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Auto & Transport Roundup: Market Talk

11 Nov 2017 9:20 am

The latest Market Talks covering the Auto and Transport sector. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

2242 GMT {Dow Jones]--One of Wall Street's biggest bears on Fiat Chrysler Automobiles' stock capitulated Friday, when Citi dropped its "sell" recommendation in favor of "neutral" in its latest report on the auto maker. "Our sell rating of FCA has been a disaster, at least since [President] Trump got elected," the brokerage said. Investors have bid up the company's shares amid a brighter outlook for U.S. demand and expectations for softer fuel-economy standards, it said. The stock may see further gains as the company launches several new models and Chief Executive Sergio Marchionne, who owns millions of FCA shares, prepares to depart in early 2019. "The next 12 months [are] critical for the CEO's legacy and potentially his personal wealth too," the report said. (chester.dawson@wsj.com; @DecodeTheFirm)

1518 GMT - Island Air, a 37-year-old carrier that flies turboprop planes among Hawaii's islands and is the state's No. 2 airline, said it will shut down at the end of Friday, just weeks after it filed for bankruptcy-court protection in a dispute with its aircraft lessors. The carrier, which has more than 400 employees, said it was unable to locate new investors or lenders to fund its reorganization. The state's dominant interisland operator, Hawaiian Airlines, said it will offer standby seats based on availability to Island Air ticket holders for the next week and offer special $71 one-way fares for those who need certainty. Hawaiian Holdings shares jumped 8.9% to $35.77. (susan.carey@wsj.com)

1314 GMT - The Big 3 are more disciplined about the quality and quantity of cars they sell to fleet buyers, said Kathryn Marinello, CEO of Hertz, on a 3Q earnings call. She said GM, Ford and Fiat Chrysler have recently been selling better trim levels to fleet buyers at a more reasonable price. "We're good partners," Marinello said. "We try to buy cars that are better trimmed out and try to be smart about how we sell them. I think we're doing our fair share to keep residual values up." She said Hertz has greatly increased the amount of SUVs they have in the fleet to match customer demand. (adrienne.roberts@wsj.com; @AdrRoberts)

1218 GMT - Teekay Offshore Partners' credit profile strengthened significantly in 3Q, thanks to a deal with Brookfield Business Partners that involved an injection of $610 million into Teekay, Danske Bank says. But the bank keeps its marketweight recommendation on Teekay's Norwegian krone-denominated floating-rate note maturing in early 2019. It sees limited potential for further gains, as the improved credit profile is already reflected in the note's price, which approaches par in November. (tasos.vossos@wsj.com; @tasosvos)

1114 GMT - Wizz Air's earnings momentum has slowed after its many profit guidance increases during the year, UBS says. The airline has increased its fiscal 2018 net-profit guidance to between EUR265 million and EUR280 million, at the top end of the guidance, from its initial range of EUR250 million to EUR270 million. UBS lowers its 2019 earnings-per-share estimate by 4% to 2.73 pence due to expected increases in fuel prices. UBS downgrades Wizz Air to neutral from buy and lowers the target price to 3,350 pence from 3,000 pence. Shares are up 42 pence, or 1.4%, to 3,145 pence.


1008 GMT - Pendragon PLC's profit warning, which comes after robust interim trading results, took investment bank Jefferies by surprise, prompting its analysts to shave 30 pence from target price estimates for the auto retailer, and downgrade its rating to hold from buy. Jefferies says that the swell of new cars coming back to the market will soon apply underlying pressure on vehicle prices, which could impact margins further. Jefferies agrees that Pendragon's review of premium car brands is sensible, but says that the move elevates risk as ending franchise agreements will bring earnings dilution. Shares at 0956 GMT unchanged at 24 pence.

(oliver.griffin@dowjones.com; @OliGGriffin)

0946 GMT - Times of "Tesla bashing" are clearly over as European car makers understand and accept the industry's radical shift to electric vehicles, say Evercore ISI analysts after an industry congress this week. Car makers see European and Chinese emissions regulations as a major challenge which can only be addressed with significant electrification, the analysts say. "What the industry is still struggling with is giving clear answers on profitable and attractive business models," the analysts note. (Max.Bernhard@dowjones.com; @mxbernhard)

0942 GMT - The B-word has started popping up in the euro corporate bond market, with BayernLB credit strategist Miraji Othman saying in a note that "Spreads enter bubble territory." He adds that the curves of various names eligible for European Central Bank purchases, such as German carmaker BMW, trade at negative asset swap spreads. Despite their latest pick-up, asset swap spreads on euro corporate bonds trade around their tightest level since 2007, according to ICE BofaML indexes. (tasos.vossos@wsj.com; @tasosvos)

0920 GMT - Continental should benefit from new European Union emissions regulations which put pressure on car makers to switch to cleaner tech, say LBBW analysts. The German auto-parts supplier's third-quarter revenue growth was driven by strong demand for auto electronics, sensors and software products, they say. As car companies race to meet emissions standards and face the industry's shift to electric vehicles, the analysts expect demand in this segment to grow heavily. On Wednesday, the EU proposed to cut carbon-dioxide emissions from cars and vans by 30% until 2030. Continental shares trade up 0.3% at EUR216.45. (Max.Bernhard@dowjones.com; @mxbernhard)

(END) Dow Jones Newswires

November 11, 2017 04:20 ET (09:20 GMT)

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