What to expect from companies announcing results week commencing 5 November 2018.
Companies reporting w/c 5 November
Graham Spooner, Investment Research Analyst at The Share Centre, gives his thoughts on what to expect from companies announcing results week commencing 5 November 2018.
Associated British Foods (Q4 results)
The market was slightly disappointed with the company’s last update in September which showed a fall in sales at Primark and a deteriorating outlook for sugar business. As Primark enters the important festive sales season investors will be listening for any comments on expectations and the level of anticipated discounting. The company’s plans to grow Primark in the US and Europe will also be of interest. The grocery, ingredients and agriculture businesses are all expected to see an increase in profits but the market will be more interested in the performance of the sugar business and its prospects in 2019.
We currently list Associated British Foods as a HOLD
Imperial Brands (Final results)
It’s been a difficult year for the shares in Imperial Brands, but not quite as bad as for its great UK rival BAT. Both have come under pressure due to further comments from the FDA, the US regulator, to reduce nicotine addiction. Most recently this has focused on the marketing of e-cigarettes to young people. Investors will be interested in any comments from Imperial on this and more broadly on how sales of its next generation products are going. As a stock of longstanding appeal to income-seekers, thanks to its strong dividend record, any comments on future dividends will be very much of interest.
We currently list Imperial Brands as a BUY
Wm Morrison (Q3 trading update)
The group restructurings and good operating performance in recent quarters has been rewarded with a good share price performance this year. While many will applaud what management have done, it is no doubt true that there remain many challenges, with the German discounters who have upped the ante by seeking further expansion, and a proposed Sainsbury Asda merger pose the biggest problems. Unusual weather patterns may have knock on impacts on quarter on quarter performance figures. It may be difficult for them to reproduce the 6.3% like for like sales growth they experienced in the second quarter which was helped by the weather, but investors should be fairly happy with the Q3 estimate of roughly 2.4% that Kantar have produced.
We currently list Wm Morrison as a HOLD
Other companies reporting today includes: Randgold Resources (Q3 results) - SELL
Marks & Spencer (Q2 results)
Marks’ shares have largely traded sideways since full-year results in May. The company said it expected profit margins at its clothing and home business to improve this year so the market will be looking out for that in the latest update. The May results were overshadowed by the news of a major restructuring which involves the closure of 100 stores so any news on progress with that, and the costs associated, will also be of interest to investors. Marks is belatedly making strides into online and digital retailing, including a new in-store payment app, and the market will be interested in what proportion of sales now come from those areas.
We currently list Marks & Spencer as a HOLD
Companies also reporting today include: ITV (Q3 trading update) – HOLD and Tullow Oil (Q3 trading update ) - BUY
Burberry (Q2 results)
It is no surprise seeing the fairly steep drop in Burberry’s share price in recent months, being a luxury retailer with a heavy Asian exposure it reflects the potential impact on Asian consumer sentiment should the trade dispute between the US and China escalate further. But it’s not just Asian buyers that have been a cause for concern, in the last trading update it seemed that sales in Europe and the UK also disappointed due to tourists spent less, whether these are continuing themes will be closely watched. A strong US dollar is also likely to hamper sales there. With a new management team in place, investors will look to see how group restructuring that focuses on efficiency rather than sales growth is panning out. There is also a focus on product innovations while looking to reduce the number of product lines.
We currently list Burberry as a HOLD
J Sainsbury (Q2 results)
Shares in the supermarket group have performed well this year, rising sharply on news of the proposed £7.3bn Asda takeover in the spring, and reaching a four-year high in August. The company hopes to complete the deal in 2019 but the competition regulator is taking a long, hard look at every aspect of it. That is hardly surprising given that the combined group would be the largest operator in the supermarket sector, as well as the largest fuel retailer in the UK, but it may also delay proceedings and significant conditions could be attached to any approval. The appeal of the takeover for Sainsbury's has been underlined in recent months by sales figures showing better and more consistent growth at Asda.
We currently list J Sainsbury as a HOLD
AstraZeneca (Q3 results)
The healthcare and pharmaceuticals sector has been the standout performer year to date amongst FTSE 100 stocks. Their peers, such as GlaxoSmithKline, reported good numbers, and much is also expected from AstraZeneca where many analysts believe that the picture is improving as the pressures from generic competition fade. The company’s past focus on R&D development has seen a number of new drugs come out of the pipeline and onto the market and there is hope that this year could see a pickup in overall sales as they more than mitigate the loss on exclusivity on blockbuster drugs such as Crestor. Key to sales growth is also their push into emerging markets especially China where they have been experiencing double digit sales growth.
We currently list AstraZeneca as a BUY
Other companies reporting today include: National Grid (Q2 results) – BUY, Persimmon (Q3 trading update) – HOLD, Tate & Lyle (Q2 results) – BUY and Inmarsat (Q3 results) - BUY
Announcements for the w/c 5 November 2018:
6 November, US Mid-term elections
8 November, US FOMC meeting and interest rate decision.
Following a series of interest rate hikes already this year and some pointing the finger at these hikes for the latest turbulence in global stocks markets, it is highly likely that the policy makers will be on halt for now, taking a wait and see approach. Investors will be seeking comment to assess whether the Fed’s policy makers believe that inflation, and wage inflation is not set to run too ahead of itself and that their rate rises so far has not derailed the strong US economic growth. That is the view that most investors would like to hear, if we get that then we should be set for a hike at the December meeting.
9 November, UK Q3 GDP data (prelims), Industrial & Manufacturing data for September
9:30am on the 9th of November will see a whole host data releases and giving a much clearer picture of where the UK economy stands when at the brink of a Brexit deal be made. The most important will be that first estimate of Q3 GDP for which economist believe that we should see a modest improvement on the second quarter to 1.3% yoy. In Q2 the services sector drove the economy forward while construction also made positive contributions, however the industrial and manufacturing sectors acted as a drag. So it will be interesting to see if these two sectors continue to act as a drag, chances are that they did according to economists, they expect September Industrial and Manufacturing productions numbers to drop back significantly compared to August.
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