Markets & Finance

STMicroelectronics Falls


From Standard & Poor's European MarketScope

Britain

Oil group BP was down £0.10 to £5.33 Wed, as the price of benchmark crude oil for June delivery fell to $53 per barrel, as U.S. inventories showed a build of 5.4 million barrels for crude stocks compared to Platts' forecast of 975,000. Gasoline stocks draw came in at 1.0 million barrels compared to estimates of a draw of 1.2 million. Separately, ING financial services group said that the reported results gave some veritable cheer and should act as a catalyst to reinvigorate interest in the stock that has waned since April 7 amid fallout from the company's tax position in Russia. The broker increased its estimates marginally to reflect higher earnings upstream and in gas and power. Meanwhile, Lehman Brothers said the company's showed evidence of lower costs in the upstream and higher realisations in the downstream. Meanwhile, BP's chief executive Lord Browne has played down fears about his company's Russian joint venture, which were sparked by a surprise claim for $1 billion in back taxes and a threat to block foreign access to key Russian oil fields, the Financial Times reports.

Oil group Shell Transport was down £0.08 to £4.69, ahead of tomorrow's first-quarter results. ING Financial Services group forecasts earnings based on a current cost of supply up 19% year on year, and up 3% quarter on quarter, to $5.049 million. The grop said this is largely unspectacular given that oil prices have risen by 48% year on year and 8.6% quarter on quarter. The group expects lower realisations and refining and marketing margins, combined with flat production growth, to impact earnings. Upstream, it forecasts earnings up 8% year on year, but down 5% quarter on quarter to $2.565 billion. Downstream, it sees refining and marketing margins falling $3 per barrel quarter on quarter in Europe and $2.50 per barrel in the U.S. Gulf Coast and West Coast. The group expects BP's earnings to rise in the US, but fall outside the US, due to restructuring benefits and higher margins in the U.S. helping the bottom line

Reed Elsevier was down £0.16 to £5.12, after the publisher said results so far this year are in line with its expectations. The company continues to target fiscal-year underlying revenue growth of at least 5% and double digit growth in adjusted earnings per share. The company also trades ex-dividend today.

Steelmaker Corus was down £0.02 to £0.45, after Mittal Steel warns second-quarter profits are likely to fall as a result of lower production volumes coupled with increases in the price of raw materials. The company said that pressure on profit was partly due to a softening in the spot market for steel. Meanwhile, Nippon Steel reported a 92% annual operating profit gain, beating estimates, and forecast 12% earnings growth this year.

France

STMicroelectronics was down €0.69 to €11.36, after the chipmaker reported a first-quarter net loss of $31 million and a loss per share of $0.03 compared to a net profit of $77 million and earnings per share of $0.08 in the period last year. Result include an impairment charge of $78 million. Excluding the impairment charge, the company reported earnings per share of $0.04. Net revenue came in at $2.08 billion, up 2.6% from last year, but weaker than forecasts. Gross margin came in at 32.9%, compared to 36.6% in the previous quarter. Second-quarter gross margin is expected to come in at 33.5%, plus or minus 1%. The company also said that second-quarter sales may miss analysts' estimates, declining by as much as 1% or rising by no more than 7% quarter on quarter. Following the results, JP Morgan trimmed its target to €13 from €14 and rated the company neutral. HSBC and Goldman Sachs said the results were disappointing.

French retailer Pinault-Printemps-Redoute was down €1.90 to €76.80, ahead of the company's first-quarter sales report tomorrow. Lehman Brothers expects January and February trends to have continued in March. The broker thinks a strong first quarter could set the tone for the year, and reiterates its equal weight rating and €86 price target. The consensus is looking for like-for-like sales growth of 5% (up 13.5% In luxury and 3.5% in retail).

