Kellogg Shares Soar on Q1 Earnings Beat and Raised Outlook

Kellogg shares rose over 8% on Thursday after the leading worldwide manufacturer and marketer of ready-to-eat cereals, reported better-than-expected earnings and revenue in the first quarter and lifted the fiscal year 2021 guidance.

The U.S. second-largest biscuit maker reported net sales rose over 5% to $3.58 billion in the quarter ended April 3, up from $3.41 billion seen in the same period a year ago. That was higher than the Wall Street consensus estimates of $3.38 billion.

The Battle Creek, Michigan-based company said its diluted earnings per share rose over 12% to $1.11, beating analysts’ expectations of $0.95 per share.

Kellogg forecasts sales growth to finish 2021 nearly flat year-on-year, an improvement from the previous expectations of about a 1% decline. Adjusted earnings per share is expected to increase by nearly 1% to 2%, up from the previous forecast of a 1% rise.

Following the upbeat results, Kellogg shares rose as high as 8% to $68.14 on Thursday. The stock rose over 8% so far this year.

Analyst Comments

“We expect a positive stock reaction to Kellogg’s large Q1 topline/profit/EPS beat, despite the cycling of solid topline growth in 1Q20, along with slightly raised FY21 guidance. While the magnitude of the FY21 raise was small (organic sales +100 bps, OP/EPS growth +50 bps), it was unexpected as there were concerns about lower or lower-quality FY guidance with commodity pressure,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

Kellogg Stock Price Forecast

Five analysts who offered stock ratings for Kellogg in the last three months forecast the average price in 12 months of $66.00 with a high forecast of $72.00 and a low forecast of $60.00.

The average price target represents a -2.73% decrease from the last price of $67.85. Of those five analysts, two rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $60 with a high of $71 under a bull scenario and $43 under the worst-case scenario. The firm gave an “Equal-weight” rating on the food manufacturing company’s stock.

Several other analysts have also updated their stock outlook. Kellogg had its price target cut by Deutsche Bank to $70 from $75. They currently have a buy rating on the stock. Citigroup reduced their price objective to $72 from $75. Jefferies Financial Group dropped their target price to $65 from $69 and set a hold rating. Piper Sandler lowered Kellogg from an overweight rating to a neutral rating and dropped their target price to $66 from $76.

Upside and Downside Risks

Risks to Upside: Higher US snacks growth on reinvestment/innovation, stabilized US cereal business with innovation and higher ad spend, higher-margin expansion on greater cost savings and moderate commodities – highlighted by Morgan Stanley.

Risks to Downside: Pricing pressure in the US (65% of sales) with retailer friction, COVID-related supply chain disruptions in 2020, lower operating profit growth on higher reinvestment needs and cost pressure.

Check out FX Empire’s earnings calendar

S&P 500 Price Forecast – Stock Market Continues Sideways Behavior

The S&P 500 initially tried to rally during the course of the trading session on Thursday but then gave back the gains to start falling again. Quite frankly, there are lot of mixed messages out there when it comes to the economy in the stock market went forward, but at the end of the day we are still very much in an uptrend and it is worth paying attention to. The 4100 level underneath should offer support, as it has over the last couple weeks. That being said, there is even more support underneath at the 50 day EMA and of course the 4000 level. With that being said, I think that if we get some type of selling pressure, then we will get long again based upon some type of bounce.

S&P 500 Video 07.05.21

To the upside, I see the 4200 level as a major barrier that needs to be overcome with some type of catalyst. We are in the midst of earnings season and it has gone fairly well but quite frankly the market had already priced all that in. Because of this, I think that we will continue to see a “buy on the dips” type of mentality, as we continue to find plenty of narratives out there to push this market higher. Central banks around the world will continue to flood the markets with liquidity, thereby having people push money into stock markets yet again. I see no scenario in which a willing to start shorting this market anytime soon.

For a look at all of today’s economic events, check out our economic calendar.

Why Shares Of Moderna Are Down By 5% Today?

Moderna Video 06.05.21.

Moderna Stock Moves Lower As Q1 Revenue Misses Estimates

Shares of Moderna found themselves under pressure after the company released its first-quarter results.

Moderna reported revenue of $1.94 billion and earnings of $2.84 per share, beating analyst estimates on earnings and missing them on revenue. It looks that the market was not ready to tolerate the revenue miss, and it weighed heavily on Moderna stock.

The bar was set high for the company whose shares were up by more than 60% year-to-date before the release of the quarterly report. In addition, shares of  vaccine makers found themselves under pressure after U.S. signaled that it would support a waiver for vaccine IP rights at the WTO.

EU has already stated that it was ready to discuss waving COVID-19 vaccines patents, which is a worrisome development for investors. At the same time, it remains to be seen whether any decisions will be made in the near term.

What’s Next For Moderna?

