Friday preview: AstraZeneca looking to please, BT to avoid 'negative surprises'
As the first Friday of the month, the market agenda is dominated by US non-farm jobs report, while the main points on the UK calendar are construction data and results from AstraZeneca and BT Group.
The FTSE 100 group said it anticipated 2017 core earnings per share would be "towards the favourable end" of its guidance range, though that still means EPS will decline by a low rather than mid-teens percentage.
Deutsche Bank expects it will be at the upper end the range, with revenue down 2% and core EPS declining 13% at constant exchange rates.
"We expect 2018 guidance to encompass low to mid single digit CER product sales growth but with declining externalisation. We assume launch investments lead to a single digit decline incore EPS," analysts wrote.
"However, we expect the shares to be driven by improving visibility on product sales growth momentum which we expect to translate to a meaningful margin expansion and above peer group growth over the medium term." Fourth quarter product sales are expected to be broadly flat, helped by easing pressures from generic rivals and strong growth from new cancer drugs Lynparza and Tagrisso, with diabetes and respiratory performance expected to remain mixed, while growth in heart attack treatment Brilinta should be solid.
BT will report third-quarter results with analysts expecting revenues to be down 0.6% at the underlying level to £6,068m, adjusted EBITDA down 1.7% to £1,838m.
"With the shares having notably underperformed over the past 12m, we think investors are looking for an absence of negative surprises," said UBS analyst Polo Tang, "and reassurance around the overhangs of pensions, fibre capex and Premier League rights costs."
Within the divisions, he said Global Services and Business & Public Sector have been notable drags on the group, but comparables for both units become easier from the third quarter onwards.
"We re-iterate our view that the downside from the overhangs has been priced in and that there could be a series of positive catalyst over the coming months," Tang said, expecting BT to re-iterate its full year guidance of £7.5-7.6bn of adjusted EBITDA and normalised free cash flow of £2.7-2.9bn.
The first Friday of the month is non-farm payrolls day, with these numbers being read with the market already pricing-in a 99% probability of a March rate hike following the Federal Reserve policy meeting this week.
In December the NFP figure dipped to 148,000 and for January is expected by the market to bounce back to around 180,000. Wages will also be front-and-centre, with the consensus of economist forecasts pointing to average hourly earnings growth remaining at 0.3% on the month and picking up to 2.6% from 2.5% on the year.
The unemployment rate is seen remaining at 4.1%, having fallen to that low in October, down from 4.7% at the end of2016.
There was a larger-than-usual drop in average temperatures across the country in early January, which many economists believe may have dampened job creation for the month.
Overall, HSBC predicted a 170,000 increase in payrolls, "as underlying momentum in the labour market still appears to be healthy", while average hourly earnings are seen rising just 0.1% with the softness partly reflecting pay period calendar quirks and so leaving the annual rate at 2.5% and a risk it could fall to 2.4% depending on rounding.
HSBC was one of a few seeing a potential further fall in the unemployment rate to a new low of 4.0% in January.
UK construction PMI is seen improving from the 52.2 printed in December to 52.6 in January.
RBC Capital Markets expected the PMI to be flat month-on-month at 52.2.
"The collapse of Carillion, announced on 15 January, could be partially reflected in the surveys, as PMI data are collected mid-month.
"To the extent that any adverse knock-on consequences for the company’s sub-contractors are captured in the survey responses this month, the skew of risks to this month’s PMIs appears to be on the downside."