The week of July 18th has been a positive one for major international markets (Milan +5.5%, London +1.6%, Paris -0.7%, Frankfurt +1.5%). After starting with a strong downswing, listings benefitted from the EU decision to relaunch the new bailout plan for Greece, by also involving private financial institutions.
Strong buybacks in the banking industry posted the best European performance: +5.7%, the reference Stoxx.
Sales in the tyre Industry: June and second quarter market data marked a slowdown in sales volumes compared to the first quarter of 2011. Major stocks underwent a downturn: Continental -3.5%, Nokian -3.2%, Michelin -2.8%. Pirelli, the best equity in the industry from the beginning of the year, closed the week at 7.25€ (-5.3%). Pirelli shares were upgraded by Exane, whose rating went from Neutral to Buy and a 9.7€ TP, and by Centrobanca, Buy and 9.5€ TP. Merrill Lynch took another view and started buying Pirelli when it was rated Underperform, with a 7€ Target Price. According to the latter broker, Pirelli overperformed the industry and its main peers in the last two years, because of an “appealing restructuring story” and a sound “earning generation”. The company can also count upon a strong brand, an efficient cost structure, robust pricing power and “an experienced management team”. The broker’s view of 2011-13 plan targets is again different: the growing competition in LatAM, as well as in Europe, could hinder the company’s ability to increase its profitability.
Pirelli average consensus Target Price is of 8.54€ with 96% of brokers buying the security at Buy rating.