Liams Last Post : Greek rumours spark rally, Honahan triggers short rally in banks, United Drug ok , Martin Marietta and Biogen good numbers.

Good Afternoon ,

 

Today markets rallied on rumours of a bailout deal being arranged for Greece.  It all centred on the story that ECB Chief Jean Claude Trichet is returning to Europe from meetings in Australia a day early.

 

The Irish Financials were positively impacted for a while this morning before resuming their downward slide by comments from our own Central bank Governor Patrick Honahan who said that Irish economic policy measures were appropriate and that market concerns re the banks re-capitalisation would be assuaged once the NAMA loan transfer process got under way formally. He did say that that the Irish state would increase its ownership of the Banks but that the overall cost would be manageable. This was initially reassuring but the negative sentient returned with the news that Halifax is to close its Irish retail operation with the loss of 75o jobs.

 

 United Drug has an Interim management statement this morning which was positive and the the stock does look cheap at this point with improving fundamentals and a better all around performance. Our forecasts are above consensus but we feel that we are being conservative and so there is scope for upside momentum when the consensus numbers rise towards our forecasts. It looks like way past the nadir for earnings and the Medco joint venture in the UK could become accretive earlier than assumed til now. The stock could get re-rated onvec it becomes clear that there is a resumption of growth as the stock is tradnig at relatively lowly valuations at this point (P?E approx 9x , Div Yield 3.5% and a free cash flow yield of about 10%)

 

Martin Marietta has reported Q4 numbers, with broadly similar themes to the results posted overnight by Vulcan Materials - Q4 earnings were short of expectations (greater than expected volume decline, and weak pricing in one division), with outlook comments that were cautiously upbeat in tone (due to many caveats).

Aggregates volumes in Q4 fell by 24% yoy (versus -22% in Q3 and compared to -23% in Q4 for Vulcan). The headline price move caught the eye, being a surprising fall of 1% (versus +1% in Q3 and compared to +5% for Vulcan in Q4). However, on closer examination the decline was driven by particularly weak pricing in one division (Southeast, which includes Florida) where average aggregates pricing in Q4 fell by 7%, while pricing in the other divisions rose by 3.4-3.8% (more comparable to Vulcan's +5%).  On the 2010 outlook, Martin Marietta expects stability in overall aggregates demand. It is positive on increased stimulus-related infrastructure demand, noting that in its top five states 80% of stimulus highway funds were obligated to specific projects in 2009, but only 15% was spent in 2009. Management was cautious on short-term non-stimulus highway spending pointing out that the re-authorisation of the six-year federal highway programme (the last one having expired at end Sep '09) is required to restore state-level confidence in highway spending, but it does not expect this until later this year. It anticipates a moderate increase in demand for aggregates from the residential segment, but off a historically low base. For private non-residential activity it expects a volume decline in 2010. Martin Marietta expects a negative mix impact on pricing (increased output going into infrastructure projects commands a lower price than its average 2009 output), and it notes that if this mix is greater than management currently assumes the downward mix impact could be greater than assumed in the formal price guidance. Overall, in the aggregates division in 2010 it is guiding increased sales and improved gross margins and profitability.

 

Elan partner Biogen Idec issued Q4 results ahead of the US open. Having already provided Tysabri patient numbers for the period of 48,200 (commercial); of interest in the numbers is the revenue generated from these patients. US in-market sales of $137m for the quarter were broadly in line with forecasts ($137.7m); whilst ROW sales of $159m were slightly behind our forecasts of $164.7m. The effect of this short fall in revenue will be c. -$3.9m from our forecast for Elan's revenue for the quarter of £304m. Tysabri remains the key growth driver for Biogen (as well as Elan) and the company as such remains committed to its future growth. The company provided guidance for 2010 including revenue growth expectations of "mid single digits" ahead of current Bloomberg consensus of 3.5% growth.

 

 At 5pm , the Euro has had a big spike vs the dollar closing at 1.3769 , the Dow Jones is +1.5% , the Eurostoxx is broadly flat , the FTSE closed +0.8%

 

Tomorrow , Smurfit Kappa reports against a background of increased uncertainty in the world but also a series of price increases for their grades of product which have been successful. Their comments on outlook will be eagerly watched .

 

 Have a good Evening

 

Liam

 

 

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

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