(BFW) Go Long in Evonik, Short in BASF Ahead of 2Q: Kepler Cheuvreux

Go Long in Evonik, Short in BASF Ahead of 2Q: Kepler Cheuvreux
2015-07-01 07:31:01.659 GMT


By Chiara Remondini
(Bloomberg) -- Kepler Cheuvreux expects mixed reporting
season for European chemicals, “with some positive and negative
surprises,” according to note today.

* Brokerage sees risk of disappointment for some agro cos.,
classical chemical players with oil exposure; bullish on
food/feed cos. with exposure to amino acids

* Says Evonik set to post strong 2Q results; earnings
visibility high, expects co. to raise target
* Sees headwinds for BASF in 2Q, risk for full-yr target as
“increasingly difficult” for co. to achieve 2015 goal for
Ebit before special items
* Industrial gas cos. to probably report solid performance,
earnings growth may be slightly better at Linde vs Air
Liquide in 1H due to different regional mix
* NOTE (June 29): BASF 2Q Results Could Disappoint: PT Cut at
Bankhaus Lampe


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Chiara Remondini in Milan at +39-02-8064-4241 or
cremondini@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-3525-2645 or
jludden@bloomberg.net

(ZeroHedge) Goldman Just Crushed The "Strong Fundamentals" Lie; Cuts EPS, GDP, R

Goldman Just Crushed The "Strong Fundamentals" Lie; Cuts EPS, GDP, Revenue And Profit Forecasts

In the past week, the one recurring theme among the permabullish parade on financial propaganda TV has been to ignore the closed stock market and banks in suddenly imploding Greece, the situation in Puerto Rico, the recent plunge in US stocks which are now unchanged for the year, and what may be the beginning of the end of the Chinese bubble and instead focus on the "strong" US fundamentals, especially among tech stocks - the only shiny spot an an otherwise dreary landscape (and definitely ignore the energy companies; nobody wants to talk about those). So we decided to take a look at just what this "strength" looks like.
Well, we already saw the collapse in hedge fund hotel Micron Technology, which plunged 30% after it slashed its guidance last week. Alas that may be just the beginning. Here are the year-over-year revenue "growth" estimates for some of the biggest tech companies in Q2:
  • Hewlett Packard: -7.3%
  • IBM: -14.2%
  • Microsoft: -5.5%
  • Intel -4.5%
  • Texas Instruments -1.1%
  • Western Digital -7.2%
  • Ericsson -19.6%
  • Qualcomm -13.9%
  • NetApp -11.3%
And that is the best sector among the "strong fundamentals" story.
In fact, the only bright light in the entire tech space may well be AAPL whose sales are expected to grow 29%. We wish Tim Cook lot of strength if the recent Chinese market crash has dampened discretionary spending and demand for AAPL gizmoes in China. He will need it.
But what's worse is that while reality will clearly be a disaster, there is always hype and always hope that the great rebound is just around the corner, if not in Q2 then Q3, or Q4, etc.
This time even the hype is be over because none other than the most influential bank on Wall Street, the one all other sellside "strategists" religiously imitate,Goldman Sachs, just slashed its EPS and S&P500 year end price forecast for both 2015 and 2016.
Here is Goldman with its explanation why it is lowering S&P 500 EPS:


We reduce our near-term earnings forecasts to incorporate diminished US GDP growth, a stronger dollar, and lower crude prices. Since October 2014 when we published our previous EPS forecast, expected 2015 real GDP growth has declined by 70 basis points (to 2.4% from 3.1%), the trade-weighted US dollar has strengthened by 9%, and crude prices have dropped by nearly 30%. In response to these macro headwinds and two additional quarters of realized earnings data, we lower our 2015 EPS target by $8 to $114 (from $122) and reduce our 2016 EPS by $5 to $126 (from $131). Energy EPS alone will decline by $8 in 2015, from $13 to $5.
However...


