Markets & Finance

SAP Falls on Broker Downgrade


From Standard & Poor's European MarketScope

Britain

Drugmaker Astrazeneca was up £0.32 to £23.48 is to start late-stage trials of a cancer drug that is one of its great hopes for increasing sales following the commercial failure of its older drug Iressa, The Guardian newspaper reported. Some trial results from the new drug, now named Zactima but previously known ZD6474, have been released and have shown promise, but more detail will be revealed this week at scientific conferences. The company said yesterday that it will start Phase III trials for lung cancer, the last and longest stage in the development process. Morgan Stanley predicts sales of £137 million in 2011 for Zactima, taking into account the risk that the drug will not get through the regulatory process.

British Airways was up £0.04 to £2.69 after Citigroup said that restated earnings to March, 2005, for International Financial Reporting Standards are little changed from the British Generally Accepted Accounting Practices figures, apart from pre-tax profit being £98 million higher under the international standards, at £513 million, mainly because of a £86 million profit on the disposal of its Qantas stake last September since the international standards disallow goodwill amortisation. The broker said that premium traffic data, due out this afternoon, and oil prices will be bigger drivers of the share price than reporting changes.

Bookmaker William Hill was up £0.13 to £5.53 after reporting its gross win in the first half is level year over year, while the rate of increase in operating expenses has fallen to 4.4% in the 26 weeks ending June 28, 2005. The company added that it has enjoyed improved sporting results in recent weeks, while continuing to exercise tight control over costs.

Wolseley, the heating and plumbing supplies distributor was down £0.14 to £11.76 after Dresdner Kleinwort Wasserstein cut its target price to £11.74 from £11.86, and downgraded the company to hold from add. The broker lowered its earnings per share forecasts for fiscal 2006 by 1.5%, following the weak update from builders' supplier Travis Perkins.

Travis Perkins was down £0.47 to £15.91 after Credit Suisse First Boston cut its target price to £16.75, following the trading statement and retained its neutral rating. The broker said that lower consumer spending hit both its Wickes do-it-yourself supplies stores and its core business.

France

Michelin was down €1.86 to €48.84 after the tire maker's cautious tone during yesterday's meetings with sell-side analysts. The company held one-to-one meetings with analysts during the day and a dinner in the evening. Shares are also under pressure on the news that rubber prices may rally to nine-year highs by December due to strong demand from tire makers in China, according to a Bloomberg survey of traders and analysts.

Outdoor advertising company JC Decaux was down €0.47 to €20.58 after the company said that it will appeal against the €10 million fine imposed by the Competition Tribunal for abuse of its dominant position.

Cognac maker Remy Cointreau was down €0.50 to €36.80 after the brokerage Cheuvreux downgraded the company to underperform from outperform as the shares have risen 25.7% year to date. The broker sees little scope to revise earnings forecasts upward, aside from further dollar appreciation against the euro. Based on these forecasts, the broker said that its target price of €37.50 has now been reached.

STMicroelectronics was down €0.15 to €13.14 as global semiconductors sales increased 4.1% year over year in May to $18.05 billion, thanks to rising demand for mobile phone chips. However, sales declined 0.5% month over month in May as DRAM prices slipped, the Worldwide Semiconductor Trade Statistics reported.

Germany

Software maker SAP was down €2.93 to €142.09 after the bank UBS downgraded the company to neutral from buy, with a €160 target. The broker said that while it expects a good second quarter to be reported, with some upside risk for estimates, it does not expect a positive preannouncement or any fundamental changes to the guidance. With European macro data deteriorating, the broker expects investor concerns to increase during the second half of 2005.

Drugmaker Altana was up €1.08 to €41.50 after Citigroup cut its price target to €42 from €48, with a hold rating. The bank ING cut its target to €47 from €57, with a buy rating. Merrill Lynch lowered its target to €50 from €54, with a buy rating. The bank MM Warburg said that it believes that the drop in the share price in response to the news is exaggerated, and considers this to be a good opportunity for fresh commitments. The broker upgraded the share to buy from hold with a target price of €47.

Continental was down €1.03 to €58.78 after the maker of tires and car parts secured European Union antitrust approval for its Xtra Print Holdings acquisition. The European Union said that the new combined firm will continue to face several strong, effective competitors. Separately, a Bloomberg survey of traders and analysts said that rubber prices may rally to nine-year highs by December thanks to strong demand from tire makers in China.

Retail group Metro was down €0.40 to €40.9 as its retail sales in May rose by 3.1% in real and by 2.7% in nominal terms. The actual outcome is clearly better than expected as market participants were going for unchanged sales after a decline of about 2% in April and should be suitable to improve sentiment for German consumer goods and retail stocks. On the positive side, nearly all categories posted increasing sales with healthy development in the important textile and cosmetics segments. On the negative side however, sales in the department stores fell sharply in May, posting an embarrassing decline of 10.4% year on year. The bank Merck Finck said that this outcome confirms its negative view on the German department store sector.

Carmaker DaimlerChrysler was down €0.36 to €33.40 as dealers report rumors that the company may lower sales guidance next week as Chrysler needs to increase incentives.

Netherlands

ABN Amro was down €0.26 to €20.39 after the Financial Times reported that the company will today extend by up to 10 working days the period of its cash offer for Italian bank Banca Antonveneta. The move is said to follow a request by Consob, the Italian stock market regulator, which is understood to be concerned that ABN Amro's €27.5 per share offer would expire before rival bids proposed by Banca Populare Italiana had been launched. ABN Amro yesterday raised its stake in Antonveneta to 25% through the purchase of around 1 million shares at a price of €26.5 per share, the newspaper De Telegraaf reports. Bloomberg writes that this has been confirmed today by ABN Amro. Separately, the Dutch bank has agreed to buy Priory Group, the chain of clinics and healthcare services, from private equity firm Doughty Hanson for a total equity and debt consideration of EUR1.29 billion.

Switzerland

Electrical group ABB was down 0.08 Swiss francs to 8.20 francs as the company signed a new five-year revolving $2 billion credit facility to replace an existing $1 billion credit line due to expired in 2006. On the broker front, Goldman Sachs downgraded the company's stock to underperform from in-line.


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