Cocktails Boost Remy, Pandemic Disrupts Medicines: Earnings Wrap

(Bloomberg) -- Cocktails in lockdown helped to soothe the woes of distillers but the pandemic’s effect on hospital admissions is disrupting the pharmaceutical industry.

France’s Remy Cointreau SA raised its profit forecast for the year as people buying its cognac and liqueurs to make drinks at home helped to offset a heavy hit from bar and restaurant closures. The auto industry also got some more good news with Volvo Cars predicting a rebound in the second half.

Swiss banking giant UBS Group AG reported an influx of funds from wealthy clients and better-than-expected profit. Flavor and fragrance maker Givaudan SA topped estimates as the lockdown drove up demand for home staples such as cleaning products and snack foods.

Still, in a worrying sign for an industry that’s been buffered from the impact of Covid-19, drugmaker Novartis AG trimmed its annual sales forecast as the virus disrupted demand for eye and dermatology medicines.

Second-quarter earnings are off to a strong start, with a broad range of companies beating analyst estimates, Morgan Stanley strategists wrote in a note on Monday. That indicates there may be modest increases to consensus expectations for 2020 and 2021 in the coming weeks, they said. The biggest revisions are coming from financial and commodities companies.

Key Developments:

• European stocks rose with the Stoxx 600 index gaining 1.1%, led by banks, autos and tech stocks
• UBS Signals Worst May Be Over With Return to Dividend Payout
• Novartis Trims 2020 Sales Forecast on Pandemic Disruption
• Asian Infections Climb; EU Reaches Stimulus Deal: Virus Update

Here’s the top virus-related earnings news for Tuesday by sector.

Banks

• UBS signaled it may resume share buybacks and dividend payments as soon as the fourth quarter after new money flowing into its key wealth management arm topped estimates. You can follow the live blog for UBS’s second-quarter earnings here. The Swiss bank’s shares rose as much as 4% with analysts optimistic on the prospects for payouts.

Health Care

• Novartis cut its 2020 sales forecast as the pandemic disrupted patients getting key drugs, including the eye medication Lucentis, and hit new patient starts for dermatology treatments. Earnings excluding some items will likely increase by a low-double-digit percentage, according to a statement, the higher end of the range given earlier this year. Analysts said the negative impact from destocking was expected and Bloomberg Intelligence said the miss reflects a degree of over-optimism. The stock fell as much as 1.7%.

Autos

• Volvo Cars said it expects a strong recovery in the second half, after posting an operating loss in the first. The company, owned by China’s Zhejiang Geely Holding Group Co., gained market share in the Asian nation, the U.S. and Europe, despite a decline in revenue. Sales in July have been slightly above last year’s level in all regions, CEO Hakan Samuelsson said in an interview. Volvo’s outlook is the latest indication car markets may have turned a corner, after Daimler AG last week said it saw demand recover at the end of the first quarter.
• German tire and car-parts supplier Continental AG’s second-quarter sales dropped by nearly 40% but still came in ahead of more pessimistic estimates. The group refrained from giving an outlook for 2020, however. Citi said the earnings were well ahead of expectations, but cash flow was not. The shares rose as much as 4.5%.

Consumer

• Remy Cointreau said first-half profit will fall less than previously estimated, as more consumers bought its Cointreau liqueur to make cocktails in lockdown, offsetting the decline in sales for bars and restaurants. The French distiller expects a “strong” recovery for the second half, boosted by the U.S. and mainland China. Analysts praised the update, noting a good performance for Remy Martin cognac in China. The shares bounced as much as 5.2% before giving up the gains.
• Swiss chocolatier Lindt & Spruengli AG said sales for the year will be 5% to 7% lower than last year, assuming there won’t be a second virus wave that leads to extensive lockdowns. The company gained market share in all its key markets as it leaned on home deliveries, pick-up services and expanded e-commerce to offset shuttered stores. Vontobel said the results are better than expected but Lindt shares fell 3.4%.

