October 11, 2024 14:50 GMT
CONSUMER CYCLICALS: Consumer & Transport: Week in Review
CONSUMER CYCLICALS
It was a quiet week ahead of earnings. We had a few early reporters including Pepsi - who showed us it’s not just Burberry that will blame the Chinese consumer on a miss. Read-through on Delta earnings was slightly positive, but we remain cautious on the struggling names. Primary was surprisingly interesting on bpost – one we will be watching through earnings. Spreads are heading towards this year’s tights, but it hasn’t been blanket compression. Air-France and Walgreen Boots reversing out wider reflect lessons learnt this year; the same cannot be said for Kering, Burberry and Lufthansa px action.
(see weekly pdf for hyperlinks)
Fundamentals linked news
- Imperial gives a trading update that sees FY guidance left unchanged for MSD growth in EBIT. Boosted equity pay-outs while it lags peers in non-combustibles exposure is not great to see though .
- Pepsi; reports continuing volume falls. Management points to macro over any structural shifts away from its snacks.
- Walgreen Boots; 26s drift wider ahead of the high-beta earnings. Summary of events since here.
- Auchan widens on flows. We will circle back on it next week, but we see uncertainty to its likely drawn-out turnaround plans.
- Airlines; Delta kicks of Airline earnings with positive comments on transatlantic performance.
- UK Grocer market share data for September sees Tesco break its highest since 2017.• Airports: Heathrow September traffic shows an easing over the quarter. We are more interested to see if ADP reports the bounce Delta saw post-Olympics.
Event Driven Movers
- Alimentation Couche-Tard revises up its bid despite a defensive target. 7-11 parent reports earnings and announces restructuring. The read-through to Couche-Tard’s bid is mixed.
Primary (fundamentals linked)
- bpost and Gatwick. Mandate out for Louis Dreyfus 7Y.
Rating Actions
- Alimentation Couche-Tard (Baa1/BBB+ Stable); S&P comments on 7-11 including on weak US operating conditions. Couche is performing better but is not immune to trends in the low-income consumer.
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