Sheridan Admans, investment research manager at The Share Centre, gives his thoughts on what to expect from companies announcing results w/c 21 July 2014.
Monday
Babcock International (interim management statement)
Despite recent news of contracts with the MOD not being won, investors will be hoping for a confident trading update over its future prospects. Expect further news on the integration of Avincis, its latest acquisition, along with comments on international expansion. Investors will acknowledge that in recent results the group pointed to a recovery in defence spending so will hope to see evidence of this continuing. News on contract wins and more importantly contracts in the pipeline will also be a point of interest.
We currently list Babcock International as a BUY
Tuesday
ARM Holdings (Q2 results)
The smartphone segment has come under pressure lately with increasing evidence of a slowdown in consumer demand for high end phones. This is having an impact on the margins of the processor designers such as ARM, and will continue to do so. However, the company is still the leader in its sector and posted a relatively positive Q1 trading statement so investors will be hoping for more of the same. It is likely that sterling’s appreciation will get a mention on how it is impacting earnings. Investors will also welcome updates on license awards and guidance for the full year.
We currently list ARM Holdings as a HOLD
Royal Mail (interim management statement)
The share price has been under pressure of late as investors concentrated on margin pressures and the growing threat of competition. Commentary on cost cutting measures and the group’s request for help from the regulator as a result of the competition will be welcomed by investors. Although unlikely, there may be further comment on the antitrust investigation in France.
We currently list Royal Mail as a HOLD
Companies also reporting today include: Croda International (Q2 results) – HOLD
Wednesday
GlaxoSmithKline (Q2 results)
This will be the first update since the M&A activity in the sector peaked during the second quarter so investors will welcome commentary on the transactions that happened. Updates on the progress of R&D assets will also be of interest and we expect to hear whether its guidance of 4-8% EPS growth will be maintained. Additionally, the company has been in the news regarding the bribery allegations in China. Although Chinese revenues only account for less than 5% of the global total, negative press coverage will not be welcomed and investors may want to hear from management on the matter.
We currently list GlaxoSmithKline as a BUY
Companies also reporting today include: Capita (Q2 results) – HOLD, BHP Billiton (Q4 results) – BUY and Sage (Q3 results) – HOLD
Thursday
Kingfisher (Q2 results)
After Kingfisher’s disappointing Q1 results investors will be looking for acceleration in its growth. However, with UK house sales slowing over the period, investors could see another quarter of lacklustre performance. Around 60% of the group’s sales and profits come from outside the UK. Recent data out of China, which has seen economic growth accelerate for the first time in three quarters, might have had a positive impact on Kingfisher’s Q2 results. However it is suspected to be more pronounced in Q3.
We currently list Kingfisher as a HOLD
Hammerson (interim management statement)
Hammerson has momentum on its side with a recovering economy supporting demand for outlets, improving consumer trends and rising rents. Any weakness in the group’s numbers could be a result of tough trading conditions in its French operations, which represents 20% of revenues. However, investors should note that footfall in the region has been seeing a slight increase lately.
We currently list Hammerson as a BUY
Companies reporting today include: Howden Joinery Group (Q2 results) – BUY, Reed Elsevier (Q2 results) – HOLD, easyJet (interim management statement) – HOLD, SABMiller (Q1 trading statement) – HOLD, Tate & Lyle (interim management statement) – BUY and Unilever (Q2 results) – BUY
Friday
Anglo American (Q2 results)
Investors will be hoping to see a continuation of the Q1 iron ore production numbers following through to the second quarter. Investors should acknowledge that the production of copper could be helped by the expansion of the Los Bronces and Collahuasi mines. Industrial disputes in South Africa have been ongoing so an update will be expected in regards to this matter.
We currently list Anglo American as a HOLD
United Utilities (interim management statement)
As usual for a utility, investors should anticipate the company to announce it is trading in line with expectations. As we move closer to the next regulatory period there may be an update with regards to its ongoing negotiations with the regulator and its proposals that were submitted in June.
We currently list United Utilities as a BUY
Companies also reporting today include: Alliance Trust (Q2 results) – HOLD, British Sky Broadcasting (Q4 results) – BUY, Pearson (Q2 results) – HOLD and Vodafone (interim management statement) – HOLD
Economic Diary
22 July, US Consumer Price Index, June 2014 – BLS
Last month data indicated that US inflation rose to 2% in May. This was a 16 month high. Prices rose by 0.4% month on month. May’s jump was not expected, and if US inflation continues to remain at this level over the next few months, the Fed may bring forward the point at which it increases interest rates.
23 July, Minutes of the Monetary Policy Committee Meeting held on 9 and 10 July 2014
Last month’s minutes from the MPC said that for some members the monetary policy decision “has becomes more balanced.” It will be a surprise, however, if the minutes published today reveal that any members of the MPC voted for a hike in interest rates. But will the minutes strike a more hawk-like tone, and give any hints of a possible rates rise later this year?
25 July Gross Domestic Product: Preliminary Estimate, Q2 2014 – ONS
The National Institute of Economic and Social Research recently estimated that UK GDP grew by 0.9% in Q1. According to Markit, the latest Purchasing Managers’ Indices are consistent with growth of 0.8%. However, recent data from the ONS on industrial production and construction was disappointing and pointed to contraction in both sectors in May. Although the ONS may subsequently revise today’s data, if it shows growth in excess of 0.8% this will be greeted with celebration, but less than 8% may provoke a feeling of disappointment.
Other announcements include:
22 July
• Public Sector Finances, June 2014 – ONS
• Quarterly Industrial Trends – CBI
• US Real Earnings, June 2014 – BLS
23 July
• Monthly Distributive Trades Survey – CBI
• EU Quarterly data on government deficit – Eurostat
24 July
• Growth Indicator Survey – CBI
• Retail Sales, June 2014 – ONS
25 July
• Index of Services, May 2014 – ONS
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 Advice team arrive at their views please read our Investment Research Policy.
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