We give our thoughts on what to expect from companies announcing results week commencing 28 October 2019.
Companies reporting w/c 28 October
HSBC Holdings Plc (Q3 2019 Earnings Release)
With dollar interest rates coming down and therefore net interest margins, there is an expectation for a profits squeeze among major global banks such as HSBC; while at the same time a slowing global economy doesn't help them much either. Investors will be looking for the specific impact on HSBC caused by the political unrest in Hong Kong. Investors will also expect a progress report on the cost cutting exercise through job reductions and how far they have got with the $1bn share buyback plan.
We currently list HSBC as a BUY
BP Plc (Q3 2019 Earnings Release)
The oil giant has been reporting good production numbers lately, as major new projects come online. This combined with better oil prices in the first two quarters saw a significant lift in profitability. Investors should still expect reasonably good production figures for Q3 but lower average oil prices during this period will put a dent on profitability. Investors will expect an update on the integration of shale assets acquired last year and keep an eye on the gearing ratio, which last stood higher than their target.
We currently list BP as a BUY
Next Plc (Q3 2019 Sales and Revenue Release)
There’s no doubt the uncertain economic and political environment is making life difficult for high street retailers at the moment, especially those involved in more discretionary areas such as clothing and homeware. Despite that, as shown in September’s interim figures, Next has actually performed fairly well this year. At that point the company was happy to keep its full-year forecasts unchanged with the key ones being a 3.6% rise in sales and pre-tax profits of £725mn. The level of online sales growth in the third quarter will be a focus for the market, as the company gears up for its most important trading period of the year in the run up to Christmas.
We currently list Next as a HOLD
GlaxoSmithKline Plc (Q3 2019 Earnings Release)
The pharmaceutical giant's share price has reflected the better underlying performances of the group lately, as demand for new drugs such as Shingrix is strong and more than make up for older drugs that have lost patent exclusivity. There are a number of other newer drugs and many also in the R&D stage which investors will expect a positive update on. The TESARO Inc acquisition was originally not welcomed by investors but a positive cancer study by the acquired group vindicates GSK's decision and investors will expect further updates in this regard.
We currently list GlaxoSmithKline as a BUY
Other companies reporting this day include: Standard Chartered Plc (Q3 2019 Sales and Revenue Release) – HOLD
International Consolidated Airlines Group SA (Q3 2019 Earnings Release)
Market concerns have heavily weighed on IAG’s share price over the past year. Recent strikes alongside weaker booking trends at some of its lower-cost airlines have not helped, causing a drop in operating profit forward guidance. It’s estimated the strikes have cost IAG around £120mn. Despite this, the company from a fundamental perspective remains relatively strong with total passenger growth and profits continuing to grow at a reasonable pace. Investors will be hoping these growing passenger figures can continue to grow, boosting profits, therefore helping to offset the strike cost implications and pricing pressures the company currently faces.
We currently list International Consolidated Airlines Group as a BUY
Lloyds Banking Group Plc (Q3 2019 Earnings Release)
Lloyds has suffered over the past five years with its share price falling roughly 21%. Economic uncertainty and PPI claims have been a drag on UK business investment and employment intentions. However, the company does remain resilient with profits reported in H1 in line with the prior year despite heavy PPI charges. PPI issues have not seemed to clear and these are likely to affect Q3 results following a surge of claims in the final weeks of August. The claims are expected to be in the region of £1.2bn to £1.8bn. Despite this expected drag and current market uncertainty, investors will hope the group’s gradual digital shift and cost reductions can help support bottom line margins to continue its strong share price performance this year.
We currently list Lloyds Banking Group as a HOLD
BT Group Plc (Q2 2020 Earnings Release)
The last update from the company confirmed market expectations of a drop in first quarter revenue and earnings but the company reiterated its full-year guidance. BT has relied on its consumer division for much of its growth in recent times and investors will be interested in the progress being made in the roll out of key new services such as 5G mobile internet and high-speed broadband. The new CEO has said the company has a lot of work to do and needs to invest to remain competitive so the market will be interested in any further comments on that subject, especially if it has implications for dividends.
We currently list BT Group as a HOLD
Smith & Nephew Plc (Q3 2019 Sales and Revenue Release)
Smith & Nephew will look to return to positive momentum following its strong results in H1. Strong growth in emerging economies benefitting from favourable demographic and economic trends, has pronounced the company’s strong performance over 2019. However, a shock management announcement over the scheduled departure of relatively new CEO Namal Nawana has seen the share price drop recently. Nawana’s reorganisation has helped accelerate revenue growth roughly 40% and news of his departure has spooked investors with the fear the company’s current strategy could be jeopardised. Despite this, the strategy is likely to remain on course. Looking ahead at the Q3 release, investors will hope the structural drivers will continue to deliver growth in emerging economies, helping to maintain the upgraded sales and margin guidance figures released in June.
We currently list Smith & Nephew as a BUY
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