DE40: UBS and Zalando boost optimism on European stock markets

• European indices continue upward wave
• German DAX breaks above key resistance zone
• Zalando and UBS quarterly results

Overall market situation:

Almost all indices traded on the Old Continent during Tuesday's session are glowing green, illustrating the prolongation of optimism among investors. Germany's DAX is currently gaining nearly 0.69%, France's CAC40 is adding 0.32% and Spain's IBEX 35 is adding 0.76%. Britain's FTSE 100, meanwhile, is adding more than 1.05%. On the other hand, however, U.S. index futures are not showing as much buying momentum, which may in part be due to a rebound in the USD market. 

European companies traded during Tuesday's trading session are currently showing clear gains. Source: xStation 5

The German benchmark DE40 is recording 0.47% gains during today's session. What's more, the wave of growth with its range broke through the key barrier of 18,430 points, where we can see a double peak formation. Breaking through this zone could theoretically create the ground for DE40, to test the historical peaks near 18,800 points. In a slightly broader perspective, the index has been continuously moving in an uptrend since the first half of November 2023 (as evidenced by the exponential moving averages). For the moment, it seems that the most important support zone of the uptrend is the 50-day moving average (blue curve on the chart). Source: xStation 5

News:

The attention of investors in Europe today is focused on the results of Zalando and UBS. Below you will find the detailed information included in the quarterly reports:

UBS 

UBS Group AG (UBSG.CH) returned to profit after two loss-making quarters amid satisfactory results from its wealth management division as well as its investment bank. The units contributed to sustained progress in the integration of Credit Suisse after its emergency takeover last year. 

Moreover, investors were pleased by management's comments on the share repurchase program. The Swiss government recently unveiled plans to increase capital requirements for banks, raising concerns about whether they would affect UBS's ability to reward shareholders. However, UBS executives said the bank is sticking to its repurchase plans for 2024, 2025 and 2026 (a $1 billion share buyback this year).

FIRST QUARTER RESULTS

• Net income $1.76 billion, estimates $598.3 million
• Total revenue $12.74 billion, +46% y/y, $11.86 billion estimate
• Net interest income $1.94 billion, +40% y/y, $2.23 billion forecast
• Net fee and commission income $6.49 billion, +41% y/y, $6.24 billion estimate
• Operating expenses $10.26 billion, +42% y/y, $10.75 billion estimate
• Profit before tax $2.38 billion, estimate $1.16 billion
• Profit before tax from Wealth Management division $1.10 billion, -9.1% y/y, estimate $1.13 billion
• Pre-tax profit from Investment Bank division $555 million, +13% y/y, estimate $397.7 million
• Pre-tax profit from Asset Management division $111 million, +17% y/y, $143.2 million estimate
• EPS 52 cents vs. 32 cents y/y, 18 cents estimate
• Common equity Tier 1 ratio 14.8% vs. 14.4% q/q, 14.4% estimate
• Cost-to-income ratio 80.5% vs. 105.7% q/q, estimate 85.6%
• Return on equity +9% vs. +8.1% y/y, +3% estimate
• Total Wealth Management revenue $6.14 billion, +28% y/y, estimates $5.89 billion
• Total investment bank revenue $2.75 billion, +16% y/y, $2.46 billion estimate

Other noteworthy comments:

• UBS aims to achieve another $1.5 billion in gross cost savings by the end of 2024
• UBS forecasts $1.3 billion in expenses related to the integration of UBS and CS in Q2
• JP Morgan sees opportunity for 6-9% earnings growth

The Swiss bank's shares gain nearly 10% after the release of the results. Source: xStation 5

Zalando

Zalando (ZAL.DE) shares are up 7.5% after the company announced an increase in adjusted EBIT and the buyback of a €100 million 2025 convertible bond. Moreover, the company reaffirmed its forecasts for 2024. Analysts at Morgan Stanley and Citi indicate that in the medium term, investors will pay a lot of attention to the company's margins, which performed in line with expectations, but recovered significantly year-on-year. 

FIRST QUARTER RESULTS

• Adjusted operating profit €28.3 million vs. loss of €0.7 million y/y, estimates €30.1 million 
• Adjusted Ebit margin 1.3% vs. 0% y/y, estimates 1.58%
• Net loss of €8.9 million, -77% y/y, estimated loss of €7.94 million
• Gross merchandise volume €3.27 billion, +1.3% y/y, estimate €3.22 billion
• Gross merchandise volume +1.3% vs. +2.4% y/y
• Revenue €2.24 billion, -0.6% y/y, estimates €2.29 billion

ANNUAL FORECAST (confirmed)

• Company still sees adjusted Ebit of €380 million to €450 million, estimates €419.6 million
• Still expects revenue of 0% to +5%
• Still expects gross merchandise value (GMV) of 0% to +5%

Source: xStation 5