Nicholas Hyett 20 April 2017
Theresa May’s decision to call a snap election in the Summer has grabbed the headlines this week, but for the City writers at least, next week promises to be busier still. With a raft of the FTSE’s biggest companies reporting, including 4 of the 5 FTSE 100 banks, we take a look ahead as:
- Lloyds Banking Group investors keep a keen eye out for signs of bad loans rising. However, even if they are on the up it’s likely to remain business as usual for now, despite the possible implication of tougher times ahead for the wider UK economy.
- AstraZeneca continues to require patience from its investors as the pipeline develops
- WPP looks to calm investor nerves after a weaker than expected start to the year at full year results last month.
FTSE 350 stocks reporting next week
|Anglo American||Q1 Production Report|
|Petra Diamonds||Q3 Trading Update|
|Amec Foster Wheeler||Full Year Results|
|BHP Billiton||Q3 Operational Review|
|Circassia Pharmaceuticals||Full Year Results|
|Nostrum Oil & Gas||Q1 Operational Update|
|St James's Place||Q1 New Business Announcement|
|Whitbread*||Full Year Results|
|Antofagasta||Q1 Production Report|
|Croda||Q1 Trading Update|
|Fresnillo||Q1 Production Report|
|GKN*||Q1 Trading Statement|
|GlaxoSmithKline*||Q1 Earnings Results|
|Hochschild Mining||Q1 Production Report|
|Jupiter Fund Management||Q1 Trading Update|
|London Stock Exchange||Q1 Interim Management Statement|
|Metrobank||Q1 Results Announcement|
|Redefine International||Half Year Earnings Results|
|Standard Chartered*||Q1 Interim Management Statement|
|Tullow*||AGM Trading Update|
|Aggreko||Q1 Trading Statement|
|Allied Minds||Full Year Results|
|AstraZeneca*||Q1 Earnings Release|
|Berendsen||Q1 Trading Statement|
|Cobham||Interim Management Statement|
|Howden Joinery||Q1 Trading Statement|
|Jardine Lloyd Thompson||Q1 Interim Management Statement|
|KAZ Minerals||Q1 Interim Management Statement|
|Lloyds Banking Group*||Q1 Interim Management Statement|
|Schroders||Q1 Interim Management Statement|
|Taylor Wimpey*||Trading Statement|
|Travis Perkins||Q1 Trading Statement|
|Weir Group||Q1 Interim Management Statement|
|WPP*||Q1 Trading Statement|
|Barclays*||Q1 Interim Management Statement|
|Computacentre||Q1 Trading Update|
|Hastings||Q1 Trading update|
|Royal Bank of Scotland*||Q1 Interim Management Statement|
|Ultra Electronics||Trading Statement|
*Hargreaves Lansdown will provide research updates on these events
As the FTSE 100 bank most heavily exposed to the UK economy, Lloyds has benefitted from the surge in domestic stocks since the Prime Minister announced an election to be held on the 8th June. However, it’s not clear that an early election has changed all that much for the UK’s banks.
The focus of Lloyds’ first quarter results next Thursday remains broadly unchanged. The goal will be to keep costs flat or falling as income remains steady. One significant change we might see is a rise in the level of impairments (bad loans). However, defaults are currently at historically low levels so it’s likely any increase would have little effect on the group.
In the medium term a slowdown in the UK economy, that sees bad loans rise and demand for new loans slow, remains the bank’s biggest risk. The recovery in sterling we have seen in recent days helps to ease some pressure, but a sustained downturn would hit the bank’s ability to generate capital and thus pay the generous special dividends that it has recently provided to shareholders.View the Lloyds Banking Group factsheet
Astra has carried out a number of ‘externalisation’ deals so far this year – essentially selling early stage drugs in return for an upfront fee and a share of future revenues. That should keep earnings ticking over, supporting the 4.75% prospective dividend yield.
Longer term the focus remains on the pipeline, and its updates here that will be the focus of most attention. Although a full readout from the MYSTIC trial isn’t expected until later this quarter, hints on progress could be seized upon by the market.
We do not expect Astra to alter the guidance it gave in February for a low to mid teens percentage decline in core earnings per share this year – it’s 2018 that really counts. However, progress the group is making on reducing Selling, General and Administrative (SG&A) costs will be of interest.View the AstraZeneca factsheet
Investors in the world’s largest advertising and media agency have enjoyed a pretty serene few years. A string of bolt-on acquisitions, combined with underlying earnings growth, have helped the shares rise while the dividend has been increased year after year.
2016 may have brought another year of impressive growth, with net sales increasing by 3.1% on a like-for-like basis, but a slower start to 2017 gave full year results a more downbeat tone. Sales momentum slowed across the UK, Europe and the US at the back end of the year, while like-for-like net sales growth was just 1.2% in January. The shares dropped 8% on the day of results.
In light of this, and the cautious economic outlook provided in full year results, it will be interesting to see what the group reports for its first quarter as a whole.
Contributors to this article hold shares in Lloyds and AstraZeneca.
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