L'Oreal was up €0.95 to €64.75 after Citigroup upgraded the cosmetics maker to buy from hold and raised its target to €75 from €60. The broker said that the CEO hand-over from Sir Lindsay Owen-Jones to Jean-Paul Agon could mark an important transition from a sales-driven profit-and-loss model toward a more balanced sales and operating margin growth model and from an insular operating culture toward a more transparent and shareholder-friendly organization. The broker expects that the second half of 2005 will see a recovery in sales growth, and fiscal-year 2005 margin expansion will lead to the 21st consecutive year of double digit earnings per share growth. The broker also believes that the company could consider exiting its stake in drugmaker Sanofi-Aventis by the end of 2007, and the proceeds could be used to buy-back Nestle's 26.4% stake in the company.
Aerospace and defense giant EADS was down €0.31 to €26.34, after yesterday unveiling yesterday plans to collaborate with Russia's Irkut to develop Airbus' A350, which is planned to be launched by fiscal year 2010. The bank ETC Pollak Prebon said that the company is keen on developing sales in emerging markets with high potential. It noted that contract revenue could hike up to $110 million in fiscal year 2007 from some $80 million now. It kept its buy rating and €32 target price.
The Royal Bank of Scotland was up £0.36 to £16.43 as it and the Bank of China announced an exclusive strategic partnership that will include cooperation across a range of business activities, including credit cards, wealth management, corporate banking and personal insurance. The two banks will establish close co-operation in certain key operational areas, including corporate governance, risk management, financial management, human resources, and IT. Royal Bank of Scotland will nominate a director to sit on the Board of Bank of China. The company will lead a $3.10 billion investment in the Bank of China and will fund $1.6 billion itself.
Shire Pharma was up £0.33 to £6.72 on hopes that the drugmaker may reach a settlement with generics manufacturer Barr over its Adderall XR. Dresdner Kleinwort Wasserstein said that a deal would mean collaboration instead of competition, and pointed out that the market assumes the company will lose Adderall XR to generics next year, so a deal would be positive. The broker is putting its "hold" recommendation and £5.80 target price under review.
BP was down £0.08 to £6.29 after the Financial Times reported that U.S. authorities investigating the oil company's refinery accidents in Texas accused the group of systemic lapses and called for an independent review of safety at its five U.S. plants. The newspaper said that the U.S. Chemical Safety and Hazard Investigation Board said that investigations of the Mar. 23 accident at the Texas refinery that killed 15 people and injured 170 showed that the company started the unit where the explosion occurred knowing alarms and a level transmitter were broken. The company never investigated previous abnormal start-ups and its written start-up procedures were incomplete, the board said.
Banca Populare Italiana was down €0.17 to €7.77 after the newspaper Il Sole24 Ore wrote that Dutch bank ABN Amro may take legal action if the company decides to sell its stake in Italian bank Banca Antonveneta to a third party. Reminder: Banca Populare Italiana's advisors Dresdner Kleinwort Wasserstein and Lazard are reportedly considering launching a tender to offer the bank's 29.45% stake in Antonveneta. ABN Amro, Banca Intesa, Royal Bank of Scotland, Deutsche Bank and WestLB are expected to be among candidates buyers.
Oil group Royal Dutch Shell was down £0.36 to £18.47 after Goldman Sachs raised its long-dated West Texas Intermediate oil price forecast to $60 from $45, in part due to rising marginal costs of production, now that most of the of the excess oil capacity in the world has been depleted. However, the bank thinks that at $60 per barrel, long-dated oil prices have now risen far above costs suggested by individual project economics. The bank added that even at current high price levels, re-investment rates appear to be falling not rising, pushing industry cash reserves near $500 billion Separately, crude futures for September delivery fell $2.83 to settle at $63.25 per barrel on the New York Mercantile Exchange last night as fears over supply shortages were eased by rising inventories.
Brewer Heineken was down €0.28 to €25.80 after the bank Fortis estimated the Ivan Taranov brewery takeover price to be around €360 million to €380 million (about $450 million), which is far lower than the rumored $560 million. The bank noted that the acquisition should be net present value positive by 2011 and reiterated its buy recommendation.
Chipmaker Infineon was up €0.13 to €7.90 after Deutsche Bank increased its price target to €10.0 from €9.50 reflecting the increasing likelihood of a wireless turnaround. The broker reiterated its "buy" rating. Today's move adds to yesterday's gains on the WirtshaftsWoche report that the company is working on the sale of its memory chip division and the move could happen as early as this year. Separately, ahead of global chips data, JP Morgan said that it is looking for a book-to-bill ratio of 0.95 for July, up slightly from 0.93 in June. The bank expects utilization rates and equipment bookings to maintain an upward trend through the second half of the year.
Financial services group AWD was down €1.19 to €33.91 after the company reported first-half operating profit up 10.4% year-over-year to €36.1 million. The company said that it achieved this substantially improved profitability despite integration costs of €3 million for the British financial adviser Chase de Vere, which it acquired this year. Net profit was up 17% at €25.5 million, while revenues were down 1.1% at €305.7 million.