What to expect from companies announcing results week commencing 30 July.
Companies reporting w/c 30 July
Graham Spooner, Investment Research Analyst at The Share Centre, gives his thoughts on what to expect from companies announcing results week commencing 30 July 2018.
Centrica (Q2 earnings release)
Off the back of SSE’s recent warning over falling demand due to the warm weather, investors could be expecting something similar. Areas to concentrate on will be the ongoing restructuring, outlook for the year ahead and the dividend. Confidence in the group and management is at a low ebb and long suffering investors may have to consider the future sustainability of the dividend. The share remains close to a 10-year low.
We currently list Centrica as a HOLD
BP (Q2 earnings release)
Much improved average oil prices during the 2nd quarter compared to the same period last year and against the first quarter of this year are likely to be the key driving factor for increased revenues. But new production facilities coming online should also be a major contributor while a much improved cost structure should see the Q2 results being the best interim set of numbers for a few years. However, investors will keenly follow their comments and their politically exposed holdings in Rosneft in the hope that the group net debt level remains below their upper target for the gearing ratio of 30%.
We currently list BP as a BUY
Just Eat (Q2 earnings release)
The shares have performed well so far this year although there was a wobble at the end of June a management meeting with analysts led to fears that profit margins may not rise as quickly as previously hoped with more investment needed in the business next year. News that rival Deliveroo is also planning to expand its services also hit the shares in June. The first quarter trading update in May reported a 49% rise in revenue so investors will be looking to see if that momentum continued into the second quarter.
We currently list Just Eat as a HOLD
Companies reporting on Monday: Keller Group. Other companies reporting on Tuesday include: Rentokil Initial (Q2 earnings release) – HOLD, Standard Chartered (Q2 earnings release) – HOLD, Taylor Wimpey (Q2 earnings release) - HOLD
Rolls-Royce (Q2 earnings release)
The deep restructuring implemented a few years ago has seen the share price roughly double since the lows of 2016. However the interims will reflect issues it has faced with the Trent 1000 engines including an additional charge of £227m charge against profits and accounting changes. Meanwhile investors will also focus on the Marine division which has challenged the management for several years, so investors will be eager to see if a decision has been made about divesting the business following a review. Comments from management regarding new contract wins will also be sought after while their vocal criticism of Brexit negotiations will likely gather media attention.
We currently list Rolls-Royce as a BUY
Barclays (Q2 earnings release)
Recent news that the SFO is set to reinstate charges over its fundraising in 2008 with Qatar has raised more concerns amongst investors. Further updates on the groups restructuring, operating expenses and performance of its still important investment bank operation will be worth noting. With an activist investor pushing for change the market has suggested the group may be set to beef up its US operations.
We currently list Barclays as a HOLD
Other companies reporting today include: RSA Insurance (Q2 earnings release) - HOLD, Vedanta Resources (Q1 sales and revenue) - HOLD
International Consolidated Airlines Group (Q2 earnings release)
The airline group was one of several to write jointly to the European Commission recently in protest at the French Government’s handling of the frequent air traffic controller strikes this year. It will be interesting to see if there has been a notable impact on earnings in this update. Investors will also be focused on any news about the company’s plans for Norwegian Airlines given that German rival Lufthansa has also expressed an interest in making a bid. In May the company said it still expected full-year operating profit to be up on last year, although fuel costs are on the rise.
We currently list International Consolidated Airlines as a BUY
Royal Bank of Scotland (Q2 earnings release)
The CEO's restructuring plans will shrink the group further through to 2020 and will shift its business towards retail and commercial banking. There have been signs of improvement relating to costs and revenue in recent updates and in May the group settled with US authorities over past misdemeanours. However the share price has fallen since May following the government sale of part of its holding and concerns over the Bank of England stress test later in the year.
We currently list RBS as a HOLD
William Hill (Interim results)
The big question from investors with these figures will be whether the bookmaking group saw any significant benefit from the World Cup. As the numbers will only cover the first two weeks of the tournament the market will be interested in any comments from management about wager levels overall. The performance of the online business and US operations will also be focused on. Given the government’s recent decision to radically lower the maximum stake allowed on fixed odds betting terminals the market will be interested in whether the company plans to go ahead with any high street shop closures.
We currently list William Hill as a BUY
Other companies reporting include: Mondi (Q2 earnings) - BUY
Announcements for the w/c 30 July 2018:
31 July: Eurozone Q2 GDP (Preliminary)
The consensus view is that the European economic growth rate, like the first quarter showed moderation compared to the same period in 2017 with the year-on-year figure expected at 2.3% compared to 2.5% during the first quarter. This would be in-line with other data releases in recent months.
1 August: FOMC Meeting & Interest Rate decision
Jerome Powell, the Trump appointed chair of the Federal Reserve, has indicated that policy makers will continue on the hiking process as US economic data continues to paint a picture of a healthy economy. But Trump’s contradictory criticism of rate hikes is unlikely to get much heed from policy makers who have previously stated that we are likely to get at least two more rate increases by the end of the year, but they are expected to remain on hold until at least the September meeting.
2 August: UK MPC Interest Rate decision
Economic data so far published for the second quarter suggests the economy has bounced back from the weakness in the first quarter with the consensus view that policy makers will raise interest rates to 0.75% despite some prominent MPC members suggesting that a wait and see approach is more suitable given the uncertainty created with the Brexit negotiations.
3 August: US July employment data
With another roughly 170,000 jobs expected to have been created during July, which is on trend with the recent period, the unemployment rate should tick below 4% again. However, more interest may be expressed in the rate of wage growth which for the month on month figure should be up to 0.3% from last month’s 0.2%. A positive set of numbers will cement the expectations of an interest rate rise in September.
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