A week in advance. 12th May - 16th May 2008
By Keith Bowman | 09 May, 2008
A week in advance
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 the number of UK companies reporting results, whilst the flow of economic announcements remains steady. In the US, the first quarter corporate results season begins to close, whilst on the economic front, an increase in major US announcements is scheduled.
Economics
In the UK, the prospects for inflation (rising prices) very much take centre stage. On Monday, we see pricing data for industry being announced in the form of Producer Price Indicators (PPI). UK producer prices continued to surge in March, led by rising oil prices and duty hikes from this year's Government Budget. On Tuesday, broader price indicators are scheduled, with the release of the more general Consumer Price Indicators (CPI) for April. Although inflation for March remained stubbornly above the Bank of England's (BoE) 2.0 percent target for the sixth month running, it did remain unchanged at 2.5pc as rises in air travel and energy prices were offset by falls in furniture prices. Finally on Wednesday, and maybe most important of all, the Bank of England’s latest quarterly inflation report is due to be released. Whilst the UK Central Bank has on several occasions warned that CPI inflation may well hit 3.0pc before the end of 2008, its medium term forecasts (18 to 24 months) will always be very closely scrutinized.
Over in the USA, inflation or Consumer Price Indicators are also due to be released (Wednesday). Rising energy prices have also underwritten price increases in the world’s biggest economy, although investors have to date taken comfort from the fact that core inflation – prices excluding energy and food inputs – have remained relatively subdued.
Along with inflation data, investors will also be closely assessing Retail sales data on Tuesday and Industrial Production data on Thursday.
Companies
On the UK corporate front, full year figures from supermarket group Sainsbury are scheduled for Wednesday. Back in late March the group reported positive fourth quarter sales, up 4.1pc on a like-for-like basis and against expectations of between 3.5pc to 4.0pc, as a combination of advertising campaigns and marketing initiatives continued to drive sales. Management also highlighted a joint venture with property group British Land aimed at enabling the group to continue developing its store portfolio. Profit margins and the group’s success in non-food sales are factors likely to be closely scrutinised by investors. Current consensus analyst estimates for pre-tax profits over the full year stand at around £493m, up 29.7pc over last year, with revenues forecast to come in at approximately £17.98 billion and the dividend is expected to be increased by nearly 20pc.
Away from the high street, British Telecom is scheduled to announce its Q4/full year results on Thursday. Despite its utility like qualities with strong cashflows, BT shares have been under pressure in recent months (-30pc over the last 6 months – as of 07May08). The group’s recent third quarter results (early February 08) saw revenues for the group’s Wholesale division under pressure as competitors such as Carphone Warehouse and BSkyB have commenced investing in their own networks, by-passing BT. Furthermore, recent declines in global stockmarkets have cast a shadow over the group’s pension fund and the viability of the dividend has also been questioned. However, BT’s management played down investor concerns, noting that such transit business, whilst boosting revenues, provided very little profit. In addition, cashflows at parts of the group can prove irregular, for example, revenues from the Global Services Division often do not materialize until the fourth quarter. Current consensus analyst estimates for Earnings Before Interest and Tax (EBIT) over the fourth quarter stand at around £681m, -2.7pc year-on-year, with the final dividend forecast to be increased by 9pc to 10.3 pence per share.
Other corporate announcements expected over the course of the week include results and trading updates from catering group Compass, property giant Land Securities and power transmission company National Grid.
Week Ahead Diary
Half Year Results
Monday – RM, Southern Cross Healthcare
Tuesday – Enterprise Inns, TUI Travel
Wednesday – Compass Group
Thursday – Thomas Cook Group, Holidaybreak
Friday – n/a
Full Year Results
Monday – n/a
Tuesday – n/a
Wednesday – Land Securities, J Sainsbury
Thursday – BT Group, Invensys, National Grid, SAB Miller
Friday – n/a
Trading Statements
Monday – Centrica, HSBC Holdings, Wolseley
Tuesday – G4S, Premier Foods
Wednesday – Barratt Developments, DSG Intl
Thursday – Barclays
Friday – Ladbrokes
Economic Diary
Monday – UK Producer Price Indicators (PPI)
Tuesday – UK Consumer Price Indicators (CPI), US Retail sales
Wednesday – Bank of England quarterly inflation report, UK Unemployment data, US Consumer Price Indicators (CPI)
Thursday – US Industrial Production
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.
