A week in advance. 14th April - 18th April 2008
By Keith Bowman | 11 Apr, 2008
A week in advance. 14th April - 18th April
Our Equity Analyst, Keith Bowman provides you with his summary of what to look out for in the coming week.
This coming week sees a pick up in UK corporate announcements, whilst US corporations move squarely into the first quarter results season. On an economic basis, pricing data steps back into focus in both the UK and US.
Economics
In the UK, and following the Bank of England’s recent decision to cut interest rates by one quarter of a percent (to 5.0pc), the focus turns back to the other side of the equation with inflation data for March scheduled for release. February UK inflation figures saw inflation jump from 2.2pc in January to 2.5pc, although allowances have to be made for recent adjustments made by the Office of National Statistics (ONS) in how it calculates the figure, with the outcome on an unadjusted basis providing an unchanged 2.2pc. Higher energy and food prices have been the key pressures behind recent price rises, although the Bank of England now looks to have joined its US counterpart in assuming that the impact of the still unfolding credit crisis will eventually curtail inflation.
In the USA, further housing data is scheduled to be released – Tuesday sees a housing market index calculation whilst Wednesday brings data in relation to the commencement of new builds. Although some confidence has recently returned to US and global stockmarkets, as some analysts hope that recent bank write-downs will prove the end of provisions, fortunes for the US housing market still remain key. US estate agents recently saw their February pending home sales index decline by 1.9pc to 84.6, the lowest reading seen so far since the index began in 2001 and 21.4pc lower than the reading during February 2007. To truly call a turn in the fortunes of the financial sector and the wider economy, some stabilisation in the fortunes of the property market first needs to be confirmed. Other US economic announcements of interest include retail sales figures on Monday, the US Central Bank’s survey of local economic conditions (the so called Beige Book survey) on Wednesday and inflation data for March, also due on Wednesday.
Companies
On the corporate front, supermarket giant Tesco is due to report its full year results on Tuesday. The group’s post Christmas trading update (15Jan08) saw growth in UK like-for-like store sales missing analysts’ sales estimates. The group achieved UK like-for-like sales growth of +3.1pc for the six weeks to 5th January 2008, against broad estimates of between 3.8pc to 4.5pc. Although not directly comparable given different time frames used to provide Christmas trading data, Tesco management itself appeared to concede the success which rivals had enjoyed, Morrisons in particular. Furthermore, in recent weeks, Tesco has halted the expansion of its new North American ‘Fresh & Easy’ business in an attempt to bed down the existing fledgling division. However, the decision comes against a backdrop of deteriorating US consumer confidence and has raised speculation that early trading has proved even tougher than expected. That said, and recent negative considerations aside, the Christmas trading update did still see overall sales rising by 13pc, international sales growing by 27pc and the online business remaining strong. Furthermore, recent industry data from market research group TNS also appeared to suggest that the group had enjoyed solid UK Easter trading. Current consensus analyst forecasts for full year pre-tax profits stand at around £2.84 billion (+12pc), with estimates for the dividend also suggesting a hike in the region of 12pc. Along with the overall management statement, investors are likely to scrutinise the results for any details in relation to the performance of Fresh & Easy. Ahead of the results, market consensus opinion remains positive in tone.
Staying on the high street, sporting goods group JJB Sports is also scheduled to report its full year results on Wednesday. The group’s post Christmas trading statement effectively saw the retailer issuing a profits warning, as management noted its expectation that profits over the second half were likely to come in below last year’s. Profit margins are likely to have suffered over the important Christmas period as an overhang of stock was cleared. Current consensus analyst estimates for full year pre-tax profits stand at around £34.1m, down nearly 21pc over last year. The dividend is expected to be left unchanged at 10.0 pence per share.
Other corporate announcements expected over the course of the week include results and trading updates from accountancy software group Sage, UK & US house building group Taylor Wimpey and first quarter new business reports from both Legal & General and Prudential.
Week Ahead Diary
Full Year Results
Monday – n/a
Tuesday – Tesco, John David Group
Wednesday – JJB Sports, Manganese Bronze
Thursday – n/a
Friday – UK Coal
Half Year Results
Monday – n/a
Tuesday – n/a
Wednesday – n/a
Thursday – WH Smith
Friday – n/a
Trading Statements
Monday – Sage Group
Tuesday – n/a
Wednesday – Experian Group, Legal & General (Q1 New Business figs)
Thursday – Prudential (Q1 New Business figs), Taylor Wimpey
Friday – n/a
Economic Diary
Monday – US Retail sales
Tuesday – UK Inflation data, US Housing data
Wednesday – UK Employment data, US Housing starts, US Inflation data, US Beige Book survey
Thursday – n/a
Friday – n/a
Note: This list represents what we believe are the highlights of the coming week and is not an exhaustive list of company announcements or economic events. Source: Digital Look.
