The coming week will see the flood of post-festive period trading updates continue from across the market, with the luxury sector, bookmakers and mining giants among the bigger names in the schedule.
There will also be some excitement from the macro calendar with UK inflation data and retail sales as well as flash PMIs due from both the UK and the US.
Experian banks on Boost product
Despite the lending market mostly drying up during the pandemic as lockdowns cut back on spending, Experian PLC (LON:EXPN) has managed to retain some semblance of organic growth in its first half of 2% which investors will hope has continued when the firm releases a trading update on Tuesday.
The company’s consumer division, which gives people access to credit reports, has served as the bright spot in the North and South America markets, with credit matching services becoming more attractive as banks have become less willing to lend
Meanwhile, the company’s performance has also been boosted by the launch of Experian Boost in the US, which lets users add utility bills and subscriptions to their credit reports, so shareholder may be eyeing any plans by the firm to also introduce the service to the UK to boost its business in the country, which has been dented by lower lending and slower investment decisions.
However, with the new coronavirus (COVID-19) lockdown measures likely to have dented recovery chances, the outlook will also be a key point for the firm going forward as the credit market continues to be held back.
Miners in demand
Foreshadowing these numbers, analysts at JP Morgan Cazenove said the new year had begun with “euphoria reminiscent of 2009/10”, a period that marked the last major bull run for the mining sector.
The US bank's analysts pointed out that the mining and steel stocks represent what it called default exposure to a “global growth, rebound and reflation”.
“[The sector] has the cheapest trading multiples in Europe and market-leading capital returns,” the analysts continued.
“Parallels with previous economic crises suggest the sector has yet to peak as momentum, rotation to value, US dollar weakness and deep liquidity are expected to be dominant themes in the first half of 2021.”
Meanwhile, focusing on copper, analysts at City broker Liberum Capital expect there to be ongoing support for the price of the red metal, which is close to an eight-year high, but the market may loosen in the second half.
The weak dollar, economic recovery and a renewed US stimulus programme (but this time with a green bias) are likely to underpin near-term demand, analyst Ben Davis said, with the White House seen targeting incentives for the nascent electric vehicle industry, which should be positive for copper demand given its use throughout electric vehicles, charging stations and supporting infrastructure.
Luxury sector spotlight with Burberry
The FTSE 100 firm saw revenues drop by a third in its last half-year though they improved in the second quarter thanks to the group's ability to attract new and younger customers.
The company also avoided having sales to shift stock to keep an emphasis on brand preservation and elevation, key parts of its current strategy.
“Cost-saving efforts have been coming in ahead of plan and there has been impressive growth in its online business though, helped also by better trading in Mainland China, Korea and the US,” analysts at Hargreaves Lansdown noted.
“Its customers are mainly from higher income brackets with significant buying power, but with the economic outlook uncertain there may well be more reticence than usual to spend on big-ticket accessories. Burberry also relies quite heavily on tourists and the latest rounds of store closures across Europe in particular is likely to have weighed on demand and its prospects for recovery are likely to be linked to a rebound in global travel," they added.
Brace for WH Smith Christmas update
WH Smith PLC (LON:SMWH) is publishing its Christmas trading update on Wednesday, which investors are probably bracing for, considering a big chunk of its estate was forced to close in the middle of the key festive period.
The newsagents group had already been struggling throughout the pandemic due to its focus on travel locations and reliance on impulse purchases, with shares still well below pre-pandemic levels.
“Vaccine rollouts will have come with a sigh of relief for the company, offering some light at the end of a very dark tunnel,” analysts at Hargreaves Lansdown commented.
“But with the third national lockdown that tunnel has become even longer and the company will no doubt be continuing negotiations with landlords to extend payment terms and reduce rents to help it survive the crisis.’’
Dixons calls in with update
Dixons Carphone PLC (LON:DC.) will release a trading update on Wednesday, with investors likely hoping the company can continue its recent strong performance as its digital operation has managed to help offset some of the effects of store closures during lockdown.
The firm’s Shoplive platform, which allows customers to book virtual appointments with assistants in-store and see video demos for goods from their own homes, has also helped to offset the store closures, although the company has still remained mostly cautious on outlook due to the pandemic as consumer spending has slowed.
With this in mind, investors are likely to keep an eye on how margins are holding up and that the digital sales operation in continuing to perform well into the new year, as well as how well the firm performed over the festive period.
Sour read for Spoons
With the estate closed and effectively unprofitable between November 2020 and March 2021, investors will want to hear on liquidity and cash burn.
In the last update in November, the company had £234mln of financial headroom, equivalent to 16 months of liquidity under full closure.
The publican will also have an opportunity to update its guidance on profitability, or lack thereof and continue its campaign for the VAT cut to be made permanent, according to Peel Hunt.
Entain in play
First, there was a takeover offer from US partner MGM Resorts in the first week of 2021 at a premium of 22% to its share price at the time, which was swiftly rejected as it “significantly undervalues the company and its prospects”.
A few days later, Entain snapped up a small Baltics-focused betting firm, before this week getting the bombshell news from chief executive Shay Segev, only six months after being promoted to the job, that he was jumping ship to sports streaming network DAZN.
Barry Gibson, Entain’s chairman, suggested it was a big-bucks move and said “this changes nothing with respect to the board's view of the recent proposal from MGM Resorts”.
