Turkish TV
- BP IM : Banco Popolare Extends Winning Streak as Merger Vote Approaches
- BAYN GY : Bayer Closes Syndication of $57b Acquisition Facilities
- CO FP : Casino 3Q Sales Beat Ests., Confirms 2016 French Targets
- DL NA : Dutch Court Rejects Delta Lloyd Probe Request by Highfields
- DB1 GY : Deutsche Boerse, LSE May Have to Sell Assets for EU Nod: WiWo
- DNB NO : DNB Won’t Rule Out Converting Offshore Vessel Debt to Equity: FA
- EOAN GY : EON Said to Explore Spinoff, IPO Options for Power Grids: WiWo
- ERICB SS : Investor AB Chairman Unhappy With Ericsson Development: DN
- GATE SW : *GATEGROUP ACQUIRER HNA SEEKS DELISTING, FURTHER SHARE PURCHASES
- IAG LN : British Airways CEO Still Sees 2016 Oper. Profit to Rise vs 2015
- INGA NA : ING Groep to Transfer Brussels Trading Desk to London: De Tijd
- MB IM : Mediobanca to Present New 3-Yr Strategic Plan November 17
- MS IM : Mediaset Said to Ask Milan Court to Freeze Vivendi Stake
- MERY FP : Mercialys Raises 2016 FFO Growth Target to 3%-4% Range From 2%
- PSM GY : ProSiebenSat.1 Raises 2016, 2018 Sales Targets
- PUB FP : Publicis Studies Levy Succession Options, Les Echos Says
- RDUS US : Press speculation about potential Shire interest - FT
- RIO LN : BHP, Rio Cut to Sell as Prices for Bulk Commodity to Fall: Citi
- SAS SS : Sweden, Norway to Boost Sale of SAS Shares to 23m From 19m
- SHP LN : FT pseculating about potential interest for Radius Health
- SNAP IPO : Snapchat Said to Pick Morgan Stanley, Goldman Sachs to Lead IPO
- SZU GY : Suedzucker Still Sees Fy Op. Profit of EU340m-EU390m
- TIF US : Tiffany Oct Puts Active in Spread Trade Amid LVMH Read Through
- TOM2 NA : TomTom Cuts 2016 Rev. Outlook, Cites Weak Consumer PND Markets
- UCG IM : UniCredit Raising $606m in Sale of FinecoBank Stake
- DG FP : Vinci Rated New Outperform at Credit Suisse, Eiffage New Neutral
- VIV FP : Mediaset Said to Ask Milan Court to Freeze Vivendi Stake
- VOW3 GY : Volkswagen Said to Disclose ‘More Realistic’ CO2 Emissions: SZ

>>> Europe : Brokers Upgrades & Downgrades - 13th of October 2016

>>> Up
*CAPCO RAISED TO OUTPERFORM VS UNDERPERFORM AT CREDIT SUISSE
*G4S RAISED TO OUTPERFORM AT RBC
*PORR RAISED TO BUY VS HOLD AT BERENBERG
*TRAVIS PERKINS CUT TO SECTOR PERFORM AT RBC
*TULLOW OIL RAISED FROM EQUALWEIGHT TO OVERWEIGHT AT MORGAN STANLEY
*TURKISH AIRLINES RAISED TO BUY VS HOLD AT HSBC

>>> Down
*GREEN DRAGON GAS CUT TO HOLD VS BUY AT PEEL HUNT
*INTERTEK CUT TO UNDERPERFORM AT RBC
*MITIE GROUP CUT TO SECTOR PERFORM AT RBC
*RENTOKIL INITIAL CUT TO OUTPERFORM AT RBC
*SANNE GROUP RATED NEW OUTPERFORM AT RBC
*SGS CUT TO UNDERPERFORM AT RBC

>>> PT Change


>>> Initiation
*AB INBEV REINSTATED AT HOLD AT DEUTSCHE BANK; PT EU120
*ASHTEAD GROUP RATED NEW OUTPERFORM AT RBC
*EIFFAGE RATED NEW NEUTRAL AT CREDIT SUISSE, PT EU74
*NANOCO RATED NEW BUY AT PEEL HUNT, PT 75P
*UNIPER RATED NEW NEUTRAL AT CITI; PT EU11.60
*VINCI RATED NEW OUTPERFORM AT CREDIT SUISSE, PT EU80

>>> Call
>> Stock
*NOKIA REMOVED FROM CONVICTION BUY LIST AT GOLDMAN; STILL BUY