Oil on track for roughly 20% monthly gain as crude eases
Magna International reported second-quarter results, and TD Cowen’s Brian Morrison said in a report the results “reinforce Magna’s margin improvement story with adjusted EBIT margin expanding y/y to 6.2% despite lower y/y global light vehicle production.” Sales increased 3% to $10.98 billion, which Morrison attributed to “anticipated benefit of FX y/y and new program launches, partially offset by lower global production y/y.” He wrote that along with strong free cash flow, he sees “upside potential to consensus and the applied multiple.”
Ferrari’s second-quarter earnings exceeded expectations by 5%, according to Deutsche Bank analyst Nicolai Kempf. Kempf said the beat was driven by the F80 supercar rollout and stronger-than-expected personalization revenue. While management raised full-year guidance, Kempf said the upgrade was “broadly in line with consensus expectations,” limiting the scope for estimate revisions and “likely weighing slightly on sentiment.” He described the implied second-half EBIT margin of around 28.9% as cautious given the F80 ramp-up and the 296 Speciale family, compared with a 30.5% margin in the first half. “As a result, we remain positive on the story and see scope for another guidance upgrade alongside Q3 results,” Kempf wrote. Ferrari shares rose 1.1%.
Berenberg analysts said Renault had a solid first half but that the strong EBIT and free cash flow beat should be “viewed with caution” because the results were supported by what the analysts described as “lower-quality items.” These included higher research and development capitalization that helped automotive margins and a €300 million partner prepayment that flattered free cash flow, the analysts wrote. They said Renault remains insulated from tariffs, capacity concerns, and exposure to the domestic Chinese market, but rising competition from Chinese manufacturers in Europe is putting “structural pressure on margins.” “In this context, we believe that Renault is unlikely to re-rate until its margins stabilize or rebound, which may not occur in the near term,” they wrote. Renault shares fell 0.8%.
J.P. Morgan analysts said IAG’s costs were better than expected in its first-half and second-quarter earnings and that the group’s outlook “looks robust, especially for long-haul markets.” They noted slightly lower pricing performance in the second quarter than the buy side had expected, though free cash flow generation and margin performance remain intact. IAG shares fell 1.7% to 431.20 pence.
Oil prices fell in early trading but remained on track for a monthly surge of around 20%. Front-month Brent crude dropped 1.1% to $88.09 a barrel, while WTI fell 1.4% to $82.42 a barrel. Ship-tracking data pointed to a modest increase in tanker traffic through the Strait of Hormuz, according to analysts, and Saudi Arabia announced plans for a multinational maritime defense coalition aimed at protecting international shipping. A drone strike at Egypt’s Damietta port raised fresh concerns over Suez Canal shipping.
“The U.S. and Iran engage in intermittent military exchanges but stop short of a return to high-intensity warfare,” BMI analysts said. “This sets the stage for volatile price movements over the coming weeks and months, with a shaky diplomatic track and volatile conditions on the ground driving sudden and extreme shifts in market fundamentals and risk premia.”