What to expect from companies announcing results week commencing 3 September.
Companies reporting w/c 3 September
Graham Spooner, Investment Research Analyst at The Share Centre, gives his thoughts on what to expect from companies announcing results week commencing 3 September 2018.
WPP (Q2 earnings release)
The company has been in choppy waters for a while not helped by lower advertising spend from some of its largest clients and the loss of its high profile CEO. As a result the group has been restructuring in order to simplify its structure, cut costs and increase its focus on technology. Any further news on its future strategy and possibility of selling off parts of the business, along with the performance of emerging markets will be worth noting. There has also been much speculation on who the next CEO will be.
We currently list WPP as a BUY
DS Smith (trading update)
The company announced good full-year results in June saying that volume growth momentum had continued into the new financial year. It has also scaled back some expansion plans due to Brexit and investors will be interested to hear if that caution remains. The big news this year has been the Eur1.9bn takeover of Spanish rival Europac and the market will be looking for an update on how that is progressing. Any news on the review of the plastics business will also be of interest, not just to investors in this company but others in the same sector.
We currently list DS Smith as a BUY
Barratt Developments (Q4 earnings release)
Stocks in the sector have done exceptionally well in recent years fuelled by the demand for housing, attractive mortgage rates and pro-demand policies such as Help to Buy. The lack of new homes has been just as important a driver and we have seen housebuilders continuously building more homes each year. Barratt earlier showed that a 1% increase in completions and a 5% increase in average selling prices should see it deliver £835m in pre-tax profits with a healthy balance sheet. Investors will monitor the rising costs of labour and materials and still expect further capital returns which have almost become the norm in recent years from the sector.
We currently list Barratt Developments as a HOLD
Other companies reporting today include: Berkeley Group (Q1 2019 Sales and Revenue Release) – HOLD
Genus (Q4 earnings release)
With the share price trading close to an all-time high, investors will be expecting another solid trading update, especially from Sexcel, which provides sexing technology. The group believe they have a competitive edge from having ownership and control of their breeding animals, along with the biotechnology used for further improvements, allied to its growing global supply and distribution network and increased spend on research and development. Other areas to focus on will be the impact of currency movements, ongoing US court case and view on the dairy market.
We currently list Genus as a BUY
Melrose Industries (Q2 earnings release)
The update will be dominated by the groups’ plans for its recent acquisition, GKN. There have been recent reports that management will be looking for bids for GKN's powder metallurgy division, with a number of parties already said to be interested. Investors will be also be keen to hear about its US business Nortek and on the restructuring at Brushwhich, despite its excellent track record of improving businesses, shows that management are not immune from setbacks and industry changes.
We currently list Melrose Industries as a BUY
PPHE (interim results)
Shares in this small hotel group have enjoyed a stellar run so far this year, comfortably outperforming the market. This is partly due to good full year results in February which were followed by a positive update in May when the company reported growth in two of its most important markets, the UK and Croatia. However, the main reason for the boost in the shares was the move to a premium listing in London and then news in July that the company was looking at a dual listing on the Tel Aviv exchange. Any update on that will be of interest to the market.
We currently list PPHE as a BUY
EnQuest (Q2 earnings release)
After a poor 2017 and reported net loss due to asset impairments, there are much better expectations from the company in the current year as oil prices have recovered. But the group's operational performance is likely to be the key driver for its prospects this year as the Kraken field ramps up production. However, debt levels remain relatively high and investors will be keen to find out if they have managed to bring this down.
We currently list EnQuest as a BUY
Announcements for the w/c 3 September 2018:
7 September: Non-farm Payrolls SA
Last month the Non-farm Payrolls dropped to 157k, nonetheless this is still an impressive figure given the number of months that we have seen job creation in the US. Economists expect small pickup for August to 186k with the unemployment rate possibly falling further to 3.8% which will give Donald Trump more boasting credentials. However, if the rate of wage growth fails to live up to expectations of 2.8%, then it will be the case that more investors begin to question whether we are getting closer to the peak of this long and protracted cycle.
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