From Standard & Poor's European MarketScope
Irish drugmaker Elan plunged £3.01 to £2.42 after the company and U.S. partner Biogen confirmed that the disease PML has been diagnosed in a third patient using their Tysabri multiple sclerosis drug. The patient died in December, 2003, and was originally diagnosed with malignant astrocytoma. The companies suspended sales of Tysabri last month after a patient died of PML during a clinical trial of Tysabri.
Shire Pharma was up £0.42 to £6.04, after the drugmaker said that sales of its hyperactivity drug Adderall XR have remained steady despite its suspension in Canada earlier this year. In its presentation to the Lehman Brothers Global Healthcare conference, the company said that Adderall XR has a 25% share of the attention deficit hyperactivity disorder market, making it the most prescribed brand.
Virgin Mobile was up £0.07 to £2.20, after the bank Cheuvreux upgraded the company to outperform from underperform, and kept its £2.40 target price. The broker anticipates that the share price range over the next nine months will be £2.10 to £2.50 and thinks, on balance, that the valuation is attractive enough to support an outperform recommendation. The broker said the company's free cash flow yield is estimated at 11% for fiscal year 2006, and its price to earnings ratio is 10.
Compass Group, the food service company, was down £0.13 to £2.42, after the company said that in the first six months of 2005 and for fiscal year 2005, like-for-like turnover growth is expected to be at least 6%, with continuing strong performance in North America. The company said turnover growth has been driven by new business wins and a continued high level of contract retention. It added that the picture in continental Europe and the rest of the world division remains mixed. The company said Northern Europe and in particular France, Germany and Netherlands remain very challenging. Lehman Brothers said it expected few surprises in this morning's trading update. The broker believes that trading is fundamentally solid and that management will be keen to stress that the one-off problems that dogged the group in fiscal year 2004 were indeed one-offs. The broker sees group organic growth of 4.8% in the first half of 2005 and estimates organic growth of 5.2% for fiscal year 2005, saying that this may prove conservative. The broker also forecasts a 20 basis point margin improvement for fiscal year 2005.
Orthopedic device maker Smith and Nephew was down £0.24 to £4.98, after the company announced that its orthopedics division has received a subpoena from the U.S. attorney's office in Newark, requesting consulting, professional service and remuneration agreements between the division and orthopaedic surgeons. U.S. peers Stryker and Johnson & Johnson also received subpoenas yesterday after the U.S. close. The financial services group Dryden said Smith and Nephew and its U.S. orthopaedics products competitors are all down sharply. The broker noted that the company says it is providing full cooperation. Dryden believes that the company has high ethical standards and will emerge unscathed but says the event could inflict longer term damage on the ratings of orthopedic companies.
Automotive supplier Continental was up €3.13 to €59.83, after the company reported better-than-expected fiscal-year results and reiterated its bullish 2005 outlook. The company said fiscal year earnings before interest and taxes rose to €1.096 billion from €855 million, which was above consensus. Fiscal year sales rose to €12.59 billion versus €11.53 billion, while net profit more than doubled to €673.8 million from €314 million in 2003. The company is forecasting record profit and earnings before interest and taxes in 2005. Fourth-quarter net income tripled to €243.2 million compared to €69 million a year earlier, while fourth-quarter earnings before interest and taxes was at €319 million compared to €194 million a year ago, and fourth quarter sales rose to €3.38 billion compared to €3.05 billion. The company said it will raise tire prices by 1% to 4% to offset raw material costs and negative currency effects. The company said it is in talks with potential partners in China about setting up a tire production facility but said it has become more cautious when it comes to future acquisitions or joint ventures abroad. The company recently abandoned plans for a joint venture in Russia and ceased negotiations with Chinese tire maker Doublestar regarding a joint venture in China over a dispute over controlling interests.
Automotive parts and defense equipment maker Rheinmetall was up €1.55 to €41.00, after Deutsche Bank upgraded the company to buy from hold and increased its price target to €48 from €35, citing strength in the auto and defence divisions. A strong balance sheet, predictable growth opportunities, attractive valuation and low exposure to geopolitical or foreign exchange risks distinguishes the company within the German midcap space, the broker said in the note. Deutsche Bank expects substantially higher earnings in 2005 to 2006 and increased its earnings per share forecasts to €3.6 from €3.26 and €3.89 from €3.65.
Optical equipment maker Linos was down €0.50 to €10.17, after the company reported its first profit in four years and said sales may dip. The company's net income rose to €5.4 million compared to a loss of €9.6m in the previous year. Sales rose 26% to €88.1million. The company forecasts revenue will drop to a range of €81 million to €85 million this year, reflecting an anticipated weakening of the semi market. The company said it expects solidly positive results this year, without going into details.
Etam was up €1.90 to €24.50, after Cheuvreux said that, according to the newspaper La Tribune, the group could announce tomorrow the nomination of a new chief executive officer, Richard Simonin. The broker said that if confirmed, this would be good news given that the group has had no chief since September. The broker expects fiscal year 2004 results to show a net loss of €14 million, and keeps its underperform recommendation. Citigroup said, unsurprisingly, the company's fiscal-year 2004 results, due out after the close, are going to be poor with an estimated €3 million net loss (which could reach €10 million due to year-end inventory provisions), but added that this is largely due to the estimated €30 million loss borne by the UK business. The broker the first-quarter trend is also likely to be negative, but remains speculatively positive, with a price target of €29.6.
Luxury-goods maker LVMH Moet Hennessy Louis Vuitton was up €0.70 to €57.70, after it disclosed that fiscal year 2004 net profit came in at €1.2 billion under International Financial Reporting Standards, compared to €1.01 billion under French accounting standards. The 18% increase is mainly attributable to reversal of goodwill amortisation. Under International Financial Reporting Standards, operating profit was down about 0.2% to €2.372 billion, net consolidated debt was up 5% and shareholder equity down 5%.
Airline Air France-KLM was down €0.14 to €13.87, after CSFB downgraded the company to underperform and lowered its target price to €11.40 from €17.70.The broker thinks the company has re-rated to the subsector average. It said quarterly earnings before interest and taxes progression is moving in the wrong direction and pointed out that analysis shows third-quarter of 2005 underlying earnings before interest and taxes was down by €105 million, or 59%, year on year, but fiscal year 2005 consensus forecasts imply fourth-quarter earnings before interest and taxes should rise by €100 million, or 74%. The broker adds that this issue is mainly fuel and estimates the company's fuel bill is 6.8 times its fiscal year earnings before interest and taxes, more than Lufthansa (4.7x) and British Airways (2.7x), so the company has to work harder to avoid fuel-related downgrades.