We maintain our 2015 S&P 500 target of 2100. Reduced EPS growth will be offset by a stable P/E. We previously forecast higher earnings with a P/E contraction. Our new EPS forecast is $114 (down from $122) reflecting slower GDP growth than we had originally assumed, a stronger US dollar, and a collapse in Energy company profits. S&P 500 will post just 1% EPS growth in 2015.... Initial Fed hike in December will allow P/E to end 2015 at an elevated 16.7x
So earnings are bad and getting worse, but for Goldman that is not a reason to cut its S&P forecast simply because the economy is weaker than expected and also getting worse which means the rate hike originally forecast to take place in June is now set to take place in December, and thus boost P/E multiples (it won't of course but that will be Greece's fault).


We maintain our S&P 500 price target of 2100 for 2015, as the negative impact of our lower EPS is offset by a later-than-previously-expected Fed hike. Our US economics team now believes the first hike will take place in December rather than September. S&P 500 P/E, which is historically rich, will stay elevated through the remainder of 2015, but will compress when the Fed starts its tightening cycle in December. Looking forward, S&P 500 will rise alongside earnings, increasing 5% in 2016 and 2017 to 2200 and 2300, respectively
So... the combination of deteriorating earnings and an even bigger slowdown in the economy ends up being a wash and keeping the S&P year end price target at 2100.
Ah, the magic of financial Goldman's financial gibberish.
So aside from Goldman's 21x forward multiple (because 114 non-GAAP is about 100 GAAP which means Goldman is expecting a 21 Price to GAAP Earnings multiple) simply due to the Fed's hike delay from June to December, is there any good news?
No.
In fact, this is what Goldman's David Kostin has to say: "Macro headwinds diminish 2015 earnings growth prospects. S&P 500 sales will fall by 2% in 2015, the first annual decline in five years. Margins will slip to 8.9%. Energy is a drag on both sales and margins." Let's just focus on the "near-term" slip before we worry about the "long-term rebound."
And before the intrepid questions of "this is only due to energy" arise, here is Goldman explaining that the weakness was broad, and impacted every single sector.


We lowered 2015 EPS levels in all 10 sectors, with Energy and internationally-exposed Information Technology declining most.We trimmed nearly $2 from our 2015 Energy EPS estimate after further cutting both expected sales growth and margins (see Exhibit 1). Information Technology EPS was cut by $2, due to the sector’s leverage to diminished economic growth and foreign exchange risk (60% of sector revenues generated abroad versus 33% for S&P 500).
But wait, there's more: because in addition to its EPS forecast, Goldman also slashed its GDP and the 10Y yield forecast as well.


We expect US GDP will grow at an average annualized rate of 2.4% in 2015 and 2.8% in 2016. In contrast, last October our assumed growth rates for the US economy equaled 3.1% and 3.0% for 2015 and 2016, respectively (see Exhibit 2). While our previous assumptions incorporated a sizeable 18% decline in crude oil prices, the actual decline has been twice as large, averaging 36% on a year-over-year basis.

So ok, Goldman had a 25% error in its forecast in just under 9 months. Does that mean that the vampire squid is even remotely remorseful or concerned about the credibility of its 2017 and 2018 (yes, 2018) forecasts? Not at all: those are expected to remain completely unchanged on the back of some of the highest EPS gains in recent history. In fact, putting in context, Goldman now expects just 1% EPS growth in 2015 which will then magically soar to 11% in 2016 before "stabilizing" to a "modest" 7% annual EPS growth rate.


We expect S&P 500 operating EPS of $134 (+7%) in 2017 and $143 (+7%) in 2018. We expect S&P 500 ex-Financials and Utilities revenue will increase by 6% in 2017 and by 5% in 2018. Coupled with stable margins of 9.3%, ex-Financials and Utilities EPS should rise by 6% and 5%, respectively. We assume Financials and Utilities EPS growth of 10% during 2016 and 13% in 2017.
With just a little hyperbole, we can say that the only way S&P EPS will grow at that pace is if the S&P ends up buying back half its float.
But while one can double seasonally adjust non-GAAP BS until a massive loss becomes a huge profit, one item can not be fabricated: sales. It is here that Goldman has far less to say for obvious reasons.