The sell-off in Moderna shares was triggered by IP waiver-related fears and a revenue miss. IP waiver-related fears probably served as the main catalyst for the current sell-off as other vaccine makers like BioNTech and Pfizer also found themselves under pressure.

Currently, analysts expect that Moderna will report earnings of $23.27 per share in 2021 and $16.58 per share in 2022 so the stock is trading at about 9 forward P/E for 2022 which is very cheap in today’s market environment.

However, there is a lot of uncertainty regarding future profits, and recent discussions about waiving IP rights add another layer of uncertainty. At the same time, it looks increasingly likely that at least some part of the vaccine revenue will be recurring as people may need regular shots to protect themselves against COVID-19.

In this light, Moderna shares may soon attract speculative traders and investors who will want to use the current pullback as an opportunity to buy the stock at lower levels.

For a look at all of today’s economic events, check out our economic calendar.

American Indices Moving in Opposite Directions

American Indices are currently moving in opposite directions. The tech-heavy NASDAQ index is going down, aiming for the long-term up trendline while the old-school Dow Jones flirts with all-time highs after the price escaped from the pennant formation.

The German Dax is trading inside a flag formation, which is promoting a long-term breakout to the upside.

Gold is aiming higher after a successful bounce from the 1760 USD/oz support.

The USDCAD broke the lower line of the channel down formation, which should be considered an extreme weakness.

The AUDCHF tested the lower line of the symmetric triangle pattern. A breakout to the downside is very probable.

The ZARJPY shot higher after a false bearish breakout from the Head and Shoulders formation.

The EURPLN is aiming higher after a very handsome bullish engulfing pattern on the daily chart.

The USDHUF dropped like a rock after the price created a shooting star on the daily chart, which bounced from a combination of dynamic and horizontal resistances.

For a look at all of today’s economic events, check out our economic calendar.

 

Divergences Could Sink McDonald’s Uptrend

Dow component McDonald’s Corp. (MCD) posted an all-time high above 238 this week, adding to a modest uptick after the company beat Q1 2021 top and bottom line estimates, earning $1.92 per-share on 8.7% revenue growth to $5.12 billion. Global comparative sales rose a healthy 7.5%, underpinned by a 13.6% surge in the United States. Foreign venues reported positive but less impressive growth, highlighting continued restrictions as a result of the pandemic.

Winning the Chicken Wars

The fast food giant noted continued expansion of digital order and delivery segments, even though seating restrictions have been eased or removed in many states. It’s looking for pent-up demand to drive positive net 2021 growth, although it hasn’t been too hard to buy a Big Mac since April 2020. The company also noted victories in the chicken sandwich wars breaking out across the nation, noting their applicants “have exceeded projections especially after 4pm”.

Telsey Advisory Group analyst Bob Derrington raised his target to $260 on Tuesday, noting the company “reported strong 1Q results which included adjusted EPS of $1.92 compared to our $1.76 estimates. McDonald’s global system sales benefited from the strategic embrace of its 3-Ds (Drive-thru, Digital, Delivery), its streamlined menu, quicker drive-thru service and the successful launch of new products across its system. That included the February launch of its new Crispy Chicken sandwich within its U.S. market, which has enjoyed robust sales”.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 25 ‘Buy’, 2 ‘Overweight’, and 9 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $225 to a Street-high $282 while the stock is set to open Thursday’s session about $25 below the median $260 target. Additional upside appears likely, given this relatively humble configuration.

McDonald’s topped out above 220 in August 2019 and plunged to a multiyear low during 2020’s pandemic decline. A strong recovery wave reached the prior high in September, yielding a failed breakout, followed by a rounded correction that completed a cup and handle pattern in March. The breakout into May has started slowly, with the stock trading just three or four points above new support, but this classic pattern may support much higher prices in coming months.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Stocks Mixed After Better-Than-Expected Initial Jobless Claims Report

Stocks Lack Direction As Traders Wait For New Catalysts

S&P 500 futures are swinging between gains and losses in premarket trading as traders remain cautious while the market is trading near record highs.

The market faced some selling pressure at the beginning of May, but it should be noted that the recent attempt to move lower was quickly bought. Traders seem to be a bit worried about higher inflation which may force the Fed to raise rates sooner than expected, but such worries are not strong. The bond market stays calm, and the yield of 10-year Treasuries has recently failed to settle above the 20 EMA at 1.60%.

At this point, it looks that the market will need additional catalysts to gain momentum and move away from current levels.

Initial Jobless Claims Decline To 498,000

The U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report indicated that 498,000 Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims would total 540,000.

Continuing Jobless Claims increased from 3.65 million (revised from 3.66 million) to 3.69 million compared to analyst consensus of 3.62 million.

