Markets will be keeping an eye on the macro diary, as they await the Federal Reserve’s latest interest rate decision.
This week will see a flurry of updates and results from major blue-chip LSE stocks, including major oilers BP, Shell, telecoms company BT, airlines Ryanair and Wizz Air, and BA owner IAG.
The FTSE 100’s drug titans GSK (LSE:AZN) and AstraZeneca will also be in focus. BAT, a tobacco company, and another batch earnings from large US corporations will also be included.
During this time, the macro calendar will focus on Wednesday as the Federal Reserve announces its latest interest rate decision.
With trading updates, will budget airlines fall ?
The airline industry was looking good until COVID-19, a Delta variant, scuppered the picture. Although passenger numbers are up, it has been difficult for holidaymakers in summer to book flights without fear due to travel restrictions.
Ryanair Holdings PLC will release a trading update Monday. It predicts quarterly revenue of EUR420mln. This is up from EUR125mln for the same quarter last year, and ahead of the consensus forecast at EUR376mln.
Expect negative earnings before interest and taxes (EBIT) for UBS, which is expected to lose EUR257mln against the market’s forecast of EUR283mln.
UBS forecasts fiscal first-quarter revenues of EUR225mln in Wizz Air Holdings’ (AIM:WIZZ) when it updates Wednesday. This is up from EUR91mln last year and far above the consensus forecast of EUR189mln.
UBS forecasts traffic levels at 25% or more of the pre-pandemic levels for the same quarter in 2019.
BP likely to promote renewable energy, while oil profits rise
BP PLC (LSE BP.) will include renewables in its Tuesday trading update. However, the strong oil price continues to drive the financials.
July already saw BP make a PS10bn investment in offshore wind in UK North Sea – in bid for acreage in a government lease round – and plans to invest in green hydrogen, electric vehicle charging networks, and shipbuilding.
It pledged to make Scotland BP’s ‘global center of excellence for offshore winds’. According to Dev Sanyal (BP executive vice president), BP sees a resilient future in clean energy for the country.
Sanyal stated that “we want to harness the clean energy from Scotland’s off-shore wind and use our capabilities to accelerate the country’s EV charging network and build its hydrogen offering, and strengthen its supporting infrastructure including ports, harbours, and ports.”
This is the latest environmental flex by BP, which seeks to improve and decrease the amount of hydrocarbons in its operations.
Operatively, the focus is still oil-centric. Current crude prices are driving cash flows.
Games Workshop outlook considered to positive
The final results of Warhammer maker Games Workshop Group PLC will be released on Tuesday. This is expected to prove positive after the positive trading update in May.
The company previously stated that it expects its profits to exceed PS150mln for the year ending May 2021, an increase of nearly 70% over the previous year. Meanwhile, revenues are not expected to fall below PS350mln. This is up from PS270mln in 2019.
Investors will also be able to take home a substantial payday as the company’s total dividend is expected to reach 235p per share, compared to the 145p last year.
The year’s figures are expected to be record-breaking. However, the most important point of interest will be the outlook statement of the company. This will explain whether the firm’s strong growth run may be impacted by the opening of the economy and the removal of restrictions on lockdown. People will be less likely to stay at home painting Warhammer figurines and playing with them.
Focus on blue-chip banks
The bank results season is here and lenders should feel confident now that the banks have removed the limiter on dividend payments.
The banks took pity on the city and sent out their results announcements, beginning with Barclays on Wednesday.
UBS forecasts a second-quarter adjusted profit before taxes of PS1.8bn, “in a result where capital market revenues and loan loss overlay writes-backs will likely distort headline figures”.
UBS predicts that the CET1 ratio, which is a measure of balance sheets strength, will be 14.4%. This excludes capitalised software intangibles.
Retail investors’ favourite Lloyds Banking Group (LSE:LLOY) is expected to report a second quarter adjusted profit before taxes of PS1.45bn. It also expects to post a CET1 ratio of 16.6%.
The company was a favorite of income investors in the past. Shareholders would like at least a wink about how high the dividend will be and when Lloyds can return the ranks of the FTSE 100’s top dividend payers. However, it has been suggested by Charlie Nunn that he may be reluctant to make changes too quickly.
NatWest Group (LSE:NWG) PLC is also issuing second-quarter results and the expectation is for an adjusted profit before tax of some PS935mln and CET1 of 18.1%.
