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Foreign Stock Roundup: Novo Nordisk, GOL Linhas Beat on Earnings

Global markets were weighed down by the deterioration in U.S.-North Korea relations over last week. On Tuesday, President Trump announced that North Korea would be dealt with “fire and fury like the world has never seen”, if it continued to threaten the US. North Korea launched an equally fierce response, announcing that it was planning an attack on Guam. Consequently, investors indulged in profit taking and a flight for safe haven assets ensued, leading to stocks closing the week on a low note.  

Tensions Surrounding North Korea Weigh on Europe’s Stocks

On Monday, stocks in Europe failed to latch on to gains triggered by a better than expected U.S. jobs report. The STOXX 600 lost 0.1% with the majority of the industrial sectors closing in the red. A surge in China’s iron ore prices led to handsome gains for basic resources stocks which gained nearly 2%. On the flip side, investor sentiment took a hit after the Sentix investor confidence index slipped from 28.3 to 27.7 in August.

The STOXX added 0.2% on Tuesday with nearly all industrial sectors closing the day with gains. Stocks across Europe ignored disappointing trade numbers from Germany and China, choosing to focus instead on bullish projections for global growth. Travel and leisure stocks suffered the most grievous losses following the release of disappointing earnings results.

A further deterioration in U.S.-North Korea relations weighed on Europe’s stocks on Wednesday. The STOXX 600 closed the day 0.7% lower with nearly all industrial sectors and exchanges closing in the red. The region’s banking index declined by% with Commerzbank and Deutsche Bank DB each losing in excess of 3.5%. Disappointing earnings results led chemicals stocks to decline by 1%.

The STOXX 600 moved 1% lower on Thursday even as geopolitical concerns surrounding North Korea heightened. Earnings results continued to have a huge bearing on market movement even as all of the region’s industrial sectors and exchanges ended the day with losses. Poor economic data led to the FTSE 100 losing 1.4%, marking its worst trading session in four months.

Fresh Tensions surrounding North Korea led to Europe’s stocks suffering their largest weekly reverse for the year on Friday. The STOXX 600 declined by more than 1%, falling to its lowest level in five months even as nearly all its sectors languished in the negative zone. The index lost 2.6% over last week even as the FTSE 100, DAX and CAC 40 each declined in excess of 2.3% over the same period. Basic resources stocks moved more than 2.5% lower even as oil and gas and telecom stocks also suffered heavy losses.

North Korea Fears Drag down Asia’s Stocks

Markets across Asia largely finished in the green on Monday following the release of a bullish U.S. jobs report. Australia’s ASX 200 gained 0.9% with nearly all sectors closing the day with gains. The Nikkei 225 and the Topix each added 0.5% while South Korea’s Kospi advanced 0.1%. The Shanghai Composite recouped early losses to gain 0.5% while the Shenzhen Composite increased by 0.7%.

Benchmark indexes across Asia ended Tuesday mixed even as China released weaker than expected trade data. The Nikkei 225 lost 0.3% while the Kospi slipped 0.2%. The ASX 200 declined by 0.5%, dragged lower by losses incurred by industrials and energy stocks. Both the Shanghai Composite and the Shenzhen Composite moved higher, gaining 0.1% and 0.4%, respectively.

Tensions surrounding North Korea and weaker than expected inflation data from China led the bulk of Asia’s indexes to close in the red on Wednesday. The Nikkei declined by 1.3% while the Kospi lost 1.1%. In contrast, financials surged 0.7% in Australia, helping the benchmark ASX 200 to gain 0.4%. The Shenzhen Composite also recouped early losses to end the day 0.3% higher. However, the Shanghai Composite ended the day 0.2% lower.   

Stocks across Asia suffered losses on Thursday even as geopolitical concerns emanating from North Korea receded somewhat. The Kospi lost 0.4% while the Nikkei 225 slipped by 0.1%. Losses made by financials and energy stocks dragged the ASX 200 0.1% lower. Hong Kong’s Hang Seng index lost 1.1%. Meanwhile, the Shenzhen Composite and the Shanghai Composite declined 0.7% and 0.4%, respectively.

Concerns regarding deteriorating relations between the U.S. and North Korea took center stage once again on Friday. The Kospi lost 1.7%, weighed down by losses incurred by tech and retail stocks. The ASX 200 moved 1.2% lower while the Shanghai Composite and the Shenzhen Composite each lost 1.6%.

Temer Probe Weighs on Brazil Investors, NAFTA Fears Guide Mexico Stocks

Brazil’s benchmark index, the Bovespa, gained 1.1% on Monday, driven primarily by gains in mining and steel stocks. However, market watchers continued to closely follow the corruption investigation against President Michel Temer. Meanwhile, Mexico’s benchmark S&P/BMV IPC index increased 0.2% even as the peso fell to its lowest level in nearly one month on NAFTA related jitters.

On Tuesday, stocks in Brazil surged to their highest level in three months. A jump of 6.5% in shares of leading meatpacker JBS SA, fueled by indications that development bank BNDES was in favor of a change in management, was primarily responsible for the day’s gains.  Consequently, the Bovespa increased by 0.3%.

Deterioration in relations between the U.S. and North Korea dragged Latin American stocks lower on Wednesday. The Bovespa declined 0.5% after a flight for safe haven assets triggered profit taking in shares of JBS SA.

The Bovespa lost 1.2% on Thursday following heightened expectations of a wider budget deficit for this year and 2018. Market watchers now believe that proposed austerity measures will now be delayed. The index gained 0.4% on Friday, buoyed by encouraging corporate news.