Yesterday, ADP Employment Change report indicated that private businesses hired 742,000 workers compared to analyst consensus of 800,000. The employment picture will not be complete without Non Farm Payrolls and Unemployment Rate reports which will be published tomorrow. Non Farm Payrolls report is expected to show that the economy added 978,000 jobs in April. Unemployment Rate is projected to decline from 6% to 5.8%.

Oil Moves Lower As India Reports Record Number Of COVID-19 Cases

Yesterday, India reported more than 412,000 of new coronavirus cases, putting pressure on the oil market. While oil traders have mostly ignored negative developments in India, the country’s problems may ultimately have a notable impact on demand for oil.

Meanwhile, the recent EIA Weekly Petroleum Status Report indicated that crude inventories declined by 8 million barrels compared to analyst consensus which called for a decline of 2.35 million barrels. The U.S. domestic production remained unchanged at 10.9 million barrels per day (bpd) which was bullish for oil.

The recent data suggests that oil demand is picking up, so oil will have good chances to continue its upside move when the situation in India shows signs of stabilization.

For a look at all of today’s economic events, check out our economic calendar.

PayPal Top Earnings Forecasts, Bets on Crypto

PayPal Holdings, Inc. (PYPL) shares rocketed over 4% higher in Wednesday’s extended-hours trading session after the company delivered a stellar quarterly earnings report.

The San Jose digital payments giant reported an adjusted first quarter (Q1) profit of $1.22 per share, blowing pasts Wall Street’s expectation of $1.01 a share. Moreover, the bottom line grew 85% from a year earlier. Revenues for the period came in at $6.03 billion, up from year-ago sales of $4.62 billion. Volume and user metrics also impressed, with the company processing $285 billion in the quarter and adding 14.5 million net new active accounts.

Looking ahead, management forecasts Q2 EPS of $1.12 on revenues of $6.25 billion. Analysts had expected earnings of $1.10 on sales of $6.16 billion. The company sees cryptocurrency continuing to drive growth in upcoming quarters. “We’ve got a tremendous amount of really great results going on tactically with our crypto efforts,” CEO Dan Schulman told investors, per CNBC. PayPal initially introduced leading cryptocurrencies to its platform last October and has progressively added more integration with digital assets over the past six months.

Through Wednesday’s close, PayPal stock has a market capitalization nearing $300 billion and trades nearly 100% higher over the last 12 months. YTD, the shares have added 5.64%, which trails the S&P 500’s gain of 11% over the same period.

Wall Street View

Late last month, Rosenblatt Securities analyst Sean Horgan raised his price target on the stock to $350 from $320 and maintained his ‘Buy’ recommendation. Horgan sees the payments giant continuing to benefit from higher levels of consumer spending, fueled by record levels of government stimulus.

Elsewhere, the stock racks up mostly favorable brokerage coverage. It receives 36 ‘Buy’ ratings, 5 ‘Overweight’ ratings, and 6 ‘Hold’ ratings. Just one analyst recommends selling the shares. Wall Street has a 12-month price median price target on the stock at $314.55. This represents 27% of upside from yesterday’s $247.40 close.

Technical Outlook and Trading Tactics

PayPal shares have recently retraced to a multi-month uptrend line extending back to the March 2020 pandemic-induced low. Although the price broke below this closely-watched indicator in Wednesday’s session, pre-market trading indicates a move back above it after the company’s solid earnings report.

Providing the stock closes above the trendline, active traders should anticipate a retest of the YTD high at $309.14. Protect capital with a stop-loss order placed under today’s low.

For a look at today’s earnings schedule, check out our earnings calendar.

AB InBev CEO Brito to Step Down, North America Chief to Step in

By Philip Blenkinsop

The brewer of Budweiser, Corona and Stella Artois lagers said its board had unanimously elected Doukeris, the former head of sales, to succeed fellow Brazilian Brito, the architect of AB InBev’s global expansion, from July 1.

Chairman Martin Barrington said in a statement that Doukeris’ expertise in brands, consumers and innovation meant he was ideally suited for the company’s next phase.

That phase could be more focused on boosting sales of over 500 brands than on acquisitions in an already concentrated brewing market.

Brito arrived when the brewer was called InBev, the result of a 2004 merger between Belgium’s Interbrew and Brazil’s AmBev, which he headed.

During his tenure, the company took over Anheuser-Busch in 2008, added Mexico’s Grupo Modelo and in 2016 spent over $100 billion on SABMiller, then the world’s second largest brewer.

The acquisition brought more Latin American markets and saw it enter Africa for the first time.

However, the purchase also saw AB InBev‘s net debt jump to $82.7 billion as of the end of 2020, some 4.8 times EBITDA and well above an “optimal” level of two.

Its share are now less than half their late 2015 peak, with craft beer eating into its U.S. sales and difficulties in Brazil and South Africa.

STRONG REBOUND AT START OF 2021

The company separately reported first-quarter earnings ahead of expectations, even with lockdowns closing hospitality in much of Europe and a one-month alcohol sales ban in South Africa.

