A week in advance. 28th April - 2nd May 2008
By Keith Bowman | 25 Apr, 2008
A week in advance. 28th April - 2nd May
Our Equity Analyst, Keith Bowman provides you with his summary of what to look out for in the coming week.
This coming week continues to see a steady flow of UK corporate announcements, whilst the US first quarter results season remains ongoing. On an economic basis, events in the USA are likely to take centre stage.
Economics
In the UK, the week could prove relatively quiet on the economic front. Further house price data is scheduled to be released – Monday should see both housing market research company Hometrack and the government’s UK Land Registry department releasing figures. Whilst data from Hometrack is more current, the sample is relatively small when set against the official numbers from the government. Both follow recent data from the UK’s biggest mortgage provider which indicated that UK house prices suffered their biggest drop in over 15 years back in March, declining by 2.5pc over February.
Across the Atlantic in the USA, the US Central Bank begins its latest meeting in relation to US interest rate policy. Having cut rates by an almost unprecedented three quarters of a percentage point back in March – at the height of the Bear Stearns banking liquidity crisis – more sedate action is expected. Any decision also comes ahead of the latest monthly US employment figures on Friday – as of March, the US economy had shed jobs over three consecutive months.
With US bank rates having been reduced by a little over a third in a period of just over a month (from 3.5pc to 2.25pc), judging the effect of any hoped for adrenaline rush to the economy is a tough assessment to make. History suggests that the restoration of interest rates back to more normal levels and the timing of this change can equally cause severe economic difficulties in itself. Furthermore, this has to be set against a background of major global inflationary concerns, with the oil price continuing to rise to record levels. Whilst uncertainty regarding US Central Bank interest rate action is as high as its been in years, consensus opinion just about suggests a further quarter of a point cut to 2.0pc.
Companies
On the corporate front, a bellwether of the UK high street, Home Retail Group, is due to report its full year results on Wednesday. A trading statement from the owner of Argos and Homebase back in mid March saw management remaining happy with double digit earnings growth forecasts for this financial year, but using distinctly more cautious language when referring to the year ahead. With the group retaining high exposure to such consumer arenas as electrical and jewellery items via Argos and DIY products via Homebase, company fortunes may prove a major gauge in assessing the health of UK consumers. Current consensus analyst estimates for full year pre-tax profits stand at around £427.0m, up 13pc over last year, with earnings per share and the dividend both forecast to rise by around 12pc. However, much of the improvement is expected to have come from management cost saving initiatives. Interestingly, forecasts for the financial year just having commenced suggest pre-tax profits will fall by around 10pc, with earnings down a similar amount. As is so often the case, management comments are likely to prove more important than the figures themselves.
Away from the high street, an often overlooked yet major UK healthcare company, Smith & Nephew, is scheduled to report its first quarter results on Thursday. Although a specialist manufacturer of hip and knee replacements, the company is also actively involved in endoscopy (equipment to view inside the body – telescope cameras) and advanced wound management. Shares in the group have to date remained relatively unaffected by the credit crisis (up 7.5pc over the last 6 months), with the group’s 2007 full year results back in early February materialising very much in-line with analysts’ forecasts. Recall product problems at the group’s artificial knee unit did cause some difficulties, although performances elsewhere helped counterbalance the difficulties. Consensus analyst estimates for pre-tax profits over the current full year stand at around £378.5m, up 8.4pc over last year.
Other corporate announcements expected over the course of the week include results and trading updates from oil and gas giants BP, Royal Dutch Shell, and BG Group, media company British Sky Broadcasting and life assurance group Standard Life.
Week Ahead Diary
Full Year Results
Monday – n/a
Tuesday – n/a
Wednesday – Home Retail Group
Thursday – n/a
Friday – n/a
Quarterly Results
Monday – n/a
Tuesday – BP (Q1), Royal Dutch Shell (Q1),
Wednesday – BG Group (Q1), Standard Life (Q1), BSkyB (Q3)
Thursday – Smith & Nephew (Q1),
Friday – n/a
Economic Diary
Monday – Hometrack (April) house price survey, UK Land registry data (March)
Tuesday – n/a
Wednesday – US Central Bank interest rate decision
Thursday – n/a
Friday – US Monthly employment report (April)
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.