Aerospace giant Eads, the parent of Airbus, was down €0.53 to €22.04, after the Airbus A380's maiden flight took place in Tolouse this morning. Meanwhile, rival Boeing continues to make significant sales in the mid-range segment. The Financial Times reported that Boeing has won an order worth close to $7 billion from Air India for up to 50 medium and long-range aircraft. On Monday, Boeing announced a $6 billion order from Air Canada. Within two weeks, Airbus' rival is expected to announce a further order of 18 787s from Northwest Airlines.

Media group Vivendi Universal was down €0.53 to €23.01, ahead of its first quarter of 2005 sales report due today. The brokerage Bear Stearns estimated group headline sales of €4.725 billion, up 4% on a comparable basis but down from €5.973 billionn on an actual basis, and rated the company outperform.

Oil group Total was down €4.60 to €170.10, after prices for the benchmark crude oil fell more than $1.50 per barrel.

Steelmaker Arcelor was down €0.66 to €15.68 after Mittal Steel warns second-quarter profits are likely to fall as a result of lower production volumes coupled with increases in the price of raw materials. Elsewhere, Nippon Steel reports 92% annual operating profit gain on strong demand beating estimates and forecasts 12% earnings growth this year.

Germany

Conglomerate Siemens was down €1.21 to €56.97 after the company said that second quarter net fell to €781 million, compared to €1.2 billion last year, but slightly above median forecasts of €763 million. Second-quarter sales rose to €18.563 billion, compared to €17.79 billion, which was above median forecasts of €18.45 billion. The company said it plans to reorganise its mobile phone division as a separate unit and hopes to find a partner. The company said its mobile unit has a €138 million loss in the second quarter, which is larger than analysts forecast of €125 million. The unit's sales were €842 million, down from €1.2 billion last year, and the company said it sold 9.3 million phones in the period. In the second-quarter, the power generation unit's profit rose to €257 million, with sales at €2.02 billion. The medical unit's operating profit was at €218 million, with sales at €1.77 billion. The company said earnings outlook for 2005 is difficult to assess. It said it plans more targeted acquisitions. Brokers said, at first glance, the earnings seem to be by and large in line with estimates. The big news is the carve out of the mobile phone business. This indicates that the company will not try to solve the problems with mobile phones alone and points strongly to a joint venture or something similar.

Drugs and chemicals group Bayer was down €0.38 to €24.77, after the brokerage Cheuvreux increased its target to €31 from €30, with an outperform rating. The broker said it see 25% upside for the stock due to strong sales growth of aspirin and economies of scale. The broker said aspirin benefits significantly from the withdrawal of Cox-2 inhibitors and will become the company's No. 1 healthcare drug in 2005. The broker moved its earnings per share estimates up by 3%.

Truckmaker Man was down €1.30 to €33.14, as heavy truck registrations in Western Europe in March increased at a lower pace of 0.7%, as the Easter break fell in March this year and therefore resulted in between one and three fewer working days. However, the bank Merck Finck expects compensation in April and year-to-date figures of 5.4% growth are still slightly above fiscal-year 2005 estimates of 5% growth. Within Western Europe, the German market saw a decline of 4.4% in March, which caused the broker to reduce its fiscal-year 2005 estimate for the German market to 1% growth. Overall, the broker believes news for German truck manufacturers is mixed, and rates Man a buy and DaimlerChrysler a sell. Separately, Swedish peer Scania AB reported first-quarter results below expectation and said restrained economic activity in Western Europe has sparked uncertainty over demand for heavy trucks. The company said first-quarter pre-tax profit rose to 1.679 billion Swedish kronor.

Steelmaker Thyssen Krupp was down €0.38 to €14.15, after Mittal Steel warns second-quarter profits are likely to fall as a result of lower production volumes coupled with increases in the price of raw materials. Elsewhere, Nippon Steel reports 92% annual operating profit gain on strong demand beating estimates and forecasts 12% earnings growth this year. Separately the investment bank MM Warburg downgraded the company to sell from hold after saying it is afraid of weakening tendencies on the carbon steel and special steel markets.


Steve Ballmer, Power Forward
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