Thursday preview: Results downpour incoming, including Astra, BAT, Diageo
Thursday brings a deluge of results and trading updates from London's FTSE 350, while the European Central Bank's meeting later on is expected to be rather uneventful.
There will be full year results from Diageo, Renishaw and Sky, interims from Anglo American, AstraZeneca, Bodycote, BAT, Howden Joinery, Inchcape, Intu Properties, Jardine Lloyd Thompson, Lancashire, Morgan Advanced Materials, National Express, Relx, Shell, Schroders, SEGRO, Smith & Nephew, UBM, Vesuvius and Virgin Money, not to mention trading updates from Aveva, CMC Markets, Compass, Countryside Properties, DMGT, Evraz, Intermediate Capital, Kaz, PayPoint, Polymetal, Sophos Group and Tate & Lyle.
Picking out a few of those, AstraZeneca should report a further modest decline of around 2% in product sales at in the second quarter, with core earnings per share down roughly 19% year-on-year given investments behind new drug launches.
However, industry data continues to supports strong performance of the new drug portfolio, said Deutsche, "and we expect product sales growth to accelerate through 2018 as launches gain momentum. We expect guidance to be reiterated."
British American Tobacco is another stock that has lost a fair amount of ground in 2018. In mid June the cigarette maker said profit would be affected by significant currency fluctuations but that earnings were showing good growth. Directors said if exchange rates remained unchanged there will be an 8% hit to operating profit in the first half and 6% for the full year, BAT said in a trading update. The cigarette maker also said revenue and profit growth would be skewed towards the second half of the year as the impact of significant events unwinds, including strong volume growth in Pakistan that led to greater geographic mix dilution.
While UBS believes BAT continues to gain underlying market share, it forecasts a 4.1% volume decline due to more challenging trading conditions in several market. "We forecast H1 margins +44bps with the benefits of price/mix and cost savings part offset by investments in next-generation products...We expect sequentially stronger H2 volume performance with FY18 volumes down -2.5% and price/mix of +5.8%."
Diageo is expected to confirm "good momentum" in the business, Deutche Bank analysts predicted, eyeing some potential upside to consensus forecasts on organic sales and underlying operating profits, "but we don’t expect new announcements on cost savings, on the medium term margin target or on size of share buy-back".
UBS expect second-half sales growth to be boosted by a step up in marketing spend and more product innovations in North America, forecasting full year organic sales growth of 4.4% and expect further acceleration to 5.1% in FY19.
Hip and knee replacement group Smith & Nephew, which after almost two decades of soaring share price growth has made little progress over the past 12 months, has in recent months replaced both its chief executive Olivier Bohuon and its full year revenue guidance after a weak first quarter. Management's guidance was also that margins will be lower in this half compared to the same period last year. The consensus is for adjusted EPS $0.48 for the first half.
After a weak start for hip replacements and wound-care, especially in the US and emerging markets, Deutsche expects similar trends for the second quarter, with group sales growth of 2.3% to $1.25bn, 5.0% reported, thanks to strong growth from knees and from sporting injuries joint repair.
Investors in shopping mall owner Intu Properties' have not had a happy year, not helped by Hammerson pulling out of an agreed merger. Last month the company reported good letting progress but this has not really helped a decline in the shares that has seen more than a quarter of value lost this year.
Interim results are likely to see an 8% drop in NAV to 380p due softness in UK values, forecast UBS, with net rents to increase 2% to £229.9m. At the bottom line, UBS estimated adjusted EPS of 7.3p due to general headwinds for bricks and mortar retailers. "Given the headwinds, we look for comments on deteriorating retail sales."
Countryside Properties is due to give a third-quarter update that is expected to build on a healthy first half where the group reported overall volume growth of 15%.
Analysts at Peel Hunt expect trading to have remained robust and the growth outlook has been bolstered by the recent acquisition of Westleigh Homes and a number of site openings planned for the second half. "Underlying pricing was ahead by circa 3% in H1 and we don’t expect this to have changed materially."
In May Howden Joinery reported a decent start to the year, helped by easy comparatives from 2017, with UK revenue up 14.8% or 13.3% on a like-for-like basis thanks to an increase in volumes.
"The comparatives get tougher as we move through 2018," said Peel Hunt, "and we are forecasting group revenue growth of 10% (to £608m) for H1. We forecast H1 gross margins to be circa 140bps lower at 62.7% and PBT to be marginally ahead of the prior year at £66m." Howden revenues and profits are typically heavily skewed to the second half, so trading in July "should give us some early clues about customer activity and the outlook for H2".
