Markets & Finance

France Telecom Dips on Lowered Outlook


From Standard & Poor's European MarketScope

France

FRANCE TELECOM (FTE) was down €1.25 to €21.94 during Thursday's session. The company reported third quarter sales of €12.26 billion, up 3.8% from a year earlier and higher than the €12.29 billion consensus estimate; and gross operating profit up 2.1% to €4.86 billion. The company trimmed its fiscal year sales outlook to around 3% from a previous 5% as revenues decrease in Telekomunicaja Polska. Citigroup considers the sales downgrade was unacceptable since the company has just come to the market for cash.

ALCATEL (ALA) was down €0.72 to €9.94. The company posted third quarter sales up 8.8% year-over-year to €3.289 billion, vs. the €3.22 billion consensus, operating profit of €278 million, vs. the €276 million consensus, and EPS of €0.19 including a €0.7 one-time gain. It notes mobile communications registered revenues up 22% year-over-year to €1.282 billion while private business was down 3% year-over-year to €928 million. Alcatel expects fiscal year operating profit as a percentage of sales of 9% from 10% and growth of between 5% to 8%.

RENAULT was up €0.15 to €72.55. The automaker reported nine months sales of €30.86 billion, up 2.9%; Automobile Division revenues rose 3.1% to €29.45 billion, thanks to strong sales growth and a positive price and model mix effect on international markets. Renault says third quarter total sales rose 1.04% to €9.54 billion. It adds that the fourth quarter should see the company benefit from the anticipated performance of New Clio, noting that order levels for the new model are encouraging in the main countries in which it has been launched. Merrill Lynch says third quarter revenue was a little below consensus and its estimates but earnings guidance was reiterated.

STM (FR) (STM) was down €0.17 to €13.72. Goldman Sachs says the company reported a slightly better than expected third quarter and offered guidance, with respect to EBIT margins, ahead of consensus forecasts. Maintains outperform. Citigroup highlights consensus gross margin for the fourth quarter of 2005 is around 36%. It adds that its guidance based on US$/€ rate of 1.22, and maintains its buy rating for the company and target price of €17.5 (US$21). HSBC says the company's third quarter was the first quarter in 2005 without (significant) negative surprises. Keeps neutral rating unchanged. Lehman says the company's third quarter 2005 results as expected with fourth quarter 2005 guidance below its expectations. It maintains its overweight rating and US$18.5 target (17.5x forward earnings).

TOTAL (TOT) was down €3.10 to €204.70. WTI crude oil prices traded just above US$61 per barrel Thursday, after settling at US$60.66 Wednesday night. Wednesday's U.S. government data showed a larger-than-expected build of 4.4 million barrels in crude inventories, which offset draws in distillate stocks.

SANOFI-AVENTIS (SNY) was down €1.30 to €65.70. The company's patent infringement lawsuits, which intend to block generic versions of its Allegra antihistamine drug in the U.S., will be heard today by the federal court of the district of New Jersey. The federal court will examine the suits filed against generic labs Barr Pharmaceuticals, Teva Pharmaceuticals, Ranbaxy Laboratories, and Amino Chemicals.

Germany

HYPOVEREINSBANK was down €0.52 to €23.00. Supervisory board chairman Albrecht Schmidt has resigned and may be replaced by UniCredito CEO Profumo. In addition, other members of the supervisory board who had opposed the takeover may also step down. Therefore, observers expect that the most prominent opponents of the takeover will lose their influence, which will help smooth the integration process of the company within the UniCredito group. On the broker front, Citigroup says its top pick among the domestic German banks remains the company, rated buy.

FRAPORT was up €0.35 to €39.75. The German government completed its sale of its 18.2% stake in the company. Meanwhile, Lufthansa, according to FAZ, may be interested in acquiring a 10% stake in the company. Lufthansa shares were down €0.20 to €11.14.

MORPHOSYS was down €0.67 to €38.88. The company has raised its 2005 full-year profit forecast to €2 million from €1 million previously, helped by lower expenses. The company's nine months net income nearly quadrupled to €3.9 million on sales 52% higher year-over-year at €23.8 million.

Italy

EDISON was down €0.07 to €1.66. AEM Milano will replace the company in the benchmark SP/MIB index as of October 31. In addition, AEM Milano and EdF have reportedly won 93% of the €3.24 billion bid sealing control of the company. AEM Milano was unchanged at €1.63.

BNL was up €0.00 to €2.68. JP Morgan, Mediobanca, and Rothschild have advised the company that the price of €2.7 offered by Unipol is too low for technical reasons and their calculations reach a range between €2.76-2.88, Reuters reports citing Il Corriere.

UNICREDIT was down €0.07 to €4.62 amid the exodus of takeover opponents within Hypovereinsbank.

Netherlands

AHOLD (AHO) was down €0.44 to €5.80. The company announced consolidated net sales (excluding VAT) of €10.25 billion for the third quarter, up 0.7% year-over-year, or up 0.3% excluding currency impact. This is in line with cautious market expectations. Sales at Stop & Shop/Giant Landover are up 2.7% at €2.994 billion. US Foodservice's sales are down 1.2% at €3.54 billion. After the results, Dresdner KW downgraded the shares to hold from buy and cut its the price target to €6.2 from €7.4. Rabo Securities is also disappointed and reiterates neutral.

