Auto & Transport Roundup: Market Talk

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.

1135 GMT - European defense stocks look set for volatility ahead in a week of intense diplomacy about the Russia-Ukraine war, but the drivers for an upturn in European defense spending over the long run remain intact, analysts at JPMorgan say in a research note. "Regardless of how the next few days play out, we strongly believe that Europe will increase its defence spending over the next decade. Our top near-term picks are the three German defence stocks [Rheinmetall, Hensoldt, Renk] and Babcock," JPMorgan says. The three German companies are likely to set 2030 guidance above consensus expectations at events in November, while Britain's Babcock is expected to highlight growth opportunities in the marine division at a September event, according to JPMorgan. Babcock is up 4.7%, Rheinmetall climbs 2.9%, Renk rises 2.5% and Hensoldt moves 2.2% higher. (adria.calatayud@wsj.com)

1118 GMT - Shares in most European arms makers trade higher, defying broader losses across stock markets, after European leaders vowed to support Ukraine following President Trump's Alaska summit with Russia's Vladimir Putin on Friday. Shares in Germany's Rheinmetall jump 3%, while smaller local peers Renk and Hensoldt are up 2.6% and 2.2%, respectively. Sweden's Saab trades 3.8% higher, Italy's Leonardo is up 3.2%, and the U.K.'s BAE Systems gains 1.6%. "Europe will have to spend a lot more for its own defence. Trump seems inclined to reduce or even end U.S. support for Ukraine," Berenberg's Holger Schmieding says in a research note. (adria.calatayud@wsj.com)

1048 GMT - Despite concerns about overcrowding or heatwaves, tourism to southern Europe is growing at a faster rate than northern Europe, Capital Economcis' Adrian Prettejohn says in a note. That's because since the pandemic tourism has been growing more quickly during the off-peak season, in part driven by fewer adults having children and price spikes in the peak season, he says. A greater proportion of people in early stages of retirement also means they have the time, wealth and mobility to travel. The shift to a more equal distribution could offer a significant boost to GDP in the medium term to countries more reliant on tourism, partly as traditional seasonal summer work gives way to lower unemployment throughout the year, Prettejohn says. (edward.frankl@wsj.com)

0632 GMT - Endurance Technologies looks well-placed to capitalize on the auto sector's growth opportunities, Axis Securities' Sanchit Karekar says in a research report. This view is backed by the Indian auto components manufacturer's strong product portfolio for electric vehicles, healthy order book and strategic capacity expansions, the analyst says. As of June, Endurance Technologies has secured new business orders valued around INR43.29 billion together with cumulative replacement orders of INR7.17 billion in India. The company also plans capital expenditure of INR2.86 billion for its standalone Indian operations across all segments. The brokerage raises the stock's target price to INR2,730.00 from INR2,160.00, but keeps its hold rating as positives are mostly factored in. Shares are 10.0% higher at INR2,864.80. (ronnie.harui@wsj.com)

0533 GMT - Ashok Leyland's earnings margins are likely to keep rising, Nomura analysts say in a research report. Management mentioned that price increases and its mix of non-vehicle products have been margin-supportive, and its air-conditioned cabins have had strong traction, the analysts note. Also, players in the medium- and heavy-sized commercial vehicles space like Ashok Leyland pursue pricing discipline, which should help maintain higher margins. Nomura lifts its FY 2025 and FY 2026 EPS forecasts for the Indian automotive manufacturer by roughly 7.8% each. It raises the stock's target price to INR144.00 from INR138.00 with an unchanged buy rating. Shares are 7.5% higher at INR131.10. (ronnie.harui@wsj.com)

0337 GMT - Hankook Tire & Technology's loss-making affiliate Hanon Systems may have to raise up to KRW1.1 trillion in capital to reduce debt, say Nomura analysts Angela Hong and Won Kang. Hankook's expected capital injection into Hanon could weaken the parent tire maker's balance sheet and its outlook for shareholder returns, they write in a note. Hanon could be required to increase capital by KRW600 billion to KRW1.1 trillion to lower its net debt-to-equity ratio to a 100%-120% target from 134%, they reckon. Hankook is likely to fund over 55% of Hanon's planned capital increase, they add. Hanon posted net losses for a fifth straight quarter in 2Q this year. (kwanwoo.jun@wsj.com)

0109 GMT - Hankook Tire & Technology's unprofitable affiliate Hanon Systems seeking to raise capital via a new rights issue could weigh on the parent tire maker's share price, say Samsung Securities analysts Esther Yim and Hyunzi Kim. Shareholders' discontent with Hankook's acquisition early this year of Hanon, a car-component supplier, could grow, they say. Shareholders could be increasingly disappointed by Hanon's continued net losses and planned share sales, which may weaken Hankook's capability to boost shareholder returns, they note. Higher U.S. tariffs are also weighing on Hankook, which makes most of its tires in South Korea and Indonesia and ships them to the U.S. for sales, they add. (kwanwoo.jun@wsj.com)

0049 GMT - Another disappointment in Aurizon's bulk business will be a concern, according to Citi analyst Samuel Seow. The miss in bulk puts more pressure on Aurizon to realize value from its network business, as the company undertakes an ownership review, he says in a note. No update on the network ownership review is provided, Seow notes. "However, interestingly, AZJ changing revenue recognition for the segment... presumably to smooth revenue/earnings and potentially increase the attractiveness of the asset," he says. Citi has a neutral rating and A$3.25 target on Aurizon. The stock is up 0.9% at A$3.30. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0024 GMT - Australia rail-freight company Aurizon misses dividend expectations in an otherwise in-line earnings result, RBC Capital Markets says in a note. Consensus expectations were for a final dividend of 6.9 Australian cents a share, versus the actual 6.5 Australian cent payout. Aurizon will buy back shares, however, the broker notes. RBC has a sector perform rating and A$3.20 target on Aurizon. The stock is up 1.2% at A$3.31. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)