Markets & Finance

European Oil Groups Rise


From Standard & Poor's European MarketScope

Britain

Oil group Shell Transport was up £0.16 to £5.44 after Morgan Stanley increased its target price to £6.00 from £5.25, and kept its overweight rating. The company holds its annual general meeting today to approve the unification with sister company Royal Dutch. The Guardian said that, assuming shareholders approve the merger today, the company's weighting in the FTSE All-Share index will rise to nearly 8% next month from around 3.4%. British institutional shareholders still need to buy billions of pounds worth of shares in the company to pump up their exposure following its planned merger with Royal Dutch, the Financial Times reported, since institutional holdings are far below what would be required to match the enlarged market weighting of a combined Royal Dutch Shell.

Oil group BP was up £0.12 to £5.96, after Morgan Stanley increased its target to £6.35 from £5.70, and kept its equalweight rating. The broker raised its forecasts for West Texas Intermediate crude oil for fiscal 2005 to $50 per barrel from $43, for 2006 to $50 from $43, for 2007 to $45 from $38, and for 2008 to $40 from $35.

Miner BHP Billiton was up £0.12 to £7.17 after Morgan Stanley increased its target to £8.20 from £8.00, and retained its overweight rating. The broker raised its earnings per share estimates for 2006 to 2008 by 3%, 4% and 5%, following upgrades to global oil price forecasts.

Energy group BG was up £0.15 to £4.69 after Morgan Stanley boosted its target to £4.80 from £4.00, and kept an equalweight rating.

Music retailer HMV was up £0.09 to £2.38 after the company reported fiscal year pre-tax profit of £136.2 million, compared to £129.3 million, year over year, and set a final dividend of 5.1 pence per share. It added that for the seven weeks ending June 18, like-for-like sales were down 1.0% against strong trading in the comparative period.

Intercontinental Hotels was up £0.09 to £7.08 after Citigroup increased its target price to £7.80 from £7.50, and reiterated its buy rating.

France

Oil group Total was up €2.40 to €196.10 after the company said that it will not buy a 25% stake in Novatek after the Russian gas producer decided to launch an initial public offering in London. The company's Jean Pierre Dolla, chief for exploration and production in Russia, said the IPO leaves "no room for Total." Novatek plans to go ahead with the offering after failing to obtain permission for the Total deal from the Russian watchdog. Meanwhile, Morgan Stanley increased its target for Total to €210 from €182, and kept its equalweight rating.

Oil services group Technip was up €0.90 to €39.00, after Morgan Stanley increased its target to €32.30 from €31.70, following an increase in earnings per share estimates for the oil service industry. The broker said that the industry will benefit from stronger dollar, but notes that foreign exchange has smaller impact on the company.

Steelmaker Arcelor was up €0.42 to €16.36 after Credit Suisse First Boston highlighted steel sector production data for May showing a 1.8% reduction in the daily production rate month over month.

Media group Vivendi Universal was up €0.31 to €25.73 after the U.S. Supreme Court ruled against peer-to-peer Internet file sharing companies Grokster and StreamCast networks. Metro-Goldwyn-Mayer Studios sued Grokster and StreamCast networks on behalf of the movie industry claiming their software aids secondary copyright infringement.

Tire maker Michelin was up €0.55 to €50.70 after the company said that its Indianapolis tires were not intrinsically flawed, but were not suited to the conditions of the race track. The press reported that defective tires eliminated 14 out of the 20 cars that were expected to race. The company said that testing the tires at the racecourse beforehand was not possible

Germany

Sporting goods group Adidas was up €1.75 to €139.61 after the brokerage Cheuvreux downgraded the company to outperform from its selected list, saying that it sees no reason to increase its earnings per share estimates. Separately, according to the newspaper Handelsblatt, the company increased sales and profit in the second quarter, helped by a turnaround in the U.S. The report said that profit grew faster than sales. The company has increased its market share in the U.S. between 2 and 3% since the beginning of the year and expects to control 12% by year end. Meanwhile, the Financial Times reported that the company hopes to make more than €1 billion next year, and as part of its tactics to make record profits, it intends to invest up to €900 million in the World Cup.

Financial-services group AWD was up €0.87 to €34.37 after the company maintained its target of increasing earnings before interest and taxes at least 88% by 2008 to €135 million. Sales are seen climbing to more than €1 billion from €691.1 million last year.

