We give our thoughts on what to expect from companies announcing results week commencing 29 July 2019.
Companies reporting w/c 29 July
Centrica (Q2 2019 Earnings Release)
Shares in the British Gas owner dropped recently following press reports that the company is going to cut its dividend and look to sell its stake in Spirit Energy, the oil and gas producer. Given the range of headwinds facing the company, including the energy price cap, lower income from its nuclear operations and concerns about Labour’s nationalisation policy, it would come as no surprise to see the dividend cut. The market is already expecting a 40% drop from last year’s 12p a share. The last update looked as if it was preparing the market for another profit warning, following the previous one in February.
We currently list Centrica as a HOLD
BP (Q2 2019 Earnings Release)
The slightly lower average oil prices during the first half of this year compared to last year will act as a dampener on the group’s steadily growing production as new projects have come online. Investors will expect to hear of the integration progress of the shale assets acquired from BHP while hopefully better operating performances from its refining division which has not been so encouraging lately. Investors will hope the gearing levels can fall off from the upper end of their target range of 30% and also hope their Rosneft exposure can show a sustained recovery from some operational difficulties.
We currently list BP as a BUY
Reckitt Benckiser Group Plc (Q2 2019 Earnings Release)
The headlines surrounding the group will be around its decision to settle with US authorities of the sales and marketing on Suboxne film by its former subsidiary group Indivior and its likely the group will have to make charges on its accounts. Aside from this investors will be keen to hear of the integration progress of Mead Johnson and whether difficulties at its Scholl foot care brands is persisting. Overall though, there is an expectancy for growth to continue due to its emerging markets exposure and expansion, but could this be tempered by concerns over global growth?
We currently list Reckitt Benckiser Group as a HOLD
Other companies reporting this day include: Fresnillo Plc (Q2 2019 Earnings Release) – HOLD
BAE Systems Plc (Q2 2019 Earnings Release)
The shares over the last year have been a disappointment, failing to recover from the market induced selloff towards the end of 2018. This maybe partly explained by the increasing questions surrounding UK companies supplying defence equipment to the Saudi's and their involvement in Yemen. Investors will expect to hear the impact of a ban of defence parts and equipment to the UK. However, in these highly politically uncertain times, it is no surprise to see defence spending on the minds of governments that is reflected in the group's order book, which last stood at a record £48.4 bn, and most investors would expect this to head upwards. Investors will keep a close eye on the group's debt levels while the pension fund still remains in deficit.
We currently list BAE Systems as a BUY
Next (Q2 2019 Sales and Revenue Release)
Next always provides an interesting litmus test of demand on the high street. The shares have had a good year although they have eased back slightly since May when the company announced better than expected first quarter figures. This second quarter update comes ahead of interim figures in September. While investors will be expecting to see a continuation of the strong online sales of recent years the market will be looking closely at high street sales as they have been falling quite sharply and the company said it expected trading there to remain challenging. In May the company was predicting full-year profits would drop to £715m so any update on that figure will be of interest.
We currently list Next as a HOLD
Lloyds Banking Group Plc (Q2 2019 Earnings Release)
In common with its peers Lloyds’ shares have struggled to make much headway so far this year. Brexit concerns are part of the reason for this very much UK-focussed bank which is near the end of a major restructuring process, but increasing competition and a weaker housing market are also factors. Both the revenue and profit figures reported for the first quarter in May were below expectations but the CEO reiterated his previous full-year guidance. The market will be watching to see if he repeats that in these interim results. With a much stronger capital base now there is naturally some hope that dividends will rise steadily so any comments on that will also be of interest.
We currently list Lloyds as a HOLD
Taylor Wimpey Plc (Q2 2019 Earnings Release)
Taylor Wimpey saw a strong level of trading in 2018 and into 2019, defying many expectations of a slowdown. Results earlier this year showed a rise in revenues and completions, helping to boost profits by 18%. With strong cash balances, the dividends have been good and are expected to remain so. However, some analysts are still concerned that increased levels of political and economic uncertainty in the future could result in a slower rate of growth. So investors will be looking at the forward order book to see if there are any signs of that.
We currently list Taylor Wimpey as a HOLD
Other companies reporting this day include: Glencore Plc (Q2 2019 Sales and Revenue Release) – HOLD; St. James's Place Plc (Q2 2019 Earnings Release) – BUY;
Smurfit Kappa Group Plc (Q2 2019 Earnings Release) – BUY; Smith & Nephew Plc (Q2 2019 Earnings Release) – BUY; Direct Line (Q2 2019 Earnings Release) – HOLD;
Just Eat (Q2 2019 Earnings Release) – HOLD;
Barclays (Q2 2019 Earnings Release)
The share price has been struggling despite the deep level of restructuring the management has taken the group through. The April statement was not that encouraging with the group suggesting if trading conditions remain difficult then further cost cuts would be initiated. Judging by some of the US investment banks that have reported, it’s much maligned investment banking division may have done better – although the net interest margins from the retail division may begin to reflect the lower interest rate environment we are expected to see.
We currently list Barclays as a HOLD
Royal Dutch Shell Plc (Q2 2019 Earnings Release)
The slightly lower average oil and natural gas prices during the first half of this year compared to last year will act as a dampener on the group’s revenues even though production is expected to have increased. Its downstream operations, including refining, have found it tougher lately and investors will be keen to hear of some improvements in these markets. Overall performance in recent years has been good with cost cuts and divestments helping to dramatically improve the cash flows. The previously announced cash and capital returns should be reiterated.
We currently list Royal Dutch Shall as a BUY
Other companies reporting this day include: British American Tobacco Plc (Q2 2019 Earnings Release) – HOLD; Inmarsat Plc (Q2 2019 Earnings Release) – we currently don’t have a view on this stock; Intertek Group Plc (Q2 2019 Earnings Release) – BUY; London Stock Exchange Group Plc (Q2 2019 Earnings Release) – HOLD; Mondi Plc (Q2 2019 Earnings Release) – BUY; Schroders Plc (Q2 2019 Earnings Release) – HOLD; Standard Chartered Plc (Q2 2019 Earnings Release) – HOLD; RSA (Q2 2019 Earnings Release) – HOLD; Rio Tinto Plc (Q2 2019 Earnings Release) – BUY
BT Group (Q1 2020 Earnings Release)
At the time of the full-year figures in May BT’s new CEO, Philip Jansen, said the company had a lot of work to do and needed to invest to remain competitive. That was mainly a reference to the roll out of 5G mobile internet and high-speed broadband services so the market will be looking for an update on progress of this. The performance of the enterprise and global services divisions will also come under scrutiny as they have been struggling recently. Investors will also be interested in any comments on the dividend policy following comments at the AGM suggesting it might be cut to fund the rollout of full fibre broadband to 15m homes.
We currently list BT Group as a HOLD
Other companies reporting this day include: International Consolidated Airlines Group SA (Q2 2019 Earnings Release) – BUY; Royal Bank of Scotland Group Plc (Q2 2019 Earnings Release) – HOLD
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.