Brexit news is likely to dominate much of the coming week, with likely leaks from the so-called intensive “tunnel negotiations” in Brussels agreed ahead of the European Council meeting on Thursday.
But earnings season will begin to ramp up in London with an early salvo of quarterly updates from a range of FTSE 350 name and other popular stocks, including Asos, Barratt, BHP, Domino’s and Unilever.
Unilever holding steady course amid emerging market troubles
Following a solid set of first-half figures in July, investors will be hoping that consumer goods giant Unilever PLC (LON:ULVR) is staying on track when it delivers a third-quarter update on Thursday.
The conglomerate, which owns brands such as Dove and Lipton, is currently expected to meet targets laid down by its former chief executive Paul Polman following a failed takeover bid by rival Kraft Heinz in 2017.
New CEO Alan Jope, however, has so far kept a steady course and reaffirmed the group’s medium-term targets, so any changes will be closely eyed.
One potential snag is some of end-markets, such as Venezuela and Argentina, are currently experiencing hyperinflation conditions which could dent the company’s performance in its emerging markets segment.
Analysts at UBS are expecting the company to deliver organic sales growth in the quarter of 2.8%, up from 2.6% previously, although they also expected “muted” growth in India and ongoing challenges for the firm’s North American market, where it is losing market share in hair care and black tea segments.
Housebuilders look for growth and lower costs as Brexit looms
Ahead of updates in the coming week, shares in housebuilders Barratt Developments PLC (LON:BDEV) and Bellway PLC (LON:BWY) were surging along with the rest of the sector and other UK focused companies after the government reported progress on a potential Brexit deal.
A quarterly statement from Barratt will be eyed to see what impact the recent uncertainty has caused for the sector.
Analysts at Peel Hunt are expecting modest volume growth from the firm in the first 15 weeks of its current year, while housing shortages and government support through the Help-to-Buy scheme continue to serve as longer-term positives.
Cost inflation is also expected to hold between 2-3%, although Peel Hunt noted comments that suggested this could “soften” as labour moved towards residential construction away from the lagging commercial sector, which could reduce pressure to up wages and attract builders.
A day earlier, there shouldn’t be any surprises from Bellway in its final results on Tuesday after an August trading update confirmed it was on track to meet its full-year expectations.
The main driver of growth in recent years has been the firm's new divisions and sales outlets, so there could be more growth ahead in its new financial when partnerships in Scotland, the Eastern counties and London begin to deliver completions.
However, as with Barratt, investors will be keeping a close eye on any wobbles caused by the wider uncertainty, as well as trends on costs.
Big miners hoping to buck up
Industry-wide supply issues have affected both mining giants in the past year, with disappointing macroeconomic data and weakening demand leading to lower prices across the industrial metals.
On Wednesday, Rio investors will hope it can buck the recent downward share price trend due to a bearish iron ore market and weakening Chinese demand.
Meanwhile when BHP reports a day later, analysts are predicting the Anglo-Australian group may fare better than its rival based on a decent oil market.
Petroleum production figures are forecast by BoA Merrill Lynch to decline up to 7% in the next year because of natural field decline, though bigger news may come from BHP’s petroleum briefing on 11 November, where the analysts expect an update on strategy for the division “and a deep dive into its growth options as BHP seeks to offset declining production and rising unit costs”.
Hays follows grim news from rival recruiters
Hays PLC’s (LON:HAYS) first-quarter trading statement is due on Tuesday, but it’s going to be hard work for the recruitment agency to push through market gloom following profit warnings from fellow hiring experts Robert Walters and PageGroup.
Investors are already braced for bad news, with Hays shares sinking to a year-low of 139p on Tuesday.
Back in August, Hays posted a 3% drop in pre-tax profit and flat net fee income for the 2019 financial year and warned of lower business confidence in Germany and Britain.
Investors will be looking to see whether Hays has followed the sector-level decline in UK business, which is being blamed on Brexit-related uncertainty that PageGroup said is now ‘impacting candidate and client confidence at all levels’.
Domino’s looking to make progress with franchisees
Domino’s Pizza Group PLC (LON:DOM) posts its third quarter trading update on Thursday.
