logo-loader

Unilever among the quality blue chip updates scheduled, but Fed meeting and US jobs data more important

Last updated: 01:00 29 Jan 2018 EST, First published: 08:00 26 Jan 2018 EST

Marmite jar

The agenda for the coming week is fairly light on quantity but the quality is certainly improving, with updates due from blue chip stalwarts such as AstraZeneca PLC (LON:AZN), BT Group plc (LON:BT.A), Royal Dutch Shell PLC (LON:RDSA), and Unilever plc (LON:ULVR), plus a Federal Reserve meeting and the January US jobs report.

As Unilever moves closer to establishing a single corporate structure as part of the strategy changes instigated after rebuffing a US$143bn takeover offer from US firm Kraft Heinz Co. (NASDAQ:KHC) early last year, the Anglo-Dutch consumer products giant’s fourth quarter update on Thursday will provide more clues as to its progress.

The maker of Marmite spread, Dove soap and Knorr soups is forecast to deliver 2017 organic sales growth of 3.7%, according to analysts at UBS, in-line with consensus forecasts, on volume growth of 2.1%.

The Swiss bank’s analysts also said they see scope for a margin beat for full year 2017, forecasting a 115 basis point progression in its underlying margin progress to 17.5%, ahead of company guidance.

At the end of November, the FTSE 100 listed reconfirmed its 2017 guidance for underlying sales growth of 3% to 5%, and an improvement in underlying operating margin of at least 100 basis points.

Production problems for Royal Dutch Shell

Meanwhile, UBS expects oil major Royal Dutch Shell to reveal a 5% drop in production on Thursday, reflecting an upstream business “held back” by two interruptions as well as post restructuring asset sales.

The interruptions come from the temporary shut-down of the Forties pipeline in the North Sea (which took 20,000 barrels of oil equivalent per day (boepd) offline for three weeks) and a fire on the Enchilada platform in the Gulf of Mexico (knocking out operations accounting for between 50-60,000 boepd) which is ongoing.

The upstream decline will partially offset by two new fields, Gorgon and Schiehallion, and expansion in Brazil, said analyst Jon Rigby. The analyst forecasts group production at 3.7mln boepd

Investors will be most keen to see what happens to the dividend though UBS, who rates Shell as a ‘buy’, reckons it will be held at its “already generous” level.

BT earnings under pressure, but better times to come

BT Group plc (LON:BT.A) is expected to reveal a fall in earnings when it reports its third quarter results on Friday.

The consensus forecast is for a 7% year-on-year drop in underlying earnings (EBITDA) as the company continues to tackle rising costs.

In the second quarter, EBTIDA fell 4%, reflecting higher costs resulting from securing sports rights, improving customer services and its pension scheme.

Numis, however, thinks the market estimate for third quarter earnings is “too bearish”.

“In fiscal year 2017, EBITDA was higher in the second half vs the first half but this was so in 2016 also,” it said.

“More importantly, fibre growth prospects remain good: at the end of the second quarter, 57% of all BT retail broadband customers took fibre (+8 percentage points year-on-year) but that number was just 30% (+10 percentage points year-on-year) for all of BT's retail rivals reselling Openreach.”

Numis believes the stock will benefit an end to the uncertainty surrounding issues such as next month’s auction for Premier League broadcasting rights, Ofcom’s review into the company’s Openreach network unit, and BT’s own review of its pension scheme.

Is AstraZeneca set to return to growth?

AstraZeneca PLC’s (LON:AZN) product sales have edged lower in recent years due to the loss of patents on its Crestor (statin) and Seroquel (bipolar) blockbuster drugs but the bottom of the cycle may finally be in sight.

Deutsche Bank expects the blue chip drugmaker's fourth quarter sales to be broadly flat, helped by easing generic pressures and strong growth from its new cancer drugs, Lynparza and Tagrisso.

Analysts reckon those two drugs alone should bring in at least US$425mln in the quarter, although they also see “significant upside potential” to that number.

The diabetes and respiratory divisions are likely to remain mixed, but Astra’s Brilinta heart attack treatment should show solid growth with sales expected to rise 32% to US$302mln.

“We expect the shares to be driven by improving visibility on product sales growth momentum which we expect to translate to a meaningful margin expansion and above peer group growth over the medium term,” analyst Richard Parkes wrote.

Can a cookie boost Domino’s winter sales?

Investors gobbled up Domino’s Pizza Group PLC (LON:DOM) after the pizza delivery group’s third quarter update back in October showed solid like-for-like sale growth.

That was on fairly weak comparatives though, and questions still remain over margins and the long-term sales growth trends.

With competition rising – think Deliveroo, UBEREats, Just Eat etc – bosses have been keen to try and underline Domino’s value proposition, which means it is struggling to pass on food price increases.

Despite that, the FTSE 250 company hinted at a possible full year profits beat in its last update, so look out for whether or not the guidance of “at least” hitting market forecasts has been maintained this time around.

