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Airlines, drinks and big US names the key news in coming week, Fed decision eyed

Last updated: 06:00 25 Jan 2021 GMT, First published: 13:47 22 Jan 2021 GMT

Saga PLC - Airlines, beverage firms among notable updates in coming week, Fed rates decision eyed

The coming week will see another round of updates and results from multiple sectors, with budget airlines and beverage companies among some of the more notable names on the calendar.

There will also be some action on the macro front as investors keep an eye on the first meeting of the Federal Reserve for 2021 as well as UK unemployment data.

Saga’s new chapter begins

Saga PLC (LON:SAGA) should provide a trading update on Tuesday having revealed a new strategy and £150mln fundraising in September after swinging to losses in the first half of the year.

Former boss Roger De Haan, son of the company’s founder, has returned as chairman and contributed a large chunk of the fundraising, as the over-50s holidays and insurance specialist was aiming to “return Saga to sustainable growth and restore significant shareholder value”.

Under De Haan and chief executive Euan Sutherland, who started just over a year ago, the strategy will be focused on five key pillars: resetting company culture; a “bigger, bolder” focus on digital and data; optimising experiences for customers; cutting costs; and reducing debt.

Since then, there have been more board changes, with the CEO of the insurance arm stepping down due to personal reasons, which was a bit of a concern to some investors as this business is currently the main contributor to the group’s cash flow as the travel business awaits the lifting of coronavirus (COVID-19) pandemic cruising restrictions.

The coming update will cover the period from the start of August into January so it will be interesting to see if the new leadership team has made much progress under the new strategy.

AG Barr investors hope update brings some fizz

Irn-Bru maker AG Barr PLC (LON:BAG) is due to deliver a trading update on Tuesday, with investors likely to look closely at how the company has held up during the latest round of coronavirus pandemic-induced restrictions and the latest UK lockdown.

In its results for the six months to July 25, 2020, reported in September, the company reported a 19.4% rise in pre-tax profits and said it was “on course” to deliver a full-year performance in line with its expectations. Given the recent new wave of COVID-19 infections, investors will want to see if this outlook can be maintained, as well as any changes to the company’s plans to reinstate its dividend this year.

easyJet investors brace for update

Budget carrier easyJet PLC (LON:EZJ) will update the market on Thursday, although as with most of the airline industry investors are unlikely to see a rosy picture.

The airline like most has been at the sharp end of the pandemic and border closures to prevent the spread of COVID-19, which has left its planes grounded at airports across Europe.

Analysts at UBS are expecting traffic levels in the first quarter of 2021 to be at just 12.5% of levels seen a year ago, while revenues for the period are forecast to plunge to £157mln from £1.42bn.

The Swiss bank's analysts said they expected easyJet’s outlook for the current quarter to be “extremely cautious (as evidenced by all holidays cancelled until the end of March) with intra EU travel restrictions remaining at all-time highs”.

Wizz Air to land quarterly loss

Peer Wizz Air Holdings PLC (LON:WIZZ) is also scheduled to land its quarterly results on Thursday, with the analysts at UBS expecting to see a 78% slump in traffic.

The bank forecasts revenue of €129mln, down from €637mln and below consensus of €171mln, while the budget carrier is estimated to swing to an underlying loss of €137mln from a profit of €35mln a year ago.

It continues to be a tough time for airlines, in fact, Wizz Air said earlier in January there was little visibility for the coming months but hoped demand should pick up in the summer.

In December, Wizz only flew 35% of 2019's capacity, which was expected to fall to 25% this month.

Diageo hopes profits keep flowing despite new lockdowns

Diageo PLC (LON:DGE), the owner of Gordon’s Gin, Guinness and Smirnoff vodka, will deliver its half-year results on Thursday in what is expected to show a strong six months for the group.

In an update in late September, the company said its outlook for the first half had improved after a good start, especially in the US, so investors will be hoping this strong showing has continued over the rest of the period.

However, the company may have seen its trade sales impacted by renewed lockdown measures across the world, which have forced pubs and bars to close their doors, so it is likely to have relied on retail sales of its products to keep the business going.

