Auto & Transport Roundup: Market Talk

Dow Jones2024-09-05

The latest Market Talks covering the Auto and Transport sector. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

1442 GMT - Canadian auto sales have been on the rise this year but it's likely to be a struggle to maintain the pace. DesRosiers Automotive Consultants estimates light vehicle sales for the first seven months of 2024 were up 10.5% for the market as a whole, thanks to improved availability. For August, sales hit about 165,000 units, a gain of 5.6% on a year earlier. But Managing Partner Andrew King says the ability of the market to keep producing significant percentage gains will be tougher from here on. In the final four months of last year the market saw the first noticeable improvement in inventory and an uptick in the pace of sales, setting tougher benchmarks to beat this fall. King says that on tip of that, unemployment is rising, GDP per capita is falling and vehicle prices are higher. (robb.stewart@wsj.com)

1108 GMT - Volvo Car's cut to its financial guidance isn't very surprising, and it should be able to meet its new goals, UBS analysts say in a note. The Swedish carmaker, majority-owned by Geely, lowered its expectations for revenue, which UBS says was widely expected, and EBIT margin, with the latter more or less aligning with analysts' forecasts. UBS is also largely unmoved by the company retreating from its electric-vehicle goals, given similar actions by other carmakers. While it is unclear how Volvo plans to invest in order to keep its non-fully-electric car lineup attractive in the meantime, the company should be able to weather the storm, and will have little issue meeting the EU's carbon mandates, UBS says. Shares rise 3.1% at SEK27.25. (david.sachs@wsj.com)

1025 GMT - Jet2 is managing to secure customers, but perhaps not at the optimum price as customer booking trends fuel a price war among airlines, AJ Bell investment director Russ Mould says in a note to clients. The summer travel season has been kind to the London-listed leisure-travel group as an increase in the number of holiday package customers helps offset lower flight-only ticket prices, Mould says. Nevertheless, the travel sector has suffered from travellers booking flights at the last minute and the lack of earnings visibility is spooking investors, Mould writes. "There is no end in sight for this booking trend and so it's uncertain how many bums on seats it will eventually get for the final few months of its summer season and for its winter period," Mould says. Shares trade up 0.50% at 1,462 pence. (pierre.bertrand@wsj.com)

1012 GMT - North American freight-railroad traffic rises 5.2% for the week ended Saturday despite the lingering effects of the brief labor stoppage in Canada. Carloads rise 2.3% on nine reporting U.S., Canadian and Mexican railroads, while the volume of intermodal units rises 8.1%, data from the Association of American Railroads shows. Canadian rail traffic falls 5.8% for the week amid the impact of the less-than-one-day stoppage at the country's two major railways. North American rail traffic is up 2.4% for the first 35 weeks of the year, AAR says. (colin.kellaher@wsj.com

1002 GMT - Jet2's booking trends shows customers' later booking patterns have continued but that, thanks to strong demand, the London-listed leisure-travel group's load factors have improved since June, Peel Hunt analyst Alexander Paterson says in a research note. The company's package holiday mix is also much higher that pre-pandemic levels and is broadly in line with Peel Hunt estimates, Paterson says. He adds that Jet2's pricing for package holidays continued to show a modest increase, in line with the U.K. brokerage's expectations. "Jet2 continues to offer what customers want, and generates superb customer satisfaction ratings. This is not an easy trading environment, and we do not believe the current valuation sufficiently reflects the group's progress," Paterson says. Shares trade up 0.80% at 1,467 pence. (pierre.bertrand@wsj.com)

0945 GMT - Ofcom's proposed changes to the Royal Mail's second-class letter delivery obligations will be music to the ears of Czech billionaire Daniel Kretinsky, who is trying to buy the Royal Mail's parent company, International Distribution Services, Russ Mould, investment director at AJ Bell, writes. The proposal, which removes the obligation to deliver second-class post on Saturday, is an important step in securing the future of the service, Mould says. This type of news would normally move the share price but the bid situation means the stock is unlikely to react to such developments, he adds. Shares rise 0.77% to 342.00 pence. (adam.whittaker@wsj.com)