Italy

Oil group Eni was up €0.39 to €21.49 after Morgan Stanley increased its target to €22 from €19.7. The broker said that its top picks in the European sector are Royal Dutch/Shell, Repsol, Norsk Hydro and Statoil, while its underweights remain Eni and Neste. Separately, Eni board member Mario Resca has reportedly said that the company should invest in growth before considering an extraordinary dividend. Also, the company could be interested in buying PetroKazakhstan, a Canadian group with upstream/downstream activities in Kazakhstan, the daily Finanza & Mercati writes.

Broadbrand provider Fastweb was up €1.68 to €35.00 after Citigroup pointed out that the stock is trading below its target price and very close to an important support level. Although it maintains its negative stance, the broker suspects the stock might have a short-lived rally on second quarter expectations. The broker rates the stock a sell.

Carmaker Fiat was up €0.07 to €5.91, as Ifil's chairman Gianluigi Gabetti said that Ifil will remain a major shareholder in the company and will support the group in any possible way, the Italian press reports. Ifil currently owns a 30% stake in Fiat that will become about a 22% stake after the conversion of the group's €3 billion loan from banks.

Netherlands

Oil group Royal Dutch was up €1.85 to €54.85 after Morgan Stanley increased its target to €61.5 from €52.0 and kept its overweight rating. The broker also raised its forecasts for West Texas Intermediate crude oil for fiscal 2005 to $50 per barrel from $43, for 2006 to $50 from $43, for 2007 to $45 from $38, and for 2008 to $40 from $35. Separately, the company will hold its annual general meeting today to approve the unification with Shell Transport.

Oil services group Fugro was up €0.89 to €20.94 after Morgan Stanley lifted its target to €20 from €18.25. The broker also lifted its oil price forecasts. As a result, the change raises earnings in local currency for the European group by 27% in 2006, 39% in 2007 and 34% in 2008.

Switzerland

Julius Baer was up 1.85 Swiss francs to 77.25 francs after it was reported that CEO Walter Knabenhans will stand down from his post at the bank at the end of the year to be replaced by Alex W. Widmer, a former Credit Suisse Group manager. In an interview with Reuters, Chairman Raymond Baer said the new CEO aims to lead a push into Asia and emerging markets in a move to revive the company's wealth management business.

Nordic

Volvo was up 6.50 Swedish kronor to 315.50 kronor, as the company saw registrations remaining remarkably strong, up 9.2% year on year in May and 6.4% year to date. Dresdner Kleinwort Wasserstein said that expectations for the North American market also remain unchanged (up 20% in 2005). The broker kept its buy rating and target at 350 kronor. Separately, Volvo opened a new truck factory in Durban, South Africa and closed its plant in Botswana, in order to shorten lead times and lower freight costs. Production in the new plant is expected to start at the end of 2005.

Oil group Statoil was up 3.75 Norwegian kroner to 133.00 kroner, after Morgan Stanley upgraded the company to overweight from equal weight and lifted its target to 155 kroner from 112 kroner. The broker also increased its oil price forecasts.

Telecom Tele2 was down 1.50 Swedish kronor to 73.00, after suing telecom operator TeliaSonera for 2.5 billion kronor over losses in its broadband unit, reported the daily Svenska Dagbladet. The company blames TeliaSonera's control over the fixed-line telephone network for causing the losses and said that it will never be able to regain what it lost due to TeliaSonera's pricing.

Wind turbine maker Vestas Wind was up 2.00 Danish kroner to 101.00 kroner after the company's liquidity crisis foced it to shelve its plans to build U.S. production capacity, reports the newspaper Berlingske Tidende. Also, the company said that it prefers to have production facilities in Asia where market conditions are more stable.

Energy group Norsk Hydro was up 8.50 Norwegian kroner to 594.50 kroner, after Morgan Stanley lifted its target to 660 kroner from 575 kroner and kept its overweight rating. The broker also increased oil price forecasts, saying that it raises earnings for the European group by 27% in 2006, 39% for 2007 and 34% for 2008. Norsk Hydro is among the broker's top picks. Separately, the company bought half of British wind energy firm Scira, with the option to buy 95%.


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