Companies with a good fundamental recommendation do not necessarily also receive a good rating on ESG (environmental, social and good governance) aspects. In fact, a quick look at the league Ibex elEconomista which combines recommendations for fundamental, FactSet and Bloomberg – Check that the highest values that occupy the most backward of the Ranking ESG are located precisely elEconomista , such as the steel companies ArcelorMittal and Acerinox, Grifols or IAG. See more news about sustainability in the Economist Sustainable Investment and ESG.
With the aim of pointing out those values that come out well in both photos (that of the fundamental criteria, and that of the sustainability aspects), we have combined both rankings: the Ibex League on the one hand (see here the Ibex League) , and the ESG ranking of elEconomista for another.
This latest ranking, which elEconomista launched on May 15, classifies Ibex companies based on the sustainability ratings given by 5 suppliers: S&P Global, Sustainalytics (Morningstar company), ISS (which only rates governance) , CDP (scoring commitment to climate change) and Bloomberg, of which the ESG Disclosure Score has been taken into account, which measures the disclosure of extra-financial data.
In this global picture, which combines financial and non-financial matters, those that come out the most favored are Endesa , Ferrovial , Inditex , ACS , Indra and Iberdrola . We analyze the first three.
Ibex League rank: 7
Position in the ESG elEconomista Ranking: 1
It is the leading company in the ESG Ranking of elEconomista , and at the same time it is among the top 10 of the Ibex League, in which it occupies the seventh position. The power company directed by José Bogas has accelerated its decarbonisation process and is fully focused on renewables, which attracts the attention of investors with a sustainable bias. He explained this recently in an interview with the Economist Ángel Fraile, director of Sustainability Planning and stakeholder management at the utility:
“Endesa has at least 212 socially responsible foreign institutional investors, almost double the number it had in 2015”, who already represent 14.9% of the share capital and 50% of the free float. The group does well in the main sustainability rankings.
With regard to financial aspects, the stock sports a buy recommendation by the consensus that FactSet has collected since last February. The company obtained a profit of close to 1,400 million euros in 2020, and the market consensus collected by FactSet foresees that this figure will grow by 24% this year, to 1,725 million, which will become 1,755 in 2022.
Regarding its behavior on the trading floor, in a year marked by the rotation of portfolios from defensive stocks to cyclicals, Endesa is one of the most bearish companies on the Ibex 35. Its shares have lost approximately 4.9% in what we have been in 2021.
This drop increases the profitability of its dividends, which FactSet places at 6% with its payments on account for this year, and 5.3% with those of the next year. This drop in profitability has to do with the cut that the company plans to make in its payout (percentage of the profit destined to remunerate shareholders), which will leave 70% (this dividend is mostly pocketed by the Italian Enel, owner of 70% of the capital).
The objective of this cut in remuneration is none other than to increase its weight in renewable energies, an area in which it has focused its growth. Despite the fact that coal still represents 13% of its installed capacity, the company has “a decided commitment to decarbonisation,” explained Ángel Fraile.
“This has to do with betting heavily on renewables and closing coal. In each industrial plan we are increasing the level of reduction and shortening the deadlines [for that decarbonization]. In 2020 we were talking about that by 2030 we would achieve a reduction of 70% of CO2 emissions. In this year, we are already talking about 80%. From 2021, coal will have a residual presence, and it will be closed in 2027, “he said.
The decline that its stock price has experienced, on the other hand, has left the stock trading with a PER (number of times the price collects the profit) of 13.3 times for its 2021 earnings, and 13 for those of 2022. It is listed cheaper than the Ibex (whose ratios are about 15 and about 14 times, respectively, for each of those two years).
Ibex League rank: 13
Position in the ESG elEconomista Ranking: 3
Ferrovial is the third highest-scoring company in the entire Ibex in elEconomista’s ESG Ranking , in which it is only surpassed by Endesa and Inditex. The Spanish infrastructure group claims to be one of the longest-lived members of the Dow Jones Sustainability Index, in which it has now been one of the four most sustainable firms in the construction and engineering sector for 19 consecutive years.
