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Companies Reporting: Barclays, Natwest, Unilever

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Our regular look at the FTSE 350 and a selection of other companies reporting from 24 – 28 April 2023

  • Alphabet’s Google competes with Bing
  • Inflation set to squeeze Associated British Foods’ margins
  • Will Visa start to see cracks in consumer resilience?
  • Have strong hotel bookings and prices continued for Whitbread?
  • Meta goes back to basics
  • Reckitt Benckiser toe the line of consumer budgets
  • All eyes on Amazon’s margins
  • WPP gains fresh footholds in influencer agencies
  • More price hikes expected for Unilever, can volumes hang on?
  • Barclays anticipate growing loan defaults
  • Interest rate hikes give Natwest a boost

Alphabet, Q1 Results Tuesday 25 April

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “Alphabet [NASDAQ:GOOGL] has had a knock to its valuation in recent days after a New York Times report which said Samsung is considering scrapping Google as its default search engine on its devices, in favour of Microsoft’s Bing. This would impact up to $3bn in annual revenue for Alphabet. With that in mind, next week’s results will be especially important as a reminder to investors about the potency and significance of Alphabet’s platforms.

The market is expecting advertising revenue to fall around 1.7%, reflecting the tough economic backdrop, which is seeing ad spend being reigned in. The jittery mood on the market means there’s likely to be a sharp reaction to any disappointment.

It will be especially interesting to see how YouTube revenue is faring. This area is a strong growth opportunity, with high quality engagement in the video and short video space. Recent results have been a little lacklustre so it would be good to see the division gain some traction. “


Associated British Foods, Half Year Results, Tuesday 25 April

Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “In a trading statement at the end of February, Associated British Food [LON:ABF] announced it expects half-year sales to be more than 16% ahead of last year, ignoring exchange rate impacts. That’s thanks to consumer spending which has so far proved to be more resilient than initially forecast.

The food businesses, which encompass household brands like Kingsmill, Ryvita and Ovaltine, are expected to post sales and underlying profit figures well ahead of the same period last year – but at a lower margin. Inflated input costs have been running ahead of pricing and cost-saving activities, and we’re keen to see how much this has squeezed margins.

Next week’s results should also give us an updated look at ABF’s expectations for the second half. While inflation looks like it could be near its peak and some commodity costs have pulled back, there are still plenty of headwinds to battle. The cost-of-living crisis remains a dark cloud over consumers’ heads, and ABF has already said it’s cautious about potential effects on discretionary spending – which could have knock-on consequences to Primark’s fortunes.”

Visa, Q2 Results, Tuesday 25 April

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Consumer spending had been relatively stable, helping Visa [NYSE:V] put in a performance exceeding expectations at the last count but, since then, the picture on main street has weakened with US retail sales falling back 1% in March. Households are increasingly feeling the pinch of rate hikes and high inflation and are cutting back.

With the Fed now predicting a mild recession, consumers may turn even more cautious and there will be concerns that credit card details could swell. Updates from big US banks don’t yet show cracks appearing in consumer resilience but, with the likes of Bank of America setting aside more money for potential loan losses, worries are clearly rising so guidance from Visa will be closely scrutinised.”

Whitbread, Full Year Results, Tuesday 25 April

Derren Nathan, head of equity research, Hargreaves Lansdown: “Whitbread [LON:WTB] carried strong momentum in its hotel business into the final furlong of the financial year. For the first five weeks of the quarter, UK accommodation sales were up 35% over the prior year and 36% ahead of pre-pandemic sales. Whitbread has been expecting pricing to remain strong. There are some signs that the market has remained resilient although there can be no guarantees. We’ll be looking to see if bookings remain strong into the current year. Food and beverage sales were also up in low double digits but not quite back at 2020 levels.

For the full year, consensus forecasts are expecting group revenue growth of about 50%, although this is flattered by Covid restrictions that were in force early in the comparative period. The forecasts also expect dividends for the full year to jump 66.3% to 57.7p, which if achieved implies a final pay out of 33.3p. This can’t be assured and the final dividend if any will depend on management’s confidence in the outlook.”

