Europe’s Stocks to Watch: Adidas, RWE, Tate & Lyle

September 20, 2013 by  
Filed under Solar Energy Tips

Adidas AG (ADS.XE) is firmly in focus Friday, with its shares dropping 4.5%, after lowering its full-year guidance late Thursday, citing the relative strength of the euro.

Adidas now predicts a net profit of €820 million ($1.11 billion) to €850 million for 2013, down from an earlier €890 million to €920 million forecast. The management now expects a low-single-digit currency-neutral sales increase, after having earlier forecast a low-to-mid-single digit increase.

The German sportswear maker has in recent years managed to narrow the once formidable gap between it and Nike Inc (NKE)  through product launches and a swath of acquisitions. But a stronger euro, which reduces the value of sales made in dollars and other currencies, has cut into earnings outside struggling Western Europe.

“Third-quarter weakness was already expected, albeit not to this extent,” said J.P. Morgan Cazenove. The market will “need to get a better understanding of such weakness and the future prospects for the company at the time of the full third-quarter results release in November, before seeing further stock strength,” the U.S. bank added.

Shares in RWE AG (RWE.XE) have dropped 3.2% after it announced plans late Thursday to wring out more savings and cut its dividend.

RWE, one of Europe’s top five power and gas companies and Germany’s largest electricity producer by output capacity, said that deteriorated earnings prospects at its conventional power-generation business have forced it to cut its dividend for this year and beyond.

The German utility announced in August it would shut down around 6% of its total power-generation capacity as a drop in electricity demand due to the recession and competition from renewable energy hit profit.

Shares in Tate Lyle PLC (TATE.LN) dropped 2.7% Friday, weighed by the decision of Swiss banking giant Credit Suisse to downgrade its recommendation on the U.K.-based company to ‘neutral’ from ‘outperform.’

Credit Suisse cites a number of concerns over the short term for its decision, including worries about price deflation in Sucralose, the selling price of sugar in Europe and the impact this has on the price of sweetners, but “the greatest concern we have that tips the balance of our rating is the Mexican government’s proposal to tax soft drinks,” adding this would lower demand for one of Tate Lyle’s key products, high fructose corn syrup.

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