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Auto & Transport Roundup: Market Talk

12 May 2018 8:20 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.

2031 GMT - A freshly-minted aviation pact between the US and the UAE leaves the status quo intact, according to people who've viewed the text, allowing Emirates to maintain its two fifth-freedom flights. The airline and labor-backed group who've campaigned against alleged subsidies to Middle East carriers welcomes the accord. A bigger test will be whether it emboldens US carriers to expand their handful of direct India flights, a market the Gulf carriers have come to dominate.(doug.cameron@wsj.com)

1642 GMT - Looming deadlines for the US, Canada and Mexico to reach a deal on Nafta is on the minds of livestock traders, who push prices for cattle and hogs sharply lower. CME June lean hog futures fall 3% to 75 cents a pound, while June live cattle slide 1.1% to $1.064 a pound. House Speaker Paul Ryan says he needs a deal by next Thursday in order to consider it in the House this year, which is prompting negotiators to focus their efforts on a scaled-back, "skinny" agreement centered on the auto industry for the time being. If a deal isn't reached in time, traders are wagering the likelihood of a US exit will increase. The cattle and hog industries derive a huge portion of demand from their North American neighbors, Mexico in particular being the largest buyer of US pork. (benjamin.parkin@wsj.com; @b_parkyn)

1528 GMT - Avianca CEO Hernán Rincón says partnership talks with United are in the "final stages," admitting that the airline underestimated the complexity of the process. Avianca also in talks to defer some aircraft deliveries due in 2020-2022, which it said would save $2B, though it didn't identify the aircraft involved. It has orders for dozens of Airbus narrowbodies and four more Boeing 787s. (doug.cameron@wsj.com; @dougcameron)

1421 GMT - Spirit Airlines plans to have wifi installed on most of its fleet by next summer, and will use dynamic pricing to flex the cost based on the route and demand. Spirit President Ted Christie says wifi fees will be included in its targeted $55 in ancillary fees from each passenger. (doug.cameron@wsj.com; @dougcameron)

1414 GMT - The approximately 30% rise in the price of Actividades de Construccion y Servicios shares since March has led CFRA analysts to downgrade the company to buy from strong buy. "We remain positive on ACS due to its exposure to North America and Asia-Pacific, strong balance sheet and the potentially higher dividend from the proposed acquisition of Abertis, which is still subject to Spanish government approval," CFRA says, raising its target price for ACS shares to EUR42 from EUR40. ACS shares trade up 1% at EUR36.48. (anthony.shevlin@dowjones.com)

1144 GMT - Things should be looking good for easyJet when the U.K. budget airline reports half-year results on May 15, though costs will be in focus, says Hargreaves Lansdown. The brokerage notes that in an industry where competition makes raising prices difficult, cost control could prove vital to profit growth and long-term viability. "Overall it's costs we'll be looking at most closely in next week's results," says HL's Nicholas Hyett. "Fuel costs are difficult to impossible for easyJet to control, but non-fuel expenses have stubbornly refused to fall in recent years. These costs are expected to rise again by 1% this year but given recent progress rivals such as IAG have made, we'd hope for some positive longer-term noises." (philip.waller@wsj.com)

1024 GMT - Pirelli's net operating cash flow could triple by 2020, says UBS analyst David Lesne. "On a cumulative basis, we forecast Pirelli will generate close to 25% of its market cap in cash by 2020," he says. The Italian auto supplier is scheduled to report first-quarter results on May 14. The analyst expects revenue to have stayed almost flat in the quarter, down 0.4% on year to EUR1.33 billion and a net debt position of EUR3.68 billion with higher earnings. Pirelli has better control over pricing than peers, and will likely outperform its competitors in product pricing and mix, he notes. (Max.Bernhard@dowjones.com; @mxbernhard)

0945 GMT - BBA Aviation's divisions show mixed trends, as flight support continues to outperform its market and aftermarket services disappointed with weak performance, Liberum says. Group revenue rose 2.9% on a like-for-like basis in the first four months of the year, with comparable revenue at its Signature flight-support business up 5.5% and revenue at the aftermarket segment down 3.8%. According to Liberum, the aftermarket weakness should be attributed to BBA's subsidiary Ontic, which was hit by timing issues. A good order book for the second half at Ontic should give a degree of confidence on BBA's full-year outlook, the investment bank says. Shares are up 0.7%. (adria.calatayudvaello@dowjones.com)

(END) Dow Jones Newswires

May 12, 2018 04:20 ET (08:20 GMT)

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