We give our thoughts on what to expect from companies announcing results week commencing 27 July 2020.
Companies reporting w/c 27 July
Reckitt Benckiser Group Plc (Q2 2020 Earnings Release)
The share price has powered ahead since mid-March and is within touching distance of an all-time high. The virus has boosted demand for some of its products such as disinfectants and health remedies. Investors will be keen to see if this surge in demand has been maintained, along with management thoughts for the year ahead.
We currently list Reckitt Benckiser as a HOLD
Other companies reporting today include:
Games Workshop Group Plc (Q4 2020 Earnings Release) – BUY
IG Design Group Plc (Q4 2020 Earnings Release – Preliminary) – BUY
St. James's Place Plc (Q2 2020 Earnings Release) – BUY
Next Plc (Q2 2020 Sales and Revenue Release - Trading Statement)
The clothing chain was performing well ahead of the lockdown, as full-year figures in March amply demonstrated. However, first quarter sales were disappointing and investors will be keen to hear any update to the guidance given in April which provided a 30% drop in full year sales as a best case scenario. Many will expect to see continued growth in online sales but the focus is likely to be more on the performance of the high street shops since they reopened, as the company warned in April that sales would be subdued initially.
We currently list Next as a HOLD
Barclays Plc (Q2 2020 Earnings Release)
Investors will be expecting the still important investment banking side to have benefitted from the volatility and increased turn-over in markets. But the main focus will be on the effects of the Covid-19 crisis on other areas of the business especially with regard to potential bad debts. The outlook is set to remain challenging.
We currently list Barclays as a HOLD
Taylor Wimpey Plc (Q2 2020 Earnings Release)
Like most of its peers Taylor Wimpey had to shut down its operations during the lockdown but most of its sales offices and construction sites have reopened. In June it said it had seen a high level of demand to view its houses so investors will be keen to hear if the increase in reservations and net sales has been maintained. The company raised £500mn through a sale of new shares recently to take advantage of attractive land acquisition opportunities so any further details on that would be of interest, as would any update on when dividends might resume. The company previously indicated it wouldn’t happen until next year.
We currently list Taylor Wimpey as a HOLD
GlaxoSmithKline Plc (Q2 2020 Earnings Release)
The first quarter numbers for the global pharmaceutical were boosted on the onset of the pandemic as healthcare authorities started stockpiling on medicines in the Far East. The expectation remains that this same activity may have been reflected in Q2 numbers as Europe and the US began to be affected. There will be strong interest on GSK's activities surrounding the progress of treatments for the virus. A defensive company that hasn't been hit significantly by the disastrous economic scenario should therefore give hope to income investors as a source of steady dividends, commentary of which will be closely followed.
We currently list GlaxoSmithKline as a BUY
Other companies reporting today include:
AVEVA Group Plc (Q2 2021 Earnings Release) – HOLD
Breedon Group Plc (Q2 2020 Earnings Release) – BUY
Smurfit Kappa Group Plc (Q2 2020 Earnings Release) – BUY
Smith & Nephew Plc (Q2 2020 Earnings Release) – BUY
Rio Tinto Plc (Q2 2020 Earnings Release) – BUY;
AstraZeneca Plc (Q2 2020 Earnings Release)
The first quarter number were solid off the back of stockpiling by various health authorities around the world and there is some expectation the second quarter would have benefitted from this as well. Most attention will focus on the Group's development of a vaccine it has been working on with universities research labs for which there was some good data published in medical journals. Further commentary will be expected on the vaccines efficacy and the company's ability to produce en masse. Investors will expect an overall positive outlook for the group and a continuation of a solid dividend.
We currently list AstraZeneca as a BUY
BAE Systems Plc (Q2 2020 Earnings Release)
The defence manufacturer has been hit by Covid-19 with the US commercial avionics and air segments suffering from the reduced air travel. Nevertheless, investors will be hopeful for a clearer picture of H2 demand, something which management seemed confident on back in their June update. Earlier this month the Group also outlined a reform of their supply chain structure as they look to move towards new innovative manufacturing techniques potentially reducing their cost base which will be encouraging for investors. Therefore any updates or outlook in relation to this will be of particular interest.