Meta, Q1 Results, Wednesday 26 April

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “Few companies have had the start to the year that Meta [NASDAQ:META] has when it comes to the valuation, with the group sitting on a 75% rebound. The market has been especially pleased by news that Meta is going back to basics and funnelling more of its consolidated budget on the traditional business. Any indication that the group’s grand but ultimately vague metaverse plans are being treated as a support act rather than the main event are likely to go down well.

Another area to keep an eye on will be how the advertising business is holding up. Facebook and Instagram have been struggling to entice marketing spend more than other tech platforms, and steep price cuts have also been necessary. Next week we’ll get an indication of whether things are moving in the right direction, or if recession risk is still holding the top line back. “

Reckitt Benckiser, Q1 Trading Statement, Wednesday 26 April

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Reckitt [LON:RKT] has been successfully passing on the higher costs of raw materials, with customers accepting price hikes which has meant it’s been able to keep to the path of sales growth. Investors will be looking keenly at whether margins have come under pressure in the last quarter as the cost-of-living crisis has intensified in key markets, and with central bank policymakers warning companies not to use inflation to boost their profit margins.

Brand power for Reckitt’s stable of brands including Dettol and Lysol disinfectants, Strepsils throat lozenges and Scholl foot products has remained strong, but with pernicious food inflation eating further into household budgets, there are only so many price hikes budget conscious shoppers will be able to swallow.”

Amazon, Q1 Results, Thursday 27 April

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “Amazon [NASDAQ:AMZN] has had a tough time since the pandemic, and margins will continue to be the main focus in next week’s results. Wider inflationary pressure means discretionary income has come under fire which makes the landscape difficult for Amazon’s enormous retail business.

The cloud business, AWS, will also be in the spotlight as investors scramble to work out if the cracks in cloud computing seen in Q4 have turned out to be prolonged, rather than a blip. “

WPP, Q1 Trading Statement, Thursday 27 April

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Global marketing spend appears to have turned a corner with TV advertising in particular heading back towards pre-pandemic levels, and this has been benefiting WPP [LON:WPP]. But, given the latest forecast for the US economy and growing expectations of a mild recession, guidance will be watched closely for any hints of a fresh curtailing of budgets. WPP’s global reach, with its agencies helping 100 companies, should help provide diversification and more of a smooth running over any bumps in parts of the world economy. The surge in China’s economic recovery should help offset weakness in other markets.

WPP’s acquisition strategy is continuing apace, with the group gaining fresh footholds in influencer agencies. This has been a growth driver, but investors will be looking at evidence of more organic expansion, in particular, a steady ramp up in returns from its successful digital marketing offerings.”

Unilever, Q1 Trading statement, Thursday 27 April

Matt Britzman, equity analyst, Hargreaves Lansdown: “Investors are awaiting Unilever’s [LON:ULVR] upcoming trading statement detailing first-quarter sales performance, curious to see how the company’s strategy to protect its strong branded products amidst consecutive price hikes has played out.

While Unilever’s full-year results exceeded market expectations, the company has struggled to maintain volumes amidst price hikes and a cost-of-living crisis. We expect more rises over the first half as the group aims to grow underlying sales toward the top end of 3-5% over the year.

For now, at least, Unilever’s brand power has helped to offset some of the volume declines. That makes protecting the quality of their brands a top priority. To that end, brand and marketing spend is crucial, and we saw a €0.5bn increase in investment over the last year. It’s a non-negotiable expense for a brand machine like Unilever, and markets will be watching the volume picture closely.

We’ll also be on the lookout for any commentary on how the €600m cost-saving program is going. It’s expected to be weighted toward the second half, but early progress would be well received.”

