PEERS & MARKETS

The week 23 to 27 August was characterised by falls on most European markets  (Milan -0.3%, London +0.1%, Paris -0.5%, Frankfurt -0.9%).
The negative data on the US economy stoked fears about the economic recovery, which were partially allayed by Friday’s figures on growth in the US GDP in the second quarter of 2010 (+1.6%, instead of the expected 1.3%) and the declarations by the president of the Federal Reserve on measures to support the economy.
Most sectors of the economy performed poorly (Auto -0.7%, Industrial -1.5%, Tech -2.6%).
European tyre shares outperformed the DJ Stoxx Auto with Pirelli at  +0.3% (€5.275). The stock confirmed its status as best performer in the FTSE Mib basket since the start of the year, with performance to date of +28.9 pp. The consensus target price was  €6.19 after the recent valuation upgrades (HSBC Buy at €6.8, SG Buy at €6.3, Banca IMI NAV at  €6.9). The most prevalent recommendation was Buy (78% of analyst coverage).
The price of Pirelli Real Estate did not change, closing at  € 0.347.
 

PEERS & MARKETS

Sector rotation in favor of bank sector characterized the week from 26 to 30 July on the stocks markets. Following the results of stress tests required by the European Commission, the European Banks sector index recorded 5% upside. Profit taking affected sector that have better performed since the beginning of the year : Automotive & Parts marks -1.8% despite the positive indications for 2010 given that emerged from the publication of half-year results by the major car and components manufacturers such as Daimler, Pirelli, Continental and Michelin. Pirelli closed the week at € 5.37 (-1.1%) containing profit taking (-3.6% Michelin, Continental -2.5%). Pirelli 2Q 2010 results beated consensus estimates (+ 21% EBIT vs. the figure expected by market) with a positive impact both in terms of tyre estimates for 2010 (in line with the new target) and a higher evaluation of Pirelli stock. Ten brokers have revised their target price on Pirelli & C by an average of 40 € cents from €5.75 to €6.15. The full consensus target price stands now at € 6.04; Buy is the prevalent recommendation (83% of coverage). Pirelli, despite last week trend, is still the best performer on Ftse Mib year to date, with a relative performance of +26 pp compared to the index of blue chips. Pirelli RE, that confirmed its guidance for 2010 closed at € 0367 with an increase of 2.4% (+1.7 pp vs. the European Real Estate Index).

Peers & Markets 26-30.07.2010