The coming week will see yet more big name firms updating from a variety of sectors including pharmaceuticals, travel and grocery.
Investors will also be looking across the Atlantic again, with earnings data expected across the pond from a number of major players including Disney, Coca-Cola, and Uber.
TUI trading update lands
Travel giant TUI AG (LON:AG) will update on its trading on Tuesday as the coronavirus (COVID-19) pandemic continues to batter the industry.
The company has been forced to cancel holidays until March due to the ongoing travel restrictions across Europe, while the pandemic has caused revenues to collapse and left it burning through cash at a rate of around EUR650mln per month.
While TUI managed to secure a third bailout from the German government and investors in December, taking its total rescue funding thus far to EUR4.8bn, it will likely be hoping the ongoing vaccine rollouts across the world will provide some relief for its business, particularly with the idea of ‘vaccine passports’ for travellers currently being mulled by several governments.
Vaccinations will also help alleviate uncertainty among consumers and may encourage them to start booking holidays again, giving the firm access to revenue streams. While it may take time to return to normal, investors will be hoping the bailouts will give TUI enough financial firepower to ride out the final part of the pandemic.
Analysts at UBS expected the company to report an underlying (EBITDA) loss of EUR700mln for the first quarter alongside a cash burn of EUR1.5bn, with any updates on this cash outflow likely to carry particular attention for investors.
Ocado delivers finals
One of the issues that may have knocked investor confidence was news that it is being sued by Norwegian rival AutoStore over claims that the online supermarket breached a patent for its warehouse technology.
Some were also worried about a deceleration in sales growth in the second lockdown and in the run-up to Christmas, with analysts at UBS noting that Ocado and its UK retail joint venture partner M&S had acknowledged that trading in 2021 will depend on how customer behaviour normalises as coronavirus restrictions are lifted.
“Ocado is best known as a grocery delivery partner so investors tend to focus on it as a strong stay-at-home stock,” says Laura Hoy, analyst at Hargreaves Lansdown.
“Retail revenue makes up most of the group’s overall income, but with half of this now sold to M&S, the bigger picture for Ocado bulls is the company’s robotic warehouses.”
With profitability from this cash-gobbling Ocado Solutions arm a long way off, she said investors would probably like to see a timeline to success.
“The most important metric to watch is cash burn–the group raised over GBP1bn last summer, but it can’t come back for more anytime soon, so it needs to make those funds last.”
A package for Smurfit
Investors will also look for guidance for the new year and dividend updates.
The packaging specialist said in November it would pay a second interim dividend, a year-end bonus to staff and repay any government coronavirus support after achieving a stronger than expected third quarter.
The Irish group expects to deliver underlying earnings (EBITDA) of EUR1.46-1.48bn for the full year and recently set out to achieve at least net zero CO2 emissions by 2050.
As part of plans to bolster its ESG credentials, it also aims for 30% female representation across its business, with at least 25% holding management positions by 2024, while an investment of EUR24mln will be made by 2025 to support community, environmental and social initiatives.
More than a vaccine
Although the focus has been on the COVID-19 vaccine developed by Oxford University and the pharma giant’s recent row with the EU, the market will be looking at the FTSE 100 group’s drug pipeline, especially after the recent approvals for cancer and respiratory drugs.
According to Nicholas Hyett, equity analyst at Hargreaves Lansdown, they are “far more important”.
Product sales were moving up in the third quarter and are expected to gather pace into the last three months of the financial year, especially thanks to oncology and new respiratory treatments.
“The key area of weakness for Astra in recent times has been its cash flow and balance sheet position. The group’s failed to cover the cost of the dividend with organically generated cash and as a result net debt has risen,” said Hyett.
“Now sales are delivering robust growth the group needs to reverse that trend – especially as the pending acquisition of Alexion (due to complete in the third quarter) will see the group taking on significantly more debt in the near future.”
