DE30: Deutsche Post surges despite miss in earnings

Summary:

• EU finance ministers to discuss digital revenue tax today

• DAX (DE30 on xStation5) failed to break above the 11600 pts handle

• Hugo Boss (BOSS.DE) earnings disappoint as long and hot summer in Europe limited sales

Following upbeat moods seen during the Asian trading hours major blue chips indices from the Old Continent launched Tuesday’s session higher. Gains could be saw all across Europe with Spanish equities being the only ones to start trading beneath yesterday’s close. Chemical companies and miners were among the best performing European stocks in the first minutes of trade while retailers and utility stocks were the only Euro Stoxx 600 subindices to launch trading below yesterday closing prices.

DE30 (DAX futures underlying) bulls surrendered yesterday and in turn we saw index pulling back from the vicinity of the 11600 pts handle. The 61.8% Fibo level of the upward impulse started after the 2016 US presidential elections more or less coincides with the 11400 pts handle and may be the first level to watch in case downward move is to be continued. Source: xStation5

Finance ministers from the European Union countries are said to resume talks on the digital revenue tax today. The tax could target international companies with a global revenue exceeding €750 million. However, tech industry claims that it would ease investment and innovation - crucial things for the sector. Some European countries, like Sweden or Ireland, advised EU not to proceed with the tax as talks on the global level are being conducted. Nevertheless, France is the toughest player in the case among the European countries as it pushes for an interim tax that will be effective until global solution is worked out. On the other hand, Germany, the EU biggest economy, opts for levying a digital revenue tax only if global talks fail to deliver a solution. Moreover, it should be noted that the tax, if levied, will target mostly US companies like Facebook, Alphabet or Amazon. Given that currently trade ties between EU and US are not so rosy such an action may result in a backlash.

Major European stock indices after the first hour of trade:

• DAX (DE30): -0.15%

• FTSE 100 (UK100): -0.16%

• CAC 40 (FRA40): -0.20%

• IBEX (SPA35): -0.58%

• FTSE MIB (ITA40): -0.69%

Deutsche Post (DPW.DE) surges after earnings while E.ON (EOAN.DE) underperforms on the back of downbeat analyst action. Source: Bloomberg

Company News

Deutsche Post (DPW.DE) is the best performing DAX stock at the beginning of the Tuesday’s session. The company reported third quarter earnings today. Deutsche Post’s EBIT came in at €376 million, somewhat below the median estimate of €393.9 million. Moreover, revenue reached €14.85 billion what was also below expectations (€14.94 billion). In the July-September period Deutsche Post generated net profit of €146 million. Despite this weaker earnings, resulting from significant restructuring cost, company still plans to boost its operating profit to over €5 billion by 2020. Moreover, company’s CEO said that he does not see major impact on the Deutsche Post business from the ongoing trade spat. While weaker than expected earnings may look worrying it should be noted that annual growth figures look rosy.

On the other hand, E.ON (EOAN.DE) is the worst performing DAX component today. Deterioration of sentiment towards the company can be ascribed to downbeat analyst action from Morgan Stanley. The Bank downgraded company from “equal-weight” to “underweight” and lowered price target to €8 (previously €9.5).

Hugo Boss (BOSS.DE) is another company that published its third quarter earnings today. The luxury fashion brand reported EBITDA of €126 million against expected €133.3 million. Revenue reached €710 million (expected €714.1 million) and net profit turned out to be €66 million (expected €77.3 million). The company explained that weaker than expected earnings resulted mostly from long and hot summer in Europe that delayed the launch of the fall/winter season, the busiest one for Hugo Boss. Nevertheless, the company said that it expects significant acceleration in sales in the fourth quarter of the year and that it is confident the full-year targets will be reached.

E.ON (EOAN.DE) underperformed in the second half of the year so far. The stock is trading 14% below the July’s peak at €9.94. Share price was rising since mid-October but bulls eventually failed to break above the resistance zone ranging €8.74-8.81 and the previously broken upward trendline. Source: xStation5