Recently, the government indicated that it would be selling off more shares in the nationalised bank. This could mean that things are going well or that the government is trying to cash in as much as possible.
It is likely that it is more of the latter, given the strength of the housing sector and the low rate of loan defaults (so far),
BAT hopes to inspire interest with its results
Lucky Strike and Pall Mall owners British American Tobacco PLC will report their half-year results on Wednesday. Investors are likely to be eager for the numbers after the firm’s June trading update that was better than anticipated.
Despite increasing regulatory pressures on the tobacco industry and a slow take-up for next-generation products, BAT has been able to grow its dividend and pay off its debts. Sales of its NGPs, Vuse, Vype, and glo brands, have also increased.
Jack Bowles, the CEO of the firm, has also highlighted the importance of increasing cigarette volumes and market share in developing countries. Shareholders will hope these trends continue throughout the year.
The numbers show that consensus expects first-half sales to be PS12bn, down from PS12.2bn last year, and an adjusted operating loss of PS5.2bn, compared with PS5.4bn last.
In keeping with the group’s strategy of paying 215.6p per Share in dividends, and distributing approximately two-thirds its profits, a dividend of 53.9p is also expected.
Shell looking to be confirmed as the most profitable major
Royal Dutch Shell Plc (LSE:RDSA), like BP, is also planning and talking a lot about its ‘transition’.
It is also arguably the best positioned to capitalize on recent high oil prices.
UBS called it “the most profitable major” in a preview note.
UBS, which rates Shell as an ‘buy’ at 1,860p, expects that the oiler will report US$5.5bn in net income. This would be a 28% increase quarter-on-quarter.
The note stated that Shell would continue to be the most profitable major bank. “Whether it is also cash generative will depend on the level and quality of the quarter’s working capital build, but we fully expect underlying CFFO generation not to be any less than the best.”
BT calls with an update
BT Group PLC (LON.BT.A), is expected to provide a trading update Thursday. Investors are keeping a close eye on the operating trends of the telecom giant amid regulatory pressures, pandemics and changes.
Analysts at UBS expect some improvement in the quarter as the pandemic effects diminish, but they also noted that revenues will likely remain under pressure.
Analysts said that earnings would be improved by accounting and cost savings. They forecast earnings (EBITDA), of PS1.8bn, and revenues of PS5.15bn.
Can the gap between FTSE’s giant drug companies widen?
GlaxoSmithKline PLC (LSE:GSK) on Wednesday and AstraZeneca PLC on Thursday are due to release their first-half results.
GSK’s numbers are the result of last month’s major strategy rejig. Emma Walmsley, under pressure boss, revealed details about the planned demerger of GSK Consumer Healthcare next year. She also gave details on the demerger. These new goals include increasing sales by 5% per year over the next decade, increasing operating profit margins over 30% from the current mid-20s and generating PS10bn in cash generation over five years.
According to financial analyst Danni H. Hewson at AJ Bell the dividend will be a “sacrificial victims” as it is expected that it will drop to 80p a Share in 2022, from its current guise of 55p a Share across ‘New GSK and ’New Consumer Healthcare.
For the half-year, investors and analysts will be focusing on any changes to current guidance for an EPS decline of the current year of a “mid-to-high single-digit percentage”, plus developments in the key areas of vaccines (after missing out on the big Covid one) and speciality medicines, plus infectious diseases, HIV, oncology and immunology/respiratory, with a drug pipeline that currently contains 20 vaccines and 42 medicines.
AstraZeneca is its most successful competitor in recent years, boasting a PS40bn plus market cap gap over its former rival. UBS analysts expect around 40 US Cents to update full year guidance following the completion of Alexion’s acquisition. Current EPS guidance ranges from US$4.75-5.00.
UBS analysts said that it is possible for the guidance range to be extended, but they don’t expect a hidden decline in outlook.
“Top-line momentum is still key for investors and its growth drivers: Tagrisso Lynparza, Imfinzi. We will be watching for Calquence uptake, especially after seeing the topline data from the trial with Imbruvica.”
Investors will be seeking comment on the Group’s China business and Covid-19’s future impact, given that China’s volume-based procurement (VBP), and Beijing’s National Reimbursement Drug List(NRDL) both hit sales for a variety of drugs in the first quarter.
IAG, BA owner, hopes for recovery following a turbulent year
Half-year results of British Airways owner International Consolidated Airlines Group SA (LSE:IAG), are not likely to be very encouraging as coronavirus travel restrictions remain a major problem in the travel industry.
