Nicholas Hyett, Equity Analyst 18 April 2019
It’s a mix of boring Brits and flashy Americans reporting after Easter, as banking and pharmaceuticals giants vie with tech titans for the limelight. I’m sure readers will be pleased to hear that Brexit takes a backseat too – for most of these global companies it’s an irritating distraction at best.
Among the stocks we’ll be covering;
- Margins take centre stage at Tesla
- Barclays looks to fend off activist Edward Bramson
- AstraZeneca investors will be hoping the group has turned the corner
FTSE 350 and selected other stocks reporting next week
|Coke*||Q1 Trading Statement|
|Snap*||Q1 Trading Statement|
|Verizon*||Q1 Trading Statement|
|Associated British Food*||Half Year Results|
|Boohoo.com*||Full Year Results|
|Centamin||Q1 Trading Statement|
|CRH||Q1 Trading Statement|
|Facebook*||Q1 Trading Statement|
|Heineken*||Q1 Trading Statement|
|Microsoft*||Q3 Trading Statement|
|Tesla*||Q1 Trading Statement|
|Visa*||Half Year Results|
|Acacia Mining||Q1 Trading Statement|
|Amazon*||Q1 Trading Statement|
|Anglo American||Q1 Production Report|
|Barclays*||Q1 Trading Statement|
|Ferrexpo||Full Year Results|
|KAZ Minerals||Q1 Production Report|
|Meggitt||Q1 Trading Statement|
|RDI REIT||Half Year Results|
|RELX||Q1 Trading Statement|
|Senior||Q1 Trading Statement|
|Synthomer||Q1 Trading Statement|
|Taylor Wimpey*||Q1 Trading Statement|
|Tullow Oil*||Q1 Trading Statement|
|AstraZeneca*||Q1 Trading Statement|
|Computacenter||Q1 Trading Statement|
|Hastings||Q1 Trading Statement|
|Pearson*||Q1 Trading Statement|
|Rotork||Q1 Trading Statement|
|Royal Bank of Scotland*||Q1 Interim Management Statement|
|WPP*||Q1 Trading Statement|
*Companies on which we will be writing research.
Tesla’s first quarter results are all about margins.
We already know production and delivery numbers were substantially lower than hoped for, despite Tesla cutting prices. The shortfall was driven by a slowdown in sales of the higher priced Model X and S. And with Model 3 prices substantially lower, margins could be under serious pressure this quarter – with negative consequences for profits.
With around 10,000 cars in transit at the end of the quarter, working capital demands have increased, and that’s likely to have dented cash flow as well. That might explain the volte-face on closing Tesla sales outlets. Terminating store leases early and making redundancies costs money up front, and if cash is proving tight, pushing the expense down the road makes sense.
Despite two successive quarters of better than expected numbers, Tesla still needs to prove the core business is stable and sustainable.
Barclays investment bank remains the scene of skirmishes with activist shareholder Edward Bramson, who would like to see the business shrink. With Bank of America reporting choppy conditions in its investment banking and trading business, and JP Morgan warning about a “high teens” percentage fall in trading revenues, Q1 results could prove another stick with which Bramson can beat the Barclays board.
The other factors to keep an eye on will be familiar, but they’re no less important for that. With UK employment looking strong, we’d hope losses from bad loans remain minimal. Continued cost control will be key to improving net interest margins (the difference between what a bank pays on deposits and charges on loans) and is likely to place a heavy focus on digitisation of the bank’s services.
With charges for historic misdemeanours largely behind it, 2019 should represent something of a clean start for Barclays. We’ll find out on Thursday if it’s made the most of the opportunity.
All being well, Friday’s numbers will show AstraZeneca has turned the corner.
Legacy products, which have lost patent protection, make up an ever decreasing portion of total sales. With the sale of the group’s new drugs building up a head of steam, revenue growth is expected to turn positive this year for the first time since 2014.
Growth is being driven by the oncology portfolio, and recent investments mean that will hopefully continue for some years to come. Lung cancer treatment Tagrisso has been the stand out performer so far. That will continue this quarter but we’d expect an increasing contribution from newer additions Imfinzi and Lynparza as they mature.
However, the real focus will be on cash. Even after the raising $3.5bn, debts remain considerable and the commitment to sustaining the dividend means demands on cash are substantial. Astra needs to start converting revenues into cash in the bank if it’s to grow returns to shareholders in the future.
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