Markets & Finance

Continental Rises on Strong Results


From Standard & Poor's European MarketScope

Germany

Tire and auto parts maker Continental was up €2.05 to €67.32 after posting better-than-expected second-quarter earnings before interest and taxes of €405.6 million and net profit of €243.3 million, also ahead of expectations. Quarterly sales came in at an in-line €3.55 billion. The company maintained its fiscal-year 2005 outlook for record revenues and earnings.

DaimlerChrysler was up €1.05 to €41.48 as the carmaker stopped the sale of MTU Friedrichshafen, of which it owns some 88%, because of a conflict with minority shareholders of the heavy diesel engine specialist. On the broker front, JP Morgan lifted its fair value on the company's stock to €45 from €40 as it reiterated its overweight rating.

BMW was up €0.67 to €39.64, with German monthly auto sales due today and the carmaker's second-quarter results set to be released tomorrow. A poll compiled by Reuters puts quarterly pretax profit 3% lower at €1.05 billion as unfavorablecurrency hedging rates dent earnings. Credit Suisse First Boston forecast that despite a 9% growth in unit sales, already reported, revenues will again fall short of unit sales growth due to a weaker mix, higher leasing eliminations, and U.S. dollar weakness year over year.

Retailer Metro was up €0.48 to €42.65 after the company reported second-quarter sales of €13.83 billion, up from €13.35 billion in the period last year, but lower than the €14 billion analysts had been expecting. However, the company reiterated its fiscal-year forecast, seeing earnings per share up 8 to 12%. The bank Merck Finck thinks the company's dependence on the German market is currently overstated by investors, and notes that the group's shares do not look. Therefore, the broker reiterated its buy rating and target of €47. The bank Kempen thinks sentiment is likely to remain subdued until a turnaround in food is visible.

Britain

Ryanair was up £0.13 to £6.88 after the discount airline reported first-quarter revenue of €404.6 million, up 35% and profit after tax of €64.4 million, up 21%. The number of passengers was 8.5 million, up 30% and yields were 3% higher. The company noted, however, that its fuel costs rose 112% to €109.90 million. It added that fuel is unhedged for August, but 90% hedged for the winter at $49 per barrel. The company also said that if there are no further incidents in London, forward bookings will not be materially impacted, but if there are more attacks, bookings and yields could be adversely impacted.

Royal Dutch Shell was up £0.19 to £18.54 after Citigroup said to switch into the company from peer BP. Separately, Royal Dutch Shell has become embroiled in legal tangles over its Corrib gas project when an Irish minister ordered the company to dismantle a three kilometer section of pipeline, The Times reports. The newspaper said that the gas pipeline, part of a £620 million project to bring fuel from a gasfield off the coast of County Mayo to an onshore processing facility, has been dogged by controversy.

Miner Rio Tinto was up £0.40 to £19.16 ahead of its first-half results tomorrow. The investment bank Dresdner Kleinwort Wasserstein forecasts adjusted net profit up 98% year on year to $1.968 billion, slightly above the consensus forecast of $1.944 billion.

France

Michelin was up €1.20 to €52.45 after the tire maker's German peer Continental posted second quarter earnings before interest and taxes of €405.6 million, which was better than expected, and net profit of €243.3 million, also ahead of expectations. Michelin reports its own first half results on August 5.

Supermarket group Carrefour was up €1.01 to €39.77 on low summer volumes, with traders pointing to a technical reaction after pressure from a big seller seen over the past few sessions. Traders dismiss rumours of potential interest from Wal-Mart, which is regularly cited during dull trading periods.

STMicroelectronics was up €0.32 to €14.43 as the Semiconductor Industry Association reported chip sales up 0.8% in June to $18 billion, but down 0.5% from May. Slumping memory-chip prices accounted for part of the month over month drop in June.

Bank BNP-Paribas was up €1.00 to €60.40 ahead of its second-quarter results report tomorrow. The consensus is looking for a 8.8% fall in net profit from fiscal-year 2004. The investment bank Dresdner Kleinwort Wasserstien expects a 3% fall in net profit year over year, while the bank ETC Pollak Prebon sees first-half net profit up to €1.3 billion, which the broker thinks is cautious.

Italy

Fiat was up €0.15 to €7.18 as Italy's new car sales rose 1.7% year over year in July, with the carmaker slightly underperforming the market. Separately, the company is among Morgan Stanley's least attractive stocks of the sector. Yesterday, Standard & Poor's Ratings Services revised its outlook on the group to stable from negative, saying the change in outlook reflects the company's much-improved financial flexibility and its expectation that the group's automotive activities will gradually recover, although they will remain loss-making in 2005.

Netherlands

ABN Amro was down €0.50 to €19.89, after a Milan judge confirmed the decision to seize Banca Antonveneta shares held by Banca Populare Italiana, Reuters reported. Earlier, ABN Amro said that it wants to be Banca Antonveneta's majority shareholder and has no interest in becoming a minority partner, the newspaper Il Sole 24 Ore wrote. According to the paper, ABN Amro could buy the stakes owned by Banca Italiana Populare and its allies and launch a bid on Antonveneta at €26.5 per share. (In Italy, Banca Populare Italiana was down €0.01 to €8.00 and Banca Antonveneta was up € 0.17 to €25.33 on the news). Separately, Deutsche Bank cut its target on ABN Amro to €19.90 from €20.70. The company also trades ex-dividend today.

Nordic

Volvo was up 8.00 Swedish kronor to 331.50 kronor, as Deutsche Bank names the carmaker its top pick in the sector. The broker reiterated its buy rating and said that it sees a 24% upside in its target price of 400 kronor, as the stock is undervalued in absolute and relative terms.

Switzerland

Food giant Nestle was up 4.25 Swiss francs to 357.25 francs, after Morgan Stanley increased its target to 400 francs from 390 francs and kept its overweight rating.


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