Our new forecast assumes Energy sales will shrink 32%, pulling aggregate S&P 500 sales growth into negative territory for the first time in five years. We expect S&P 500 sales per share to decline by 2% in 2015, in line with consensus.
Yes you read that right "sales per share", because if buybacks can boost Non-GAAP earnings, why not revenues too.
If there is a silver lining on the horizon it is one: "We forecast Health Care will grow sales faster than consensus expects."
The corporations thank you Obamacare.
* * *
So to summarize: the first revenue drop for the S&P in 5 years, a major downward revision in EPS now expecting just 1% increase in 2015 EPS, a 25% cut to GDP forecasts, a machete taken to corporate profits and 10 Yields, and not to mention double digit sales declines for some of the most prominent tech companies in the world.
And that, in a nutshell, is the "strong fundamentals" that everyone's been talking about.

(ZeroHedge) For Greeks The Nightmare Is Just Beginning: Here Come The Depositor

For Greeks The Nightmare Is Just Beginning: Here Come The Depositor Haircuts

With capital controls already imposed on Greece, some have wondered if this is as bad as it gets. Unfortunately, as the Cyprus "template" has already shown us, for Greece the nightmare on Eurozone street is just beginning.
As a reminder, over the past few months there have been recurring rumors that as part of its strong-arming tactics the ECB may eventually move to raise the haircuts the Bank of Greece is required to apply to assets pledged by Greek banks as collateral for ELA. The idea is to ensure the haircuts are representative of both the deteriorating condition of Greece's banking sector and the decreased likelihood that Athens will reach a deal with its creditors.
Flashback to April when, on the heels of a decree by the Greek government that mandated the sweep of “excess” cash balances from local governments to the Bank of Greece’s coffers, Bloomberg reported that the ECB was considering three options for haircuts on ELA collateral posted by Greek banks. “Haircuts could be returned to the level of late last year, before the ECB eased its Greek collateral requirements; set at 75 percent; or set at 90 percent,” Bloomberg wrote, adding that “the latter two options could be applied if Greece is in an ‘orderly default’ under a formal ECB program or a ‘disorderly default.’”
While it’s too early to say just how “orderly” Greece’s default will ultimately be, default they just did if only to the IMF (for now), in the process ending their eligibility under the bailout program and ending any obligation by the European Central Bank to maintain its ELA or its current haircut on Greek collateral, meaning the ECB will once again reconsider their treatment of assets pledged for ELA and as FT reported earlier today, Mario Draghi may look to tighten the screws as early as tomorrow:


When the Eurozone’s central bankers meet in Frankfurt on Wednesday, they could make a decision which some officials fear could push one or more of Greece’s largest banks over the edge.

The European Central Bank’s governing council is poised to impose tougher haircuts on the collateral Greek lenders place in exchange for the emergency loans. If the haircuts are tough enough, it could leave banks struggling to access vital funding.

The ECB on Sunday imposed an €89bn ceiling for so-called emergency liquidity assistance, effectively putting the Greek banking system into hibernation. If, to reflect the increased risk of default, the ECB now applied bigger discounts to the Greek government bonds and government-backed assets which lenders use as collateral, that could leave banks struggling to roll over those emergency overnight loans.

Some on its policy-making governing council feel that Athens’ exit from a programme — notwithstanding its 11th-hour request for an extension and third bailout — leaves the ECB with little choice but to take actions that would, in effect, cut the Bank of Greece’s emergency support to Greek lenders.

Some eurozone officials fear that the position at Greece’s biggest lenders is so tight the ECB could be in danger of pushing some weaker banks over the edge if tougher haircuts are imposed.
Recall that in mid-June, Greek banks were said to have had as much as €32 billion in ELA eligible collateral that served as a buffer going forward. Since then, the ELA cap has been lifted by around €5 billion, meaning that a generous estimate (and we say "generous" because according to JPM, Greek banks ran out of ELA collateral weeks ago) puts the buffer at a little more than €25 billion.
As the haircut rises, that buffer disappears and once the discount applied to the collateral reaches a certain level, an implied depositor haircut materializes. Why? Because by simple balance sheet rules, assets must match liabilities (leaving a token €0.01 for shareholder equity) and once the haircuts eat through the collateral buffer, the implied value of Greece's pledged assets (currently at around €125 billion) will quickly fall below the value of Greek banks' unsecured liabilities which sit at around (but really under) €120 billion as of the date capital controls were imposed in Greece over the weekend. These liabilities are better known as "deposits."
At that point, a depositor haircut is required.
Although the collateral haircuts aren't public, the face value of pledged collateral is (it can be found on the BoG's balance sheet) as is the ELA cap, meaning it's possible to estimate the current haircut and, starting with the assumption that a generous €25 billion buffer remained as of the ECB's Sunday freeze of the ELA ceiling at €89 billion, project the implied depositor bail-in for different collateral haircut assumptions.
Here is the summary sensitivity analysis indicating what a specific ELA haircut translates to in terms of deposit haircut.

