Companies reporting w/c 19 February

What to expect from companies reporting week commencing 19 February

Graham Spooner, investment research analyst at The Share Centre, gives his thoughts on what to expect from companies announcing results week commencing 19 February 2018.

Monday

Reckitt Benckiser (Q4 results)

The share price has drifted lower since last summer on the back of future growth concerns. Investors will be keen on an update on the group’s proposals to split the business into two separate divisions (Health & Hygiene) and to see, in the light of a lowering in sales forecasts for the current year, management forecasts for the year ahead. Cost controls and performance of new products will also be worth noting.

We currently list Reckitt Benckiser as a BUY

Tuesday

BHP Billiton (Q2 results)

The group has already reported its Q2 production numbers which showed good progress in some of its key focus areas such as copper and iron ore, but petroleum production fell short of expectations. Overall though investors should expect these production numbers to positively feed through to revenues as average commodity prices have been higher than a year ago. Given recent years focus on cost cuts, we should also see operating profits pickup materially, but the recognition of a $1.8bn charge related to US tax changes will dent the reported profits.

We currently list BHP Billiton as a BUY

InterContinental Hotels (Q4 results)

Despite rather lacklustre results over the past year, the shares in this group, which operates a range of hotels including Holiday Inn and Crowne Plaza, have continued to rise. Interim results showed operating profits rising 7% but these were below expectations overall with the Americas and Middle Eastern regions weaker than anticipated. Third quarter figures in October were solid rather than spectacular but the group remained confident that it was on track to meet full-year guidance. The main point of interest in this update will be in the performance of the US operations and whether there are signs of improvement.

We currently list InterContinental Hotels as a HOLD

HSBC (Q4 results)

The market has been taking the view that HSBC should continue to benefit from its emerging market exposure and signs for interest rates to rise further, especially in the US. Investors will focus on performance in Asia, along with the group’s outlook for the region. Other areas of interest will be operating costs, bad debts, which fell last time round and organic growth. As with most banks any comments regarding regulatory issues will be noted.

We currently list HSBC as a BUY

Wednesday

Barratt Developments (Q2 results)

Barratt Developments, just like its peers, has done exceptionally well in recent years helped along with low mortgage rates and high demand for housing. We would expect this demand level to have held up as forward sales have been healthy, standing at roughly £2.4bn at the last count. With strong sales we should see this flow through to the bottom line. However, the sector’s shares have sold off a little since the beginning of the year and exacerbated by the recent market correction. Investors will therefore seek reassurances those in recent weeks, buyer confidence has held up.

We currently list Barratt Developments as a HOLD

Lloyds Banking (Q4 results)

Profits rose in the last quarter helped by income growth and cost control. The market will however be focussed on the groups next strategic plan which it is expected to announce with fourth quarter results. The share price has struggled to make any headway over the last year, which in itself suggests that investors remain cautious on the sector and the fact that the group is geared to the UK economy.

We currently list Lloyds Banking as a HOLD

Thursday

BAE Systems (Q4 results)

There has been some very good newsflow lately relating to contract wins for the defence and aerospace group which will flow into 2018 results. Indeed, there are positive expectations for the 2017 numbers where the market believes revenues grew to £19.6bn, up by roughly 10% while reported profits are expected to breach £1bn for the first time since 2012 after a difficult numbers of years following government budget deficits. Trading from the US and Middle East are expected to have been good and management should reaffirm these views for 2018.

We currently list BAE Systems as a BUY

British American Tobacco (Q4 results)

In December, the company said second half trading had remained on track with further growth in market share and the integration of Reynolds American was proceeding well. The pricing environment in some markets remained difficult and the rollout of tobacco heating product Glo was going well. Investors will be expecting to hear more detail on the company’s plans for its next generation products and any comments on the steady increase in regulation of tobacco products will also be of interest. There should also be more details on how the recent tax changes in the US are likely to affect the company, but it is already expecting a useful 6% boost to earnings this year.

We currently list British American Tobacco as a HOLD

Companies also reporting today include: Anglo American (Q4 results) – HOLD, Barclays (Q4 results) – HOLD, Centrica (Q4 results) – HOLD and RSA Insurance (Q4 results) - HOLD.

Friday

Royal Bank of Scotland (Q4 results)

Investors will be hoping for more signs that the groups restructuring remains on track. Further updates on costs and how talks are going with the US authorities over further fines will be worth noting. The CEO's restructuring plans will shrink the group further through to 2020 and will shift its business towards retail and commercial banking. The share price has trended slowly higher over the last year and some analysts have turned more positive on the longer-term potential.

We currently list Royal Bank of Scotland as a SELL

Companies also reporting today include: Pearson (Q4 results) – HOLD, Standard Life Aberdeen (Q4 results) – HOLD, International Consolidated Airlines (Final results) – BUY and William Hill (Q4 results) - BUY

Economic Diary: week commencing 19 February 2018:

21 February, UK productivity flash estimate: October to December 2017 – Office for National Statistics

The Nobel prize winning economist Paul Krugman once said that ‘productivity isn’t everything, but it is almost everything.’ With UK unemployment at just 4.3%, the UK is running out of spare capacity, creating a growing inflation threat, and thus the risk that interest rates may rise faster and higher than has been factored in by the markets. The only way the UK can grow at a reasonable pace, without seeing a surge in inflation, is if productivity rises, and although Q3 was good quarter for UK productivity, with output per hour rising by 0.9% on the previous quarter, the fastest growth rate since 2001, many think it was a one-off. Did productivity rise by much in Q4?

21 February, UK Labour Market – Office for National Statistics

The three months to November more than made up for negative growth in employment in September and October, with the period seeing employment grow by 102,000. Average wages rose by 2.5%. Given that we know Q4 saw the UK economy grow by 0.5%, based on the first estimate from the ONS, what happened in December will relate to the all-important UK productivity. The equation is simple, if GDP grew by 0.5%, the only way productivity grew was if employment grew by less than 0.5%. For this to happen, growth in UK employment in the three months to December, would have needed to have been less than around 160,000.

Further announcements include:

20 February Industrial Trends Survey – Confederation of British Industry
21 February UK public finances, January – 2018
22 February UK index of services, December – Office for National Statistics
22 February Distributive Trades Survey – Confederation of British Industry
22 February UK GDP, Q4 second estimate – Office for National Statistics
23 February EU Inflation (HICP), January – Eurostat

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