Investors take heart from positive growth news from eurozone membersLeading shares have bounced back after two days of decline, helped by positive growth figures from the five biggest members of the eurozone.For once shrugging off worries about Greece’s finances, the FTSE 100 has added 53.01 points to 6986.81 as Germany, France, Italy, the Netherlands and Spain all reported GDP growth in the first three months of the year. But later come figures for Greece and the EU as a whole and, closer to home, the Bank of England inflation report. Meanwhile the unemployment rate fell to 5.5%, its lowest level since July 2008, and average earnings rose to a higher than expected 1.9% in the three months to March. Sterling hit a five month high after the data, on the basis an interest rate rise looks more likely.The strong performance reflected higher demand, lower input costs, and incrementally higher contributions from capital projects and acquisitions (and was despite the Richards Bay shutdown in the first quarter of 2015 (UBS estimated €15m impact) versus no shuts in the first quarter of 2014). On the back of this we lift our 2015 estimated earnings per share by 5% (to around 8% above consensus as of 12 April). We upgraded the share to buy on 24 April reflecting our view that there were forecast upside risks and this upgrade highlights the ongoing potential. Arguably, the international strategy has been led by Engelhardt, who has had ambitions of expanding into the US market. The key driver of profits for the group has come from the UK, and Admiral has built an undisputed UK motor insurance track record since 2004, while the international strategy has required significant investment. No news on whether this changes the group’s international strategy. The shares trade at 16 times 2015 PE versus the sector’s 14.7 times. We maintain our hold. Continue reading...
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