Sales of beer surged 64% in Asia-Pacific, a year on from the initial coronavirus lockdown in China, a major AB InBev market.

They rose by more than 10% in Latin America, outperforming industry growth in two of its top markets, Brazil and Mexico. In Europe, sales of its own beers were flat.

Core profit (EBITDA) rose 14.2% on a like-for-like basis and removing the impact of currency translation to $4.27 billion, beating the 6.6% average forecast in a company-compiled poll.

This figure should increase by between 8% and 12% in 2021, with revenue growth greater than that, based on higher beer sales, price hikes and a shift in consumer taste to premium brands, AB InBev said.

(Reporting by Philip Blenkinsop; Editing by Sherry Jacob-Phillips and Jason Neely)

Superdry Sees ‘Light at End of Tunnel’ as Returns to Growth in Q4

“The early signs following the reopening of our UK stores are encouraging, as lockdown restrictions start to lift, and we can clearly see the light at the end of the tunnel,” Chief Executive Julian Dunkerton said in a trading update for the year to April 24.

Shares in the company, which fell to a low of 60 pence at the start of the pandemic in March 2020, were trading up 6% at 293 pence in early deals.

The company, best known for its sweatshirts, hoodies and jackets, has been hammered by the pandemic.

It slumped to an underlying pretax loss of 10.6 million pounds ($14.4 million) in the six months to Oct. 24, and it suffered a further blow when stores were forced to close in the important Christmas period.

However it said on Thursday trade in stores that had reopened was “encouraging”. Non-essential shops reopened in England on April 12.

But trading in the European Union remained suppressed due to continuing restrictions, it said.

Group revenue in its fourth quarter increased by 0.8% to 118.3 million pounds, it said, with a 26.6% rise in online and a 13.5% rise in wholesale offsetting a 51.5% drop in store sales.

($1 = 0.7191 pounds)

(Reporting by Paul Sandle; Editing by Alistair Smout)

EasyJet CEO Warns Britain Could be Left Behind on Travel

Britain will on Friday announce its “green list” of low risk places where people can travel without needing to quarantine on their return home, but reports suggest that just a handful of countries will make the list, with major destinations like Spain and Greece excluded.

“It’s going to you know be very odd and ironic that actually the UK, the most advanced when it comes to the roll out of the vaccination programme, is actually going to find themselves left behind,” easyJet Chief Executive Johan Lundgren told the FT Live online conference on Thursday.

“I think this is going to need to change, it’s going to need to change very rapidly.”

(Reporting by Sarah Young, Editing by Paul Sandle)

Tesla Developing Platform to Allow Car Owners in China Data Access

Tesla, which makes Model 3 sedans and Model Y sport-utility vehicles at its Shanghai factory, aims to launch the data platform this year, it said in a statement.

This is the first time an automaker has announced plans to allow customers access car data in China, the world’s biggest car market.

Automakers for the past several years have been equipping more vehicles with cameras and sensors to capture images of a car’s surroundings. Control of use, sending and storage of these images is a fast-emerging challenge for the industry and regulators worldwide.

China last month published draft rules to ensure the security of data generated by smart cars. Data collected from Tesla electric cars in China is stored in the country, a company executive said last month.

Tesla in April was targeted by state media and regulators after a customer, angry over the handling of her complaint about malfunctioning brakes, climbed on top of a Tesla car in protest at the Shanghai auto show. Videos of the incident went viral.

Tesla provided the data related to the brake incident to the customer complying with the local authorities’ order.

(Reporting by Yilei Sun and Tony Munroe; Editing by Christian Schmollinger, Rashmi Aich and Vinay Dwivedi)

Exclusive: China’s Tencent in Talks with U.S. to Keep Gaming Investments

By Echo Wang and Greg Roumeliotis

Tencent has been in talks with the Committee on Foreign Investment in the United States (CFIUS), which has the authority to order the Chinese technology giant to divest U.S. holdings, since the second half of last year, the sources said.

CFIUS has been looking in to whether Epic Games’ and Riot Games’ handling of the personal data of their users constitutes a national security risk because of their Chinese ownership, the sources added.

Tencent owns a 40% stake in Epic Games, the maker of popular video game Fortnite. Tencent also bought a majority stake in Riot Games in 2011 and acquired the rest of the company in 2015. Riot Games is the developer of “League of Legends,” one of the world’s most popular desktop-based games.

Tencent is negotiating risk-mitigation measures with CFIUS so it can keep its investments, according to the sources. The details of the proposed measures could not be learned. They typically involve ringfencing the owner of a company from operations that have national security implications. They often call for the appointment of independent auditors to monitor the implementation of these agreements.

One of the sources said Epic Games has not been sharing any user data with Tencent.

The sources cautioned there is no certainty that Tencent will clinch deals to keep its investments and asked not to be identified because the matter is confidential.

