We give our thoughts on what to expect from companies announcing results week commencing 26 October 2020.
Companies reporting w/c 26 October
Whitbread Plc: Q2 2021 Earnings Release
Whitbread is one of many companies that have suffered with the uncertainty that has plagued the hospitality and travel sector during the pandemic period, with sales dropping 77% back in the September trading update. The shares continue to trade at very low levels, as uncertainty and the possibility of further restrictions loom large heading into the winter period. With the Company holding onto cash at present, this ultimately means no dividend for investors. Therefore, any information on the Company’s outlook, and how long management believes it will take for trading activity to recover to pre-pandemic levels, will be keenly sought-after by investors.
We currently list Whitbread as SELL.
HSBC Holdings Plc: Q3 2020 Earnings Release
It has been a difficult year so far for HSBC, with the bank facing significant headwinds in the form of falling dollar interest rates, the resurgence of Covid-19 in key jurisdictions, and navigating the potentially difficult path of negotiations between Hong Kong and China. Last month, there were also the ‘dirty money’ allegations, which caused the shares to fall to a 25-year low. As with other players in the sector, impairment charges have also been rising for HSBC. Investors will be hoping for further signs of improvement from Asia, where the Group generates the majority of profits, along with an update on costs, the dividend policy and any further restructuring.
We currently list HSBC as HOLD.
Next Plc: Q3 2020 Sales and Revenue Release – Trading Statement
Next’s sales have recovered well since the lockdown eased, although interim results in September were slightly below market expectations. The Company indicated that sales had improved in August, so investors will be keen to hear if this recovery has continued through the rest of the third quarter. Online sales have been a strongpoint for some time, so the focus will be more on the performance of the high street stores. The market will also be interested in whether the Company still expects full-year sales to fall 12%, and if there are any indications that it might resume dividend payments to shareholders.
We currently list Next as HOLD.
WPP Plc: Q3 2020 Sales and Revenue Release – Trading Statement
There was news recently that the Group is looking at possible acquisitions, following a period of restructuring which involved selling off parts of the business to strengthen the balance sheet. The market had been expecting to receive further news on WPP’s restructuring and future plans by the end of the year, so the focus is likely to be more on overall revenue and cost control in these results, which were slightly ahead of expectations back in August.
We currently list WPP as HOLD.
Royal Dutch Shell Plc Q3 2020 Earnings Release
Royal Dutch Shell is another FTSE 100 company that has faced difficulties since the markets dropped in March. The oil price may have recovered from its April low, but it’s still almost 40% below where it was a year ago, and Shell’s shares have dropped to levels not seen in 25 years. The economic impact of the Covid-19 pandemic came on top of a failure by the Saudis to agree an oil production cut with Russia. Second quarter figures in July did little to raise spirits, showing a loss of $18bn as a result of significant impairment charges. A cut in the dividend was inevitable, but also significant, as it was the first for the Company in 80 years. Investors will be hoping there is light at the end of the tunnel.
We currently list Shell as BUY.
BT Group Plc: Q2 2021 Earnings Release
Investors in BT will be hoping for some good news following a challenging year for the Company so far, characterised by the first ever dividend cut, and the Covid-19 lockdown which reduced business activity and demand for its BT Sport channels. That showed in a 7% drop in first quarter revenue, but with most top-level football having resumed since then, the market will be interested to hear if demand for its TV services has improved. In July, BT forecast that its full-year earnings would drop to between £7.2bn and £7.5bn, compared to £7.9bn last year. So, any update on this and future dividends in these interim results will be a focus for investors.
We currently list BT as HOLD.
Lloyds Banking Group Plc: Q3 2020 Sales and Revenue Release – Interim Management Statement
The banking sector remains under pressure with growing concerns around the potential for bad debts to continue to rise as a result of the virus. Lloyds’ business is predominately UK based, given its position as the biggest mortgage provider geared to the housing market. That said, the current low share price reflects investor fears; with Brexit once again on the corporate agenda and the threat of the virus lingering, we expect management to remain very cautious in their outlook. Any further news on future dividend payments will also be worth noting.
We currently list Lloyds as HOLD.
International Consolidated Airlines Group SA: Q3 2020 Earnings Release
Air travel continues to remain volatile and shareholders of IAG have had a very active time in recent months, since the Company progressed with a rights issue back in September. The Company should now have enough liquidity to see it through these difficult times. However, with quarantine restrictions returning, the threat of numbers passenger dropping further has returned. Nevertheless, the airline has pushed ahead with big changes, including redundancies, cuts in spending and deferring deliveries of aircraft, all of which investors will be hoping are enough to keep the Company in a sustainable position. Any further outline on passenger demand and management’s outlook will be of particular interest in these results.
We currently list IAG as HOLD.
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