We give our thoughts on what to expect from companies announcing results week commencing 10 February 2020.
Companies reporting w/c 17 February
BHP Group Plc (Q2 2020 Earnings Release)
While the latest half year production update was generally in-line with expectations the group's production was impacted by factors outside of its control such as the Australian bushfires which limited coal production towards the end of 2019. This should be offset by favourable commodity prices such as iron ore where Brazilian supply has been constrained and investors would expect efficiencies to help on the bottom line. However, dark clouds may be over the horizon again for them as the Covid-19 virus halts the Chinese from importing many raw materials. This and the subsequent slump in commodity prices will be crucial on management outlook for the second half.
We currently list BHP as a BUY
Anglo American Plc (Q4 2019 Earnings Release)
The diversified miner did suffer production issues from various factors such as a drought in Chile and issues in diamond mining but better prices for iron ore and platinum are expected to raise full year sales while profitability could be flat. While a small fry for Anglo American, it has been in the news lately for the rescue deal of Yorkshire based potash miner Sirius Minerals. Commentary surrounding this, its debt position and the short term outlook for the commodity sector given the issues in China will be sought after.
We currently list Anglo American as a HOLD
HSBC Holdings Plc (Q4 2019 Earnings Release)
HSBC has been finding life more difficult and management are set to take further restructuring action. The market and investors will be focussing closely on the new plan. Difficulties involve low interest rates, slowing China growth and Hong Kong civil unrest. Other areas to concentrate on will be costs, the outlook for the year ahead and any possible comment on the Coronavirus.
We currently list HSBC as a BUY
InterContinental Hotels Group Plc (Q4 2019 Earnings Release)
Shares in this global hotels giant, the owner of the Holiday Inn and Crowne Plaza brands amongst many, have dropped back over the past six months. That has been due to a drop in revenue per room and expectations of a slowdown in global economic activity in 2020. While Europe and Asia have been performing well the important US market was weak in the first half of 2019 and investors will be looking closely to see how that has performed in the final quarter and what the management now expect in 2020. Any comments on plans to add rooms will be seen as a marker of the company’s confidence.
We currently list InterContinental Hotels as a HOLD
BAE Systems Plc (Q4 2019 Earnings Release)
BAE Systems has continued its strong end to 2019 with shares up roughly 15% YTD. The advanced systems group seem set to maintain this heading into its Q4 earnings release on Wednesday. Defence companies have been in the spotlight in recent months over Middle-eastern tensions and this has seemed to benefit investors. Acquisitions remain a priority for the group as it looks to expand capabilities and with Sterling relatively flat in the last few months, investors will be optimistic for some good results.
We currently list BAE Systems as a BUY
Lloyds Banking Group Plc (Q4 2019 Earnings Release)
Lloyds’ business is predominately UK and is the biggest mortgage provider in Britain and geared to the housing market. The share price rallied on the back of optimism of a Brexit deal and the election result but has since slipped back and remains stubbornly close to a 5-year low. Investors have increasingly focussed on the yield and management continue to target a progressive dividend policy. The group's outlook for the UK especially with regard to Brexit will be worth noting.
We currently list Lloyds as a HOLD
Morgan Sindall Plc (Q4 2019 Earnings Release)
Investors will be hoping for some reasonably good news from Morgan Sindall, whose activities span a range from construction and infrastructure to office fit out and property services. After a decent 20% rise in profits in the first half the company upgraded its full year forecast in November thanks to strong trading in the second half up to that point. The shares have responded to the good performance soaring 70% since last October. Given the election result and the new government’s desire to push ahead with infrastructure projects the market will be interested in any comments on prospects for 2020.
We currently list Morgan Sindall as a BUY
Smith & Nephew Plc (Q4 2019 Earnings Release)
The specialist medical equipment maker reported successively good trading updates during 2019 driven by strong growth in China leading to management to upgrade full year underlying sales growth to 4.5%, but the profit margin may not improve as much due to capital investment, acquisitions and foreign exchange headwinds. The outlook for 2020 will though be clouded by growing exposure in China and the virtual shutdown of the country for which investors will be keen for an update on.
We currently list Smith & Nephew as a BUY
Pearson Plc (Q4 2019 Earnings Release)
The company’s share price recently hit a 10-year low following on from the latest profit warning in January along with the resignation of the finance director. Cost cutting has been obscuring the ongoing slowdown in US higher education which continues to impact. This in turn has again raised doubts over management, its strategy and hopes for the next financial year. Management is expected to come out with a new plan with the results.
We currently list Pearson as a SELL
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