Tencent, Epic Games and a CFIUS representative at the U.S. Treasury Department declined to comment.

A Riot Games spokesman said the Los Angeles-based company operates independently of Tencent and that it has implemented “industry-leading practices” to protect player data. He declined to comment on Riot Games’ discussions with CFIUS.

CFIUS has been cracking down on Chinese ownership of U.S. technology assets in the last few years, amid an escalation in tensions between Washington and Beijing over trade, human rights and the protection of intellectual property. U.S. officials have expressed concerns that the personal data of U.S. citizens could end up in the hands of China’s Communist Party government.

President Joe Biden’s administration has maintained the hawkish stance against China inherited in January from his predecessor Donald Trump, albeit with more of a focus on geopolitical issues such as the future of Taiwan and Hong Kong, as well as China’s persecution of the Uyghurs in Xinjiang.

Yet many key CFIUS roles have not yet been staffed. This has provided a reprieve to China’s ByteDance, which was ordered by Trump last year to sell its popular short video app TikTok but balked at a transaction that would have involved Oracle Corp and Walmart Inc. CFIUS has not sought to enforce the divestiture order under Biden.

Epic is locked in a legal fight with Apple Inc over access to the iPhone maker’s app store. It alleges that Apple forces developers to use its in-app payment systems – which charge commissions of up to 30% – and to submit to app-review guidelines that discriminate against products that compete with Apple’s own.

Apple argues that Epic Games broke their contract when it introduced its own in-app payment system in Fortnite to circumvent Apple’s commissions. It says the way it runs the app store inspires trust in consumers to open up their wallets to unknown developers.

Tencent’s vast businesses include video games, content streaming, social media, advertising and cloud services. China has in recent months sought to curb the economic and social power of Tencent and other internet companies such as Alibaba Group Holding Ltd, in a clampdown backed by President Xi Jinping. Reuters reported last week that Beijing was preparing a substantial antitrust fine for Tencent.

(Reporting by Echo Wang in Miami and Greg Roumeliotis in New York; Editing by Matthew Lewis)

Aston Martin Posts Smaller Loss as Sales More than Double

That compared with the 110.1 million pound loss the luxury brand posted in the same period last year, when it brought in fresh investment from billionaire Executive Chairman Lawrence Stroll to shore up its finances.

The carmaker of choice for fictional secret agent James Bond has had a tough time since floating in 2018, as it failed to meet expectations and burnt through cash.

The arrival of its first sport utility vehicle, the DBX, which fist rolled off the production line in July 2020, has helped boost the company as it widens its appeal in a lucrative segment of the market.

In the first quarter of 2021, total sales to dealers more than doubled to 1,353 vehicles and the firm said it was maintaining its full-year guidance that volumes will stand at around 6,000 vehicles.

It hopes to reach around 10,000 cars and revenue of roughly 2 billion pounds by 2024/25.

“I am pleased with our performance in the first three months of the year, delivering results in-line with our expectations of good growth and progress on the path to improved profitability and cash generation,” said CEO Tobias Moers.

“We are encouraged by the growth in orders for both GT/Sport and DBX, providing good visibility.”

($1 = 0.7191 pounds)

(Reporting by Costas Pitas; Editing by Alistair Smout and Sarah Young)

Rebound in Trading Boosts Earnings at France’s SocGen

France’s third-largest listed bank, which tumbled in 2020 to its first full-year loss for a decade as the COVID-19 pandemic rattled its businesses, posted a 814 million euros ($977.37 million) net profit in the quarter against a 326 million euros loss a year ago.

Earnings per share amounted to 0.79 euro, above a mean forecast for 0.23 euro according to Refinitiv data.

Under market pressure to boost profitability, SocGen chief executive Frederic Oudea has speeded up an overhaul of business since 2018 to reinforce the bank’s balance sheet by selling units in Eastern and Central European countries such as Poland, Serbia and Bulgaria.

SocGen also exited or cut back some corporate and investment banking (CIB) activities, such as commodities trading. The bank is due to unveil a review of its CIB on May 10.

SocGen benefited from a sector-wide boom in share trading, with first quarter revenues jumping to 851 million euros against just 9 million euros last year when the bank was hit by losses from complext derivative products, and had said it would exit some business lines.

“The equity businesses enjoyed their best quarter since 2015,” SocGen said in a statement.

Revenue was up by 2.63% in fixed income and currency trading, outperforming some European rivals such as BNP Paribas and Barclays but still lagging U.S. investment banks.

The positive tone was echoed at other European banks, with ING and UniCredit also reporting better-than-expected earnings on Thursday.

However, European lenders are still grappling with thin margins and home markets still dealing with COVID-19 restrictions, with the resilience of their recovery likely to be tested if financial market volumes become more subdued.

In its French retail business, SocGen posted a 1.8% drop in revenue but said activity was gradually improving.

