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Companies Reporting: Lloyds Banking Group, Shell, Unilever

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Our regular look at the FTSE 350 and a selection of other companies reporting from 24 – 28 October 2022.

  • Continued resilience is expected from Alphabet despite economic downturn
  • Whitbread will show whether they can replicate the success of their last quarter
  • WPP will reveal if they can keep up their recent momentum this quarter
  • The spotlight will be on how well-received the latest iPhone has been at Apple
  • Shell will show whether cooling oil prices have taken the shine off their bumper growth performance
  • Lloyds Banking Group’s exposure to traditional banking could spell a Net Interest Margin spike
  • Any news on Unilever’s new CEO will be eagerly awaited, alongside costs and margins updates

Alphabet, Third Quarter Results, Tuesday 25 October

Sophie Lund-Yates, Equity Analyst: “Alphabet NASDAQ:GOOGL is an advertising powerhouse, and it is expected that the resilience will continue next quarter. Businesses by and large need to advertise on Google these days, and digital ads offer a cheaper alternative than large scale traditional media, which makes these platforms even more attractive in economic downturns.

That said, the outlook statement will be one to watch closely. There’s cautious optimism about ad demand, given the better than expected economic data coming from the US, but conditions can change very fast.

YouTube is an exciting area of potential growth, with YouTube shorts getting over 1.5bn signed-in viewers every month, and with more than 30bn daily views. It will be interesting to receive commentary on viewing behaviours and plans for the future.”

Whitbread, Half Year Results, Tuesday 25 October

Sophie Lund-Yates – Equity Analyst “Premier Inn owner, Whitbread LON:WTB, will offer a window into the soul of the UK consumer next week. As a budget value and convenience option, if Premier Inn’s revenue per room is struggling then it gives a stark read across other areas of the discretionary economy.

Last quarter, Whitbread saw like-for-like sales rise 10.8% compared to pre-pandemic levels. While there’s likely to be a resilient showing, it is likely that number could be hard to replicate given the ongoing pressures on people’s incomes.

The other thing to watch will be costs. Costs are expected to rise by £20-£30m in the current year, as the group increases investment in staff, refurbishments, and IT. Despite this, margins in the UK are still expected to rise. There will be a close eye on whether that’s still the case.”

WPP, Third Quarter Results, Wednesday 26 October

Susannah Streeter, Senior Investment and Markets Analyst: “WPP LON:WPP has been firing on all cylinders, after corporate wallets re-opened with advertising spend shooting back up. The company’s laser-sharp focus on boosting its digital market offerings has also helped the company turn a big corner with first half revenues jumping up by more than 10%.

Efficiencies accelerated during the pandemic helped here but the work is not yet done. Hundreds of millions is set to be spent on fresh technological advances and staff changes over the next few years. It’s necessary expenditure but also comes at a time of another bout of increased uncertainty.

WPP’s more focussed structure will help it if conditions deteriorate, but it won’t be immune to a global downturn, when marketing budgets typically get slashed. So, there will be a close watch on whether sales continue to tick up as expected and whether margins, as forecast, do tick up by 0.5% at the full year mark. It’s worth remembering that WPP’s agency business is still being chipped away at, and it’s turning to acquisitions to keep growth coming. So, WPP needs to prove that recent momentum can be harnessed and continued.”


Apple, Fourth Quarter Results, Thursday 27 October

Derren Nathan, Head of Equity Research: “In the third quarter Apple’s NASDAQ:AAPL sales of innovative gadgets fell slightly. Hardware sales make up about three quarters of total revenue, so this was a disappointing development. Investors will be hoping the recent launch of the fourteenth generation of iPhone has stoked momentum, but it’s not expected to have moved the dial too much yet because of the timing of the release. What will be more prudent to monitor will be the outlook statement and whether customers are holding back on buying brand new models amid rising inflation. The latest iPhones start at £1,099 in the UK but there are earlier models priced as low as £499, and so it will be interesting to see if there is any evidence of down-trading.

There will be a watch on whether there’s continued momentum in Apple’s services offering, which has shown stronger growth of late. But investors should remember that the world of Apple is a tight-knit ecosystem and if hardware sales growth doesn’t return this will also impact Apple’s ability to sell services.

Apple’s cash generation is impressive, with analysts expecting free cash flow of $111.6bn for the financial year just ended. There’s room to grow pay outs to shareholders and so eyes will be on any news about the dividend and buybacks next week.”