CMC Markets is expected to give a first-quarter update on customer numbers and revenue per client. At the its finals in June the company said it expected 40% of run-rate revenues to be from professional clients by the end of July, at which time the new European rules on retail clients comes into force.
Broker Numis expects CMC's client numbers to be down, but higher revenue per client. "Of more interest will be the growth in premium clients and the opt up to professional status."
ECB YAWN-FEST?
European Central Bank president Mario Draghi laid out the monetary policy plan in June's meeting, announcing the end of the central bank's asset purchase programme at the end of 2018, although interest rates will remain at their current levels "at least through the summer of 2019".
This month's ECB meeting should be largely a "summertime placeholder", said analysts at TD Securities, with the only real burning question being around the translation issues with the rates guidance, where the bank chief Mario Draghi will hopefully provide more clarity but "may waffle around giving more specific month-by-month guidance".
Indeed, many in the market are likely expecting it to be, as Naeem Aslam at Think Markets said, "one of those boring meetings" where nothing new is said. "Nobody is expecting the ECB to move the needle on the interest rate hike."
Danske Bank agreed it was likely to be a "rather uneventful" meeting, with no new policy decisions, nor expecting the post-meeting press conference to see any change in forward guidance on rates, including clarification of "at least through the summer of 2019", with a change in forward guidance on rates only coming next year.
On a potential 'Operation Twist', Danske predicts there will be no formal announcement of longer-dated reinvestment strategy.
Market participants, however, are aware that everything is dependent on economic growth and inflation, Aslam added. "So, investors would be looking to asses if the ECB is going to add anything new on this subject. If Draghi sends out the message that he is comfortable with the current growth rate, it would be deemed as a hawkish stance by the market participants. The euro could get some tailwind as a result of this."
Thursday July 26
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
ECB Interest Rate (EU) (12:45)
GFK Consumer Confidence (GER) (07:00)
Gross Domestic Product (US) (13:30)
Initial Jobless Claims (US) (13:30)
FINALS
Diageo, Renishaw, Sky
INTERIMS
Anglo American, AstraZeneca, Bodycote, British American Tobacco, Countrywide, Franchise Brands, GKN, Howden Joinery Group, Impellam Group, Inchcape, Intu Properties, Jardine Lloyd Thompson Group, Lancashire Holdings Limited, Law Debenture Corp., Mail.ru Group Ltd GDR (Reg S), Morgan Advanced Materials , National Express Group, Relx plc, Robert Walters, Royal Dutch Shell 'A', Royal Dutch Shell 'B', Schroders, SEGRO, Smith & Nephew, Tarsus Group, Telefonica SA, UBM, Vesuvius, Virgin Money Holdings (UK)
TRADING ANNOUNCEMENTS
Aveva Group, AstraZeneca, CMC Markets, Compass Group, Compass Group, Countryside Properties, Daily Mail and General Trust A (Non.V), Discoverie Group, Evraz, Intermediate Capital Group, Lancashire Holdings Limited, PayPoint, Royal Dutch Shell 'A', Royal Dutch Shell 'B', Smith & Nephew, Sophos Group
GMS
Discoverie Group
DRILLING REPORT
Kaz Minerals, Polymetal International
SPECIAL DIVIDEND PAYMENT DATE
EIH Plc
SPECIAL EX-DIVIDEND DATE
LXB Retail Properties, M Winkworth
EGMS
MHP SE GDR (Reg S)
AGMS
Avocet Mining, Bonmarche Holdings, CMC Markets, De La Rue, Discoverie Group, EIH Plc, Evgen Pharma, Findel, Immunodiagnostic Systems Holdings, Intermediate Capital Group, Johnson Matthey, PayPoint, Record, Tate & Lyle, Telecom Plus, Triple Point Income VCT, Two Shields Investments , Two Shields Investments , Weiss Korea Opportunity Fund Ltd
FINAL DIVIDEND PAYMENT DATE
Calculus VCT , Fuller Smith & Turner, Mckay Securities, System1 Group, Triple Point Income VCT, Triple Point Income VCT C, Triple Point Income VCT D
FINAL EX-DIVIDEND DATE
Bilby, Bloomsbury Publishing, Blue Planet Investment Trust, Halfords Group, Investec, Royal Mail, SSE
INTERIM EX-DIVIDEND DATE
Blackrock Income And Growth Investment Trust, Nichols, Porvair, Sanderson Group, Stenprop Limited
QUARTERLY PAYMENT DATE
Fair Oaks Income Limited 2014 Shs NPV, Fair Oaks Income Limited 2017 Shs NPV
QUARTERLY EX-DIVIDEND DATE
APQ Global Limited, City of London Inv Trust, Custodian Reit , M Winkworth, Supermarket Income Reit