Miners will be a big theme among this week's reporting companies, with two FTSE 350 names kicking things off on Tuesday in markedly different places.
Ahead of these updates, 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 bank's analysts pointed out that the mining and steel stocks represent what it called default exposure to a “global growth, rebound and reflation”, with sector shares offering “the cheapest trading multiples in Europe and market-leading capital returns”.
Rio, despite blowing up sacred aboriginal burial sites, was carried higher on the mining rollercoaster last year, helped as Chinese infrastructure spending creates demand for steel, which requires the iron ore that the company produces.
However, last week, Deutsche Bank analysts ripped off their ‘buy’ recommendation as they expect iron ore prices to normalise through the second half of 2021 and 2022, although near-term fundamentals remain very tight.
As for Centamin, the pure-play gold producer was carried higher on the coronavirus gold rush, but was hit by geotechnical problems at its Sukari mine in Egypt and production disappointments.
After Sukari’s life-of-mine update in December, analysts at UBS said the reset expectations and new mine plan appeared to be conservative and they saw value upside from exploration and/or M&A and the turnaround of Sukari under new boss Martin Horgan.
With the aim of producing 450-500koz at all-in costs below US$900 an oz from 2024, a strong balance sheet and good dividend yield, BoA Merrill Lynch was also on board, forecasting underlying profit (EBITDA) for 2020 of US$420mln and US$448mln for 2021.
Experian banks on Boost
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 tomorrow.
The FTSE 100 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.
Netflix and churn
This week the US reporting season gets properly underway, and for a lot of retail investors video streaming star Netflix Inc (NASDAQ:NFLX) will be of particular interest, especially with the stock having gained around 45% to a US$220bn market cap last year, but this is after losing more around 10% of ground from September's all-time high.
The decline is likely to be a combination of the company's lofty valuation, disappointment with the subscriber numbers and guidance given at the third-quarter by founder Reed Hastings and the result of a shift toward cyclical, recovery stocks and away from those stocks which shone during the early stages of the pandemic.
The average Wall Street forecast for tomorrow points towards earnings per shares of US$1.40 on revenues of US$6.6bn, up 20% year-on-year.
“Whilst the company has been a big winner from the pandemic as subscriptions leapt with consumers stuck at home, there are worries about the service going forward,” said Neil Wilson at Markets.com
“One, is it as good as it used to be? The library content is shrinking, and competition is far more intense these days,” he adds, giving a nod towards Disney in particular.
Customer churn is a big concern, with one survey showing 32% of respondents indicating they are likely to cancel Netflix in the next three months, which is much higher than the company is used to.
“Two,” adds Wilson, “we’re heading into the other side of the massive pull-forward in demand that really drove the 2020 subscriber growth.”
After paid net customer additions hit 26mln in the first half but had declined to just 2.2m in the third quarter, Netflix had 195mln paid subscribers and expects a further 6mln net adds in the fourth quarter.
Significant announcements expected on Tuesday, January 19:
Trading announcements: Centamin PLC (LON:CEY), Experian PLC (LON:EXPN), Integrafin Holdings PLC (LON:IHP), Rio Tinto PLC (LON:RIO), Premier Foods PLC (LON:PFD), Kier Group PLC (LON:KIE), Henry Boot PLC (LON:BOOT),