In the September update, Diageo chief executive Ivan Menezes said the company was continuing to expect “sequential improvement in organic net sales and operating profit compared to the second half of fiscal 20”, so investors will be eyeing any changes to this outlook statement into 2021.

TalkTalk to issue one of last updates before going private

Talktalk Telecom Group PLC (LON:TALK) will not be silent on Thursday when it releases a quarterly trading update coming a month after agreeing a £1.1bn takeover offer by Tosca IOM.

It may well be one of its last updates before it goes private, when shareholders will receive 97p per share in cash, which is a 16.4% premium to the closing price of 83.3p on October 7, 2020, when the offer period started.

That big news was followed by chief financial officer Kate Ferry announcing her departure so she can live and work in London, while the business remains North-West based.

She will be replaced by Phil Eayres, who has been with the company for six years, more recently as an independent strategic advisor leading the development and disposal of FibreNation, and who was “instrumental” in completing the takeover deal.

In the six months to September 30, 2020, Talktalk's revenue dipped by 7% to £740mln and 2019’s £15mln profit before tax turned into a £3mln loss.

The internet provider saw 187,000 fibre net adds but did not provide guidance for the rest of the year due to COVID-19 uncertainty.

Tate & Lyle on the menu

Investors are hoping to see sweet numbers from Tate & Lyle PLC’s (LON:TATE) trading update on Thursday, which comes a week after the ingredients producer appointed Vivid Sehgal as its new chief financial officer.

Sehgal previously held the same role at Delphi Technologies and will start in March to replace Imran Nawaz, who is leaving in May to take up the same position at grocer Tesco (LON:TSCO).

The sweetener producer posted a defensive performance in the six months to September 30, 2020, with revenue down 4% to £1.3bn and profit before tax up 3% to £180mln, which topped expectations.

It didn’t issue any guidance so the market is looking forward to seeing how it performed in the Christmas period, which may have been lifted by the increase in at-home consumer spending.

Apple, Tesla and more

Apple, Facebook and Tesla all report quarterly earnings on Wednesday, with Tim Cook, Mark Zuckerberg, Elon Musk reporting after the markets close at 5pm Eastern time (10pm in the UK).

The big number for Apple Inc (NASDAQ:AAPL), outside of its eye-popping US$2.3trn market valuation, is a US$100bn quarterly revenue figure that most analysts expect to be notched up for the first time in its history.

Hitting the Wall Street top-line forecast of $102.6bn would equate to year-on-year growth of 12%, its fastest progress in ten quarters.

Expect the focus to be on hardware sales in these first-quarter results, according to analyst Susannah Streeter at Hargreaves Lansdown.

“There has been a lot of fanfare around its offerings like Apple Music, Apple TV+, iCloud, Apple News, Apple Arcade and Apple Fitness+ which have been grouped together into the Apple ONE bundle. But that big product line is hugely dependent on people continuing to buy Apple devices,” she says.

Facebook Inc (NASDAQ:FB) has seen its shares have come under pressure in recent days over its controversial decision to ban outgoing US President Trump from its platform.

“While its rationale may well appear to make sense, it comes across as too little too late, from one side of the political divide, while on the other side of the divide it comes across overstepping the bounds of free speech,” said analyst Michael Hewson at CMC Markets.

After Joe Biden and the Democrat's blue wave, social media companies are expected to face tougher times, with members of the new administration and Republicans having publicly said that companies like Facebook need to be made accountable for what’s published on their platforms and regulated more tightly. 

Although advertisers have already started to cut back spending on social media sites in the past few weeks, the step may not show up in Zuck's latest numbers, with earnings per share expected to come in at US$3.20.

Over at Tesla Inc (NASDAQ:TSLA), Musk has already reported that the electric carmaker hit its target of delivering half a million cars last year, although it actually missed the mark by a whisker despite the pandemic, and in the past week sales kicked off in China of the new Model Y crossover, which is seen as being one of the next key growth steps.

With a 16% rise in the shares to US$845 so far this year, analysts at US broker Oppenheimer just hefted their price target on the stock to US$1,036 as they believe the company has “the potential to be a transformational technology company and deliver outsized returns”.

