Stocks in Review: HeidelbergCement AG and LPKF Laser & Electronics AG Were the Week’s Big Winners… But Should You Buy?

Snapshot

Stocks rallied on Thursday on news of a cease-fire between Ukraine and Russian-backed separatists that was brokered by Germany and France. Also on Thursday, Sweden’s central bank took a page from the ECB’s playbook and announced aggressive stimulus action. The markets reacted so positively that even Greek stocks rebounded!

On Monday, we learned that German December seasonally adjusted exports rose 3.4 %, and imports were down 0.8% over November. This beat the consensus estimates of exports up 1%, imports down 0.45%. With all the positive news, it’s no surprise that only two DAX stocks out of 30 were down for the week as of Thursday’s close.

The major indices

As of Thursday’s close, the DAX was up 1.43% for the week to 10,919.65, in record high territory. The other major indices were all up between 1% and 2% as well, with the exception of the SDAX, only up 0.84%, and the TecDAX, up 2.1%.

TOPS for the week

HeidelbergCement AG (ETR:HEI) (FRA:HEI) was up more than 7% for the week as of Thursday’s close, easily the best performance by a DAX company so far this week. The world’s largest producer of sand and gravel was buoyed by a solid earnings report, a reduced debt load, and a positive 2015 prognosis. “In operational terms, 2014 was by far the most successful year for HeidelbergCement since the financial crisis,” said Chief Executive Bernd Scheifele. The company was able to reduce its debt load to below 7 billion euros for the first time since 2007, when it went deep into debt to acquire British building materials company Hanson PLC.

Currently, the HeidelbergCement’s debt has received the highest junk rating from both Moody’s and Fitch, meaning any improvement would bring it back to investment-grade status. Scheifele expects to pay down more debt once the company completes the 1.2 billion euro sale of its brick and roof-tile business to Lone Star Funds. “We will continue with our successful strategy of adding value by means of debt reduction and growth, as well as keep our focus on improving our operating efficiency and margins,” he said in a statement. “Considering the positive outlook for the global economy and our advantageous geographical positioning, we are confident about the future.”

I agree. I think HeidelbergCement will continue to benefit throughout 2015 from its reduced debt load and improved North American and British housing markets.

LPKF Laser & Electronics AG (ETR:LPK) (FRA:LPK) rose more than 14% on Thursday after announcing it had received an order worth 2.5 million euros from a client in China. The order had been initially scheduled for late 2014, but the client postponed. This may be the first in a series of orders: Ingo Bretthauer, LPKF’s CEO, said that he expected the second phase to come in the next few months.

LPKF has had trouble with China in the past. The patent for its Laser Direct Structuring (LDS) system was invalidated in China in 2013, and China’s Supreme People’s Court recently rejected LPKF’s appeal. However, the patent remains in effect in all other major global markets, so if Chinese companies want to sell LDS devices outside of China, they still need LPKF’s approval.

However, even Thursday’s jump does little to alter the stock’s downward trend: its price has been trending steadily downward since January 2014. I’d need to see a bit more evidence of stabilization before I bought in.

This Week’s FLOPS

Henkel AG & Co. KGaA (ETR:HEN3) (FRA:HEN3) was the biggest DAX loser as of Thursday’s close, dropping 1.74% for the week after analysts at Goldman Sachs downgraded the company to “Sell.” Of the eight analysts who currently follow the consumer products company, four have given it a “Buy” rating, two a “Sell” rating, and two a “Hold” rating. So it’s fair to say that analyst opinions as a whole are mixed.

Wire and cable manufacturer LEONI AG (ETR:LEO) (FRA:LEO) dropped 5.95% on Monday on no major news, the largest one-day drop of any HDAX company so far this week. Luckily, on Thursday the company reported a 2% operating profit in the fourth quarter, which was in line with analysts’ expectations, causing the stock to rally somewhat. It’s still down about 1.4% for the week, however.