Telecoms

• Telecommunications masts operator Cellnex Telecom SA raised its 2020 outlook following a string of deals in the first half, including its entry into Portugal and the completion of the purchase of the U.K.’s Arqiva. Goldman Sachs said the results were reassuring, though attention will be on the firm’s new deal pipeline. Cellnex shares fell as much as 1.4%.
• U.K. telecom firm TalkTalk Telecom Group Plc’s fiscal first-quarter revenue fell but has seen a recovery in trading in June and July. It saw net additions to its fiber service in the quarter and improving trends as the period progressed. The shares fell as much as 3.6% and Berenberg said the revenue decline the firm saw was “steep.”

Tech

• Computer mouse and keyboard maker Logitech International SA raised its full-year profit forecast after its fiscal first-quarter sales and earnings easily topped estimates. The company is experiencing a significant boost in demand from customers working from home purchasing new equipment. The shares jumped as much as 6.5% and Goldman Sachs noted a good product mix and lower promotional spending for the beat.

Media

• Publishing and events group Euromoney Institutional Investor Plc said trading has been in line with expectations as it dealt with pricing pressures in its publishing arm and focused on cost controls as events were canceled amid the pandemic. Citi said the events business is still clearly facing challenges, though the firm’s net cash position provides some comfort. The shares rose as much as 2.5%.

Chemicals

• Fragrances and flavors manufacturer Givaudan reported better-than-expected profit, buoyed by demand for ingredients in what are Covid-19 staples like household-cleaning products, shampoo, comfort food and snacks. That offset a slump in demand for perfume during lockdowns as people worked from home and duty-free shopping at airports ground to a standstill. Liberum said the results were impressive but the shares dipped as much as 0.7%.

Business Services

• Transport group Kuehne + Nagel International AG’s first-half earnings beat estimates, aided by cost management as its revenue declined. It said significant uncertainty still exists for the second half. Citi said the results were a “strong” beat, driven by a good performance in sea freight. The shares rose as much as 3.5%, but gave up those gains later.
• Swiss testing company SGS SA reported first-half revenue that missed estimates, as operating income dropped by 33%. The main declines came in its oil and gas and industrial segments. Analysts at RBC said the firm has executed its strategy well, with earnings slightly ahead and cash flow still strong. The shares rose as much as 3.9% before paring gains.
• Dutch staffing firm Randstad NV said visibility remains “very limited” as it reported a decline in second-quarter sales but said this has eased more recently as lockdowns are lifted. It added that volume trends in July also indicates more positive momentum. Shares in the firm surged as much as 9.6% with Citi praising its gross margin and cash performances.

Industrials

• Swedish engineer Alfa Laval AB posted second-quarter estimates ahead of expectations, though it said it anticipates demand in the third quarter will be somewhat lower. CEO Tom Erixon said the virus impact on supply chains and demand has been “significantly better” than feared and its shares rose as much as 6% in Stockholm.
• Bearings and seals maker SKF AB’s second-quarter earnings beat estimates but the group said it remains unfeasible to provide guidance for the third quarter. It said sales are being hit by both government-imposed restrictions and by weaker underlying demand. The shares dropped as much as 4.9% and Liberum said the cash flow looks disappointing and the outlook uncertain.
• Stora Enso Oyj’s second-quarter earnings topped estimates but it did not provide a guidance. The Finnish paper and packaging group said that despite some “optimistic signs,” visibility in its markets remains very low and the pandemic has accelerated the structural decline in all paper grades. The shares bounced as much as 6%.
• Swedish forestry company Svenska Cellulosa SCA’s second-quarter earnings missed estimates, with demand lower than in the first quarter. It also said most paper product areas have been hit by a decline in consumption for marketing and print advertising. The stock fell as much as 4.2%.

Metals & Mining

• Swedish steelmaker SSAB AB said there are signs that demand may improve in the third quarter after second-quarter earnings beat estimates. It said demand for its special steels was stronger than for standard steels in the quarter. Morgan Stanley said the beat was driven by good cost management and shipments in the Americas and the shares bounced as much as 8.6%.

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