Next week’s numbers will, however, be focused on the previous three months, which are likely to have seen fairly strong online trading but some impact on UK bookies shops from coronavirus lockdowns, with the company having in October raised its forecast for full-year underlying profits to between £770mln and £790mln but warning in November that that month’s lockdowns will cost it at least £37mln.
Reports ahead of next week suggest non-executive director Jette Nygaard-Andersen could be promoted to CEO as the group tries to defend itself against the MGM approach.
EMIS looks to stay in good health
EMIS Group plc (LON:EMIS), the provider of GP surgery management software, is scheduled to deliver a trading update on Thursday, although investors are unlikely to expect any nasty surprises given the firm’s markets have continued to operate flat-out during the pandemic.
The company’s sales were down by only 2% in the first half of 2020 while recurring revenues improved. Sales have also risen as doctors have looked to reduce in-person contact with patients to reduce the spread of COVID-19, relying instead on digital health services that firms like EMIS provide.
With this in mind and COVID-19 cases surging once again, investors will be looking to see if these trends have been maintained, as well as how the firm’s cash balance has performed and how it intends to spend any of it.
There’s a fair amount of macro data out in the coming week, including preliminary PMIs surveys for January, three central bank meetings around the world and the inauguration of a new US President.
Joe Biden’s White House administration kicks off on Wednesday, hopefully without anything kicking off. “Let’s hope that it goes off smoothly and peacefully,” said market analyst Marshall Gittler at BDSwiss.
Perhaps the most-watched macro data will be on Friday, with the ‘flash’ PMI surveys for the first weeks of 2021, which are expected to be lower across the board, particularly in the UK and particularly for services.
“Manufacturing is forecast to remain in expansionary mode in all the countries, but services, which have been contracting except in the US, are expected to fall even more. Not good,” says Gittler.
The UK’s decline in November GDP on Friday was not as bad as feared, but the UK economy is going to get worse before it gets better due to the current lockdown.
“A double-dip recession is increasingly on the cards for Britain,” says Robert Alster at Close Brothers Asset Management. “Virus cases continue to climb, leaving policy-makers grappling with establishing an effective health policy whilst providing enough financial support for both individuals and businesses. With no set end-date for the current restrictions, investors will be hoping that the rapid vaccine roll-out programme across the nation will get the UK economy up and running again, meaning there is light at the end of the tunnel.”
US earnings season gains traction
The US earnings season properly gets underway in the coming week, with S&P 500 earnings for the fourth quarter seen falling on average by around 10% on last year, with revenues seen flat, compared to a 7% drop in the second quarter and over 32% in the second.
For the first quarter of 2021, average EPS is forecast to be up by 12.6%.
But rather than the fourth-quarter numbers, guidance on the upcoming couple of quarters will “be more important than ever”, said analyst Neil Wilson at Markets.com, with a key theme of this season being “to what extent corporates think the growth trend will pick up at the start of this year, or do they fear of a stop-start recovery?”
Looking forward, FAANG investors get their first kicks in the coming week with Netflix, with Apple, Facebook and Alphabet at the end of the month and well-followed Tesla due on February 3.
Looking at Netflix, a stock that gained around 45% to a US$220bn market cap last year, but is down a fair bit from its all-time high in September.
It is not clear whether this is the result of the current shift toward cyclical, recovery stocks and away from those stocks which shone during the early stages of the pandemic, its Netflix’s lofty valuation or mild disappointment with the guidance given at the third-quarter by founder Reed Hastings, say analysts at AJ Bell.
“Shareholders will therefore be looking for some positive surprises from Netflix in terms of new customer numbers and profits (something which the firm does have a track record of delivering).”
Significant announcements expected for week ending January 22:
Monday January 18:
Tuesday January 19:
Trading announcements: Rio Tinto PLC (LON:RIO), Centamin PLC (LON:CEY), Experian PLC (LON:EXPN), Premier Foods PLC (LON:PFD), Kier Group PLC (LON:KIE), Henry Boot PLC (LON:BOOT), Integrafin Holdings PLC (LON:IHP)
Wednesday January 20:
Trading announcements: Antofagasta PLC (LON:ANTO), BHP Group PLC (LON:BHP), Burberry Group PLC (LON:BRBY), WH Smith PLC (LON:SMWH), CMC Markets PLC (LON:CMCX), Pearson PLC (LON:PSON), Diploma PLC (LON:DPLM), JD Wetherspoon PLC (LON:JDW), Dixons Carphone PLC (LON:DC.), Cairn Energy PLC (LON:CNE), City of London Investment Group PLC (LON:CLIG)
Economic data: UK inflation, UK PPI
Thursday January 21:
Trading announcements: AJ Bell PLC (LON:AJB), Entain PLC (LON:ENT), Sage Group PLC (LON:SGE), Countryside Properties PLC (LON:CSP), EMIS Group plc (LON:EMIS), Ibstock PLC (LON:IBST), Arrow Global Group PLC (LON:ARW), Close Bros Group PLC (LON:CBG), Energean PLC (LON:ENOG), Eve Sleep PLC (LON:EVE), Luceco PLC (LON:LUCE)
FTSE 100 ex-dividends: None
Economic data: US jobless claims
Friday January 22:
Economic data: UK retail sales, UK consumer confidence, UK flash PMIs, US flash PMIs