Ted Baker looks to draw a line under 2020
Revenues at the company fell 45.9% in the 28 weeks to August 8 last year which pushed Ted into a GBP39mln pre-tax loss as the coronavirus pandemic battered retailers. The update will cover trading in the latter part of the year so investors will be hoping the firm enjoyed a Christmas boost despite lockdowns and other pandemic disruption likely weighing on demand.
This demand slump may be a particular risk for the company as its fashion lines, often geared towards smart, occasion-focused dress, are unlikely to have been sought after with everyone stuck at home.
The company is trying to pivot more towards casual wear, however, this is unlikely to appear until the summer so investors will have to hope the company’s online sales can support the business until lockdown measures begin to subside.
Royal Mail on course for FTSE100 return
All of a sudden everything in the garden looks rosy for Royal Mail Group PLC (LON:RMG).
Parcels demand has boomed during lockdown while a deal has just been agreed with its main union the CWU over pay, technology and working hours.
Thursday’s third-quarter trading update also gives new chief executive Simon Thompson a first opportunity to explain his plans for the future.
Thompson hails from Ocado, the supercharged food delivery operation that is now rolling out automated fulfilment centres.
Automation has long been touted as a necessity for the postal service so any plans here will be keenly noted both by employees and investors.
Brokers, meanwhile, have been steadily upping their forecasts for the year to March 2021.
Citigroup has just raised its forecast for underlying profits to GBP289mln helped by the parcels tailwind, which it reckons has been strong enough for RMG to increase prices giving a boost to margins.
The US broker also expects a statement about the resumption of dividends.
Shares have risen to 421p currently from a twelve-month low of 124p in April 2020, valuing the group at GBP4.2bn, which might be enough to re-enter the FTSE 100.
In terms of UK data, the big item in the week will be monthly and quarterly GDP on Friday, which will be accompanied by trade, services and industrial numbers. BRC retail sales and RICS housing market figures are also out on Tuesday and Thursday respectively.
Meanwhile, across the Atlantic, US inflation data will be in the spotlight on Wednesday in addition to the weekly jobless claims on Thursday and a smattering of consumer sentiment data on Friday.
Elsewhere, China begins its new year-Golden Week holiday on February 11 as does Korea while Taiwan starts a day earlier on Wednesday, and most other big economies in the region will be out on Friday.
“The holiday lull is expected to drain the liquidity from the markets, making it a relatively quiet week for market watchers,” said ING.
Disney, Coca-Cola among key US earnings news
Across the Atlantic, earnings season continues, with big names such as Walt Disney Co (NYSE:DIS) and soft drinks giant Coca-Cola Co (NYSE:KO) among those in the diary on Thursday and Wednesday respectively.
For Disney, the COVID-19 pandemic has taken the shine off its theme parks, often considered one of the major jewels in the crown of the House of Mouse, with 32,000 workers having already been laid off due to enforced closures.
While the rollout of vaccines may signal better times ahead, the uncertainty of new variants means it is unclear when the doors of the Magic Kingdom will be open again. However, the company has seen a bright spot in the form of its Disney+ streaming business which has allowed it to swoop into the market as a major player in less than a year.
With the parks closed as well as cinemas, maintaining subscriber growth will be the core metric in the near-term.
Other notable US firms in the diary are social network operator Twitter Inc (NYSE:TWTR) and broadcaster Fox Corp (NASDAQ:FOX) on Tuesday, ride-hailing app Uber Technologies Inc (NYSE:UBER) and carmaker General Motors Co (NYSE:GM) on Wednesday, and PepsiCo Inc (NASDAQ:PEP) and Kraft-Heinz Co (NASDAQ:KHC) on Thursday.
Significant announcements expected for week ending February 12:
Monday February 8:
Economic data: US inflation expectations
Tuesday February 9:
Wednesday February 10:
Trading announcements: Lancashire Holdings Ltd (LON:LRE)
Economic data: US inflation
Thursday February 11:
Trading announcements: Royal Mail Group PLC (LON:RM.)
FTSE 100 ex-dividends: None
Economic data: US jobless claims
Friday February 12:
Economic data: UK GDP, UK trade balance, US Michigan consumer sentiment