Another way of showing this dynamic is presenting the ELA haircut on the X-axis and the corresponding deposit haircut on the Y-axis once the critical "haircut" threshold of 60% in ELA haircuts is crossed.
As can be seen raising the haircut to 75% implies a €33 billion (or 37%) depositor bail-in or "haircut", while raising the haircut to 90% implies a €67 billion (or 55%) hit.
Note that the latter scenario looks quite familiar to what happened in Cyprus, and indeed that's not at all surprising because if, as Dijsselbloem himself said, Cyrpus is a "template", then the next step after capital controls is a depositor bail-in.
And while we wish we could have some good news for the Greek population, this outcome may have been preordained by none other than Goldman whose Hugh Pill, who on June 28 suggested the following:


The core constituency of the current Greek government -- pensioners and public employees -- has enjoyed the first claim on remaining government cash reserves. Only when those cash reserves are exhausted will that constituency face the direct implications of the liquidity squeeze the political impasse between Greece and its creditors has created. And only then will the alignment of domestic political interests within Greece change to allow a way forward.
And as Goldman's former employee and current head of the ECB is about to have his way, the pensioners and public employees will be the first to suffer - first with capital controls and then with ever increasing haircuts on their deposits.
In other words, in order for the Troika to finally achieve its goal of either forcing Tsipras to relent or inflicting enough pain on Syriza's "core constituency of pensioners and public sector employees" to compel them to drive the PM from office, after capital controls come the depositor haircuts, first small, then ever greater until Greece collectively Cries Uncle and begs Europe to take it back while presenting Merkel with Tsipras and Varoufakis' heads on a proverbial (and metaphorical, we hope) silver platter.

(Makor) Tech View Euro Stoxx 50, Dax30, EN FP & EUR/USD

Quick note: Bearish Monthly reversals in June include the FTSEMIB, UKX, SMI Indices in Europe & S&P500, Dow Jones & Nasdaq100 Indices in the US. This suggest
that the risk/reward in chasing these indices into new highs (above the June15 highs) has very poor risk/reward. Moreover, I have been arguing for weeks against chasing the uptrend in the US market and given the candle setup on the Monthly charts I would stick
to the strategy of selling rallies rather than buying the dip.  

 

                Euro Stoxx 50 Index – testing important support at 3,374-3,379

 

·         The Index continues to put pressure on the 3,374-3,379 support area,

·         This area combines the June 18th low and the 200 day moving average and therefore should provide good support

·         While above 3,374-3,379 an attempt to fill the gap at 3,544-3,569 is possible. On the other hand, a sustain move below 3,374-3,379 would be bearish and argue for a retracement towards 3,312, 3,189 & possibly 3,036

 

Strategy: No position, Step aside for now

 

 

                Dax30 Index

 

·         The Index is putting pressure on the 38.2% Fibonacci retrace of the October 2014-April2015 retracement level which stands at 10,849

·         While above it a bounce is possible but given the fact that the Index has broken its uptrend and the setup of the moving averages which are turning lower the main threat at the moment is for a move lower over time

·         A sustain move below 10,849 would argue for a move towards the 200dma at 10,582 and then towards the Fibonacci support levels at 10,372, 9,896 & 9,307

 

Strategy: No position, Step aside for now

 

 

EN FP – bullish above 32.94-33.30

 

·         The stock is trading in a rising channel since Octover 2014, channel support is at 33.30  and while above it a move higher is likely

·         There is an open gap at 35.66-37.65 and a if we do get a move higher an attempt to fill the gap should be on the cards

·         Risk/Reward in playing this idea from the long side is attractive

 

 

                EUR/USD – Monday bullish reversal still in play and argues for a move higher

 