Investors will be hopeful that the slight relaxation of restrictions will help the firm’s fortunes over the remainder of the year. Therefore, the outlook statement and ongoing cost management will be critical.
UBS analysts predict that forward bookings, the impact of the UK traffic light system and the current rate for cash burn will be the main focus of UBS’s analysis.
Macro matters in focus
This week’s macro focus will be on the Fed meeting on Thursday, and US GDP and PCE indices Friday. There may also be a variety of US data that could affect the market.
On Wednesday, the Federal Open Market Committee (FOMC), which is the US central bank’s rate-setting body, meets.
According to Marshall Gittler, market analyst at BDSwiss, “The FOMC will discuss the timing of tapering down their $120bn per-month bond purchases. However, they are not likely to be in any hurry to make a decision.
The Fed committee decided that although they are still far from reaching the “substantial further progres” standard, they believe that progress will continue.
Although June employment numbers have been “good but not exceptional”, inflation has risen to well above 2%. Gittler wondered if Gittler could still believe that inflation is “transitory”.
Gittler said that it is possible to expect an optimistic outlook for the US economy.
They will likely remain cautious due to the rapid spread of the delta virus. It is hoped that, with the majority of the over-60-year-olds vaccinated against the virus, hospitalizations will not rise as much as the number of new cases. This will allow the US to continue its openness. This is why I believe the “let’s wait” crowd will prevail.
Report from Tesla, Apple, Amazon, and other US companies: Big week for earnings
It’s Tesla results time after Monday’s closing bell, with Hasbro (NASDAQ.HAS) being another well-known brand on the day.
Things heat up as Microsoft Corp and Apple Inc, which are valued at US$2trn each, report to the bell on Tuesday. Also reporting after the bell is Alphabet Inc (NASDAQ.GOOG), who is closely behind Google. A number of large names are also reporting from various sectors, including McDonald’s Corp (NASDAQ:SBUX), Starbucks (NASDAQ:SBUX), Corp, Texas Instruments Inc, 3M, Lockheed Martin (NYSE;LMT).
It’s a billion-dollar Facebook Inc (NASDAQ :FB) Wednesday, along with Visa (NYSE :V) Inc and Pfizer (NYSE :PFE) Incs, Qualcomm, Boeing Advanced Micro Devices Incs, and Ford Motor Co.
Thursday’s event will feature Amazon.com Inc. and Mastercard (NYSE.MA), Comcast (NASDAQ.CMCSA), Intel and Altria.
Warren Buffett’s Berkshire Hathaway, (NYSE:BRK) Inc is the final Wall Street Week participant. Other big names include Procter & Gamble, ExxonMobil Corp., Caterpillar and Chevron, as well as Procter & Gamble, Procter & Gamble (NYSE;PG) Co.
Recent production numbers for Tesla have exceeded expectations. This shows that Tesla has successfully navigated the shortage of computer-chips that have affected the entire industry. According to Hargreaves Lansdown analyst Nick Hyett, tighter supply chains and a changing product mix, as well as increased competition in the electric vehicle market, will “spark extra interest” in comments about the outlook for future deliveries, especially in China, where local competitors are ramping up sales.
Analysts at Wedbush expect a strong performance from Microsoft’s Azure cloud product.
Apple: The Street expects US$73bn in revenues and US$1.00 in earnings. Wedbush believes both measures are likely conservative due to the iPhone strength Wedbush saw during the quarter, which included a significant uptake of demand from China. The iPhone 13 launch is big news. Supply chain checks have shown that iPhone 13 production has reached 130-150mln units. This positive outlook “gives us greater confidence that 2021 will see a normal launch,” analyst Dan Ives said.
Investors will be watching Alphabet for signs that the Mountain View search giant is showing momentum in its Google Search and advertising products. They also expect signs of Alphabet’s cloud division becoming a competitor to the market leaders, Amazon Web Services (AWS) and Microsoft Azure.
Facebook has been a pandemic winner, and the group will struggle to beat its 2020 first-half results. The monthly active user count increased by 10% in the last quarter, but it is likely that this number will be lower since people are more mobile. “However, it seems impossible for Facebook and the shift to digital appear like a long-term behavioural change and not a passing trend.”