Being part of this indicator has “served as a guide” for the company “to know where we have to strengthen ourselves,” says Cristina Moral, Ferrovial’s Director of Corporate Responsibility and Reporting . It refers to the different evaluations carried out by S&P Global in this selection. On the other hand, the group has linked its cost of financing to its behavior in ESG, and has signed with a group of banks that the cost of one of its lines of credit is lower if it reaches the highest rating in the Dow index Jones.
If we look at the fundamental aspects, the recommendation issued by the consensus analysts that FactSet collects for the company is a keep, and has experienced a notable improvement in 2021, the year of recovery and the return of the cycle, compared to 2020.
Experts predict that this year its profit will still be negative (it would lose 57 million euros, according to estimates, after throwing red numbers by 400 in 2020). In 2022 it would be able to return to positive net profits, with 212 million euros, which, if the forecasts are met, will grow by around 80%, to 389, in 2022.
Regarding its evolution on the stock market, Ferrovial has recorded 8.8% so far this year, and at the beginning of July it reached its annual maximum, at 25.65 euros. Since then, its price has dropped by 4%.
The company has seen how, in the second quarter of the year, its main asset, Canada’s 407 ETR highway, has kept the dividend payment to its shareholders suspended, even despite registering a strong boost in traffic compared to the same period last year, a decision that responds to the financial prudence of the Toronto toll road concessionaire’s board of directors.
The 407 ETR is the first dividend generator for Ferrovial, which received 160 million from it in 2020. With this, there are now four consecutive quarters without a dividend from 407 International, the operator of the highway of which Ferrovial is the second shareholder (with 43% of the capital).
On the other hand, the company has made headlines this week by being able to position itself in the group of seven large Spanish construction companies – together with ACS, Acciona, FCC, Sacyr, OHLA and Grupo San José – that appear on the list prepared by Deloitte that brings together to the 100 largest companies in the sector worldwide by turnover.
In this ranking, Ferrovial ranks 42nd, with revenues of 6,100 million euros. Only exceeded, among the Spanish, ACS, with 34,000 million euros, and Acciona, with 6,300).
Ibex League rank: 19
Position in the ESG elEconomista Ranking: 2
Although it has achieved it only in four counted days of 2021, Inditex has managed to touch this year a level to which it has not appeared since the end of 2019: the 100,000 million capitalization, a psychological barrier that briefly surpassed in the middle of last May and , later, at the beginning of June.
To date, its market value is 10% below, on the edge of 90,000 million, but it continues to be, by far, the largest company on the Ibex 35 (the second, Iberdrola, is worth 25,000 million less). So far this year, it has risen more than the benchmark index, 11.4%.
The textile group occupies the second position in the ESG ranking of elEconomista , a position that must be understood from the basis that the textile industry is, after petrochemicals, the second most polluting in the world.
For this reason, it is worthwhile that organizations such as Greenpeace have highlighted the environmental policies of the Galician group as leaders within the so-called Detox Commitment : it is about achieving zero discharge of polluting waste, a category in which Inditex has set a trend in the industry, not only because it plans to achieve this by 2023, but also because it has developed a guide that analyzes 23,000 chemical substances that are used to manufacture garments and that serves as a benchmark for other large companies in the sector.
A couple of weeks ago, the company held its General Shareholders’ Meeting and announced that it is advancing its goal of zero net emissions from 2050 to 2040. It plans to use 100% renewable energies already in 2022, compared to the 80% previously set; and has anticipated its goal of using more sustainable cotton from 2025 to 2023.
With a maintenance by the market consensus that FactSet collects, the experts predict that Inditex will more than triple its 2020 profit this year: it will obtain, according to the estimates of the same consensus, about 3,500 million, and about 4,000 in 2022.
The company has turned its business to the Internet. By the end of 2020, the group’s online revenue had soared 77%, tripling the sector’s average growth, which stood at 22%. “We never wanted to do an independent business on the Internet. However, with sales of 6.6 billion euros last year, we are world leaders in online fashion ,” Pablo Isla, president of the group, told the Financial Times just a few days ago .