Bourses end flat despite steep fall for Nokia

Nokia fell out of favour with investors on Thursday as the Finnish mobile handset maker’s third quarter earnings fell short of expectations, despite a rise in sales in the period. The stock topped the list of blue-chip fallers with a decline of 3.6 per cent to €15.36.

Analysts said the market had taken fright at news that the average selling price of Nokia’s phones declined sharply.

But Richard Windsor, analyst at Nomura International, said the fall had been overdone.

“We don’t feel this sell-off is at all justified,” he said. “The company is growing very strongly in emerging markets and the outlook for this segment in the fourth quarter is positive.

“We would expect to see the shares rebound strongly in the next few months.”

In contrast, Swedish rival Ericsson rose 1.7 per cent to SKr27.05 after a strong performance by its mobile phone joint venture with Sony led to a modest rise in third-quarter group profits. The company forecast moderate growth in its key markets next year.

The market as whole was flat as investors digested a further barrage of third-quarter results and got little in the way of a lead from Wall Street’s early performance. The FTSE Eurofirst 300 index ended with a loss of just 0.32 points at 1,441.16.

Investors were disappointed by Nestlé’s third-quarter results even though the Swiss food group reported nine-month sales growth of 6.1 per cent, in line with market expectations.

That lagged behind sales growth of more than 9 per cent unveiled by French rival Danone earlier this week.

Stephen Pope, head of equity research at Cantor Fitzgerald Europe, noted that Nestlé shares had enjoyed a decent run lately and had been helped by the company’s emphasis on selling healthier food.

“However, sales forecasts were not encouraging, particularly in Europe,” he said. “They also gave no details on further share buybacks.”

Nestlé shares fell 2.5 per cent to SFr427. Danone gave up 1.6 per cent to €115.

SAP was also undermined by a disappointing outlook statement.

The German software group reported a forecast-beating 17 per cent rise in third-quarter sales as it recovered from an unexpectedly weak second quarter.

But it said it was now unlikely to reach the upper end of its targets for the full year, sending its shares down 3.1 per cent to €159.45.

Despite the poor forecast, Dresdner Kleinwort maintained a “buy” recommendation on the stock with a target price of €210.

“SAP’s shares are still trading at only 23 times our full-year 2007 estimated earnings per share, comfortably below their historic (ex-bubble) trading range of between 25 and 30 times,” said Dresdner analyst Adam Shepherd.

WestLB was less sanguine, however. Keeping a “hold” rating on the stock with a target of €164.60, analyst Jonathan Crozier said: “SAP’s results had something for the bulls and something for the bears.

“Licence revenues and pro-forma earnings before interest and tax were both at the top end of consensus but guidance for each was moderated slightly.

“In our view, only the most enthusiastic bulls could have expected more. Consequently we regard this as neutral news.”

Chipmaker Infineon fell 2.2 per cent to €9.85 after US rival Advanced Micro Devices reported a sharp drop in third-quarter gross margins, although its sales and profits beat expectations.

There was better news from Novartis, the Swiss pharmaceuticals group. Third-quarter net profits rose 12 per cent, more than expected, largely due to strong demand for its heart and cancer treatments. The shares rose 2.2 per cent to SFr75.45.

Julien Dormois, analyst at Bryan Garnier, noted that Novartis shares had experienced a strong rally since hitting a 52-week low in mid-June and were now trading roughly in line with the sector, despite a less risky profile.

“Hence, the current valuation appears unjustified given all the positive leverage anticipated through 2006, and justifies our “buy” recommendation with a target price of SFr82,” he said.

Michelin gained 3.3 per cent to €61.65 after Dresdner Kleinwort raised its price target from €50 to €56, citing the recent stabilisation of raw materials prices.