“The strong recovery in equities and the resilient top line performance in French retail is reassuring and consensus has to upgrade estimates given the turnaround in global markets and lower cost of risk guidance”, analysts at JPMorgan noted.

SocGen also confirmed pandemic-related provisions would fall this year from 2020 levels. The bank now sees its cost of risk, which reflects provisions against bad loans, to be between 30 and 35 basis points in 2021 against 64 basis points last year.

Shares in SocGen have gained 38.5% since the beginning of the year after a 45% slump in 2020. Its share price has more than doubled since its lowest at 10.77 euros on Sept. 30.

As part of further initiatives to enhance returns, SocGen entered last month in exclusive talks to sell most of its asset management arm Lyxor to Amundi for 825 million euros.

The lender said last year it would merge its two retail banking networks in France, with the closure of 600 of its nearly 2,100 branches by 2025.

(Reporting by Matthieu Protard and Marc Angrand, Editing by Sarah White and Carmel Crimmins)

Air France-KLM Operating Loss Widens as European Recovery Lags

By Laurence Frost

Air France-KLM said it expects to operate 50% of its pre-pandemic flight capacity in the second quarter under way, ramping up to 55% to 65% in July-September.

“We’re waiting to see the first effects of vaccination,” Chief Financial Officer Frederic Gagey said. Demand is showing “no noticeable improvement so far”, he added, with customers often waiting to book at the last minute.

While rebounding U.S. and Chinese domestic markets are already benefiting airlines there, carriers in Europe are stuck waiting for the region’s slower vaccine rollouts to give way to looser curbs and an anticipated recovery.

Lufthansa cut its 2021 capacity forecast last week while narrowing its first-quarter loss with a workforce reduction of 19%. British Airways parent IAG posts quarterly earnings on Friday.

Air France-KLM’s operating loss increased to 1.18 billion euros ($1.42 billion) from 815 million in the first quarter of 2020, which was only partially affected by the onset of the pandemic. Revenue fell 57% to 2.16 billion euros.

The group, which took a 10.4-billion-euro government-backed bailout last year, raised 1 billion euros in an April share issue that saw the French state double its holding to 28.6%.

Air France-KLM is seeking shareholder approval this month to raise more equity and hybrid capital, in a process its CFO said would see debt and state support “gradually transformed into market-credible products” as the outlook improves.

Gagey, 64, is due to retire at the end of June and will be replaced in the group role by current Air France finance chief Steven Zaat, the company said on Thursday.

The quarterly numbers beat the 2.07 billion in revenue and 1.31-billion-euro operating loss expected by analysts, according to the median of 12 estimates in a company poll.

The net loss narrowed to 1.48 billion euros from 1.8 billion a year earlier – which included a large fuel-hedging deficit as traffic collapsed.

Air France-KLM said net debt rose by 1.5 billion euros over the quarter to 12.5 billion at March 31, when it held 8.5 billion euros in liquidity and available credit.

(Reporting by Laurence Frost; Editing by Cynthia Osterman and Keith Weir)

ArcelorMittal Reports Best Start to a Year for a Decade

By Marine Strauss

The company said it expects global steel demand to grow by between 4.5% and 5.5% this year, with inventories low after prolonged destocking, capacity utilisation rising and steel spreads healthy. Excluding China, that growth would be 8.5% to 9.5%, with a strong rebound expected in India.

The Luxembourg-based company reported first-quarter core profit (EBITDA) of $3.24 billion, more than three times the $967 million a year earlier and higher than the $2.97 billion average forecast in a company poll.

“The first quarter of this year has been our strongest in a decade,” CEO Aditya Mittal said in a statement.

“We are seeing a continuation of the positive market dynamics of the fourth quarter and have been steadily bringing back production in line with the demand recovery, which is supported by low inventory levels through the value chain.”

The group said it had benefited from a strong recovery in steel demand led by the auto industry, resulting in higher steel shipments and improved margins.

It also expects iron ore shipments of about 39 million tonnes this year, from 38.2 million tonnes in 2020.

(Reporting by Marine Strauss @StraussMarineEditing by Philip Blenkinsop and David Goodman)

Volkswagen Lifts Margin Target on Demand for Premium Cars

By Christoph Steitz

The group now expects its operating profit margin to be 5.5-7% this year, versus a previous forecast for 5.0-6.5%, with vehicle deliveries and sales each up by more than a fifth.

The better outlook is mainly driven by improved demand for high-margin premium cars such as Porsche and Audi, a trend that has also been observed by rivals General Motors, Daimler and Ford and Stellantis.

During the first quarter deliveries of cars under the Porsche and Audi brands were both up about a third year on year, Volkswagen has said. Sales of electric vehicles more than doubled to 133,300 vehicles.

“We started the year with great momentum and are on a strong operational course. This is clearly reflected in our positive quarterly figures,” Volkswagen AG CEO Herbert Diess said.

