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Porsche Higher on Broker Report

From Standard & Poor's European MarketScope


Porsche was up €9.45 to €544.20 after Deutsche Bank lifted its target to €625 from €560 with a buy rating. The broker said after a positive management roadshow, that it sees no new information but that the company's confidence in the short-term and medium-term outlook is impressive.

Deutsche Bank was up €0.87 to €67.70, after Morgan Stanley said it thinks no other stock in its coverage universe exhibits the same degree of disconnect between the message from management and the market view. The broker and reiterated its overweight rating and said with management earnings expectations a full 50% higher than Wall Street's, the difference is quite simply staggering. The broker said that while many other banks are seemingly given credit in their share price for multi-year restructuring plans, the company is given little despite the restructuring being centered on the current year and already well advanced, as well as public statements by the company that they are on track to meet targets. Admittedly, neither does the broker fully buy in to the plan, but this disconnect appears to offer a free call option on management being even partially right and poses little downside risk if they are wrong. The broker thinks this makes the stock an attractive play ahead of results on April 29, when some resolution on these matters will be achieved.

Schwarz Pharma was up €2.44 to €37.90, after the company said it will submit its Fesoterodine treatment for bladder disorders to U.S. and EU regulatory authorities following successful Phase III trials. The trials revealed statistically significant improvements with patients in all primary variables requested. This suggested to dealers that the drug may be very competitive. The company did not reveal when the drug would be submitted. Potential filing is seen around mid-2006, allowing for a launch in 2007. Forecasts are for the drug to generate peak sales of around €300 million to 400 million. The broker estimates that 2006/2007 will be high for sports car volumes and mix.

Database maker Software AG was up €1.66 to €26.65, after the company said first-quarter license sales reached about €27 million, up from €23.3m on the back of stronger XML software products. First-quarter earnings before interest and tax will rise to €17 million to €18 million, up from €15.1 million. The company also expects total revenue to reach €100 million, up from €95.7 million, and sees 2005 revenue growth of 4% to 6% at constant currency levels and an earnings before interest and taxes margin of 20% to 22%. The company is due to report first-quarter results on April 28. Maintenance revenues were flat year on year, and revenues from services grew 4% year on year, due to growth in the U.S. Broker Merck Finck believes the figures indicate year on year accelerating growth rates in license revenues, maintenance, professional services and total revenues.


Luxury retailer Burberry was down £0.05 to £4.00, after the company reported that second half total revenues increased by 6% on an underlying basis, with retail sales increasing by 6%. The company said underlying wholesale sales increased by 5%, driven by spring and summer 2005 season sales, while underlying licensing revenue increased by 8%. The company expects minimum earnings before interest, taxes and amortization of £162 million for 2004 and 2005, ahead of expectations, and said that in the 2005/2006 year, it sees first half wholesale revenues broadly flat compared to the previous year, based on orders to date for the autumn and winter 2005 season. The company also sees more moderate growth in licensing revenue relative to the second half of 2004/2005. Earlier, Morgan Stanley had forecast second half sales growth of 9% and fourth-quarter sales growth of 10%. JP Morgan expected second-half sales to grow 6% on a reported basis and 8% on an underlying basis, implying 9% underlying growth in the fourth quarter.

Troubled Irish drugmaker Elan was up £0.38 to £3.28, after the company announced that a Phase III trial showed treatment with suspended drug Tysabri led to a reduction in disability progression and reduced rates of clinical relapses and brain lesions in patients with relapsing forms of multiple sclerosis. Tysabri was suspended by the company and its U.S. partner Biogen on February 28 after a patient died from the rare disease PML following treatment with Tysabri.

Grocery and retail chain Tesco was up £0.07 to £3.25, after Deutsche Bank increased its target to £3.40 from £3.30 and kept its buy rating. Morgan Stanley increased its target to £3.45 from £3.19 and kept its overweight rating. The broker raised its 2006 and 2007 earnings per share forecast by 2%, as it increased its UK like-for-like growth assumption for 2005/06 and rolled over its long-term valuation framework into 2006. The broker also extrapolated the company's comments on non-food to conclude that new non-food margins are only around 250 basis points higher than food, which is one reason why the strong sales growth in non-food (a 17% increase in 2004/05) did not feed through into a big increase in UK margins. The broker now assumes 5% like-for-like sales growth for the company's UK business in 2005/06, dropping to 3.5% growth in 2006/07. Earlier, Lehman Brothers tweaked up its target to £3.25 from £3.20 and kept its overweight rating. The broker said the company's fiscal year results were impressive, but in line.

Oil group BP was down £0.08 to £5.48, after oil prices dropped below $51 a barrel following U.S. Energy Information Administration inventory data. Separately, the International Energy Agency said growth in world oil demand was finally slowing. The IEA argued that high oil prices appear to be stemming global oil demand. The agency revised down its outlook for global demand growth by 50,000 barrels a day this year to an average of 84.3 million barrels a day. The agency added that this would not be enough to significantly soften oil prices, due to the limited spare oil capacity. Meanwhile, a pioneering Russo-British oil joint venture, TNK-BP, has been hit by a $1 billion tax bill, in a sign that Russian president Vladimir Putin may fail to restrain state bureaucrats and tax inspectors emboldened by their pursuit of Yukos, The Financial Times reported yesterday.


PSA Peugeot Citroen was down €0.85 to €47.92 after March registrations showed the company's cars down 9% in the European Union plus the European Free Trade Association region, underperforming the broader market, which saw a 3.7% fall. Registrations of Peugeot cars were down 10.7% at 121,593 units, while Citroen's were down 6.7%

at 96,081. The stock was hit yesterday as the company proposed a fiscal-year 2004 dividend of €1.35 per share, unchanged year on year. Deutsche Bank downgraded to hold from buy and cut the price target to €52 from €54 on flat dividends and a tough 2005. The broker had been expecting a 20% dividend increase.

Supermarket retailer Carrefour was up €0.77 to €41.75, after reporting good results that got mixed reviews from brokers. Societe Generale raised its fair value to €48 from €45 and rated the company a buy. ABN AMRO raised its target to €45 from €43, and kept its add rating. Deutsche Bank said the company's first quarter sales breakdown was mixed. Rates hold. CSFB said headline like-for-like growth of 1.6% for the first quarter looked impressive, especially when calendar-adjusted to 3.2%. The broker rated the company underperform. Lehman Brothers considers like-for-like evolution disappointing, and kept its underweight rating. Last night, the company reported first-quarter pro-forma sales up 4.8% to €19.59 billion, thanks to growth in Asia and Latin America. French sales were up 0.9% at €9.39 billion, or down 1.6% adjusted for Easter.

Steelmaker Arcelor was up €0.26 to €17.66, after it emerged that the company will propose to launch a program to buy back a further 6% of its own shares in addition to the 4% it already holds in treasury stock. The stocks will be acquired at a price between €10 and €30 per share. The operation will represent a maximum of €1,116 million.

Cigarette maker Altadis was up €0.65 to €33.41, after Citigroup cut its target to €36 from €37 and reiterated a buy rating. The company, along with the British Imperial Tobacco, is the broker's sector top pick.

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