News and comments
According to the results of yesterday's trading, US stock indexes showed a positive trend. The advanced dynamics showed shares of semiconductors' companies against the background of preserving a positive view of investors for industry prospects. Among the Large CAP companies after the lagging dynamics from the beginning of the year (risks of strengthening regulatory measures) in the growth leaders were Facebook (NASDAQ: FB) and Google (NASDAQ: GOOGL) against the background of investors' expectations to restore advertising market in the current year.In the financial committee of the US Senate, hearings were held on the candidacy of Janet Yellen to the post of Minister of Finance. According to the statements of some senators, the candidacy of Yellen can be approved on Thursday. During the speech, Janet Yellen noted the need for additional fiscal incentives to support small and medium-sized businesses, financing state governments. In the process of hearing, Yellen softened the fears of senators on the growth of public debt, noting: "In conditions of very low interest rates, we see that, despite the fact that the amount of debt has grown relative to the economy, the burden of interest has not increased."
US companies
General Motors (NYSE: GM) announced a concluded partnership with Microsoft Corporation (NASDAQ: MSFT) CRUISE division, developing unmanned technologies. As part of the Cruise partnership will use the Azure cloud platform. Microsoft will also be an investor in the next round of Cruise capital raund at $ 2 billion (assessment of Cruise $ 30 billion). Shares responded with 9% growth, despite the lack of direct financial benefits.
Recently, General Motors shares demonstrated excellent dynamics (+ 20% since the beginning of the year) not only on the return of growth in demand for automotive sales, but also on the technological leadership of the company previously ignored by investors. General Motors promotion recommendations are on revision, since the current price ($ 55) has already exceeded the target price of $ 44.
Bank of America (NYSE: BAC) published results for 4k20. The profit per share was $ 0.6, which is 11% higher than a consensus forecast and 16% higher to / k. ROE Bank has grown by 120 BP K / K due to the stable cost of risk and reduced operational costs. The percentage margin is stable to / k, as the nearest competitors.
The growth of balance indicators was one of the best in the sector (assets rose by 3% to / k, deposits - by 5.5%). I'm still not sure in strong estimates of the results of Bank of America for 4k20 neutral. Despite the fact that EPS surpassed a consensus forecast, the bank's revenue did not reach forecasts due to the weak dynamics of commission and trading income. A positive point was only further restoration of ROE.
Citi (NYSE: C) reported in 2020 in 4Q20 net profit of the bank recovered before pre-crisis values and amounted to $ 4.6 billion EPS increased by 52% to / k, surpassed the consensus forecast. Profit growth to / k was provided with a zero risk value (Citi restored reserves for $ 46 million). Revenue dynamics did not reach the consensus forecast. If a stable interest margin supported the interest income, the commission income fell by 12% due to reducing income from trading and securities.
2020 Became a test for Citi, as well as for the entire global banking sector. The net profit of the bank decreased by 41% due to the rise value of risk, which was 2.3% in the results of 2020 (more than 2 times higher than g / g). I evaluate the results of the bank moderately negative. Weak dynamics of non-interest income disappointed investors. Nevertheless, it is worth noting several positive: NIM has ceased to decline to / k, the risk cost has become zero, which indicates sufficiency (even some redundancy of reserves created during the crisis). This will have a positive effect on the bank profitability in 1P21.
Delta Air Lines (NYSE: DAL) has provided financial statements for 4Q20. Revenue surpassed the expectations of a consensus forecast for $ 380 million and amounted to $ 3.97 billion (drop by 65.3% y / y). The load factor of aircraft was at 42%, significantly worse than consensus in 49.2%. The available number of Mestern was at the level of 36.57 billion (a decrease of 44% y / y) against expectations of 33.45 billion. The company completed the year from $ 16.7 billion. In December, the combustion of funds from the downtime of aircraft and low flights of flights was $ 12 million per day, which is 90% less than the indicator of the end of March, when demand for airfares dropped sharply due to a pandemic.
In aggregate for the year of sales amounted to $ 10.8 billion, which is 66% lower than last year. Operating expenses decreased by 40% and amounted to $ 10.8 billion. Revenue from the passenger transportation decreased by 70%. Management predicts a drop in revenue in the first quarter by 60-65% compared to the first quarter of 2019, but expects to significantly restore air carriage in the second half of 2021.
In general, the reporting is neutral. The negative from the lower than expected earlier, the flights were loaded with a decrease in operating costs and a decrease in the combustion of money to $ 12 million per day. From the positive one, it can be noted that the company plans to achieve a break-even point in cash flow to 3k21. Management also declared more quickly than previously expected, restoring business flights in the coming years.
It is worth noting the cost reduction strategy, which after the end of the pandemic will be able to bring the company to a higher marginality in comparison with indicators to a pandemic, but in my opinion, it is too early to talk about it yet, because 1k21 is not expected to significantly improve indicators (compared to 4k20) due to the stronger growth in the incidence rate of COVID-19 in the US and the seasonal factor.
As for the restoration of business travel, I am rather skeptical about the statement of management, and, according to my estimates, by 2027, proceeds from business travel will be only 90% of the 2019 indicator. There is a supply of liquidity on accounts ($ 16.7 billion), which partially removes concerns about large debt service (in aggregate with pension obligations is $ 38 billion) and maintaining the current expenses of the company in a pandemic. According to the reporting, I increase the target price from $ 32.1 to $ 36.6 on the horizon 1 year by successfully implementing the cost reduction strategy, but at the same time I confirm the recommendation overvalued to the investment horizon 1 year, since I believe that in current quotes The risks of longer restoration of flight activity are not taken into account.
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