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BT Group, Shell, Unilever, and Barratt Developments to feature in Thursday’s busy diary

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BT Group PLC (LON:BT.A) is releasing third-quarter results on Thursday, but analysts at UBS remain cautious given a series of hurdles over the coming six months where risks to the company have been underestimated.

The telecoms giant is facing an expensive 5G spectrum auction and increased competition for Openreach from Virgin Media, which is significantly expanding its footprint and working more closely with Sky.

It’s also struggling with a £10.9bn actuarial pension deficit potentially constraining the dividend and limiting acquisition opportunities. Revenues in the quarter are expected to drop 6% to £5.4bn, with underlying earnings (EBITDA) down 7% to £1.8bn.

Performance has been hit by COVID-19 causing lack of mobile roaming and lower BT Sport revenues not helped by elevated competition in the UK broadband market. Although the worst is behind the FTSE 100 firm, it’s likely to see more declines because the second quarter benefitted from a sports programme rebate and other one-offs.

Shell eyed for write-down news

Royal Dutch Shell PLC (LON:RDSB) will deliver the first in a one-two punch next week, as on Thursday it releases its fourth quarter results ahead of a more forward looking strategy day seven days later, on February 11.

Much of the headlines for the quarter have been flagged, in December’s trading update.

UBS in a note highlighted that production is expected to be close to guidance.

For the downstream businesses, UBS noted that Shell’s oil products are expected to benefit from better refining but normalising marketing after a blow-out third quarter and its trading business typically sees the fourth quarter as the quietest quarter of the year. Shell’s chemicals unit is expected to have improved margins.

Shell’s December update also flagged U$3.5bn to US$4.5bn of possible write downs, plainly the market will be keen to see where exactly that lands.

Unilever hopes to sustain growth after turbulent year

Unilever PLC (LON:ULVR) is scheduled to report final results on Thursday for what has been a relatively resilient year for the consumer goods giant.

Despite this, analysts at UBS said they are still cautious on the company’s medium-term earnings growth prospects as a result of what they said was a lack of pricing power in its mature markets, a volume slowdown in emerging markets and a recurring “adverse mix” impact on its margins.

For Unilever’s fourth quarter, UBS is predicting a slowdown in underlying sales growth to 3% from 4.4% in the third quarter due to mobility restrictions globally as a result of the pandemic, although they expect a better performance in North America due to elevated at-home consumption.

Meanwhile, investors may also look for more details on the company’s climate change plans after it announced in December that it will give shareholders the chance to vote on its action to reduce carbon emissions to zero at its AGM in May.

Will big builder Barratt bump up profit guidance?

Britain’s biggest housebuilder, Barratt Developments PLC (LON:BDEV), will report first-half results on Thursday, with dividend payments making a comeback.

The company in early January announced it had completed 8,699 house sales at an average selling price of £283,000 in the half-year, which would mean sales should be roughly £2.5bn.

Analysts at UBS expect gross profit margins to have improved slightly year-on-year, resulting in an underlying profit (EBIT) forecast of £491mln compared to £440mln a year ago, and underlying earnings per share of 39.1p versus 35.3p last time.

While the FTSE 100 group said the rate of house sales and building work in progress have slowed from the breakneck speed seen late last summer, its levels of cash in the bank have tripled to £1.1bn so not only can it bring back dividends but also increase investment in land and work in progress in the second half.

For the full year, management said they expect 15,250-15,750 completions, with the average City analyst forecast equating this to full-year profits of roughly £750mln.

Significant announcements expected on Thursday, February 4

Trading announcements: Royal Dutch Shell PLC (LON:RDSB), BT PLC (LON:BT.A), Compass Group PLC (LON:CPG), Cranswick PLC (LON:CWK), Severn Trent PLC (LON:SVT)

Finals: Unilever PLC (LON:ULVR)

Interims: Barratt Developments PLC (LON:BDEV), NCC Group PLC (LON:NCC), Alumasc Group Plc (LON:ALU), Renishaw plc (LON:RSW)

FTSE 100 ex-dividends: None

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