Shell, Third Quarter Results, Thursday 27 October

Laura Hoy, Equity & ESG Analyst: “This will be the first time we’ve heard from Shell LON:SHEL since news broke that the group’s current head of integrated gas and renewables, Wael Sawan, will step in as CEO. While his appointment is likely to see the group lean into a more comprehensive renewables strategy, we think any major shifts are unlikely until he’s formally taken the wheel in January.

The renewables division will be of interest with investors looking for further profit growth and improved capacity. But the real earnings driver is the group’s oil and gas businesses, which have seen a slowdown as oil prices came down from highs near $120 in the summer to around $90 per barrel now. With that in mind, revenue growth is likely to have tempered. Analysts expect this to feed through to a quarter-on-quarter operating profit decline, though with estimates of $15.3bn, that’s still more than double last year’s.

The big question for investors is what impact this might have on pay outs to shareholders. The group’s $6bn buyback programme was due to complete in the third quarter and investors will be wondering whether deteriorating macroeconomic conditions will make Shell consider being more cautious with its cash resources.”

Lloyds Banking Group, Third Quarter Interim Management Statement, Thursday 27 October

Sophie Lund-Yates, Equity Analyst: “All banks feel the pinch in the face of economic downturns. Lloyds Banking Group LON:LLOY is especially exposed because of its reliance on traditional banking. Classic loans, day-to-day accounts and mortgage lending are the core of the business, unlike other names which have more exposure to trading and investment bank activity.

So, there will be watch for any impairment charges. Lloyds is likely to take the view that more people are going to default on their loan repayments. Higher “bad debts” as they’re known, result in non-cash, but potentially hefty, charges being recognised which can affect profits. The scope of any impairments will give an indication of how Lloyds thinks consumers are going to fare in the coming quarter. The group’s open mortgage book rose over £3bn in the first half the year, and stood at £296.6bn. It would be good to get some commentary about mortgage demand, and the bank’s willingness to supply loans, given the significant volatility in mortgage rates triggered by last month’s mini budget.

The better news is that banks make money by lending money out at higher rates than they pay on deposits. Even though interest rates are low by historic standards, the recent increases should be making themselves known in an improved net interest margin.”

Unilever, Third Quarter Trading Statement, Thursday 27 October

Steve Clayton, Fund Manager, HL Select: “Back in September Unilever LON:ULVR announced that CEO, Alan Jope, would retire at the end of next year, so any comments on the succession plans will be eagerly seized upon. More important though will be the commentary on costs and margins. Rival Nestlé set the stage earlier this week when it revealed that it had been able to drive pricing ahead by 9.5% in response to inflationary input pressures. Unilever has been raising its own prices, but still struggling with the pace of input costs. At the half-year stage, Unilever saw margins dipping to 16% for 2022, before improving into 2023 and 2024 as the company’s cost controls and restructuring bore fruit.”

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-Oct
No FTSE 350 Reporters
25-Oct
Alphabet Third Quarter Results
Coca-Cola Third Quarter Results
HSBC Third Quarter Results
Microsoft Third Quarter Results
Softcat Full Year Results
Spotify Third Quarter Results
Visa Third Quarter Results
Whitbread Half Year Results
26-Oct
Barclays Third Quarter Results
Elementis Third Quarter Trading Statement
Essentra Third Quarter Trading Statement
Fresnillo Third Quarter Production Report
Heineken Third Quarter Trading Statement
Hochschild Third Quarter Production Report
Meta Third Quarter Results
Reckitt Third Quarter Trading Statement
Standard Chartered Third Quarter Results
WPP Third Quarter Results
27-Oct
Airtel Africa Half Year Results
Amazon Third Quarter Results
Anheuser-Busch InBev Third Quarter Results
Apple Fourth Quarter Results
AVEVA Half Year Trading Statement
Inchape Third Quarter Trading Statement
Indivior Third Quarter Results
Lloyds Banking Group Third Quarter Interim Management Statement
McDonald’s Third Quarter Results
Renishaw Trading Statement
Shell Third Quarter Results
Unilever Third Quarter Trading Statement
28-Oct
EVRAZ Third Quarter Trading Statement
Computacenter Third Quarter Trading Statement
Glencore Third Quarter Production Report
International Consolidated Airlines Third Quarter Results
NatWest Third Quarter Results

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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