ROYAL DUTCH SHELL (NL) (RD) wasp €0.34 to €25.29. The company reported third quarter CCS earnings of US$7.36 billion, up 68%; net attributable profit of US$9.03 billion, up 68%; however, upstream production fell to 3.207 million barrels per day from 3.608 million in the 2004 third quarter. Basic EPS was US$1.35, up 69%. The company declared an interim dividend of €0.23 per A and B share. Including hurricane impacts, the company's production outlook for 2005 is around 3.5 million bpd and for 2006 is in the lower half of the 3.5 million - 3.8 million bpd range. It expects to return US$5 billion to shareholders via buybacks in fiscal 2005.

VAN DER MOOLEN (VDM) was down €0.42 to €4.64. The company announced third quarter net attributable profit of €2.3 million, vs. €1.8 million in the second quarter and €0.6 million in the year-earlier quarter (restated to IFRS). However, this includes a €0.9 million gain on disposal of investments. Excluding this gain, figures are weaker than expected. The company's NYSE participation rate also disappoints at 19.9%. Fortis says these figures raise questions about earnings going forward and do not justify the company's toppy valuation. Reiterates reduce.

VNU was up €0.03 to €26.56. According to the FT, the company and IMS Health have abandoned their hopes of pushing through their merger in its current form, and are debating whether to break off the deal altogether in the light of heavy shareholder opposition.

PHILIPS (PHG) was down €0.29 to €21.50. Peer NEC Electronics was lower in Tokyo after the group forecast a deeper-than-expected fiscal year loss.

HEINEKEN (HINKY) was down €0.10 to €26.13. On Wednesday, the company's American rival Anheuser-Busch (BUD) posted third quarter net profit down 24%, suffering from price cuts on Budweiser and Michelob. Sales for the period were almost unchanged at US$4.09 billion. Separately, the company is in focus after an article appeared in Dow Jones quoting the CEO of Grupo Modelo, Mexico's leading brewer, as believing that Molson Coors is about to sell its stake in Kaiser to the company and FEMSA. Goldman Sachs highlights such a deal might be perceived positively by the market.

Nordic

ERICSSON (ERICY) was down SEK0.40 to SEK25.60 after peer Alcatel cut its outlook. Separately, the company signs an agreement with Astelit worth US$45 million for a GSM network expansion in the Ukraine. Meanwhile, T-Mobile Slovensko selects the company as sole supplier of its 3G/WCDMA network. the company will deliver 3G radio and core network and the commercial launch is planned for the first half of 2006.

NOVO NORDISK was up DKK6.00 to DKK311.50. The company's third quarter operating profit landed at DKK2.312 billion, up from DKK1.750 billion in the previous year, on sales up 18.7% year-over-year to DKK8.793 billion. EPS was DKK5.36, up from DKK3.63 last year. Looking forward, the company raised its its fiscal 2005 outlook: it now sees sales up 13%-15% year-over-year, with operating growth of 12%-15% (vs. 10% previously forecast). In 2006, it sees at least 10% growth in sales and expects operating growth of 10%-15%.

Swiss

ACTELION was down CHF3.50 to CHF145.00. The company's approved Gaucher treatment Zavesca fails to substantially improve symptoms of a rare genetic disease called Niemann Picl Type C, a 29-patient study shows.

NESTLE (NSRGY) was down CHF0.50 to CHF383.00. CEO Peter Brabeck and future CFO Paul Polman hosted a Q&A session for Swiss sell-side analysts on Wednesday. Cheuvreux says the tone was positive and first impression from the new CFO is excellent. The broker reiterated its Selected List rating. Zuercher Kantonalbank reiterates overweight.

UK

ASTRAZENECA (UK) (AZN) was down £0.10 to £25.80. The company raised its fiscal 2005 guidance to EPS of US$2.85-US$2.95 from US$2.75 previously estimated. It sees double-digit sales growth in fiscal 2005. In the 2005 third quarter, the company posted net profit of US$1.223 billion, up 7.9%; EPS of US$0.76, up 11.7%; and sales of US$5.789 billion, up 10%.

GLAXOSMITHKLINE (GSK) was up £0.46 to £14.41. The company reported third quarter sales of £5.547 billion, up 11%; and EPS of 21.3p, up 20%. It says pharma sales rose 10% to £4.70 billion. The drugmaker hiked EPS growth guidance for the fiscal year to mid-teens growth in CER terms. It expects the strong performance this year to continue into the fourth quarter.

REUTERS (RTRSY) was down £0.09 to £3.57. The company reported third quarter total revenue of £611 million, up 8% (1% on an u/l basis); and recurring revenue of £574 million, up 9% (+1.5% u/l). It notes this is the third consecutive quarter of positive net sales. The company will launch new versions of Reuters 3000 Xtra, Reuters Knowledge and Reuters Datafeeds. It expects underlying recurring revenue to grow 1%-2% in the second half of 2005, in line with guidance issued at its interim results in July. Prepared by European MarketScope reporters Zaida Espana (France), Michael Sanderson (Germany), Mariella Mongio (Italy), Alexander Wisch (Netherlands), Holly Cook (Nordic), Emma Stevenson (Spain), Pawan Girglani (Switzerland), and Rocio Opazo-Aniotz (UK)


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