·         The CCY pair is trading near the 55dma which stands at 1.1132 and following Monday bullish reversal a move higher is still likely

·         Support stands at 1.1160 (50% retracement of Monday's reversal), 1.1060 (rising channel support) & 1.0955 (Mondays low)

·         On the upside, resistance is at 1.1278 (Monday's high) and then 1.1430 which is the resistance of the short term trend line connecting the highs and then 1.1436 & 1.1467

·         Once again, longer term charts favor a move higher over time, I continue to think that chasing the CCY pair lower has very poor risk/reward. Similar long term setups exist on Bullish AUD/USD, bullish AUD/JPY, Bullish GBP/USD and Bearish USD/ILS   

 

 

 

>>> Wynn Resorts and MGM Resorts rise amid merger speculation - report

Wynn Resorts and MGM Resorts rise amid merger speculation

Shares in MGM Resorts (NYSE: MGM) and Wynn Resorts (Nasdaq: WYNN) climbed on 30 June amid continued merger speculation surrounding the two Las Vegas-based hospitality groups, the Financial Times reported. MGM’s share price closed the day up 3.8% while Wynn’s stock rose 5.05%, the market report noted.

MGM has a USD 9.9bn market capitalisation, while Wynn’s market cap stands at USD 9.54bn.

>>> Sika acquires remaining Addiment Italia stake from JV venture partner Buzzi

Sika acquires remaining Addiment Italia stake from JV venture partner Buzzi Unicem

Sika AG acquired the remaining shares of the Italian based Addiment Italia from its joint venture partner Buzzi Unicem. The company is active in the production and sale of concrete admixtures and cement grinding aids. The transaction will strengthen Sika's production set up in Italy and increase its market presence. Addiment Italia generated sales of EUR 14m in 2014.

Addiment Italia has a history of over 25 years of experience in the construction market offering a broad range of concrete admixtures and cement grinding aids. In 2003 Buzzi Unicem and Sika AG formed a joint venture in order to produce an innovative range of construction chemicals that enhance the quality and performance of concrete and cement.

Pietro Buzzi, co-CEO of Buzzi Unicem: " The cooperation between Buzzi Unicem and Sika as joint venture partners of Addiment Italia has continued effectively for more than twelve years, with good understanding of the common goals and management decisions that led to great results for both employees and shareholders. We hope that our future business relationship will continue with the same long lasting success."

Paul Schuler, Head of region EMEA: "The acquisition will allow us to further build upon the successful partnership between Buzzi Unicem and Sika in the admixture business worldwide and strengthen the operational footprint in Italy. We welcome the new employees on board and look forward to developing the business together."

(Exane) Europe: Heading Back to Peak…RNO, FCA, CON, ALIV, UG

2 Up, 2 Down: Rating changes with this note
– Renault (+ from =): Our bullish European demand view prompts an upgrade to
Renault, joining PSA as one of our top OEM picks. To date we have played the EU
recovery primarily via PSA, but in hindsight we should have owned both. We correct
this mistake with this note, and believe it’s not too late to buy either French OEM as
demand and productivity recovers back to peak levels.
– FCA (= from +): We still like the optionality within the FCA story, and still see the
stock as a ‘trading buy’ ahead of the Q4 Ferrari IPO. However with Brazil an increasing
concern and NAFTA market profitability at peak, we would be reducing Americas
(North & South) auto exposure at this juncture. Together with some product delays, this
prompts a 15% cut to ‘16e EBIT and a downgrade to Neutral. We also note that any
fallout from current Greek instability may be most keenly felt in Italian stocks.
– Continental (= from -): Our Underperform rating on Conti was driven by the
conviction that consensus earnings expectations were just too high. We believe that
expectations are now much more realistic and we see some 2-3% upside to 2015-16
EBIT. We move to Neutral as we no longer see a catalyst for underperformance.
– Autoliv (- from +): We continue to believe that Autoliv’s leverage to the Active
Safety business is underestimated by the market. While this should eventually translate
into a re-rating for the stock, the near term might be overshadowed by earnings
pressure. Stronger growth in Europe will in our view only partly offset lower than
expected growth in China. We thus move to Underperform and reduce our TP to
USD119 from USD131.
– Peugeot (+; TP to EUR23.0): We keep PSA as our top pick, but increase our TP by
10% to EUR23 to reflect our increased European margin expectations. Our 15-16e
EPS estimates rise c.5%, leaving us c.30% ahead of consensus.