“Our successful e-offensive continues to gain momentum and we have significantly expanded it with attractive new models.”

Shares in the group were indicated to open 1.2% higher in pre-market trade.

The world’s second largest carmaker by vehicle sales this year pleased investors when it provided more detail about its electric vehicle strategy, including higher sales targets and plans to build six battery factories in Europe.

Volkswagen’s operating profit came in at 4.8 billion euros ($5.8 billion) in the first quarter to March, helped by cost cuts and higher sales, versus 0.9 billion in the same period last year that was impacted by the COVID-19 pandemic.

Its improved outlook for the year comes even though the car maker expects the impact of an ongoing shortage of crucial automotive chips to intensify in the second quarter.

($1 = 0.8330 euros)

(Reporting by Christoph Steitz; Editing by Himani Sarkar and Jason Neely)

MetLife Shares Hit New Record High After Strong Q1 Earnings; Target Price $72 in Best Case

MetLife, one of the largest life insurers in the world, reported better-than-expected earnings in the first quarter of 2021 and said the worst impact of the COVID-19 pandemic was behind, sending shares to a record high on Wednesday.

The New York-based insurer reported net income of $290 million, or $0.33 per share, compared to net income of $4.4 billion, or $4.75 per share, in the first quarter of 2020. Adjusted earnings rose to $2.0 billion, or $2.20 per share, up from adjusted earnings of $1.4 billion, or $1.58 per share, seen in the same period a year ago. That beat the Wall Street consensus estimates of $1.48 per share.

“In the quarter, we were very pleased to return approximately $1.4 billion to shareholders through share repurchases and common stock dividends. We believe the worst impact of the pandemic on our business performance is behind us, and we are well-positioned to create additional value for our stakeholders in the future,” said MetLife President and CEO Michel Khalaf.

The leader of life insurance company said its net investment income rose 74% to $5.3 billion, largely driven by increases in the estimated fair value of certain securities that do not qualify as separate accounts under GAAP and higher variable investment income primarily due to higher private equity returns.

Following the upbeat results, MetLife shares hit an all-time of $65.905 on Wednesday. The stock rose over 39% so far this year.

Analyst Comments

“This quarter’s results clearly received an outsized benefit from strong alternative results, but what impresses us more is the stability and growth in underlying earnings, which should help in our view to drive further upside in the stock,” noted Nigel Dally, equity analyst at Morgan Stanley.

“Operating EPS was $2.20, considerably above both our estimate and the consensus of $1.53. Favorable marks on alternative investments provided more of a boost than expected, contributing over $1 billion to pre-tax earnings above a normal level. Conversely, pandemic-related claims weighed on some divisions, most notably its domestic group insurance operations. Excluding these items, we view the core earnings run-rate potential of the company as being largely in-line with prior expectations.”

MetLife Stock Price Forecast

Nine analysts who offered stock ratings for MetLife in the last three months forecast the average price in 12 months of $66.11 with a high forecast of $72.00 and a low forecast of $54.00.

The average price target represents a 1.07% increase from the last price of $65.41. Of those nine analysts, eight rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the base target price to $72 from $70 with a high of $83 under a bull scenario and $48 under the worst-case scenario. The firm gave an “Overweight” rating on the life insurer’s stock.

“Following its retail separation, the company is committed to profitable growth while also simplify its operations to reduce earnings volatility. The company also de-risked its investment portfolio somewhat. Given these moves, the investment thesis for MetLife now revolves around capital management and free cash flow generation, growth in international operations, and expense reduction initiatives,” Morgan Stanley’s Dally added.

“We believe MetLife has the ability to continue its solid execution in its various businesses. More importantly, the solid results over the past several quarters were not driven by a single division, with all segments contributing to earnings growth to a certain extent.”

Several other analysts have also updated their stock outlook. JP Morgan raised the stock price forecast to $66 from $64. UBS initiated with a buy rating and a $72 target price. KBW upped the price target to $68 from $64. Piper Sandler lifted the price objective to $68 from $58. Evercore ISI increased the price target to $65 from $52. RBC raised the target price to $66 from $57.

Check out FX Empire’s earnings calendar

EssilorLuxottica Q1 Sales Rise Driven by China, U.S. Rebound

The company, which makes sunglasses and spectacle frames for brands such as Chanel, Prada and Versace, was hit by coronavirus lockdowns and travel curbs last year, which knocked demand for sunglasses in particular.

Sales in the first quarter jumped 14.3% at constant currencies from a year earlier to 4.06 billion euros ($4.9 billion).

EssilorLuxottica confirmed it targets a return to pre-pandemic levels this year. It also specified the 2021 target concerned revenue and adjusted operating profit margin.

First-quarter results were ahead of that goal as sales in the first quarter grew 1.9% over 2019 at constant currencies.