We currently list BAE Systems as a BUY
Compass Group Plc (Q3 2020 Sales and Revenue Release - Trading Update)
The global catering Group has clearly been impacted by the crisis with revenue dropping in March and April by 20.4% and 46.1% respectively. The current outlook remains uncertain so investors will be looking for some opinions on the outlook from management. Despite this, recovery in Chinese operations should help bring some support and there appears to be enough liquidity for now to help the Group navigate the crisis. Shares are yet to stage a significant recovery as of yet however we still see value should normality return smoothly.
We currently list Compass Group as a BUY
Lloyds Banking Group Plc (Q2 2020 Earnings Release)
The share price has been drifting sideways since the heavy falls back in March. This highlights the difficult environment that Lloyds, which is UK focussed, faces in light of the current crisis. Profits have been falling and impairment charges rising. The CEO highlighted the crisis presents ‘an unprecedented social and economic challenge’. Do not expect much in the way of financial guidance and one analyst recently suggested it could take years for the group to recover.
We currently list Lloyds Banking as a HOLD
Rentokil Initial Plc (Q2 2020 Earnings Release)
Rentokil has staged an impressive recovery since the lows in April following the success of its 'RIGHT WAY' plan launched in 2015, where the Group is also cutting costs and has suspended dividends to shore up cash reserves. Results have been fairly robust in recent months with revenues continuing to rise. However, investors should not be expecting this to continue, with management outlining the virus will hit the Group more than expected over the second quarter.
We currently list Rentokil Initial as a HOLD
Royal Dutch Shell Plc (Q2 2020 Earnings Release)
The cut in dividends earlier in the year was a big blow to income investors as the oil price plunged, but with only a modest recovery in oil prices since, investors should not get carried away expecting pay outs being restored so quickly. The business, much like peers, is likely to give a further assessment of the value of its assets in this lower oil price environment, possibly reassessing some even lower as fears of second waves and slow economic recoveries seem to be the consensus view. More streamlining and asset disposal programmes may be announced to help reduce the debt.
We currently list Royal Dutch Shell as a BUY
Other companies reporting today include:
Anglo American Plc (Q2 2020 Earnings Release) – HOLD
Schroders Plc (Q2 2020 Earnings Release) – HOLD
Vesuvius Plc (Q2 2020 Earnings Release) – BUY
Standard Chartered Plc (Q2 2020 Earnings Release) – HOLD
RSA Insurance Group Plc (Q2 2020 Earnings Release) – HOLD;
British American Tobacco Plc (Q2 2020 Earnings Release)
The defensive qualities of British American Tobacco, including its stable dividends, made it attractive to investors during most of the past four months. The shares outperformed the market but some of that has been unwound in recent weeks as investors have begun to return to other sectors as restrictions have eased and valuations look tempting for those willing to take the risk. In this update the market will be looking at the impact of travel restrictions on sales and whether the company is sticking with its 1-3% revenue growth forecast for the full year.
We currently list British American Tobacco as a HOLD
International Consolidated Airlines Group SA (Q2 2020 Earnings Release)
Shares in British Airways owner International Consolidated Airlines went into a sharp nosedive when the Covid pandemic began, and still trade at just a third of their value in February. With most of its fleet then grounded, the company launched a major restructuring programme which involved a substantial number of redundancies at BA. The company is better off than many of its rivals with plenty of liquidity to see it through but investors will be looking for an update on how quickly the company is burning through those resources and what it’s forecasting in the way of flights for the second half of the year.
We currently list International Consolidated Airlines as a HOLD
Royal Bank of Scotland Group Plc (Q2 2020 Earnings Release)
As with others in the sector operating profits are falling and bad debt provisions rising as a result of the virus. Coming at the end of the week when most other banks will have reported investors will probably not have much in the way of new information.
We currently list Royal Bank of Scotland as a HOLD
Other companies reporting today include
BT Group Plc (Q1 2021 Earnings Release) – HOLD
Intertek Group Plc (Q2 2020 Earnings Release) – BUY
London Stock Exchange Group Plc (Q2 2020 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.