If sales are to deliver solid growth once again, the Winter Survival Deal is likely to be a key factor. WSD sales dived last winter after the cookie was removed from the £15.99 meal deal but it’s back this year so keep an eye out on how this offer performed.

Restructuring progress eyed for Rank

Rank Group PLC (LON:RNK), owner of the Mecca Bingo and Grosvenor Casino chains, has been restructuring its UK operations after tough trading conditions hit its 2017 results.

In the year to June 30, 2017, the company reported lower revenues and profits, blaming “a combination of macro-economic conditions, customer due diligence, venue closures and competitor openings”.

SUBSequently, it kicked off a review of its cost base and decided to cut working hours, remuneration and management roles as well as simplify its organisational structure.

In an effort to lift revenues, it sought to beef up its digital arm amid slowing growth at land-based venues.

“The new financial year has started well and the board looks to the future with confidence,” it said at the time.

Rank reports its interim results on Thursday with a key focus on the progress of its restructuring.

US rates to stay on hold

The first Federal Reserve policy meeting of 2018, taking place on Tuesday and Wednesday, is expected be one of the more uneventful FOMC meetings in some time.

The likelihood of a hike on Wednesday evening is near zero, and the fact that there is no press conference or update to economic projections means only the statement will be in focus.

Commentators think there will be important tweaks that could make this statement much more hawkish than the December version, with the economic assessment to get a slight mark-up from an already robust characterisation.

The wild card is also that the Fed committee acknowledges some shift in the balance of risks following the recent US tax cuts as the economy is going from strength to strength.

Economists at ING are currently forecasting no US rate hike in the first quarter of 2018 as near-term activity data may be somewhat soft given bad weather in January and core inflation is likely to remain below 2% through to April.

As such, they added, incoming Federal Reserve Chair Jay Powell may choose to wait until the outlook is clearer before triggering consecutive hikes in Q2, Q3 and Q4.

Jobs due too

The Fed will also want to see the first US jobs report of the year, due on Friday, with another disappointment possible given the poor weather in January after December’s non-farm payrolls missed forecasts.

Last month’s reading saw 148,000 jobs added, against forecasts for 190,000, while the unemployment rate held at 4.1%, the lowest level since 2000.  

Significant events expected:

Monday January 29:

Trading updates: Petra Diamonds Limited (LON:PDL), Yu Group PLC (LON:YU.)

Interims: Conviviality PLC (LON:CVR)

Finals: Porvair PLC (LON:PRV), SThree PLC (LON:STHR)

Economic data: Nationwide UK house price index; US personal income, personal spending

Tuesday January 30:

Trading updates: CYBG PLC (LON:CYBG), Domino’s Pizza Group PLC (LON:DOM), Restore Plc (LON:RST), UDG Healthcare PLC (LON:UDG), Avocet Mining PLC (LON:AVM), 

Interims: Filtronic PLC (LON:FTC), NWF Group plc (LON:NWF), PZ Cussons PLC (LON:PZC)

Finals: Oxford Biodynamics PLC (LON:ODB)

Economic data: UK consumer credit; UK mortgage approvals; EU preliminary Q4 GDP; US consumer confidence; US Case-Shiller house prices index; US FOMC meeting begins

Wednesday January 31:

Trading updates: Britvic Plc (Q1) (LON:BVIC), SSE plc (Q3) (LON:SSE), Wizz Air PLC (Q3)

Interims: ANGLE PLC (LON:AGL), Best of the Best plc (LON:BOTB); Joules Group PLC (LON:JOUL)

Finals: Centamin PLC (LON:CEY)

Economic data: US FOMC meeting outcome; BRC UK shop price data; UK international trade in services; US ADP employment report

Thursday February 1:

Finals: Royal Dutch Shell PLC (Q4) (LON:RDSA), Unilever plc (Q4)

Interims: Rank Group PLC (LON:RNK)

Trading updates: Vodafone PLC (Q3) (LON:VOD), AG Barr PLC (LON:BAG), Glencore PLC (LON:GLEN), RPC Group PLC (Q3) (LON:RPC)

FTSE 100 ex-dividends: None

Economic data: UK manufacturing PMI; US manufacturing PMI; US weekly jobless claims; US Challenger job cuts

Friday February 2:

Interims: BT Group plc (Q3) (LON:BT.A)

Finals: AstraZeneca PLC (Q4) (LON:AZN)

Trading update: Gem Diamonds Limited (LON:GEMD)

Economic data: UK construction PMI; US jobs data; US factory orders; US consumer sentiment

BenevolentAI advances novel ulcerative colitis treatment through Phase 1a trial

BenevolentAI (OTC:BAIVF) chief scientific officer Dr Anne Phelan joins Proactive's Stephen Gunnion with positive safety data from the Phase 1a, first-in-human, clinical study of BEN-8744 in healthy volunteers. Phelan explained that BEN-8744 is a potent, selective PD10 inhibitor, uniquely...

1 hour, 34 minutes ago