The company, formed from the merger of French lens manufacturer Essilor and Italian spectacles maker Luxottica, also confirmed it expects to deliver synergies from the merger of 300 million to 350 million euros in adjusted operating profit by the end of this year, and of 420 million to 600 million by the end of 2023.

($1=0.8331 euros)

(Reporting by Silvia Recchimuzzi in Gdansk; Editing by Jacqueline Wong)

European Equities: Economic Data from Germany, the Eurozone, and the U.S in Focus

Economic Calendar:

Thursday, 6th May 2021

German Factory Orders (MoM) (Mar)

IHS Markit Construction PMI (Apr)

Eurozone Retail Sales (MoM) (Mar)

Friday, 7th May 2021

German Industrial Production (MoM) (Mar)

German Trade Balance (Mar)

ECB President Lagarde Speech

The Majors

It was a bullish day for the European majors on Wednesday, which were on the rebound from Tuesday’s pullback. The DAX30 rallied by 2.12%, with the CAC40 and the EuroStoxx600 ending the day up by 1.40% and by 1.82% respectively.

Corporate earnings, economic data, and a pickup in vaccination rates across the EU supported the more optimistic economic outlook.

With the EU making progress on the vaccination front, plans across the EU to reopen borders this summer also delivered a boost.

The Stats

It was a particularly busy day on the economic calendar. Service sector PMI figures for Italy and Spain were in focus early in the session.

Finalized services and composite PMIs from France, Germany, and the Eurozone also drew attention.

In April, Spain’s services PMI rose from 48.1 to 54.6, while Italy’s services PMI slipped from 48.6 to 47.3.

Economists had forecast PMIs of 50.0 and 49.8 respectively.

From France, the services PMI rose from 47.9 to 50.3, which was down from a prelim 50.4.

Germany’s services PMI fell from 50.8 to 49.9, which was down from a prelim 50.1.

The Eurozone

For the Eurozone, the Services PMI rose from 49.6 to 50.5, which was up from a prelim 50.3. As a result, the composite PMI increased from 53.2 to 53.8, which was up from a prelim 53.7.

According to the finalized Markit Composite Survey,

  • The latest data from the private sector indicated the fastest expansion since July and the second best in over two-and-a-half years.
  • Goods producers continued to lead the way, with output rising at a rate little changed from March’s record.
  • Service sector output returned to growth following 7-months of continuous contraction.
  • Germany led the way again in terms of overall growth, supported by strong manufacturing sector growth.
  • A jump in service sector activity in Spain saw private sector growth at its strongest in over 2-years.
  • Growth in both France and Italy was modest in April, while growth in France was the best in the past 8-months.

The Details

  • New orders across the private sector rose at the most marked pace in over two-and-a-half years.
  • Firms reported higher sales in both domestic and international markets.
  • The rate of backlog growth was the sharpest for 39-months and supported a pickup in hiring.
  • Firms increased staffing levels to the strongest degree for 2-years.
  • Optimism across the private sector reached its highest since composite data were first available in mid-2012.

From the U.S

It was a busy day, with ADP nonfarm employment change and service sector PMIs in focus late in the European session.

In April, nonfarm payrolls increased by 742k according to the ADP, which was up from 517k in March. Economists had forecast a rise of 800k.

From the services sector, the ISM Non-Manufacturing PMI slipped from 63.7 to 62.7, coming up short of a forecasted 64.3.

Finalized Markit survey services and composite PMIs for April were also out but had a muted impact on the majors.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Daimler rallied by 2.57%, with BMW and Volkswagen gaining 1.25% and 1.55% respectively. Continental bucked the trend, however, falling by 0.20%.

It was a bullish day for the banks. Deutsche Bank rose by 1.89%, with Commerzbank ended the day up by 0.78%.

From the CAC, it was a bullish day for the banks. BNP Paribas rallied by 3.49%, with Credit Agricole and Soc Gen gaining 1.95% and 1.87% respectively.

It was also a bullish day for the French auto sector. Stellantis NV jumped by 7.25% off the back of better-than-expected earnings results. Renault ended the day up by 3.13%.

Air France-KLM fell by 1.72%, with Airbus SE slipping by 0.17%.

On the VIX Index

It was back into the red for the VIX on Wednesday, marking a 2nd daily loss in 5-sessions.

Partially reversing a 6.39% gain from Tuesday, the VIX fell by 1.69% to end the day at 19.15.

The NASDAQ fell by 0.37%, while the Dow and the S&P500 saw gains of 0.29% and 0.07% respectively.

VIX 060521 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the European economic data front. Key stats include German factory orders and Eurozone retail sales figures.

Expect March factory orders from Germany to have a greater impact on the European majors.

From the U.S, weekly jobless claims figures will also provide direction later in the session.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 2 points.

For a look at all of today’s economic events, check out our economic calendar.