What to expect from companies announcing results week commencing 30 April 2018.
Companies reporting w/c 30 April
Graham Spooner, Investment Research Analyst at The Share Centre, gives his thoughts on what to expect from companies announcing results week commencing 30 April 2018.
WPP (Q1 trading results)
With the share price languishing close to a 5-year low and the recent loss of its high profile CEO, you will be feeling rather nervous ahead of the latest trading update. Management have already stated that they will be concentrating on growth and not a break-up. There has been growing pressure on advertising spend, especially from large consumer groups. It will be too early for announcing a new strategy, but any comments regarding the year ahead will be worth noting.
We currently list WPP as a BUY
BP (Q1 earnings)
With much better average prices of crude oil during the first quarter compared to Q4 and the same period last year, you would expect this along with improved production figures following much improved revenue figures. Management did indicate that improved production experienced in 2017 could follow through into this year; and with large integrated oil giants getting more control of costs, this should result in underlying earnings enjoying a big improvement too. The big question is whether the improving conditions on the energy market will give companies more confidence to invest in large scale infrastructure project again, indications are that this is so but tentatively.
We currently list BP as a BUY
Direct Line Insurance Group (Q1 trading results)
The company owns the Churchill and Privilege insurance brands but has also seen good growth in its own brand policies recently. The market will be looking to see if that has continued into the new year, especially focusing on the motor insurance business which has been a source of growth. The combined operating ratio, a commonly used measure of profitability among insurers, will also be a key figure and was last reported at 91.8%.
We currently list Direct Line Insurance Group as a HOLD
Sainsbury (J) (Q4 earnings)
The sector received a recent boost from Tesco’s results and long suffering investors will be hoping that Sainsbury can also come out with improving news regarding sales. We can expect an update on cost saving measures and the expansion of Argos into its stores. The crowded market place with the rise of Lidl and Aldi makes for a very difficult environment for the group, which has been reflected in the share price performance for many years.
We currently list Sainsbury as a HOLD
Companies also reporting today include: ConvaTec Group (Q1 trading results) – BUY,
The Sage Group (Q2 earnings) – HOLD, Standard Chartered (Q1 interim management statement) – HOLD, Inmarsat (Q1 earnings) – BUY, Howden Joinery Group (Q1 trading update) - HOLD
Smith & Nephew (Q1 trading report)
There has been a raft of M&A activity in the pharma and health sector lately and Smith & Nephew has not been immune to this. There have been rumours of another approach from Stryker of the US and activist investors increasing their stake in Smith & Nephew. There is some expectation that procedures in the US that were held back due to severe weather conditions can be made up. There is the expectation that their focus on expansion into the fast growing emerging markets is continuing to payoff and that their sales are still growing faster than the market as a whole. It is expected that management can maintain their 3-4% underlying revenue growth expectations for 2018.
We currently list Smith & Nephew as a BUY
HSBC (Q1 earnings)
The recovery in the share price has faltered this year. With the group increasingly geared to Asia, you will be focussing on news from the region. Other areas to concentrate on will be the ongoing restructuring, organic growth, bad loans and as usual from banks, an update on its position with the regulators and further fines.
We currently list HSBC as a BUY
International Consolidated Airlines Group (Q1 earnings)
In February, International Consolidated Airlines Group (IAG), which owns British Airways and Iberia, reported a drop in fourth quarter operating profits. However, it also said it was planning to grow its capacity and expected passenger unit revenue and operating profit to rise in the current financial year. The market will also be interested in any comments about discussions with Norwegian Air Shuttle following IAG’s purchase of a 4.6% stake in April.
We currently list International Consolidated Airlines as a BUY
Economic Diary: week commencing 30 April 2018:
2nd May, Eurozone Q1 GDP (preliminary estimates)
Following on from the UK and US GDP figures, there is an expectation that the Eurozone has followed with improving trading conditions we saw in 2017, although probably not as strong as we saw in the 4th quarter. Consensus estimates are that we saw a 0.55% quarter on quarter growth compared to 0.7% previously.
2nd May, The Federal Open Market Committee meeting and interest rate decision
Policymakers are expected to leave the interest rate upper bound at 1.75%, but the market will expect their comments to indicate several more rate hikes for this year as the US economy. The jobs market and corporate America continues to steam ahead and pull the world economy along.
4th May, US Non-Farm Payrolls, Bureau of Labor
After a fairly disappointing number of jobs created in March of 103,000 compared to the consensus of nearly 200,000, economist expect a little bounce-back during April with around 194,000 jobs created during the month, with the unemployment rate hitting 4%. The rate of wage growth should also remain at a healthy 2.7%.
During the week there will be a raft of PMI figures published from various countries, most of which should continue to show expansion across the industries.
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