Companies Reporting: HSBC, NVIDIA, BAE Systems, IAG

Our regular look at the FTSE 350 and a selection of other companies reporting from 20-24 February 2023.

• How much will HSBC gain by Chinese economy opening?
• NVIDIA hoping to reverse revenue declines
• Will BAE keep flying forward?
• International Consolidated Airlines will outline the outlook for long haul

HSBC, full year results, Tuesday 21 February

Steve Clayton, Head of Equity Funds: “Investors have been warming to HSBC LON:HSBA in recent months, in response to China re-opening its economy. With Covid controls fading away, investors are hoping that the Chinese economy will spring back into life, driving trade volumes higher. That would play well for HSBC which has been focusing its business ever more toward China. In the near term though the drivers of the business are closer to home.

Cost controls and the degree of success in widening net interest margins will determine the 2022 outcome. The outlook for 2023 will depend on the pace and scale of Chinese recovery and how HSBC manage their capital base; a pending disposal of their Canadian business raises the possibility of bumper distributions toward the end of the year.”

NVIDIA, Q4 reuslts, Wednesday 22 February

Aarin Chiekrie, Equity Analyst: “NVIDIA’s NASDAQ:NVDA coming off the back of some tough results, seeing revenues decline for the second quarter in a row. The biggest cause of this was the steep drop-off in gaming revenue, which saw an annual decline of 51% to $1.6bn.

More positive news comes from the data centre division, which has been there to pick up some of the slack. These data centres (and NVIDIA’s GPU’s which power them) provide the computing power behind Cloud storage, virtual desktops and even Artificial Intelligence (AI).

NVIDIA’s anticipating a strong recovery in gross margins in the fourth quarter, but we think a recent ramp up in inventories casts some shadows over this short-term goal. Missing next week’s target could see the stock come under some downward pressure, especially given the lofty valuation.”

BAE Systems, full year results, Thursday 23 February

Aarin Chiekrie, Equity Analyst: “BAE Systems LON:BA. last trading update in November showed that it’s tracking towards a very strong year, especially in terms of order intakes. In the first 9 months of the year, £28bn worth of orders were secured and we’re keen to find out how much more’s on the books when full-year results are released next week.

Undoubtedly, the Ukraine crisis has had positive effects on BAE’s growth, but no one quite knows how long this conflict will last. That’s why the order book is so important. As it’s predominantly long-cycle, with revenues spread over several years, it gives BAE multi-year revenue visibility. A great asset to have in uncertain times.

Investment in research & development has also increased recently, and we view this as a smart move. Companies which invest now are more likely to reap the benefits in the future, especially as defence spending across the world continues to trend upwards.

But costs have been facing pressure from supply chain disruption. While it looks like the fighter-jet maker can ride out the turbulence, next week’s results will give a better idea of the impact this is having on margins, which analysts expect to remain broadly flat.”

International Consolidated Airlines (IAG), full year results, Friday 24 February

Sophie Lund-Yates, Lead Equity Analyst: “The market expects International Consolidated Airlines LON:IAG to report operating profits of EUR1.2bn for its full year. A stark improvement from the heavy losses this time last year. That comes as travel gets back to normal and pent-up travel demand works its magic. While their clientele might be different, we’re cautiously encouraged by what IAG will have to say judging by the impressive boosts to passenger numbers TUI has recently reported. It seems IAG’s planes are now full enough on each of its flights that profits can start flowing, despite the considerable costs associated with getting capacity back up to pre-pandemic levels.

The bigger question is how forward bookings are shaping up. There’s a limit to how long pent-up demand can carry the mantle. It would be good to know how willing people are to spend on booking summer holidays, which is a crucial time of the year for long-haul specialist British Airways.”

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