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Oil majors, telecoms giants and pharma to dominate big week for blue-chip results

Both BP and Shell are scheduled to deliver news in the coming week alongside telcos BT and Vodafone, consumer goods giant Unilever and pharm firm GlaxoSmithKline

IDOX plc - Oil majors, telecoms giants and pharma to dominate big week for blue-chip results

The first week of February will bring earnings reports and updates from big names on both sides of the Atlantic, with oil majors BP and Shell some of the key names in the UK diary alongside pharma group GSK, telecoms giants BT and Vodafone and consumer goods titan Unilever all scheduled to report news.

There will also be big news over in the US with earnings due from Google parent Alphabet Inc (NASDAQ:GOOGL), Amazon Inc (NASDAQ:AMZN) and pharma giant Pfizer Inc (NYSE:PFE).

Macro news will also be turning heads in the week as the Bank of England makes it first interest rates decision of 2021 ahead of US non-farm payroll data on Friday.

BP reports after difficult period

BP PLC (LON:BP.) releases fourth quarter results on Tuesday and whilst it has been somewhat supported by the crude price improvement in recent weeks it, nonetheless, comes after a tough period.

“Sentiment has not been helped by a dividend cut, heavy losses in the second quarter and break-even result in the third, thanks in part to weak commodity prices and in part to US$22bn of asset impairments and write-downs relating to the value of exploration assets in Angola, Brazil, Egypt, Canada and the Gulf of Mexico,” AJ Bell analyst Russ Mould said in a note.

“The write-downs have only stoked fears that BP may be left sat on stranded assets and that its US$82bn net asset (or equity) value may still be too high.”

Moreover, there will also be plenty of eyeballs on strategy and the proposed diversification into alternative and renewable energy businesses.

Recent reports of an exodus out of BP’s exploration department – which is now said to have less than 100 staff compared to 700 – is a sign of these transitory times for both BP and the wider industry.

“Investors will also look for further evidence of the pivot from being an integrated oil firm to an integrated energy company after BP’s entry into offshore wind via a strategic partnership with Equinor and recent contract wins for Chargemaster. The company also has exposure to biofuels in Brazil and solar energy via BP Lightsource,”

“Near-term financial performance, however, will still be driven by upstream (production and exploration) and downstream (refining and petrol stations).”

Injection of results from GSK

GlaxoSmithKline PLC (LON:GSK) is releasing its fourth-quarter results mid-week where the market is eager to read an update on the COVID-19 vaccine developed with Sanofi.

A new study will begin in February with a final trial in the second quarter and regulatory submissions in the third, so if it goes well it will be available later in 2021, though it will be months behind competitors Pfizer/BioNTech, Moderna, and Oxford/AstraZeneca.

Analysts will also focus on the sales numbers, which will indicate how the FTSE 100 firm’s new drugs are helping to compensate for the loss of patent protection on older ones.

The drugmaker previously said momentum has tailed off because lockdowns are limiting visits to doctors and hospitals.

Earnings per share will also be eyed after the company said in October they would come in at the lower end of the forecast range of down 1-4%.

Analysts at AJ Bell said guidance for 2021 will be very important considering consensus forecast is currently for pretty flat adjusted EPS at 116.4p.

Finally, shareholders will want to hear on dividends, where an unchanged full-year payment of 80p per share is expected.

“GlaxoSmithKline shares are down by a quarter over the past year… This seems odd when in light of the rush to defensive stocks as the pandemic broke just under a year ago and how GlaxoSmithKline is the world’s leading provider of vaccines: it has a 30% global market share and produces and distributes about two million vaccines a day worldwide for everything from meningitis to whooping cough and from hepatitis to flu,” analysts at AJ Bell said.

“Possible reasons for the turgid share price performance include the company’s recent pedestrian earnings and dividend growth profile, some lingering concerns among analysts about weak dividend cover, and also disappointment that the company seems slow off the mark in the race to beat COVID-19.”

Vodafone calls in with update

Telecoms giant Vodafone Group PLC (LON:VOD) will issue a trading update on Wednesday, with analysts hoping the company will continue to see an improvement in top-line growth and maintain its guidance for the full year of earnings (EBITDA) of between €14.4-14.6bn.

Analysts at UBS said they expect the company’s service revenues to fall 0.14% in the third quarter, a reduction from the 1.3% and 0.4% declines in the first and second quarters respectively.

