Unilever plc (LON:ULVR) investors are hoping the consumer goods giant delivers a strong set of interims on Thursday after a good start to the year but poor weather in Europe could have dented ice-cream sales.
In the first quarter, underlying sales beat expectations, led by growth in the home care division, which sells the Domestos and Sunlight brands.
However, UBS has lowered its forecast for second quarter sales growth to 3.2% from 4.2% previously following weak data from market research firm Nielsen for Unilever's ice cream business, particularly in Europe due to unfavourable weather compared to last year's prolonged heat wave.
“In addition, we do not expect an improvement in Argentina volumes (-10% in the first quarter); the softening in the Indian market does not help; and Unilever is still losing share in some of its key US categories (dressings, hair),” UBS said.
“On the other hand, we see approximately +100 basis points offset as Unilever laps last year's trucker strike in Brazil, and mergers and acquisition (+30bps) / disposals (+40bps) should continue to be top-line accretive.
For the first half, the investment bank expects a 19.3% EBIT margin, up 45 basis points year on year.
Unilever has guided for 2019 organic sales growth of 3-4% range, with continued improvement in EBIT margin and another year of strong free cash flow. UBS predicts 3.1% organic sales growth and a 19.1% underlying EBIT margin.
National Express outlook in focus
National Express Group PLC (LON:NEX) had a good start to the year with first-quarter revenue rising 8.3%, putting it on track to meet its full-year targets.
The company grew sales across its bus and rail divisions in the first quarter, although its largest unit of North America was helped by swings in the US dollar.
The division, which runs school buses and offers corporate transit services, was hit by school closures due to severe snow during the period, with a US$4.5mln incremental year-on-year profit impact, although a “sizeable proportion” of the lost schools days is expected to be made up within the rest of the first half of the year.
The company reports its results for the first half on Thursday with the focus on whether it remains on course to achieve its guidance for the year.
Diageo set to toast strong results
The owner of Johnnie Walker whisky and Tanqueray gin, Diageo plc (LON:DGE), looks set to toast a good set of final results after beating sales forecasts in its interims in January.
The group has said it expects "mid-single digit" organic sales growth for the year, led by strong demand for spirits.
Investors will be watching out for update on the additional £600mln share buyback, which was unveiled at the start of the year after the group netted US$550mln from the sale of 19 drinks brands in September to US-based Sazerac.
UBS expects Diageo to announce additional cash returns “over and above” its progressive dividend at the full-year results. It estimates £3.0bn in share buy-backs in fiscal year 2020.
The investment bank estimates organic sales growth of 4.4% for the second half. UBS sees the company reiterating its guidance for “mid-single digit” organic sales growth and operating profit up 5% to 7% in fiscal year 2022.
Markets await guidance from ECB
The European Central Bank (ECB) is widely expected to change its forward guidance towards easing monetary policy at its meeting on Thursday.
Last month ECB president Mario Draghi said the central bank could launch a fresh expansion of its €2.6trn quantitative easing programme if the inflation outlook failed to improve.
Many economists expect the central bank to cut the deposit rate in September, a month before Draghi is due to step down, but they do not see a relaunch of asset purchases this year.
ING Economics thinks the ECB may not wait until September for easing given recent weak eurozone data and the fact the US Federal Reserve is expected to cut rates at the end of this month.
"The main question is whether the ECB can afford to wait six more weeks before delivering new monetary stimulus or whether it should surprise financial markets by frontloading new measures,” it said.
“In fact, traditional ECB watching argues in favour of compiling more data, waiting for the release of second quarter GDP in mid-August and the next ECB staff projections and only then taking a decision at the September meeting.
“Draghi’s track record of over-delivering and trying to be ahead of the curve, however, could bring new ECB action at the ECB’s July meeting. It's a very close call, which will only be decided during the meeting next week.”
Major announcements due:
ECB rate decision
Finals: Diageo plc (LON:DGE), Fuller Smith & Turner PLC (LON:FSTA), Highlands Natural Resources PLC (LON:HNR), NCC PLC (LON:NCC), Scholium Group Plc (LON:SCHO)
Interims: AstraZeneca PLC (LON:AZN), Unilever plc (LON:ULVR), RELX PLC (LON:REL), Robert Walters PLC (LON:RWA), National Express PLC (LON:NEX), Anglo American PLC (LON:AAL), Inchcape PLC (LON:INCH), Bodycote PLC (LON:BOY), Acacia Mining PLC (LON:ACA), Capital & Counties PLC (LON:CAPC), Howden Joinery PLC (LON:HWDN), Lancashire PLC (Q2) (LON:LRE), Morgan Advanced Materials plc (LON:MGAM), Tyman PLC (LON:TYMN), Vesuvius Plc (LON:VSVS), Primary Health Properties PLC (LON:PHP)
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AGMs: Advanced Oncotherapy PLC (LON:AVO), BlueRock Diamonds PLC (LON:BRD), Polarean Imaging Group PLC (LON:POLX)
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