Not a lot of surprises expected (page 3 of 3)

We expect Total to outperform when further upgrades of the sector come through. Total ended the week 5.6% higher. Total's 2Q results were broadly in line with consensus estimates.

Whereas higher oil and gas prices had a positive impact, the stronger Euro offset some of this increase. Despite lacking exposure to rallying US gas prices, clean net income was up 42% in USD versus an average of 46%. Oil production grew by 5% and the rate was also confirmed for the full year, which reflects faster growth than some of its competitors such as BP and Shell.

ROCE at 18.9% is top quartile, cash generation remained strong and share buy-back is ongoing. With an indicative dividend yield of over 3% Total fits nicely into both our 'energy' and 'dividend yield' themes. We reiterate our buy for an investor with a long-term view.

Our other energy cum dividend yield play is ENI (ENI IM; EUR 13.438). Solid production growth of 6% makes it one of the fastest growing oil companies. Indicative dividend yield is around 5.6% and valuations remain attractive on a PE03 of 10.4x.

Adidas-Salomon (ADS GY; EUR 70.39) reported solid results. Sales figures came in slightly below expectations however 2Q net income rose 27% yoy. Gross margins remained stable at 44.8%. A further positive was also that the earnings growth forecast was maintained at 10-15% for the full year and for currency adjusted sales at 5%.

After Nike pointed to weakness from US retailers in the 1Q and Adidas-Salomon announced a 10-15% decline in end June US backlogs at the Munich ISPO trade fair, we believe the 12% decline in North American order backlog was already priced in by the market.

Whereas we consider this a temporary market weakness and not company specific, we would expect the solid sales in Asia and the stronger than expected sales and margins in Europe to offset it on an overall basis. Europe order backlog increased by 10% and the company sees European sales increasing more than expected for the full year.

With the strong Euro the company is losing on the translation effect, however in the mid to long-term there is a counterbalancing element as the cost of their mainly Asian production is expected to go down. We reiterate our buy.