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CONSUMER STAPLES: Consumer and Transport; Week in Review

CONSUMER STAPLES
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Earnings were skewed negative mainly as troubled names Barry Callebaut and PostNL. Excitement in primary continued as topical names Sainsbury, Intermarche and Sudzucker came. Earnings will pick up some pace next week; LVMH, VF, Whirlpool, Electrolux, Wizz Air, Manpower, Altria and Elis of particular interest. 

Fundamentals linked news

  • Barry Callebaut; reports 1Q (to Nov) earnings that showed cost-plus contracts passing through most of the rise in Cocoa. The concern remains the additional funding it will need; we see it set -up with another CHF2b in and see that covering a WC swing in-line with Cocoa holding around £9000/t this year. That will take leverage close to 10x, a number raters will not like regardless of if it being held as liquid inventory. We would keep in mind even on last years 7.0x gross leverage Moody’s had the BS in CCC territory while it balanced final ratings with the one-off nature, market position, and scale of Barry. For now we see near-term catalyst skewed negative and encourage caution as Cocoa prices remain in the driver seat. Full note here – expect follow up.
  • Burberry: quarterly numbers are impressive and catch us (and the market) by surprise on the pace this turnaround may take.. We see value on the £30s even after this morning’s rally (-17bps) and see near term catalyst now skewed positive for the first time since issuance (subject to macro) (full note).
  • PostNL; Q4 results remain lacklustre. The structural issues behind the business, lack of CoC protection on above par mids and potential IDS supply all weigh on our view to be cautious - even in the face of attractive carry. On RV the IDS28s, despite also facing near term negative catalyst, are screening more value.
  • Birkenstock; reiterates guidance for double digit growth this year and continued deleveraging. 1Q earnings come 20th of Feb, €29s are holding at lows (3.5%) and now working out to an April call (at 101.3). We would welcome refi supply.  

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Earnings were skewed negative mainly as troubled names Barry Callebaut and PostNL. Excitement in primary continued as topical names Sainsbury, Intermarche and Sudzucker came. Earnings will pick up some pace next week; LVMH, VF, Whirlpool, Electrolux, Wizz Air, Manpower, Altria and Elis of particular interest. 

Fundamentals linked news

  • Barry Callebaut; reports 1Q (to Nov) earnings that showed cost-plus contracts passing through most of the rise in Cocoa. The concern remains the additional funding it will need; we see it set -up with another CHF2b in and see that covering a WC swing in-line with Cocoa holding around £9000/t this year. That will take leverage close to 10x, a number raters will not like regardless of if it being held as liquid inventory. We would keep in mind even on last years 7.0x gross leverage Moody’s had the BS in CCC territory while it balanced final ratings with the one-off nature, market position, and scale of Barry. For now we see near-term catalyst skewed negative and encourage caution as Cocoa prices remain in the driver seat. Full note here – expect follow up.
  • Burberry: quarterly numbers are impressive and catch us (and the market) by surprise on the pace this turnaround may take.. We see value on the £30s even after this morning’s rally (-17bps) and see near term catalyst now skewed positive for the first time since issuance (subject to macro) (full note).
  • PostNL; Q4 results remain lacklustre. The structural issues behind the business, lack of CoC protection on above par mids and potential IDS supply all weigh on our view to be cautious - even in the face of attractive carry. On RV the IDS28s, despite also facing near term negative catalyst, are screening more value.
  • Birkenstock; reiterates guidance for double digit growth this year and continued deleveraging. 1Q earnings come 20th of Feb, €29s are holding at lows (3.5%) and now working out to an April call (at 101.3). We would welcome refi supply.  

Event driven news

Keep reading...Show less