Big names from the oil and pharmaceuticals sectors report this week and there is little doubt the drugs companies are likely to be the happier.
Before they weigh in, however, telecoms group BT gets the ball rolling on Monday with its third quarter report, having confirmed on Friday that the acquisition of mobile phone network EE has been completed.
At the half-year stage, revenue was flat year-on-year and the market is not expecting the picture to have changed much since then. Growth in underlying revenue, excluding transit, was up 2.0%.
Underlying earnings (EBITDA) are tipped to have grown modestly, by 1%, which is at least better than the 1% decline in the second quarter
BT Consumer is expected to report 2% growth year-on-year (YOY), despite the inclusion for the first time of the cost of a full quarter’s worth of the costs of the Champions & Europa League rights.
Revenue in BT Business is forecast to be flat YOY, while the Openreach division’s top line is predicted to rise 2%.
Tuesday sees BP report its fourth quarter numbers against a backdrop of a small rally in the oil price. Nevertheless, investors will be looking for the oil giant to reduce capital expenditure to protect the dividend.
Barclays noted that capital expenditure (capex) in the coming three years looks to be some 30% lower than was originally planned when oil was selling for $US60 a barrel.
“Our dynamic modelling shows that even in the event of an oil price of $40/bl prevailing, BP could respond by reducing capex a further 20% to US$14bn, which would allow the management to balance the books by 2018 with the current level of dividend maintained. Key to BP's share price performance in the coming 12 months is continued evidence of the company's ability to control costs,” Barclays opined.
As for Royal Dutch Shell, it has dodged the potential banana skin of shareholders voting against its proposed takeover of BG.
Thursday’s results statement is probably too early for a grandiose statement of what the “new Shell” will look like, but UBS expects a capital markets day “launch” of the combined Royal Dutch Shell and BG in June.
“We believe the quality of the asset base is clear. Shell now has the opportunity to fundamentally re-set strategy and the operating model of the firm,” the Swiss broker suggested.
Royal Dutch Shell has already indicated that full year net profits will be between US$10.4bn and US$10.7bn. The market consensus is for fourth quarter net income of US$2.0bn, all of which is likely to come from Shell’s downstream (refining) operations.
BG, by the way, releases what will be its final set of results, on Friday. It is scheduled to be assimilated into Shell on 15 February.
As for big pharma, there was a whiff of takeover rumour concerning GlaxoSmithKline last week, with US healthcare giant Johnson & Johnson said to be sniffing around.
Glaxo reports on its fourth quarter performance on Wednesday, and the consensus forecast for core earnings per share (EPS) of 18.9p.
UBS is forecasting sales of £6.21bn, core operating profit of £1.42bn and a core operating margin of 22.8%.
“We expect GSK to reiterate the 2016 outlook issued in May '15 of reaching double-digit Core EPS growth in 2016,” UBS said.
On Thursday, sector peer AstraZeneca follows Glaxo in to bat, but investors’ attentions may be more focused on the Bank of England and its Monetary Policy Committee.
“Recent MPC members' comments have been unsurprisingly dovish. Therefore, the vote split looks set to remain unchanged at 8-1. The Inflation Report, meanwhile, should show downward revisions to both the growth and inflation forecasts, in the near term at least, but the medium-term inflation forecast, supported by recent sterling depreciation, is likely to continue to show inflation hitting the 2% target at the two-year horizon. As a result, MPC members will probably continue to signal that the next move in interest rates, albeit still some way off, will be up,” postulated Daiwa Capital Markets Research.
Elsewhere in the macroeconomic firmament, the market-moving US non-farm payrolls numbers for January are out on Friday, with pundits predicting a rise of around 200,000.
Significant announcements expected
Monday
Finals: RM (LON:RM.)
Economic: UK – Manufacturing PMI, Net Lending to Individuals. US – ISM Manufacturing PMI
Tuesday
Finals: Low & Bonar (LON:LWB), Ocado Group (LON:OCDO), St Modwen Properties (LON:SMP)
Interims: Alumasc Group (LON:ALU), BP (LON:BP.), Mattioli Woods (LON:MTW), NWF Group (LON:NWF)
Economic: UK – Construction PMI
Wednesday
Finals: Torchmark Corporation (LON:TMK)
Interims: GlaxoSmithKline (LON:GSK), Hargreaves Lansdown (LON:HL.)
Trading statements: International Consolidated Airlines (LON:IAG), Johnson Matthey (LON:JMAT), Severn Trent (LON:SVT)
Economic: UK – Services PMI. US – ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI, Crude Oil Inventories
Thursday
Finals: AstraZeneca (LON:AZN), Primary Health Properties (LON:PHP), Royal Dutch Shell (LON:RDSA), Smith & Nephew (LON:SN.)
Interims: Avanti Communications Group (LON:AVN)
Trading statements: Bellway (LON:BWYA), Compass Group (LON:CPG), 04/02/2016 Great Portland Estates (LON:GPO), Vodafone Group (LON:VOD)
Economic: UK – Bank of England Inflation Report, Monetary Policy Committee Bank Rate Vote & Asset Purchase Decision. US – Unemployment Claims, Preliminary Non-farm Productivity, Preliminary Unit Labour Costs, Factory Orders
Friday
Economic: US – Non-farm Payrolls, Unemployment Rate