Davy Morning Equity Briefing

Mar 23, 2023

Market Comment

US Treasuries rally as Fed’s hawkish language dialled down

US Treasury markets rallied yesterday (March 22nd) after the Fed’s decision to raise rates by 25bps. Investors focused on signs in the Fed’s statement that the rate tightening cycle is coming to an end, reinforced by Jay Powell’s acknowledgement that the fallout from the collapse of Silicon Valley Bank (SVB) will tighten credit conditions. Markets ignored Powell’s assertion that the Fed does not see rates being cut this year. Options prices now see less than a 50% probability of a further hike in May, with the OIS curve implying rates will fall to 4.1% by end-2023.


Pre-close trading update

C&C expects to deliver EBIT of €84m for FY23, which is €2m below our forecast due to unanticipated costs relating to the recent ERP roll-out. We will leave our FY24 EBIT forecast unchanged. Strong cash generation was evident in the year, with net debt coming in lower than forecast. Dividend will be reinstated post its FY23 results, with further capital returns to be considered in due course. Our model needs to reflect higher interest costs, which will lower our FY23 and FY24 EPS forecasts by c.6% and c.2% respectively. C&C will report FY23 results on May 24th.