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AstraZeneca likely to remain in favour, banks update on PPI

Prudential completes its M&G demerger on Monday, with the week also seeing WPP and Travis Perkins follow recent profit warnings from rivals and Reckitt Benckiser's new CEO makes his debut

AstraZeneca - new drugs
Results will come thick and fast

The coming week has plenty of company news for investors to get their teeth into, but depending on parliament's weekend activities, trading could be dominated by Brexit-related drivers.

Either way, AstraZeneca PLC (LON:AZN) is likely to remain a favourite as the pharma giant releases third-quarter results on Thursday.

Shares hit all-time highs in September after the FTSE 100-listed group reported updated results on the efficacy of Brilinta, a drug for coronary artery disease and type-2 diabetes treatments.

The second quarter has a lot to live up to, as results were well ahead of analysts’ forecasts with product sales jumping 14% year-on-year to US$5.72bn and total revenue was up 13% to US$5.82bn.

There has been a steady stream of news from the Anglo-Swedish colossus in recent months, including on a COPD drug, ovarian cancer trials and an asthma pen, with regulatory progress for a breast cancer antibody the latest update in the past week.

The drugmaker’s shares are among the most followed by UK investors large and small, a transformation from its unloved status a few years ago as it battled the declining sales of older blockbusters that had lost their patents, with a dearth of new products coming through.

Those investors that stuck with chief executive Pascal Soriot, unlike a certain Mr Woodford, have enjoyed the fruits of their faith as lung cancer treatments Tagrisso sales surging and Lynparza making good progress, while dozens of trials in respiratory and cardiovascular health offering potential.

Analysts at Jefferies said Astra has “the most upcoming catalysts” among the European pharma sector from its Roxadustat, Lynparza and Imfinzi trials and regulatory applications, while also flagging its “impressive” earnings growth and saying the group is the “best positioned to benefit from China reforms”.

While Jeff feels the shares are a tad overvalued versus its £67 target price, Barclays has its eye on £82.

Banking on PPI impact

Royal Bank of Scotland Group PLC (LON:RBS) and Barclays Plc (LON:BARC) provide third-quarter updates at the back end of next week, with the rest of the sector following the week after.

Could this be the final fallout of the of payment protection insurance (PPI) furore?

Deutsche Bank analysts said PPI mis-selling charges will be closely eyed in the numbers, along with banks also facing further pressure on their net interest income and profit margins.

However, the analysts said the key focus was likely to be on both the outlook for net interest margins (the difference between the interest income generated by a bank versus the amount paid out to lenders) and any newsflow surrounding the ongoing Brexit process.

At RBS, where Alison Rose has been announced as the new CEO, the second quarter saw £1.3bn profits, much higher year-on-year and compared to the first quarter, flattered by the completion of the recent merger with Saudi bank Alawwal and a return to profit for NatWest Markets.

Barclays boss Jes Staley has seen off activist investor Edward Bramson but eyes will be on whether the performance of ths investment banking arm can build on its strong second quarter.

Reckitt new boss follows profit warning

A quarterly update from Durex and Dettol owner Reckitt Benckiser Group PLC (LON:RB.) will be the market debut for new boss Laxman Narasimhan, poached from Pepsi and who started work in September.

Outside of this change, the last time we heard from the consumer products group was July’s profit warning, when RB blamed a decline in birth rates in China on a disappointing first-half performance.

Net revenue guidance was cut to 2-3% on a like-for-like basis, down from the previous 3-4% target, though outgoing CEO Rakesh Kapoor maintained that adjusted operating margins remained as planned.

Health products were the achilles heel, with LFL sales falling 1% in the first half, as over-the-counter medicines dropped 5% and other products such as Scholl, Dettol and Durex fell 1%, counterbalancing the 2% growth from infant formula and child nutrition.

The Hygiene Home business was solid, with LFL growth of 3% from strong performances from Finish, Harpic and Vanish.

Narasimhan has plenty more to ponder, says Ross Mould at AJ Bell, including the $1.4bn settlement with the US authorities relating to the now-spun-off Indivior unit and ongoing strategy.

