What to expect from companies announcing results week commencing 10 December 2018.
Companies reporting w/c 10 December
Graham Spooner, Investment Research Analyst at The Share Centre, gives his thoughts on what to expect from companies announcing results week commencing 10 December 2018.
Ashtead Group (Q2 2019 sales and revenue)
Ashtead’s shares were hit by the market sell-off in October despite the fact that September’s first quarter figures beat expectations. They got a boost from the news that Geoff Drabble has decided to step down from his role as Chief Executive at the end of the current financial year, to be replaced by Brendan Horgan, currently chief executive of the group's North American business. Given that revenues from the US account for 87% of the total, investors will be focusing particularly on the performance there and any comments on future prospects.
We currently list Ashtead as a BUY
British American Tobacco (Q4 2018 Sales and Revenue Release)
Interesting times for the usually rather staid world of big tobacco as the FDA in the US has recently suggested that it will look to ban menthol cigarettes. That would have a significant impact on British American Tobacco given the significant amount of revenue it derives from those products. It is likely to challenge any ban in the courts and, even if it still goes ahead, it is likely to take some time to be fully implemented. The market will be interested in any further comments on the possible impact. In mid-October the company said it remained confident of achieving revenue growth on a constant currency basis and exceed its earnings growth target.
We currently list British American Tobacco as a HOLD
Bunzl (Q4 2018 Sales and Revenue Release)
The company’s defensive attractions have been growing over the year with the shares still close to an all-time high. The company provides a variety of every day products ranging from disposable cups, safety equipment, napkins to food packaging. It operates in over thirty countries and the majority of revenue comes from outside the UK. Bunzl has been expanding its global presence by a constant stream of acquisitions and there is every chance of another being announced with the results. Other areas to focus on will be the effects of currency movements and their outlook for the year ahead.
We currently list Bunzl as a BUY
TUI (Q4 2018 Earnings Release)
These results will attract even more attention given the recent profit warnings from rival Thomas Cook, which has had an impact on shares across the sector. TUI is a much bigger company with less exposure to the tour operator sector in the UK, and its last update in September was reassuring as it showed that sales had not deteriorated over the summer as many had predicted due to the heatwave. Investors will be looking to see the impact of foreign exchange moves, especially relating to the Turkish lira, but full-year earnings are expected to rise by around 10%.
We currently list TUI as a BUY
Ocado (Trading update)
It has been an eventful year for Ocado having signed a number of contracts with various grocers around Europe but they were all trumped by the deal with Kroger of the US, all of whom are pursuing the transition to online shopping and all see that Ocado’s technology and distributions system as better than them doing it themselves. But Ocado are still in the rapid growth phase and with heavy investment, including new state of the art warehouses and distribution centres are expected to report their largest loss for a number of years, but investors will look at the underlying operating profits which should more than double the previous year’s figure. Investors will want an update of the proposition for Kroger and whether there are possible deals with other retailers.
We currently list Ocado as a HOLD
Announcements for the w/c 10 December 2018:
10 Dec, Construction, Manufacturing and Industrial production data for October
In a crucial week in the Brexit negotiations with parliament voting on Theresa May’s deal, the economic data will take a back seat. But data published this week such as the Markit Services PMI data brought to the fore some of the real impacts of Brexit (the lowest PMI figure since immediately after the referendum) and could play on the minds of politicians. Next week will start off with production data from the manufacturing, construction and industrial industries. Only the construction sector has shown a positive trend lately, however as we get into the deeper end of Brexit, we may see signs of activity in the manufacturing sector as businesses begin to stockpile for the worst case scenario.
11 Dec 2018, UK Jobs data for Oct/Nov
The Unemployment rate should remain close to recent lows of around 4.1% but focus will once again go on the rate of wage growth. For October it was encouraging to see wages breach the 3% level as a sign of the health of the UK jobs market, but this will undoubtedly fuel interest rate expectations, but policy makers have got other things to worry about at the moment.