In July the pizza chain had 15% sliced off its share price after reports of falling profits and a dispute with its franchisees, who were refusing to open new stores until they were granted a greater share of its profits.
This was quickly followed in August by pizza chief executive David Wild announcing his retirement under a cloud - after Domino’s was accused of misleading its investors about the row with its franchisees.
Investors will be scanning the statement for any news over whether Domino’s has made any progress toward clearing the impasse with its franchisees the not-yet-announced incoming chief executive.
Analysts are expecting like-for-like sales to be up 4% across UK and Ireland LFL, a small improvement on the first half’s 3.9% growth.
Asos profits plunge
Shares halved over the past 12 months following two profit warnings, issued in December and July, as a result of substantial investments in IT and logistics, operational issues at warehouses and the unfavourable market conditions.
The warm weather in September, the worst month on record according to the British Retail Consortium, may have slowed down demand for autumn/winter items, leading to higher discounting.
Analysts suggest a negative sentiment, as the financial year and mid-term guidance may be below forecasts, with broker UBS estimating underlying profits at £53.7mln, against Reuters’ consensus of £62mln on revenues up 12% to £2.7bn.
Statutory pre-tax profit of around £30mln would be a third of last year’s figure, reflecting restructuring and the so-called transition costs.
WH Smith outlook eyed
With less digital kudos but a more than just reliable retail investment in recent years, WH Smith PLC (LON:SMWH) puts out final results on Thursday a few weeks after saying profit margins and stores openings were “in line with plan”.
UBS forecasts full year PBT of £156mln, with the travel arm seen as the driving force, with a first-time contribution from US acquisition InMotion.
“Key issues going forward will likely be any potential Brexit impact on airport passenger numbers, the growth rate of the Travel business and any news on the opening of full-line Travel stores in the US,” analysts said.
Marston’s booze diluted by weak food
Publican and brewer Marston’s plc (LON:MARS) is expected to report a robust fourth quarter in the year-end trading statement out on Tuesday, driven by the wet-led Taverns segment, offset by a weaker performance in the food-led Destination & Premium segment.
The latter will be due to a decrease in eating out consumers, although it could be helped by the downward shift in supply, after Frankie & Benny’s closure plans and Pizza Express flagging its huge debt pile.
Broker Peel Hunt estimates 34% growth in equity value over the next two years, driven by underlying earnings, dividends and debt reduction, nearing the £50mln per annum mark.
Full-year expectations are slightly below the performance recorded in the three quarters, with like-for-like sales decline in Taverns and Destination & Premium of 1% and 1.2%, respectively.
Moneysupermarket revenues seen slowing
Analysts expect revenue growth is likely to slow down, contracting from 8% to 4% quarter-on-quarter, only to pick up in Q4, though the switching environment may be challenging.
The consensus for full-year underlying earnings is £142mln, with UBS proposing an optimistic £143.5mln, who rates it as a “buy”, on the back of traction in policy monitor and credit scoring.
The quarter may be less buoyant as energy switching was down 9% year-on-year in June but rebounded in July and August with a 10% and 15% growth respectively, while motor insurance pricing is expected to improve after a weak Q2 performance.
Significant events expected for week ending 18 October
Monday 14 October:
Finals: Bacanora Lithium PLC (LON:BCN)
Economic data: EU industrial production
Significant events on Tuesday 15 October:
Economic announcements: UK unemployment, German ZEW
Significant events on Wednesday 16 October:
Economic announcements: UK inflation, EU inflation, US MBA mortgages, US retails sales, US Beige Book
Significant events on Thursday 17 October:
Trading statement: BHP Group PLC (LON:BHP), Domino's Pizza Group PLC (LON:DOM), Moneysupermarket.com Group PLC (LON:MONY), National Express Group PLC (LON:NEX), Rank Group PLC (LON:RNK), Rathbone Brothers PLC (LON:RAT), Rentokil Initial PLC (LON:RTO), Unilever PLC (LON:ULVR)
Economic announcements: UK retail sales, UK credit conditions, European Council meeting, US housing starts, US jobless claims, US industrial production
Significant events on Friday 18 October:
Economic announcements: European Council meeting