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Research Market strategy
by Swissquote Analysts
Morning News

Air France-KLM Presents Medium-Term Targets

Topic of the day

Air France-KLM (AF.FR) is initiating a plan to boost profitability and optimize operations over the next five years, the company said Tuesday. The Franco-Dutch carrier said its new strategic guidelines include refocusing on passenger revenue growth and analyzing consolidation options. As for financial objectives, the company targets a medium-term operating margin of 7-8% and positive adjusted free cash flows. It is aiming for net debt and earnings before interest, tax, depreciation and amortization ratio of around 1.5x. "This is the starting point of a strategy that will allow Air France-KLM to reinvent itself, creating value for all key stakeholders," Chief Executive Benjamin Smith said. The company will optimize its operational model and increase revenues to improve its operating margin.

Swiss stocks

In tandem with other European markets, the SMI took a breather Tuesday, slipping 0.6 percent to 10,273 points, after marking a new record high of 10,354 points Monday. Positive developments in the US-China trade dispute continued to buoy the market, as the "Financial Times" reported that the US Administration is considering rescinding punitive tariffs on Chinese imports worth USD 112 billion introduced in September. Defensive heavyweights weighed on the index, declining as investors’ risk appetite increased. Novartis slumped 0.9 percent, Roche 1.5 percent and Nestle 0.9 percent. Adecco gained 0.8 percent despite posting lower earnings in several markets and failing to achieve market expectations in the third quarter. But Adecco is selling US medical personnel subsidiary Soliant Health for USD 612 million in cash to private equity firm Olympus Partners. Bank stocks were still sought, with Credit Suisse up 0.5 percent and UBS up 1.3 percent as market participants pointed to rising bond market yields.

International markets

Europe

In Europe, the Stoxx Europe 600's closed 0.2% higher at 404.23. London stocks closed higher, with the FTSE 100 up 0.25%, in its third consecutive day of gains. Primark-owner Associated British Foods rose 5.6% and was the top gainer of the FTSE 100, after exceeding expectations for fiscal 2019. Software company Aveva Group fell 2.7% and was the biggest blue-chip faller. The French CAC-40 Index was up 22.59 points, or 0.39%, to 5846.89 while the German DAX was up 12.22 points, or 0.09%, to 13148.50. AstraZeneca plans to raise up to $1 billion for a new fund that would invest in Chinese health-care startups, making it the latest drug giant to place a bet on the world's second-largest pharmaceuticals market. Pandora shares slide 12% after the company posted disappointing 3Q results, says Citi. Pandora missed expectations on both topline and Ebit, and with FY guidance now lowered, the market will question the timing and success of the brand turnaround plan, Citi says. It expects consensus Ebit expectations for FY19 and FY20E to come down by a low-single-digit percentage today. Shares in Siemens Gamesa Renewable Energy SA (SGRE.MC) (-8,2%) traded sharply lower on Tuesday after the turbine maker said its profitability in the next fiscal year will weaken. For its 2020 financial year, the Spanish company expects an adjusted margin on earnings before interest and taxes of 5.5%-7%, compared with 7.1% achieved in the fiscal year ended Sept. 30. For the just ended financial year, the margin outlook range was 7%-8.5%.

United States

The Dow Jones Industrial Average extended its recent rally intraday as investors grew hopeful that the U.S. and China will roll back tariffs as they work to clinch a partial trade deal. The blue-chip index rose 81 points, or 0.3%, extending its recent rally. The gains accelerated in afternoon trading as shares of Walgreens Boots Alliance surged on a Reuters report that the company has held talks with private equity firms about potentially going private. The Nasdaq Composite inched up 0.1%, while the S&P 500 edged down less than 0.1%. All three indexes closed at records Monday propelled by optimism over trade and a better-than-expected corporate earnings season. Uber Technologies Inc. (UBER)(-9,8%) shares declined to their lowest closing price on record Tuesday, after the company reported yet another quarterly loss of more than $1 billion and ahead of a lockup expiration that could release millions of new shares to the market. Boeing Co. (+2%) Chief Executive Dennis Muilenburg won’t receive bonus compensation this year or stock grants until the 737 MAX is flying again, according to the plane maker’s chairman, who also said the company still had confidence in the embattled CEO.

Asia

Most Asian markets slipped, while U.S. benchmarks ended mixed, with the S&P 500 edging down. Japanese stocks were up in morning trade, led by banks as U.S. economic optimism boosts Treasury yields and weakens the yen. Japanese government-bond yields were broadly higher recently, with the 20-year yield up 3 basis points at 0.255%.

Bonds

U.S. government-bond yields continued their sharp recent ascent intraday following signs of progress in U.S.-China trade talks and strong U.S. service-sector data. In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 1.864%, according to Tradeweb, compared with 1.787% Monday.

Analysis

UBS lowers Daimler to Neutral (Buy) – Target 52 (54) EUR
IR lowers the Traton target to 27 (29) EUR – Hold
IR rises the Evonik target to 27 (25) EUR – Hold


Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.

 
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