Stocks in the News

Novo Nordisk A/S NVO reported second-quarter 2017 earnings of 59 cents per American Depositary Receipt (ADR) beating the Zacks Consensus Estimate of 56 cents by 5.4%. In fact, the reported earnings were in line with the year ago figure. Quarterly revenues were up 1.6% year over year (up 3% in local currency) to $4.23 billion. However, reported revenue figure missed the Zacks Consensus Estimate of $4.29 billion.

For 2017, Zacks Rank #3 (Hold) rated Novo Nordisk expects sales growth (in local currencies) to be in the range of 1% to 3%. The growth is likely to be driven by robust performance for Victoza and Tresiba as well as a contribution from Saxenda and Xultophy. Operating profit is expected to be in the range of -1% to +5%. (Read: Novo Nordisk Beats on Q2 Earnings, Revenues Miss)

SINA Corp.’s SINA second-quarter 2017 non-GAAP earnings of 70 cents per share surged a massive 159.3% from the year-ago quarter while non GAAP net revenue grew 48% to $356.3 million. SINA has a Zacks Rank #5 (Sell) rating.

Advertising revenues moved up 44% year over year to $295.2 million, driven by the momentum of the Weibo segment. Non-advertising (non GAAP) revenues increased 68% year over year to $61.2 million. Revenues from the Weibo WB business surged 72.5% year over year to $253.4 million. (Read: SINA Q2 Earnings and Revenues Surge Y/Y Driven by Weibo)

GOL Linhas Aereas Inteligentes S.A.’s GOL second-quarter 2017 earnings per share of 24 cents per share compared favorably to the Zacks Consensus Estimate of a loss of 60 cents. However, the Zacks Rank #2 (Buy) rated Latin-American carrier’s bottom line contracted 51.02% on a year-over-year basis due to higher expenses on aircraft fuel. Net revenue, comprising of cargo and passenger revenues, came in at $696.2 million (R$2.2 billion), up significantly year over year. While cargo revenues increased 16.7%, passenger revenues also improved 5.3%.

The company reiterated its forecast for 2017, provided in June this year. The company still expects earnings before interest and taxes (EBIT) margin – a measure of the company's earnings ability- in the band of 7% to 9%. The guidance for EBITDA margin still stands in the band of 12% to 14%. (Read: GOL Linhas Q2 Earnings Decline, Revenues Rise Y/Y)

Fresenius Medical Care FMS, the German dialysis provider, announced that it will acquire U.S. home dialysis device maker NxStage Medical, Inc. NXTM for $2 billion. Following this development, shares of NxStage skyrocketed 28% in morning trading on Aug 7.

Fresenius Medical Care will acquire all outstanding shares of NxStage for $30.00 per share, in cash. The merger has already been approved by NxStage’s board. The merger will allow Fresenius Medical Care to strengthen its vertically integrated business. The stock has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Toyota Motor Corporation TM has signed an agreement with the Japanese multinational automaker, Mazda Motor Corporation MZDAY, to set up a new joint venture. Per the deal, the companies will collaborate to build a vehicle manufacturing plant in the U.S. Toyota has a Zacks Rank #3.

Total investment of $1.6 billion will be made to construct the plant with an annual production capacity of around 300,000 vehicles. The hub is expected to start operations in 2021 and provide up to 4,000 jobs. (Read: Toyota Inks Deal With Mazda for Car Plant in the U.S.)

BP p.l.c. BP recently announced that its Lower 48 onshore unit has discovered a natural gas well in the Mancos formation of the San Juan Basin located near the border of Colorado. The company believes that the new find has the potential to become an important source of natural gas for the U.S. market.

Zacks Rank #3 rated BP stated that the discovered well (Northeast Blanco Unit 602 Com 1H) is seven miles south of the Colorado border in New Mexico. The average initial 30-day production rate of the well is 12.9 million cubic feet of gas per day, which has been drilled with a 10,000-foot lateral. It is the highest production level that has been recorded in the region in the last 14 years. (Read: BP Adds Natural Gas Well to its Asset Base in New Mexico)

Performance of Leading Foreign Stocks

The table given below shows the price movement of 10 of the largest stocks listed on indexes worldwide, over the last five days and during the last six months.

 

Ticker

 

Last 5 Day’s Performance

 

6-Month Performance

SNY

+0.2%

+11.8%

E

-1.9%

+2.2%

SAP

-2.4%

+12.9%

IDEXY

-1.6%

+18.3%

BABA

-1.9%

+47.1%

CHL

+6.3%

-1.5%

KEP

-1.1%

+7.2%

TM

-2.2%

-1.8%

ABEV

-0.5%

+11.9%

MELI

-7.9%

+23.1%

Next Week’s Outlook

Given President Trump’s recent comments and subsequent geopolitical events, tensions surrounding North Korea are unlikely to die down in a hurry. Trump has taken a stance which is atypical of the United States’ traditional position on this vexatious issue. With both countries refusing to budge, the prospect of military action seems increasingly real.

In such an event, the demand for safe haven assets is likely to increase further. Also, the impact of more local events will be diminished given the massive proportions that this conflict in the making has assumed. It remains to be seen whether the U.S. opts for a softer approach in the days to come, a move which is likely to go down well with global markets at large.  

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Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report
 
Sina Corporation (SINA): Free Stock Analysis Report
 
Weibo Corporation (WB): Free Stock Analysis Report
 
Novo Nordisk A/S (NVO): Free Stock Analysis Report
 
Toyota Motor Corp Ltd Ord (TM): Free Stock Analysis Report
 
Mazda Motor Corporation (MZDAY): Free Stock Analysis Report
 
Deutsche Bank AG (DB): Free Stock Analysis Report
 
Fresenius Medical Care Corporation (FMS): Free Stock Analysis Report
 
NxStage Medical, Inc. (NXTM): Free Stock Analysis Report
 
BP p.l.c. (BP): Free Stock Analysis Report
 
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