DE40: Negative sentiment on the European markets continue

• DAX erases early session gains and returns to declines 
• European indexes decline 
• German industrial orders data above expectations 
• Bayer posts higher 2Q24 revenue and raises forecasts 

Sentiment in European markets remains negative. Company results are not in the main focus, as investors are still mostly concerned about a potential recession in the US. After yesterday's drastic declines in equity markets, European indices today traded up at the beginning of the session, but as the hours of trading passed, they returned below the previous session's closing prices. 

Similar sentiment prevailed today on Germany's DAX index, which is currently losing about 0.1%. The index was helped today by a higher-than-forecast reading of industrial orders. Orders in June rose to 3.9% on a m/m basis versus a forecast of a 0.5% increase. The stronger-than-expected industrials is an important signal for the market, as it is the health of German industrial stocks that investors are most worried about for now. 

Among companies from DAX index, Airbus (+2%) is the best performer today. Despite the strong results, Bayer is trading with a slight decline of about 0.7%. Source: Bloomberg Finance L.P.

Most of the major sectors of the DAX index are falling. The exceptions remain the IT (+1.4%) and industrial (+0.4%) sectors. Source: Bloomberg Finance L.P. 

The contract for the German DAX index (DE40) is slightly down and testing support at the 38.2% Fibonacci retracement at 17365 points. Resistance for today's session is set by the SMA 200 at 17540 points. Its breakthrough may open the way to erase the previous days' losses and attempt to break through the level of 18003 points. The contract has been experiencing a dynamic discount for four sessions, returning to the valuation from the end of February. The market's negative bias may be reinforced by the opening of the US stock market, which also promises strong declines in this environment. Source: xStation 

Company news:

•  Bayer (BAYN.DE) has reported results for 2Q24. The company posted revenues of €11.14 billion (flat y/y), halting negative y/y revenue growth for the first time in five quarters. At the same time, the revenue came in 2% above expectations. Adjusted EBITDA remains at the same level as the consensus forecast of €2.11 billion. Thus, the EBITDA margin turned out to be slightly lower than expected. At the EPS level, the company reported EUR 0.94 (vs. EUR -1.9 a year earlier), 11% higher than forecasts. The company's performance was driven primarily by its pharmaceuticals segment, which was bolstered by strong demand for anti-cancer and kidney support drugs. The strong Q2 results led the company to raise its forecasts for the full year 2024, and it now expects revenue growth in the pharmaceuticals segment (0-3%, versus a decline of -4 - 0% previously). Bayer also plans to release two new drugs in the next year. 

FINANCIAL RESULTS 2Q24

• Sales: EU11.14 billion, estimate EU10.88 billion 
  • Pharmaceuticals unit sales EU4.61 billion, estimate EU4.4 billion 
  • Xarelto revenue EU904 million, estimate EU916.3 million 
  • Eylea rev. EU843 million, estimate EU800.4 million 
  • Adalat revenue EU112 million, estimate EU117.7 million 
  • Crop Science unit sales EU4.98 billion, estimate EU4.88 billion 
  • Consumer Health unit sales EU1.46 billion, estimate EU1.45 billion
• Adjusted EBITDA EU2.11 billion, estimate EU2.11 billion 
  • Pharmaceuticals unit adjusted EBITDA EU1.32 billion, estimate EU1.16 billion 
  • Crop Science unit adjusted EBITDA EU524 million, estimate EU778.7 million 
  • Consumer Health unit adjusted EBITDA EU314 million, estimate EU336.7 million 
• Adjusted EBITDA margin 18.9%, estimate 19.4% 
  • Pharmaceuticals adj. EBITDA margin 28.7%, estimate 26.4%
  • Crop Science adjusted EBITDA margin 10.5%, estimate 15.8%
  • Consumer Health adj. EBITDA margin 21.5%, estimate 23.2%
• Ebit EU525 million, estimate EU732 million
  • Pharmaceuticals Ebit EU1.04 billion, estimate EU840.1 million
  • Consumer Health Ebit EU135 million, estimate EU233.3 million
  • Crop Science Ebit loss EU229 million, estimate loss EU230 million
• Free cash flow EU1.27 billion
• Core EPS EU0.94, estimate EU0.84
• Net debt at period end EU36.76 billion, estimate EU36.64 billion

• Zalando (ZAL.DE) released its results for the second quarter of 2024, which were better than forecast. Gross merchandise value (GMV) rose 2.8% to €3.84 billion, slightly exceeding market expectations. Revenues rose 3.4% to €2.64 billion, and adjusted EBIT came in at €171.6 million, well ahead of consensus of €162.1 million. The company reiterated its full-year forecast for 2024, projecting GMV and revenue growth in the 0-5% range and adjusted EBIT between €380 million and €450 million. Significantly, Zalando reported a return to sales growth for the first time since the first quarter of 2023. The number of active customers increased by 300,000 in the last three months, reaching 49.8 million. Analysts reiterate their recommendations and point to the third quarter results as a catalyst to revise the forecast. The market's reaction to the published results was positive - Zalando's shares rose after the announcement, but are now lower after piercing the 50% Fibonacci retracement.

RESULTS FOR Q2 2024

• Gross Merchandise Value (GMV): EUR 3.84 billion, +2.8% YoY, estimates: EUR 3.81 billion
• Revenue: EUR 2.64 billion, +3.4% YoY, estimates: EUR 2.61 billion
• Adjusted EBIT: EUR 171.6 million, +18.5% YoY, estimates: EUR 162.1 million
• Adjusted EBIT margin: 6.5%, +0.8 pp YoY, estimates: 6.35%
• Net profit: EUR 95.7 million, estimates: EUR 90.8 million

Key operational indicators

• Active customers (last 12 months): 49.8 million, -1.3% YoY
• Number of orders: 63.4 million, +0.3% YoY
• Average orders per active customer: 4.9, -3.2% YoY
• Average GMV per active customer: EUR 297.2, +1.3% YoY
• Average basket size: EUR 60.8, +4.6% YoY

Segment results

• B2C revenue: EUR 2.41 billion, +2.8% YoY
• B2B revenue: EUR 233.8 million, +10.3% YoY
• B2C adjusted EBIT: EUR 165.2 million, +27.8% YoY
• B2B adjusted EBIT: EUR 7.1 million, -54.1% YoY
• B2C adjusted EBIT margin: 6.8%, +1.3 pp YoY
• B2B adjusted EBIT margin: 3.1%, -4.3 pp YoY

FORECAST FOR 2024 (maintained)

• GMV and revenue growth: 0% to +5%
• Adjusted EBIT: EUR 380-450 million
• Capital expenditure (CAPEX): EUR 250-350 million
• Negative net working capital

• Mercedes-Benz (MBG.DE) has been granted permission to test Level 4 fully autonomous driving in Beijing. This level is considered a fully autonomous driving technology without human intervention, although the driver can still take control of the vehicle. The permit means the company will be able to test its sensors and systems for the most advanced elements of driving, including parking in busy urban areas, turning and making left turns without supervision, and changing lanes on highways. The company's stock price today remains at a slight loss of approx. -0,2%.