George Salmon, Equity Analyst 12 April 2019
This week’s look ahead is slightly different.
As part of our expanded share research offering, we now offer research on a selection of the most popular overseas shares. And with the UK reporting calendar entering a quiet period, it felt like a good time to broaden our horizons and include an international stock in our preview.
We take a look ahead as;
- Unilever seeks to deliver more progress towards its 2020 goals
- Netflix will be looking to add more subscribers
- Acquisitions remain under the spotlight at JD Sports
Here’s our list of FTSE 350 and selected other stocks reporting next week.
|Rio Tinto||Q1 Production Results|
|Ashmore||Q3 AUM Statement|
|BHP||Q3 Production Results|
|Card Factory||Full Year Results|
|Hays||Q3 Trading Statement|
|JD Sports||Full Year Results|
|Netflix*||Q1 Trading Statement|
|Bunzl||Q1 Trading Statement|
|Countryside Properties||Half Year Results|
|Mediclinic International||Full Year Results|
|PepsiCo*||Q1 Trading Statement|
|Segro||Q1 Trading Statement|
|Moneysupermarket.com||Q1 Trading Statement|
|Nestle*||Q1 Trading Statement|
|Polymetal||Q1 Production Report|
|PZ Cussons||Trading Statement|
|Rentokil Initial||Q1 Trading Statement|
|Unilever*||Q1 Trading Statement|
|No FTSE 350 Reporters|
*Companies on which we will be writing research
A first quarter trading statement from Unilever will give more indications as to how it’s progressing with its 2020 plans. Front and centre is a drive to get operating margins up to 20%.
In 2016, the last full year before the target was announced, profitability stood at just 16.4%. Delivering almost one percentage point of improvements a year is a tough ask, but progress has been reasonable so far. Underlying margins rose to 17.5% in 2017, then to 18.4% last year.
Still, there’s some way to go. On the cost side, raw material and distribution expenses are ticking up, while top line growth is under pressure in a few geographies. Latin America, particularly Argentina, is proving volatile, while France is also facing challenges. Hopefully these results can reassure the market.
Netflix shares were hit by the wider US tech sell off at the back end of 2018, but a market bounce, and recent strong results have helped lift the gloom. Founder and CEO Reed Hastings will be hoping that upward trend can continue with next week’s numbers.
Cash flow remains negative as Netflix ramps up content spending, but longer-term the group is hopeful the benefits of scale can tip the balance back in its favour.
That means the rate of subscriber growth will again be one of the most keenly watched figures – especially given these results are the first since the group started increasing the price of its most popular US package by $2 a month. If new customers haven’t been put off by the increase, there’s clear potential to close the cash flow gap quicker than had been expected.
It’s been an absorbing year for JD Sports, with lots of moving parts. That should mean there’s plenty to talk about at full years.
First up, there’s the group’s acquisitions. There’s an offer on the table for Footasylum, and the deal for US retailer Finish Line completed in June 2018. Trading there has been good so far, with sales and margins both rising. We’ll be looking for more updates, including around the strategy of converting existing Finish Line stores into the JD brand.
While the US growth potential is exciting, investors shouldn’t forget the UK and European businesses still make up the majority of group sales. Momentum has been strong, despite uncertainty around the UK economy.
JD’s hopeful the trainers boom has further to run, and is spending heavily on its stores. That should ensure they stay looking fresh, but could mean free cash flow growth lags profits. Still, analysts expect the dividend to rise by about 8% - although remember there are no guarantees.
The author holds shares in Unilever.
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