Other Significant announcements anticipated for week ending 30 July:
Monday July 26:
Trading announcements: Ryanair Holdings Limited, Cranswick PLC (LSE:CWK)
Interims: Science Group PLC (AIM:SAG)
Tuesday July 27:
Trading announcements: BP PLC, Virgin Money UK PLC (LSE:VMUK), Mitie Group (LSE:MTO) PLC, Greencore Group (LSE:GNC) PLC
Finals: Games Workshop Group PLC, Moonpig Group PLC (LSE:MOON), Cohort PLC (AIM:CHRT), Foresight Group Holdings Limited, In The Style (AIM:ITS, FRA:8DH) Group PLC
Interims: Reach PLC (LSE:RCH), Croda International PLC (LSE:CRDA), Reckitt Benckiser Group PLC (LSE:RB.), Ascential (LSE:ASCL) PLC, Capital & Counties (LSE:CAPC) Properties PLC, International Personal Finance (LSE:IPF) PLC, Kitwave Group PLC (AIM:KITW), Restore Plc (AIM:RST), Sabre Insurance Group PLC (LSE:SBRE), Unite Group (LSE:UTG) PLC, Vivo Energy PLC (LSE:VVO)
Economic data: US durable goods orders, US house prices
Wednesday July 28:
Trading announcements: GlaxoSmithKline PLC, Wizz Air Holdings PLC, Lancashire Holdings Ltd
Finals: Hargreaves Services Plc (AIM:HSP, OTC:HGRVF), Shearwater Group PLC (AIM:SWG)
Interims: Barclays PLC (LSE:BARC), British American Tobacco PLC, ITV PLC (LSE:ITV), Aston Martin Lagonda Global Holdings PLC (LSE:AML), Rio Tinto PLC (LSE:RIO), Smurfit Kappa Group plc (LSE:SKG), St James’s Place PLC, Aptitude Software Group PLC, Conduit Holdings Ltd (LSE:CRE), Hutchmed (China) Limited, MusicMagpie PLC, Primary Health Properties PLC (LSE:PHP, FRA:PP51), Quartix Technologies PLC, Rathbone Bros PLC, Foxtons (LSE:FOXT) Group PLC, Card Factory (LSE:CARD) PLC, Dignity (LSE:DTY) PLC
Economic data: Fed rates decision, US trade balance
Thursday July 29:
Trading announcements: Royal Dutch Shell PLC, BT Group PLC, Airtel Africa PLC (LSE:AAF), Compass Group (LSE:CPG) PLC, discoverIE Group PLC, Evraz PLC (LSE:EVR), Headlam Group (LSE:HEAD) PLC, Intermediate Capital Group (LSE:ICP) PLC, Sage Group PLC, Johnson Matthey PLC (LSE:JMAT)
Finals: Amigo Holdings PLC (LSE:AMGO), SRT Marine Systems PLC (LSE:SRT)
Interims: Lloyds Banking Group PLC, AstraZeneca PLC, Anglo American PLC (LSE:AAL), BAE Systems (LSE:BA.) PLC, Diageo PLC (LSE:DGE), SEGRO PLC, National Express (LSE:NEX) Group PLC, Rentokil Initial (LSE:RTO) PLC, Devro (LSE:DVO) PLC, Elementis plc (LSE:ELM), Equiniti (LSE:EQN) Group PLC, Inchcape (LSE:INCH) PLC, Indivior PLC (LSE:INDV), Informa PLC (LSE:INF), Relx PLC, Schroders (LSE:SDR) PLC, Smith & Nephew PLC (LSE:SN), Spectris PLC (LSE:SXS), Totally PLC (AIM:TLY), Vesuvius Plc (LSE:VSVS)
FTSE 100 ex-dividends to knock 2.57 points off the index: Royal Mail PLC (LSE:RMG), SSE PLC (LSE:SSE)
Economic data: US GDP, US jobless claims
Friday July 30:
Trading announcements: Paragon Banking Group PLC (LSE:PAG), Yamana Gold (TSX:YRI) Inc, Kerry Group PLC
Finals: Victoria PLC (AIM:VCP)
Interims: NatWest Group PLC, International Consolidated Airlines Group SA, Rightmove PLC (LSE:RMV), Pearson PLC (LSE:PSON), Essentra PLC (LSE:ESNT), IMI PLC (LSE:IMI), Intertek Group (LSE:ITRK) PLC, Jupiter Fund Management PLC (LSE:JUP), Man Group (LSE:EMG) PLC
