EU TECHNOLOGY: Nokia: Q225 Prelim Update
(NOKIA ; Ba1/BBB-/BBB-)
FY op profit range lowered by 14% at the midpoint ahead of Q2 results on Thursday. Release attributes the miss mostly to the weaker USD albeit with a tariff impact also cited though they indicate that operational performance was not factor. Ericsson results also saw FX headwinds though the name has a more significant US presence which likely helped to comparatively dampen the impact.
While Nokia has affirmed FCF margin guidance, the lower op profit will translate to an impact on the cash position; Moody’s see downside pressure on €4bn – consensus already had the cash pile decreasing from €4.9bn to €3.2bn this year on the back of the Infinera deal, though this weaker performance could see levels close to €3bn.
S&P’s Feb 2023 update was more explicit about op performance; their stable outlook was based on single digit rev growth and an adj-EBITDA margin of 14-16% (equiv. to reported comp EBIT margin of 12-14%). LTM revenue is -23% vs. FY22 while the LTM EBIT margin looks 10.7%.
- Prelim Q2 net sales: €4.55bn (+2% YoY, ~5% miss).
- Prelim Q2 op profit: €300mn (-29% YoY, ~26% miss).
- FY op profit view cut to €1.6–€2.1bn from €1.9–€2.4bn due to FX, tariffs. Consensus: €2.1bn.
- FY FX drag €230m (€90 non-cash reval, €140m op impact). Sees EURUSD 1.17 vs 1.04 in Jan.
- Tariffs expected to hit FY op profit by €50mn–€80mn.
- FCF conversion guidance unchanged at 50%–80% of op profit.
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BTP TECHS: (U5) Trend Structure Remains Bullish
- RES 4: 122.71 2.764proj of the May 14 - 20 - 21 price swing
- RES 3: 122.35 2.500 proj of the May 14 - 20 - 21 price swing
- RES 2: 122.00 Round number resistance
- RES 1: 121.73 High Jun 13 and the bull trigger
- PRICE: 120.61 @ Close Jun 20
- SUP 1: 120.15 Low Jun 5
- SUP 2: 119.48 Low May 26
- SUP 3: 118.87 Low May 21
- SUP 4: 118.51 Low May 14 and key support
The trend condition in BTP futures is unchanged, it remains bullish and the latest pullback appears corrective. Recent gains reinforce a bull theme and maintain the price sequence of higher highs and higher lows. Sights are on the 122.00 handle next. Key support to watch lies at 118.51, the May 14 low. A clear break of this level would highlight a reversal. First support is 120.15, the Jun 5 low.
SCHATZ TECHS: (U5) Support Remains Exposed
- RES 4: 107.690 High Apr 30
- RES 3: 107.610 High May 23 and a key near-term resistance
- RES 2: 107.430/475 High Jun 13 / High May 27
- RES 1: 107.304 20-day EMA
- PRICE: 107.240 @ 06:38 BST Jun 23
- SUP 1: 107.195/185 Low Jun 6 / 16
- SUP 2: 107.125 Low May 12 and a key support
- SUP 3: 107.000 Round number support
- SUP 4: 106.890 2.000 proj of the May 23 - 29 - 30 price swing
Schatz futures are still in consolidation and remain below the Jun 13 high. Support to watch lies at 107.195, the Jun 6 low. It has been pierced, a clear break of this level would reinstate a bearish threat and signal scope for an extension towards 107.125, the May 12 low. On the upside, clearance of 107.470, the May 30 high, is required to strengthen a bullish condition. First key resistance is 107.430, the Jun 13 high.
EUROZONE ISSUANCE: EGB Supply: W/C 23 June (2/2)
- Italy will come to the market on Wednesday to hold a BTP Short Term / BTPei auction with new issues of both on offer. As expected we will see E2.5-3.0bln of the new 2.10% Aug-27 BTP Short Term (ISIN: TBC). However, we had not expected a new 6-year BTPei to launch alongside it with E2.5-3.0bln of the new 1.10% Aug-31 BTPei (ISIN: TBC) on offer.
- Finland will come to the market on Thursday to hold an ORI auction with up to E400mln on offer.
- Italy will look to conclude issuance for the quarter on Friday with a 5/10-year BTP / CCTeu auction. For the 5-year BTP there is a chance that the line is cancelled after the E12bln syndication earlier this month and the large BTP-ST/BTPei auction. There is also a chance that we see the 2.70% Oct-30 BTP (ISIN: IT0005654642) reopened for the first time or an off-the-run issue. We expect to see a reopening of the 10-year 3.60% Oct-35 BTP (ISIN: IT0005648149). We also have little conviction surrounding the CCTeu on offer but note there is a chance that we see a first reopening of the Apr-34 CCTeu (ISIN: IT0005652828) that was launched in last month’s auction. Details will be confirmed tomorrow.
NOMINAL FLOWS: This week sees a E21.3bln redemption from a formerly 10-year Belgian OLO. Coupon payments for the week total E6.3bln of which E4.9bln are Belgian and E1.2bln are French. This leaves estimated net flows for the week close to flat, at negative E0.4bn, versus positive E25.0bln last week.
