What to expect from companies announcing results week commencing 29 October 2018.
Companies reporting w/c 29 October
Graham Spooner, Investment Research Analyst at The Share Centre, gives his thoughts on what to expect from companies announcing results week commencing 29 October 2018.
HSBC (Q3 2018 earnings release)
With the share price close to a 2-year low on the back of growing pressures on emerging markets, investors will be hoping that the CEO remains optimistic over global growth. Areas to concentrate on will be costs, which have recently been rising, the performance in Hong Kong and thoughts on the impact of the China - US trade wars. There has also been both internal and external criticism of its investment banking division, along with further fines from the US regulator.
We currently list HSBC as a BUY
BP (Q3 2018 earnings release)
We have seen steadily improving numbers from the oil majors as oil prices have steadied but for the third quarter when oil prices breached $85 a barrel, a significant improvement in profitability should be expected. This is on the proviso that production did not suffer any setbacks and judging by the first half, plant reliability and uptime was high. Investors should expect production to rise though as new production facilities have come on-line while we will also see the inclusion of production from the acquisition of shale assets from BP. Investors will also hope that the improvement we saw in the Rosneft operations during the last quarter followed through, however, its Downstream business may still have found conditions tough due to the refining market.
We currently list BP as a BUY
Reckitt Benckiser Group (Q3 2018 sales and revenue release)
The company produces a number of well-known brands (Dettol, Nurofen) and products that are generally considered as everyday necessities in developed markets and sales of these products will not vary hugely through the economic cycle. This results in a relatively steady earnings and cash flow stream. Investors will be hoping that the improved guidance on sales growth will be maintained. Other areas to concentrate on will be costs, emerging market sales, and the performance of its foot care brand Scholl and recent acquisition Mead Johnson.
We currently list Reckitt Benckiser as a HOLD
Next (Q3 2018 sales and revenue release)
The market will be hoping that the company can repeat the good news that came with interim results in September when it was announced that second quarter trading had been better than expected and full-year profit guidance was raised. This update comes as the company approaches Black Friday and the crucial Christmas and New Year trading period, so any comments about the strategy relating to discounting will be of interest. The last update showed that online sales were higher than those in the high street stores and that trend is likely to have continued. CEO Lord Wolfson has been one of the more vocal company executives on the issue of Brexit, laying out in some detail how the company is preparing for every eventuality.
We currently list Next as a HOLD
GlaxoSmithKline (Q3 2018 earnings release)
We saw a good set of first half numbers from all three divisions which many expect to have followed through to the latest quarter as new drugs continue to sell very well including Shingrix. While there has been good news that a generic rival to their Advair drug faces delays, investor will nonetheless monitor the pace of the decline in sales of this blockbuster drug. The acquisition of Consumer Healthcare assets from Novartis will help with diversification but investors will expect good integration synergies. News of the R&D developments and drugs that are expected to make it regulatory approval will also be keenly anticipated.
We currently list GlaxoSmithKline as a BUY
Other companies reporting this day include: PPHE Hotel (trading update) – BUY, Smurfit Kappa (trading update) – HOLD, Standard Chartered (Q3 sales and revenue release) - HOLD
BT Group (Q2 2019 earnings release)
These are interesting times for the usually sedate telecoms giant with uncertainty created by the departure of CEO Gavin Patterson and an activist investor, Greenlight Capital, takes a stake in the company. Worldpay’s co-CEO Philip Jansen has been confirmed as Patterson’s successor and the suggestion is that Greenlight is keen to see the Openreach infrastructure division split off. Patterson has begun a large restructuring of the group but some investors think Jansen should consider further changes that could boost the share price. The last trading update in July was better than expected although revenues still dropped 2%.
We currently list BT as a HOLD
Other companies reporting this day include: Royal Dutch Shell (Q3 2018 earnings release) – BUY, Smith & Nephew (Q3 sales and revenue release) – BUY, Shire (Q3 2018 earnings release) – HOLD, RSA (Q3 earnings release trading update) - HOLD
Paddy Power Betfair
Shares in the betting group have struggled this year in common with most of the sector, due mainly to increased taxes in the UK and elsewhere. There are also rumours of further tax rises to come in the Budget, which comes ahead of this trading update, with the focus being on offshore gambling activities. Investors will be paying especially close attention to any full-year earnings guidance given that it was lowered in August to £460m-£480m. On a more positive note the recent merger of the company’s US operations with fantasy sports group FanDuel has raised hopes of growth and any further update on that will be of interest.
We currently list Paddy Power Betfair as a HOLD
Announcements for the w/c 29 October 2018:
2 November 2018, Nonfarm Payrolls, the US Bureau of Labour Statistics
The surprisingly weaker number of jobs created during September did not at the time put much concern into the market as investors focussed on the steadily improving rate of wage growth. For October there is an expectation that we could see wage growth bounce back closer to the 200,000 level while the hourly wage rate growth could hit above 3%. If so, then even more focus and expectation will be on the Fed to increase the pace of monetary tightening. The current unstable markets will not like that, so could we see the equities sell-off gather more momentum?
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.