NEWS
nd
MONTH2015
2014
200th
February
We see the potential for European equities to continue to outperform this week, given the continued fund flows into
Europe, following the ECB’s QE announcement. That said, we believe positive sentiment toward Europe will likely be
tempered by comments from the new Greek Finance Minister over the weekend, stating that Greece would not seek to
renew Troika loans upon maturity at the end of next month. Earnings season continues with a greater European focus this
week, with GlaxoSmithKline and Vodafone reporting from the core portfolio, in addition to Ryanair which we highlight
below. Economic data will also act as a potential catalyst to market movements with a number of important releases
including Eurozone Composite PMI’s, ISM Manufacturing, Bank of England rate announcement, Eurozone Retail PMI and
US Non-Farm Payrolls to conclude the week. We continue to see lower bond yields as positive for equity flows, but
reiterate the importance of specific stock selection.
Equities Commentary
This week’s market events
Ryanair – Report substantial earnings beat for Q3
M
Ryanair (Previous Close €10.40) reported solid Q3/15 results this morning. Top line
revenues were €1.13bn (4.8% beat vs. our forecasts). Profit after tax of €49m was 22.5%
above our expectations, and 63% ahead of consensus of €30m. Earnings were driven by
stronger passenger numbers (+14% YoY, to 20.8m for Q3), improved load factor (up 6pts to
88%) and higher average fares (+2%). Ryanair also increased its FY15 guidance by 3%, to
a range of €840m - €850m, due to higher passenger growth. The airline also confirmed its
special dividend of €0.375c to be paid on the 27th February. Strong passenger growth and
improving margins lead us to re-iterate our BUY recommendation. The shares are trading
on a 23% premium to peers at 16x FY15e earnings, however we view this as justifiable
given the growth dynamics of the airline. Our €10 Target Price is currently under review.
T
W
CORPORATE
ECONOMICS
BG Group – FY14
EZ – PPI YoY
BP – FY14
US – ISM New York
CORPORATE
ECONOMICS
ECB Non Monetary
Policy Meeting
Hibernia REIT –IMS CH – Comp PMI
BSkyB – H1/15
FR – Comp PMI
IAG – Traffic Stats GE – Comp PMI
EZ – Comp PMI
EZ – Retail Sales
YoY
T
CORPORATE
Vodafone – IMS
Astra Zeneca –
FY14
easyJet – Traffic
Stats
Twitter – Q4
GoPro – Q4
Daimler – FY14
F
CORPORATE
n/a
Bank of Ireland – Raising Price Target to €0.39 from €0.35
On the 21st January, Bank of Ireland (Previous Close €0.268) announced it was delisting its
ADR (an investment vehicle primarily for US retail investors) from the NYSE, effective from
the 12th February, which accounts for 5% of outstanding shares. Its share price has fallen
9% since this announcement, underperforming the wider banking sector over the same
period. We view this pull back as an opportunity to add to existing holdings, as we remain
confident in its ongoing capital generating ability, its ability to write back loan loss provisions
as asset prices improve, and its potential to re-instate its dividend in 2017. From current
levels, BOI offers a 43% upside to our new Target Price of €0.39c
SPDR S&P Euro Dividend Aristocrat – General play on European Equities
We see the potential for European equities to outperform this week, given the continued
flows into Europe following the QE announcement by the ECB. Indices have seen strong
gains to date; however we believe the attractiveness of dividend yielding stocks in Europe
should remain high given the prevailing low yield environment. As such, we highlight the
SPDR S&P Euro Dividend Aristocrat ETF (SPYW GY, N/C, Previous Close €20.50) as an
alternative play on this view. The ETF’s objective is to track the performance of the 40
highest yielding Eurozone stocks from the S&P Europe BMI index and offers a dividend
yield of 3.3%. The ETF has seen gains of 9% YTD, against 7% in the wider Eurostoxx50
index.
Equities
Portfolio Management
Research
ECONOMICS
CH- Manuf. PMI
US – PCE Core
YoY
US – ISM Manuf.
GSK – Q4
Apple – Strong earnings, raising Price Target to $160 from $143
Apple (Previous Close $117.16) has started 2015 strongly, with an exceptional December
driven by much stronger-than-expected iPhone shipments and healthy margins. Apple
reported Q1/15 sales of $74.6 billion which comfortably beat our recently increased revenue
estimate of $68.2 billion. Equally, pro forma EPS of $3.06 (up 48% YoY) was much better
than our $2.61 projection. We are boosting our Q2/15 revenue estimate 4.65% to $56.2
billion, while increasing our EPS projection to $2.13 from $1.97. For FY15, we are boosting
our EPS projection to $8.68 (+12.4%) to reflect the addition of Apple Watch and continued
iPhone momentum, while increasing our FY16 EPS projection 15.5% to $9.62. We are
raising our 12-month price target to $160.00 from $143.00, which is based on 14x our CY16
pro forma EPS estimate (adjusted for interest income/expense), plus Apple’s $24.07 net
cash per share.
CORPORATE
Ryanair – Q3
Exxon Mobil – Q4
ECONOMICS
GE – Factory Orders
GE- Retail PMI
EZ – Retail PMI
BoE Bank Rate
ECONOMICS
GE – Industrial
Prod YoY
US – Change in
Nonfarm Payrolls
Upcoming Events
10/02/15
Coca-Cola – Q4
11/02/15
11/02/15
11/02/15
11/02/15
Smurfit Kappa – FY14
Tullow Oil – FY14
Arm – FY14
Cisco – Q2
12/02/15
12/02/15
12/02/15
12/02/15
AIG – Q4
DCC – IMS
Rio Tinto – FY14
Total – FY14
13/02/15
Rolls-Royce – FY14 Prelim
Bonds
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