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Investor Channel is the communication channel between Pirelli and the financial community. Analysts, shareholders and web users can use the channel for direct dialogue with the Group. The blog is moderated by Pirelli Investor Relations.


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PEERS & MARKETS

 The main European stock markets were almost flat in the week from the 18th to the 22nd of November (Milan +0.7%, London -0.3%, Frankfurt +0.5%, Paris -0.3%, Madrid -0.2%). According to the minutes of the FED meeting, tapering of economic stimulus (worth 85 billion $ per month) should begin gradually in the coming months; economists surveyed by Bloomberg predicted it to start as early as March 2014. Within the main economic data released during the week, Chinese manufacturing activity in November surprised negatively and so did business confidence in Germany; positive news came out of US retail sales.

Auto & Parts stocks were up during the week (+1.9%), led by auto manufacturers supported by the positive trend of the car market in October (global market +9.3% in the month, +2.1% YTD). On a regional basis, China outperformed with a monthly growth rate of +24%, followed by Japan (+18%), USA (+11%) and Europe (+5%).

Pirelli closed the week at 11.31€, up 4.6% trading an average of 2.2 million shares per day, in line with the previous 3 months.
3 global brokers published an update report on the stock (HSBC, UBS and Goldman Sachs), upgrading their valuation by an average of 1.3€ per share; analysts appreciated the Industrial Plan’s focus on cash flow generation, as well as greater details on the Industrial Business and regional strategy.
Consensus Target Price taking into account the 15 most recent publications stood at 12.15€ with 50% of analysts advising to “BUY” the shares.


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PEERS & MARKETS

The main European stock markets were mixed in the week from the 11th to the 15th of November, 2013 (Milan -1.4%, London -0.2%, Frankfurt +1%, Paris +0.7%, Madrid -0.5%) with the Stoxx 600 index closing at +0.1%. Negative news came out of Europe with GDP growth slowing down to +0.1% in Q3 (after the +0.3% reported in Q2), whereas comments from future Fed Chairman Janet Yellen suggested that tapering of monetary stimulus will happen very gradually.

Auto & Parts stocks were flat (sector index +0.4%). Broker CITI confirmed its positive view on the sector at the end of Q3 reporting season: investor focus is now on technological innovation to reduce emissions and on the impact of foreign exchange fluctuations, given the increasingly global reach of the industry. Despite the good sector performance ytd (+32%), auto stocks are still among the least expensive within Europe (9x 2014E P/E vs EU average of 13x).

Slight profit taking on Pirelli shares, which closed at 10.81€ (-2.2%) after the +8.3% of the two days following the presentation of the Industrial Plan. 5 brokers published an update report during the week, upgrading their estimates especially for what concerns cash generation; according to KeplerCheuvreux, Pirelli is starting a new phase of value creation after the high investments of recent years. Citi (+2.6€ at 11€), Deutsche Bank (+1.5€ at 11€), Banca Aletti (+1.5€ at 13.5€) and KeplerCheuvreux (+0.8€ at 11€) improved their valuation on the stock, whereas Bank of America Merril Lynch trimmed Pirelli’s target price to 11.6€ (from 11.8€).


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PEERS & MARKETS

Main european stock exchanges were weak in the week from November 4 to 8 2013 (Milan -1.1 % , London -0.4 %, Frankfurt +0.8 % , -0.3 % Paris , Madrid -0.9 %). The U.S. macroeconomic data above expectations (GDP +2.8 % QoQ vs. +2 % consensus; increase in jobs more than double than estimates: approximately 204,000 vs. 100,000) was pushing stocks at first but the improving economy also renewed concerns that the Federal Reserve Bank may begin tapering its Quantitative Easing. On the European front instead, a further cut by the ECB to official interest rates to historical low (0.25%), confirms the weakness of the Eurozone economy.

Above parity the European Auto&Parts sector ( +0.7 %) driven by good car registrations data in October ( +3.4 % yoy , -2.1 % YTD) . The sector also benefited from the good performance of Tyre stocks following Continental quarterly results and the presentation of the new Strategic Plan 2013-2017 by Pirelli: the stock, having earned more than 8% in the two subsequent sessions, ended the week at € 11,050 recording the best performance of the Stoxx Auto (+6.9 % , +6.2 pp vs. index) with over 4 million volumes traded on average each day. According to analysts, the “realistic” targets , the internal levers of value creation and the focus on profitability and cash generation, provide significant opportunities for upside. Four brokers have currently revised upwards the target price of Pirelli by 1.2€ on average. The average price objective stand now at € 10.9 with 84% of the coverage with positive recommendations ( € 12.8 the average target price of new publications after Investor Day).


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