Meanwhile, investors may be eyeing any updates from the company on the ongoing challenge by the government of India to Vodafone’s US$2bn tax rebate awarded to it by an independent tribunal in the Netherlands.

Vodafone was awarded the payment in September when an international arbitration tribunal in The Hague ruled that India’s tax breached an investment treaty agreement between India and the Netherlands, however, an Indian official has said the South Asian country will challenge the ruling in Singapore.

Dialling in BT

BT PLC (LON:BT.A) is releasing third-quarter results on Thursday, but analysts at UBS remain cautious given a series of hurdles over the coming six months where risks to the company have been underestimated.

The telecoms giant is facing an expensive 5G spectrum auction and increased competition for Openreach from Virgin Media, which is significantly expanding its footprint and working more closely with Sky.

It’s also struggling with a £10.9bn actuarial pension deficit potentially constraining the dividend and limiting acquisition opportunities.

Revenues in the quarter are expected to drop 6% to £5.4bn, with underlying earnings (EBITDA) down 7% to £1.8bn.

Performance has been hit by COVID-19 causing lack of mobile roaming and lower BT Sport revenues not helped by elevated competition in the UK broadband market.

Although the worst is behind the FTSE 100 firm, it’s likely to see more declines because the second quarter benefitted from a sports programme rebate and other one-offs.

Shell eyed for write-down news

Royal Dutch Shell PLC (LON:RDSB) will deliver the first in a one-two punch next week, as on Thursday it releases its fourth quarter results ahead of a more forward looking strategy day seven days later, on February 11.

Much of the headlines for the quarter have been flagged, in December’s trading update.

UBS in a note highlighted that production is expected to be close to guidance.

For the downstream businesses, UBS noted that Shell’s oil products are expected to benefit from better refining but normalising marketing after a blow-out third quarter and its trading business typically sees the fourth quarter as the quietest quarter of the year. Shell’s chemicals unit is expected to have improved margins.

Shell’s December update also flagged U$3.5bn to US$4.5bn of possible write downs, plainly the market will be keen to see where exactly that lands.

Unilever hopes to sustain growth after turbulent year

Unilever PLC (LON:ULVR) is scheduled to report final results on Thursday for what has been a relatively resilient year for the consumer goods giant.

Despite this, analysts at UBS said they are still cautious on the company’s medium-term earnings growth prospects as a result of what they said was a lack of pricing power in its mature markets, a volume slowdown in emerging markets and a recurring “adverse mix” impact on its margins.

For Unilever’s fourth quarter, UBS is predicting a slowdown in underlying sales growth to 3% from 4.4% in the third quarter due to mobility restrictions globally as a result of the pandemic, although they expect a better performance in North America due to elevated at-home consumption.

Meanwhile, investors may also look for more details on the company’s climate change plans after it announced in December that it will give shareholders the chance to vote on its action to reduce carbon emissions to zero at its AGM in May.

Will big builder Barratt bump up profit guidance?

Britain’s biggest housebuilder, Barratt Developments PLC (LON:BDEV), will report first-half results on Thursday, with dividend payments making a comeback.

The company in early January announced it had completed 8,699 house sales at an average selling price of £283,000 in the half-year, which would mean sales should be roughly £2.5bn.

Analysts at UBS expect gross profit margins to have improved slightly year-on-year, resulting in an underlying profit (EBIT) forecast of £491mln compared to £440mln a year ago, and underlying earnings per share of 39.1p versus 35.3p last time.

While the FTSE 100 group said the rate of house sales and building work in progress have slowed from the breakneck speed seen late last summer, its levels of cash in the bank have tripled to £1.1bn so not only can it bring back dividends but also increase investment in land and work in progress in the second half.

For the full year, management said they expect 15,250-15,750 completions, with the average City analyst forecast equating this to full-year profits of roughly £750mln.

Macro matters

The start of February on Monday brings a new month’s macro data and later in the week there will be the first Bank of England meeting of the year and we’ll finish up with the US monthly jobs report.

BoE governor Andrew Bailey is not expected to tweak the current level of interest rate from 0.1% or the monthly £895bn of asset purchases in the ‘quantitative easing’ scheme.

“While there is a case for the Bank of England to provide more stimulus for the UK economy at the February Monetary Policy Committee (MPC) meeting,” said EY ITEM Club chief economic advisor Howard Archer, he believes it is more likely that the MPC will stand pat.