0901 GMT - Daimler Truck's earlier-than-expected CEO change, with Karin Radstroem set to start by Oct. 1, could raise the question of whether the company is falling short of expectations, Citi analysts say in a note. The German truck maker's CEO change was already planned as current CEO Martin Daum's contract will expire in February 2025. Daimler Truck attributes the earlier appointment to ensuring a smooth CEO transition, and operational performance does not appear to have fallen short of management expectations so far, Citi says. Nevertheless, Citi analysts believe more information is required in order to be able to fully assess the development of the third quarter. Citi estimates the company's third-quarter margin at 4.8%, below the company's forecast of about 6% and consensus of 5.7%. Shares rise 0.7%. (helena.smolak@wsj.com)

0841 GMT - Jet2's on-year rise in its seating capacity for the summer also represents a slight rise when compared with what the London-listed leisure-travel group reported in July, Goodbody analyst Dudley Shanley says in a research note. Jet2's seating capacity rose 12% on year to 17.17 million, compared with 17.16 million in July. "Encouragingly, both July and August experienced strong late booking momentum with September showing a similar trend," the analyst says, adding that the company's average load factor compared with summer 2023 improved since July. Despite some softness in flight-only ticket yields, the company's update for the winter is positive and its package holiday mix is ahead of last year with modest increases in prices for flights and packages. Shares trade up 1.8% at 1,481 pence. (pierre.bertrand@wsj.com)

0410 GMT - ComfortDelGro stands to benefit from its three new bus contracts in Australia, Maybank Research analyst Eric Ong writes in a report. The three contracts are worth around A$1.6 billion over a 10-year-period starting July 2025, the analyst says. "Assuming 6% EBIT margin and a corporate tax rate of 30%, we estimate the incremental profit contribution at about [S$5.9 million per annum] on a full-year basis," he adds. Maybank raises the stock's target price to S$1.65 from S$1.60 with an unchanged buy rating. Shares are 0.7% higher at S$1.44.(amanda.lee@wsj.com)

0339 GMT - XPeng's vehicle gross margin is expected to improve further in 3Q and 4Q thanks to stronger sales, Deutsche Bank analyst Bin Wang writes in a note. The Chinese automaker's management has guided for sales of more than 20,000 units in September, with overall 3Q deliveries likely hitting high-end of the guidance of between 41,000 and 45,000 units, DB says. The stronger sales volume will further boost XPeng's economies of scale and help its vehicle margin, Wang adds. The P+ large sedan debut will offer double-digit gross margin while rising share of higher margin overseas sales will drive overall vehicle margin for the rest of the year, the analyst says. DB maintains a buy rating with a target of HK$32.20 on the stock, which is at HK$33.05. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

0306 GMT - HD Hyundai Mipo seems just at the start of a cyclical business upturn after posting a profit turnaround in 2Q, DS Investment & Securities analyst H.M. Yang writes in a note. The South Korean shipbuilder could remain busy for half a year even without any new contract wins due to its large backlog work, Yang says. He estimates its total backlog order at $8.7 billion as of July. The firm stands to win more contracts amid growing client needs to replace their aging fleet with new vessels, he adds. DS raises its target for the stock by 17% to KRW135,000 and keeps a buy rating. Shares are 1.7% lower at KRW98,500. (kwanwoo.jun@wsj.com)

2251 GMT - Uber Technologies, now with investment grade ratings, will use proceeds from a senior note sale to fully repay about $1.97 billion of term loans and redeem its $1.5 billion senior notes due in 2026, Fitch Ratings says. Remaining proceeds are slated for corporate purposes. Fitch says Uber has a resilient and leading position in its markets and a conservative financial policy. S&P Global Ratings notes an improving credit profile and significant liquidity position. Last month, S&P upgraded Uber's corporate rating to BBB- from BB+ and called its liquidity exceptional, while Fitch assigned a first-time issuer default rating of BBB. The note offering has ratings of BBB- from S&P and BBB from Fitch. Also in August, Moody's upgraded Uber's unsecured notes to Baa2. (josh.beckerman@wsj.com)

(END) Dow Jones Newswires

September 05, 2024 12:20 ET (16:20 GMT)

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