Key medium-term items will be the company's execution on Model 3 and Y volumes, along with battery cost reduction.

The attention of investors and Wall Street in these numbers will also be on profit margins and cash generation, said Nick Hyett at Hargreaves Lansdown.

"With rivals upping their electric production the demand for these credits should fall over time – undermining a key source of cash for the company,” he added.

Macro matters

Unemployment numbers on Tuesday will be Britain’s big economic data in the coming week, while elsewhere the macro diary highlights will be Wednesday’s Federal Reserve decision and the week-long Davos forum, which will be held online.

The first of eight US Federal Reserve policy meetings for the year is not expected by economists to lead to any changes in interest rates or quantitative easing (QE).

With interest rates unchanged since last March’s cut, Fed head Jerome Powell is expected by markets to announce that the US central bank will stand pat, with the headline cost of debt staying at 0.25% and QE running at US$120bn a month.

“Economists will look for commentary on inflation, employment and the US economy but the Fed seems in no rush at all to tighten policy,” note Russ Mould at AJ Bell, “especially as it is moving to inflation averaging as a target – so that it will tolerate an overshoot in inflation relative to its 2% target after any prolonged period of undershooting it. At the moment, that means a fair portion of the last decade.”

Fed rate-setters have consistently said there will be no QE tapering or raising of rates or other tightening of policy until inflation is running at or above the 2% target and the US employment is healthy again.

“Whether steamy financial markets, where there are clear signs of asset price inflation, need any further incentive to run hot is open to debate and the Fed has a tricky balancing act to manage as it tries to support the economy and avoid a third market bubble in just over 20 years (something which some argue it is already failing to do),” Mould says.

Significant announcements expected for week ending January 29:

Monday January 25:

Trading announcements: Plant Healthcare PLC (LON:PHC), Yamana Gold Inc (LON:AUY), Larsen & Toubro (LON:LTOD), TI Fluid Systems PLC (LON:TIFS)

Finals: SThree PLC (LON:STEM)

Tuesday January 26:

Trading announcements: AG Barr PLC (LON:BAG), Saga PLC (LON:SAGA), DP Eurasia NV (LON:DPEU)

Finals: Crest Nicholson Holdings PLC (LON:CRST)

Interims: Quiz PLC (LON:QUIZ), PZ Cussons PLC (LON:PZC)

Economic data: UK unemployment

Wednesday January 27:

Trading announcements: Fresnillo PLC (LON:FRES), Brewin Dolphin Holdings PLC (LON:BRW), Tullow Oil PLC (LON:TLW)

Finals: Redx Pharma PLC (LON:REDX)

Interims: Hargreaves Services Plc (LON:HSP)

Economic data: Federal Reserve rate decision, US durable goods orders

Thursday January 28:

Trading announcements: easyJet PLC (LON:EZJ), Wizz Air Holdings PLC (LON:WIZZ), Anglo American PLC (LON:AAL), Britvic PLC (LON:BVIC), 3I Group PLC (LON:III), Talktalk Telecom Group PLC (LON:TALK), Euromoney Institutional Investor PLC (LON:ERM), Intermediate Capital Group PLC (LON:ICP), KAZ Minerals PLC (LON:KAZ), St James’s Place PLC (LON:STJ), Tate & Lyle PLC (LON:TATE)

Finals: Oxford Biodynamics PLC (LON:OBD)

Interims: Diageo PLC (LON:DGE), Joules Group PLC (LON:JOUL), Rank Group PLC (LON:RNK), Hansard Global PLC (LON:HSD)

FTSE 100 ex-dividends to knock 0.11 points off the index: Pennon Group PLC (LON:PNN)

Economic data: US GDP, US jobless claims

Friday January 29:

Trading announcements: Evraz PLC (LON:EVR), Polymetal International PLC (LON:POLY), Paragon Banking Group PLC (LON:PAG)

Interims: Real Good Food PLC (LON:RGD)

Economic data: US personal incomes, US Chicago PMI

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