“Analysts and shareholders will also be looking for an update from Mr Narasimhan on the RB2.0 plan, whereby Reckitt will establish Health and Hygiene & Home as two entirely independent businesses by mid-2020. This has prompted speculation that the company could be broken up and formally split in two.”

Prudential does the splits

On Monday, Prudential PLC (LON:PRU) will complete the demerger of its UK-focused M&G PLC arm from its ongoing focus on the US and Asia, with the shares trading separately at the start of the week.

Prior to the split, on analysts at Citigroup provided an update to its valuation model to clearly separate out the future earnings and valuation estimates for both parts.

“There are a lot of moving pieces, but ultimately, we make no change to our existing group target price, and our combined EPS changes are minimal,” Citi said.

The analysts value M&G at £6.0bn using a sum-of-the parts approach based on a 13 multiple of forecast earnings and “sense-checked” the implied dividend yield of 7.75% against peers, with 6.6% at Phoenix, 7.0% at Legal & General, 7.9% at Standard Life Aberdeen and 7.9% at Aviva.

As regards dividend growth, Pru PLC is assumed to offer 8% annual growth compared to 2% at M&G.

WPP expectations low after rival's warning

When we last heard from WPP (LON:WPP), it was crowing over the poaching of Argos boss John Rogers to spearhead its new growth strategy as its new finance chief.

WPP has had a tough time in recent years, with shares sliding 50% between 2017 to 2019, and the first half of this year saw the marketing behemoth’s profits drop by 44%.

Friday’s third-quarter trading update is expected to see organic revenue growth worsen, according to Deutsche Bank, which forecast a fall 1.7% for the full year.

Big ad agencies are continuing to suffer from competition with Google and Facebook, which have wreaked havoc on traditional marketing, with sector-mate Publicis cutting its full-year guidance last week for the second time in three months last week.

Deutsche also noted the likely impact of “global growth uncertainty feeding into marketer budgets” across the sector, and WPP’s exposure to China, where it employs 14,000 staff.

Tough for Travis to perk up

After a profit warning by a sector peer a week earlier, builders’ merchant Travis Perkins PLC (LON:TPK) will post what Peel Hunt call “a relatively important update” on Tuesday.

Investors will be wondering how the economic backdrop has impacted the company’s third quarter, especially after Grafton’s warning that UK business has been hit by "increased economic uncertainty" that was preventing consumers from spending in home improvement projects, with growth in Ireland also reported to be slowing.

With such strong pressure from macro conditions, Peel Hunt said this might mean the benefits from Travis Perkins’ operational improvements may be subsumed.

Other hotly anticipated items will be news on the sales of its chain of Wickes do-it-yourself stores and its plumbing and heating division, which have been dividing consensus forecasts for adjusted results.

Hotels under fire

Similarly, Premier Inn owner Whitbread plc's (LON:WTB) half year results come after some negative news from the sector.

Market data from STR Global showed UK sector-wide revenues per room fell an average of 0.7% this year, while at the end of the preceding week, easyHotel gave a grim assessment of UK hotels market, saying its London hotels performed well enough but regional hotels saw a 2.8% decline, with a number of regions reporting double-digit drops.

Recently, however, analysts at UBS upgraded the shares to 'buy' from 'neutral' as they see the market's predictions of sharp fall in hotel room revenue in the current financial year as "too conservative".

The shares are at "an attractive risk/reward entry point", the analysts said, with the recent market valuation of WTB's shares implying the group's revpar will fall 10% compared to UBS forecasts for a fall nearer 3%.

Germany is expected to remain a drag on earnings until the 2022 financial year, but the UBS analysts believe Whitbread has an opportunity to create “material value” in a country with similar characteristics as the UK, possibly even better.

Softcat purring after four profit upgrades

Wednesday will see Softcat PLC (LON:SCT) chasing a tenth consecutive year of increasing profits, having already upped its guidance four times this year.

The FTSE 250 group has done well out of sky-high demand for hybrid cloud computing, which is a blend of private and public cloud services, as well as increased digitalisation in businesses and stricter data protection requirements ramping up demand for security solutions.

It has a market cap of £2bn, and its share price has zoomed up 63% year-to-date to 977p.

Antofagasta and Anglo American: are miners worth their weight in copper?

