Stocks to watch: Smurfit, RBS, Merlin, Electrolux, Jupiter – Financial Times

Three generations of Smurfits dating back to the 1930s have led Europe’s largest cardboard box maker © Bloomberg

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Here’s what’s happening

Box maker Smurfit Kappa led the FTSE 100 fallers. Overnight, International Paper chief executive Mark Sutton stressed that, after his company had delivered poorly received quarterly results, buying Smurfit was not its only option. The US group has had two bid approaches for Smurfit rejected.

International Paper was “a great free cash flow story and returning that cash to shareholders is better than acquiring Smurfit”, said RBC Capital Markets. “We remain hopeful that International Paper has the discipline to stop bidding against itself and look at the other options available to it.”

Royal Bank of Scotland faded after its first-quarter earnings showed higher than expected operating costs and below-consensus pre-provision operating profit. The underlying earnings miss was offset by lower impairments and falling expenses from litigation and restructuring.

Merlin Entertainments rallied after an in-line trading update from the Alton Towers owner. The group said its performance remained on track with the full-year guidance given in March, which was for 3 per cent like-for-like sales growth at its theme parks and 1 to 2 per cent sales declines at Midway visitor attractions such as Madame Tussauds and Sea Life.

“We spoke to the company who conceded that London remains significantly down (lapping tough comparisons), and that the early Easter is unhelpful for the outdoor parks, but they had planned for this in guidance, and they are not incrementally more cautious,” said Morgan Stanley. “There was a fairly high level of nervousness running into these numbers but this is now the group’s second consecutive update where forecasts have been held, and we therefore think the statement should be seen as reassuring.”

Electrolux led the Stoxx 600 fallers after its quarterly earnings missed consensus forecasts by about 11 per cent, with North America and Latin America the main problems. The appliance maker also tempered full-year guidance to reflect a strengthening headwind from raw materials and currency exchange effects.

“Guidance on market outlook is unchanged for 2018 for all regions but this will not be today’s focus,” said Citigroup. “While the increased raw material headwind guidance was somewhat expected, the incremental foreign exchange headwind represents a circa 8 per cent drag to consensus ebit.”

Sellside Stories

● Barclays upgraded Ashmore to “overweight” and cut Jupiter to “underweight” in a sector review of the European asset managers.

This year has seen retail investors switching out of UK equity income into global and emerging markets equity, where Ashmore is a bellwether. Yet Ashmore is trading at just 13.5 times 2019 ex-cash earnings for improving flow momentum and 4 per cent yield, said Barclays. On Jupiter, the broker said: “We see further downside given slowing flow momentum, mostly driven by the Dynamic Bond fund, which has performed poorly in 2018 year to date, and concerns over medium-term positioning and revenue margin pressure.”

● In brief: Investec upgraded Vesuvius to “buy” and downgraded Hunting to “hold”; Straumann upgraded to “buy” and Kinnevik downgraded to “hold” at Kepler Cheuvreux; Goldman Sachs downgraded Ahold Delhaize to “neutral”; JPMorgan cut Kion to “neutral”; Goldman Sachs cut TeleColumbus to “neutral”. Berenberg started coverage of Midwich Group with “buy”, Nordex with “hold” and Vestas with “sell”.

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