Although not ruling anything out, Archer predicted the MPC will “look beyond a challenging Q1 and focus on the economy’s brighter longer-term prospects: the vaccine roll-out may facilitate an easing of restrictions from Q2 and hopefully pave the way for firming growth”.

One big thing that has changed since the last BoE interest rate decision is the state of the pandemic, said Laith Khalaf, financial analyst at AJ Bell, meaning markets are now pricing in a 40% chance of a rate cut this year.

“The emergence of the new, more transmissible strain in the UK has prompted another economic shutdown, and pushed back expectations of a recovery,” he said.

But as the picture is still unfolding, Khalaf said the Bank’s interest rate committee will probably sit on their hands for now, particularly seeing as they are running out of monetary policy ammunition.

“Further down the line the MPC may decide further stimulus is required, and negative interest rates are one tool they have brandished. At the moment it looks like the Bank are trying to have their cake and eat it; by talking up the possibility of a negative base rate, they are encouraging lower borrowing rates in the market without actually having to shift policy. However, that doesn’t mean that ultimately MPC won’t go there, though this will depend on whether commercial banks can handle negative rates, which the central bank is currently investigating.”

Outside of Threadneedle Street, there will be a focus on the new round of purchasing managers index surveys, with manufacturing data for the major economies on Monday and services on Wednesday, with some construction sector PMIs on Thursday.

The US non-farm payrolls report, always a fairly big deal for markets, will wrap up the week.

This week saw another sharp decline in US weekly jobless claims, with market analyst Michael Hewson saying this suggests “the big spike in claims at the beginning of this month may well have been a temporary phenomenon, and with new stimulus cheques coming down the pipe, the outlook has started to look a little more promising ahead of next week’s January payrolls report”.

Amazon, Alphabet and Pfizer’s turn in US earnings season

As the US quarterly earnings season rolls on, there is more big tech action to look out for, with Amazon, Alphabet and Alibaba reporting on Tuesday; then Spotify and chipmaker Qualcomm on Wednesday; and Snapchat owner Snap on Thursday.

Other winners from the pandemic include coronavirus vaccine saviour Pfizer on Tuesday, the same day as computer games maker Electronic Arts and delivery group UPS, with another video games name Activision Blizzard reporting on Thursday, along with cleaning products maker Clorox.

Along with BP and Shell, US oil giants with earnings in the week include ExxonMobil and Conoco-Phillips on Tuesday, while in the auto sector there Ferrari and Harley Davidson on the same day, followed by Ford on Thursday.

Other big names in the week include Warner Music on Monday, Royal Caribbean Cruises on Wednesday, and on Thursday drugmaker Merck, tobacco giant Philip Morris and Yum Brands, the owner of KFC and Pizza Hut.

Significant announcements expected for week ending 5 February:

Monday February 1:

Finals: Porvair PLC (LON:PRV)

Interims: Hargreaves Lansdown PLC (LON:HL.)

Economic data: UK manufacturing PMI, US manufacturing PMI

Tuesday February 2:

Trading announcements: SSE PLC (LON:SSE), Gem Diamonds Ltd (LON:GEMD), Virgin Money UK PLC (LON:VMUK), Glencore PLC (LON:GLEN)

Finals: BP PLC (LON:BP.), Idox PLC (LON:IDOX), Sureserve Group Plc (LON:SUR)

Interims: Filtronic PLC (LON:FTC), NWF Group plc (LON:NWF)

Wednesday February 3:

Trading announcements: GlaxoSmithKline PLC (LON:GSK), Vodafone Group PLC (LON:VOD)

Interims: Frontier Developments PLC (LON:FDEV)

Economic data: UK services PMI, US services PMI, US non-manufacturing PMI

Thursday February 4:

Trading announcements: Royal Dutch Shell PLC (LON:RDSB), BT PLC (LON:BT.A), Compass Group PLC (LON:CPG), Cranswick PLC (LON:CWK), Severn Trent PLC (LON:SVT)

Finals: Unilever PLC (LON:ULVR)

Interims: Barratt Developments PLC (LON:BDEV), NCC Group PLC (LON:NCC), Alumasc Group Plc (LON:ALU), Renishaw plc (LON:RSW)

FTSE 100 ex-dividends: None

Economic data: BoE rates decision, UK construction PMI, US jobless claims

Friday February 5:

Finals: Beazley PLC (LON:BEZ)

Economic data: US non-farm payrolls, US trade balance

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