Global miners Anglo American (LON:AAL) and Antofagasta (LON:ANTO) are set to deliver third-quarter production reports on Tuesday and Wednesday, respectively.

Shares in both companies, which are prominent miners of copper, have tumbled over the last six months due to tensions ratcheting up in the ongoing trade war between the United States and China, the world’s two biggest economies and major copper importers.

Anglo American may be the big winner since it should be better protected from copper volatility, with its platinum group metals division turning a corner recently thanks to rising demand for palladium, used in batteries, and platinum, which has benefited from a bullish precious metals market.

RBC Capital Markets rates the diversified miner a “top pick” and raised its target price to 2,300p, meanwhile Credit Suisse has rated it an “outperform”.

Meanwhile, when Antofagasta releases its results, investors will keep their eyes peeled for signs of improving relations with its employees, having just averted a planned strike at its copper mine in Chile last week by promising 1% wage hike.

It is also expected to report record production figures after 22% growth in the first half of the year.

RPS looks Down Under

Business consultant RPS Group PLC (LON:RPS) is releasing a third quarter trading update on Thursday, where investors hope to see signs of improvement following disappointing half-year results.

Profit before tax plunged 34% year-on-year to £18.2mln due to the underutilisation of Australian staff and a slow start in North America.

The company anticipated a stronger performance in the second half, based on higher transport spend in Australia and two major defence contracts signed in July, assuming the markets remain favourable.

Conditions in the UK and Ireland are not likely to have alleviated either, having been said to be weighed down by political uncertainty as clients delay investment decisions.

Significant events on Monday 21 October:

Finals: Bioventix PLC (LON:BVXP), Gfinity PLC (LON:GFIN)

Interims: Trifast PLC (LON:TRI)

AGMs: Clipper (LON:CLG), CPL (LON:CPS), Mattioli Woods plc (LON:MTW)

Significant events on Tuesday 22 October:

Interims: Whitbread Group PLC (LON:WTB)

Trading statement: Anglo American plc (LON:AAL), Bunzl PLC (LON:BNZL), Gear4Music Holdings PLC (LON:G4M), Reckitt Benckiser Group PLC (LON:RB.), St James's Place PLC (LON:STJ), Travis Perkins PLC (LON:TPK)

AGMs: Accrol Group PLC (LON:ACRL), McBride (LON:MCB)

Economic announcements: UK public sector net borrowing, CBI industrial trends survey, US existing home sales, China policy decision

Significant events on Wednesday 23 October:

Finals: Softcat PLC (LON:SCT)

Interims: HarbourVest Private Equity PLC (LON:HVPE)

Trading statement: Antofagasta PLC (LON:ANTO), Integrafin Holdings PLC (LON:IHP), Metro Bank PLC (LON:MTRO)

AGMs: Beeks Financial Cloud Group PLC (LON:BKS), Haynes PLC (LON:HYNS), Springfield Properties (LON:SPR), Stand Life UK Small Companies Trust PLC (LON:SLS), Stanley Gibbons (LON:SGI)

Economic announcements: UK Finance mortgage lending, US MBA mortgage applications, US housing prices

Significant events on Thursday 24 October:

Finals: RDI Reit PLC (LON:RDI)

Interims: Braemar Shipping Services PLC (LON:BMS)

Trading statement: Astrazeneca PLC (LON:AZN), KAZ Minerals PLC (LON:KAZ), Royal Bank of Scotland Group PLC (LON:RBS), RPS Group PLC (LON:RPS)

AGMs: Aberforth Split Level Income Trust PLC (LON:ASIT), Alumasc Group (LON:ALU), Myanmar Investments International Ltd (LON:MIL), Renishaw plc (LON:RSW), South32 Ltd (LON:S32)

FTSE 100 ex-dividends: Ferguson PLC (LON:FERG)

Economic announcements: ECB policy decision, EU PMI data, US jobless claims, US capital goods orders, US PMI data

Significant events on Friday 25 October:

Trading statement: Barclays PLC (LON:BARC), Essentra Plc (LON:ESNT), Hastings Group Hldg PLC (LON:HSTG), WPP PLC (LON:WPP)

AGMs: Trafalgar Property Group PLC (LON:TRAF)

Economic announcements: German IFO survey, US Michigan consumer sentiment

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