Barclays, Q1 Results, Thursday 27 April

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Barclays [LON:BARC] is less reliant on traditional interest income for its profits, it won’t have enjoyed quite so much of the benefit of higher base rates compared to some of its peers. Nonetheless, the ramping up of rates, with yet more hikes expected, will have benefited the bottom line. Although its model based on fees, commission and trading should offer greater potential growth over the long term, there may be evidence in this update that management are bracing for more short-term volatility, particularly with the world’s largest economy expected to tip into recession.

As volatility has hit financial markets, fees for its large investment division have been weaker than forecast, and it’s already been anticipating a higher number of loan defaults. Although indices have crept back upwards in recent months, uncertainty has been the order of the day and the slowdown in dealmaking which its investment arm relies on, is likely to have continued.”

Natwest, Q1 Results, Friday 28 April

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Natwest [LON:NWG] generates most of its income from interest payments on loans it makes to consumers and companies, so it’s had a spring in its step as interest rate hikes have boosted its incomes. With fresh rate hikes set to be on the way, due to higher-than-expected inflation, this more positive environment will hang around for longer.

However, weakness is being sniffed out further ahead, given the expectation that rates will start to come back down as inflation falls back in the second half of the year and Natwest doesn’t have as many diversified income streams to rely on as some of its peers. The banking scare may have put another spanner in the works as some banks are expected to take defensive action and try and attract more deposits by offering higher rates to savers which could eat further into net income margins.

That said, Natwest is well capitalised, running on a Common Equity Tier ratio of over 14%, which is a comfortable position to be in. A slightly better outlook for the economy should also help given that the bank has already recognised impairment charges and companies and consumers have been proving relatively resilient. But the uncertainty of what lies ahead may still lead customers to repay debts more quickly and be more reticent about taking out extra borrowing, especially for home loans, which would make earning interest more difficult.’’

This article has been brought to you in association with Hargreaves Lansdown. All opinions expressed in this article are from the analysts and do not necessarily represent the opinions of The Armchair Trader.

FTSE 100, FTSE 250 and selected other companies scheduled to report

24-Apr
Coca-Cola Q1 Results
25-Apr
Alphabet Q1 Results
Anglo American Q1 Production Report
Associated British Foods Half Year Results
IWG Q1 Trading Statement
Jupiter Fund Management Q1 Trading Statement
McDonald’s Q1 Results
Microsoft Q3 Results
Nestle Q1 Trading Statement
Petrofac Full Year Results
PepsiCo Q1 Results
Quilter Q1 Trading Statement
Travis Perkins Q1 Trading Statement
Verizon Q1 Results
Visa Q2 Results
WAG Payment Solutions Q1 Trading Statement
Whitbread Full Year Results
26-Apr
Bunzl Q1 Trading Statement
Drax Group Q1 Trading Statement
Fresnillo Q1 Production Report
Glencore Q1 Production Report
GlaxoSmithKline Q1 Results
Meta Q1 Results
Persimmon Q1 Trading Statement
Reckitt Benckiser Q1 Trading Statement
Smith & Nephew Q1 Trading Statement
Standard Chartered Q1 Results
27-Apr
Amazon Q1 Results
AstraZeneca Q1 Results
Barclays Q1 Results
Capricorn Energy Full Year Results
Caterpillar Q1 Results
Howden Joinery Q1 Trading Statement
Inchcape Q1 Trading Statement
Indivior Q1 Results
J Sainsbury Preliminary Q4 Results
Lancashire Holdings Q1 Trading statement
London Stock Exchange Group Q1 Trading statement
Schroders Q1 Assets Under Management
Spectris Q1 Trading Statement
St James’s Place Q1 Trading Statement
Taylor Wimpey Trading Statement
Unilever Q1 Trading statement
Weir Group Q1 Interim Management Statement
WPP Q1 Trading statement
28-Apr
Chevron Q1 Results
Computacenter Q1 Trading Statement
Hikma Pharmaceuticals Trading Statement
Morgan Advanced Materials Full Year Results
Natwest Q1 Results
Pearson Q1 Trading statement
PureTech Health Full Year Results
Rotork Q1 Trading Statement
Smurfit Kappa Q1 Trading statement

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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