>>> What to look at today - 1st of July 2015

Dow+0.13 S&P +0.27% Nasdaq +0.57% Russell
US Market Closed Higher, but still down 2.1% on the month. Index climbed to a fresh high during afternoon action with the move taking place amid reports Greece could cancel its Sunday referendum if negotiations are resumed and an agreement could be reached on required prior actions. To that point, Eurogroup Chief Jeroen Dijsselbloem acknowledged the receipt of a new proposal from the Greek government with the offer set to be reviewed at today's Eurogroup meeting (11:30).Seven sectors settled in the green with energy (+0.6%) and consumer discretionary (+0.5%) showing relative strength throughout the day. The energy sector rallied behind crude oil, which climbed 1.9% to $59.44/bbl. Despite today's outperformance, the energy sector still lost 3.6% for the month. volume was heavier than average as quarter-end flows contributed to the increased activity with more than a billion shares traded. Asian trading session is also seeing some cautiously renewed optimism. Investors await further clarity on the Greek situation, the latest US jobs reports, and signs that Beijing was successful in putting the floor under the plummeting A-share market. In China, Shanghai Composite opened notably lower but returned to near-unchanged levels heading into midday break. Local press reports special entities affiliated with top state-run financials put a bid under yesterday's drop, even as other analysts noted another liquidity injection and a more carefully managed approach on China IPO pipeline. Typically high-profile June PMIs were largely a non-factor. World Bank reaffirmed the country's 2015 GDP target at 7.1% and 2016 at 7.0%, but warned of the headwinds on consumption from the recent market volatility. End of the month PMI releases in Asia were otherwise also mixed. Japan final figure returned to marginal expansion of 50.1 from contraction of 49.9 prelim. Fed's non-voting hawk Bullard remarked the Greek situation is not likely to weigh on US markets, calling for higher rates to prevent the rise of asset bubbles. Bullard added Sept liftoff is "very much in play", though a move in July cannot be discounted either....Sony +1.8% after yesterday plunge on share sale

Nikkei +0.46% Hang Seng +1.09% Shanghai -1.01%

Eur$ 1.1126 JPY 122.67 GBP 1.5692 EURCHF 1.0412 RUB $55.60 WTI $58.68 (-1.33%)

S&P +0.51% EuroStoxx +0.64% Dax+0.60% SMI -0.22%

Macro :
- ‘No’ Vote Leads in Poll for Greece’s Efsyn Newspaper
- Greece Will Vote ‘Yes’ in Referendum, Say 59% in Citi FX Poll
- Greece Cut to CC by DBRS; Rating Under Review Negative
- Greece’s Ratings Cut to CC From CCC by Fitch
- HSBC China June Manufacturing PMI 49.4; Est. 49.6
- China Manufacturing PMI at 50.2 for June; Est. 50.4
- Eurogroup Teleconference Wednesday 11:30 a.m.: Dijsselbloem

Keep an eye on :
- CON GY : Continental AG Raised to Baa1 by Moody’s, Outlook Stable
- DAI GY : Mercedes-Benz Says Its Diesel Vehicles Can Use B10 Palm Biofuel
- ANN GY : Deutsche Annington Completes Capital Increase of ~EU2.25b
- EXO IM : Exor to Hold Investor Meeting July 7 at 9am in New York
- GSZ FP : Engie Buys Solairedirect, Becomes France’s No. 1 Solar Producer
- M5Z GY : Manz Cuts FY Sales Forecast on Canceled Order
- NOVN VX : Novartis Gets European Lens-System Approval for Cataract Patient
- OSR GY : Osram in Talks W/ Potential Buyers on Selling Lamps Unit: Rtrs
- PNDORA DC : Pandora Want to Make German Market as Big as U.K.: Borsen
- SAN SM : Santander, Cerberus Didn’t Submit Bids For Novo Banco: Expresso
- VIV FP : Vivendi Finalizes Acquisition of Dailymotion