Blue-chip deluge on Thursday with Royal Dutch Shell, AstraZeneca and Diageo (and more) set to report

Three of the 10 largest London-listed companies (by capitalisation) are updating the market on Thursday. A dozen or more other household names are also expected to report.

Shell logo
It's all about the cash-flow for shell and its ability to finance the dividend

There may have been busier days for big company results but taking the heatwave into consideration, research analysts are likely to finish Thursday exhausted.

Product sales at AstraZeneca have plunged in recent years due to the loss of patents on a couple of its blockbuster drugs such as Crestor (statin) and Seroquel (bipolar).

That cycle looked to have come to an end in the final quarter of 2017 when sales edged higher, but they fell again in the first three months of 2018.

Astra is still forecasting a “low single-digit percentage increase” in product sales growth this year and investors will be looking for that guidance to be maintained when the drugs giant publishes its second-quarter trading update on Thursday.

To do just that, some of the FTSE 100 group’s newer drugs will need to step up and plug the gaps, with Lynparza and Tagrisso (both cancer), which the market has high hopes for, likely to be the most keenly eyed.

If the new kids do indeed step up to the plate, this could prove to be Astra’s turnaround year.

Not so much a cash shell, as a cash-flow Shell

When Royal Dutch Shell updates the market, investors will want to be at best impressed with cash-flow, at worst reassured.

Importantly, they’ll want to know that the more recent slip-ups were indeed mere one-offs, as previously promised.

“Shell’s cash flow was disappointing in 4Q17 and again to some extent in 1Q18, and explained by management in terms of a number of one-off negative factors. With these falling away, and Shell’s exposure to strong LNG pricing as well as crude prices, we expect a sharp improvement in underlying CFFO to above USD10bn in 2Q18,” HSBC analysts said in a recent preview note.

HSBC also looked forward to news of a possible share buyback but acknowledged that Shell may not be quite ready yet.

“Shell’s management have repeatedly talked of wanting ‘line of sight’ to their target gearing level of 20% before restarting buybacks,” the bank said.

“We don’t see gearing there yet – our end-2Q figure is 23.5% - but with a target to buy back USD25bn of stock by 2020, timing is getting fairly limited.

“With a strong crude price backdrop, Shell may choose to announce the restart of buybacks with these results. We don’t yet assume it in our numbers (we assume an early 2019 start), but we understand that market expectations of a near-term restart have risen considerably.”

Diageo biting the Bulleit

Drinks brands giant Diageo has, rather unexpectedly, found itself on the front line of the brewing global trade war.

US whiskey now faces an additional 25% tax in the EU, as Europe looks to respond to tariffs placed on European imports in the US. Similar levies are being put in place in China, Canada and Mexico.

In a preview, Laith Khalaf, senior analyst at Hargreaves Lansdown commented: “Given that North American whiskey brands like Bulleit account for some 9% of Diageo’s sales that’s far from ideal – although the blue chip’s dominant position in scotch could mean it sees some benefit from consumers switching.”

He added; “Given Diageo’s target to improve operating margins by 1.75 percentage points over the three years to 2019, costs will be a focus in this set of results.”

Meanwhile, Diageo’s recent offer for shares in Chinese spirit maker Sichuan Shuijingfang suggests its management sees potential in Asian markets despite recent headwinds.

Bid situation overshadows Sky

While still swirling in the midst of a takeover war, investors will be looking out for anything that could push up the bid price of FTSE 100 pay-TV broadcaster Sky PLC (LON:SKY) when it releases a fourth-quarter trading statement.

Now that Comcast has pulled its bid for the assets currently being sold by major Sky shareholder 21st Century Fox, investors will be expecting the media giant to turn its guns fully on Sky, making a higher bid price even more likely.

Analysts at broker Liberum have said Comcast’s decision to focus on Sky can be interpreted in two ways; “(1) it suggests a division of the spoils to Disney i.e. Disney is left to take the Fox US assets while Comcast gets Sky and/or (2) it is a warning shot to Disney to say that Comcast now has extra firepower to come back with an increased bid in case Fox/Disney looks to trump Comcast's 1475p bid.”

Significant announcements expected

Interims: AstraZeneca PLC (Q2) (LON:AZN), Royal Dutch Shell PLC (Q2) (LON:RDSA), Diageo plc (LON:DGE), Anglo American PLC (LON:AAL), Smith & Nephew PLC (LON:SN.), British American Tobacco plc (LON:BATS), Inchcape PLC (LON:INCH), Schroders PLC (LON:SDR), RELX PLC (LON:REL), National Express PLC (LON:NEX), SEGRO PLC (LON:SGRO), Intu Properties PLC (LON:INTU), Bodycote PLC (LON:BOY), Robert Walters PLC (LON:RWA), Vesuvius Plc (LON:VSVS), Howden Joinery Group PLC (LON:HWDN), Franchise Brands PLC (LON:FRAN), Lancashire PLC (LON:LRE), UBM PLC (LON:UBM), Virgin Money PLC (LON:VM.)

Finals: Sky PLC (LON:SKY), Renishaw PLC (LON:RSW)

Trading updates: Compass Group PLC (LON:CPG), Johnson Matthey PLC (LON:JMAT), Sage Group PLC (LON:SGE), Tate & Lyle PLC (LON:TATE), Countrywide PLC (LON:CWD), Daily Mail & General Trust PLC (LON:DMGT), Aveva Group PLC (LON:AVV), Sophos Group PLC (LON:SOPH), KAZ Minerals PLC (LON:KAZ), Countryside Properties PLC (LON:CSPC)

Ex-dividends: To knock 3.2 points off FTSE 100 index - Royal Mail PLC (LON:RMG), SSE plc (LON:SSE)

Economic data: US weekly jobless claims; US durable goods orders; US international trade in goods

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