Companies Reporting: Pfizer, HSBC, Apple, Lloyds

Our regular look at the FTSE 350 and a selection of other companies reporting from 02 – 05 May 2023.

• Watch out for Pfizer’s progress on Seagen acquisition and non-COVID sales
• Will Barratt Development benefit from the usual seasonal uplift?
• Few surprises in store for Haleon
• Interest margins and bad debt provisions in focus for Lloyds
• Is Apple due a slow-down?
• Next faces falling footfall

Pfizer NYSE:PFE Q1 Results, Tuesday 2 May

Derren Nathan, head of equity research, Hargreaves Lansdown: “After a record 2022, Pfizer’s expecting quite a slowdown in 2023 largely due to COVID-19 products bottoming out this year, a reflection of significant stockpiles by the authorities. But it’s not all bad news, with guidance suggesting that other products will grow between 7-9%. Given the anticipated drop in COVID-19 revenues, any sign in next week’s first-quarter report that other products are tracking either side of this range will likely attract a lot of attention.

But the big news of the first quarter was the announcement of the proposed $43bn acquisition of Seagen, which would be one of the largest pharma deals in history and add significant capabilities to Pfizer’s cancer-fighting credentials. Pfizer thinks Seagen can more than quadruple revenues to over $10bn by 2030, but that’s not without the usual risks of drug development. And it’s not yet a done deal. While it’s expected to complete by early 2024, a deal of this size won’t go unnoticed by the competition authorities. We’ll be looking for any further updates.

Pfizer’s investing heavily in its future both organically and through M&A, so we’ll also be keeping an eye on cash generation and the balance sheet, which need to remain healthy to support the prospective yield of over 4%. Yields are variable and not guaranteed.”

HSBC Holdings LON:HSBA Q1 Results, Tuesday 2 May

Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘’The rising tide of interest rates is set to buoy HSBC results in the first quarter with higher net interest income expected to deliver a spurt of profits. But, with the outlook for the global economy darkening, the prospects of higher defaults is on the cards. HSBC set aside a hefty $3.6 billion in preparation for more bad loans, so guidance will be watched closely for any indication that more provisions may be needed.

Market volatility and a reticence over deal making is likely to continue to weigh on HSBC’s investment arm and fees may well come under renewed pressure. The elephant in the room is the ongoing demands from the bank’s largest investor, Ping An, concerning hiving off the Asian segment from the rest of the business. Pressure is now also coming from activist shareholder Ken Lui, but management are expected to hold firm, believing alternative structural options will not deliver increased value to shareholders.’’

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Barratt Development LON:BDEV Q3 Trading Statement, Wednesday 3 May

Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “So far in 2023, Barratt’s valuation is up around 16% – a rebound that’s generally been repeated across the sector as some of the previous pessimism has unwound.

Only back in February, net private reservation rates were down 44% year-on-year, indicating that demand for newbuilds had slowed. But despite the trading backdrop remaining difficult since then, we’re cautiously optimistic Barratt will benefit from the usual seasonal uplift and lower mortgage rates.

Barratt’s also been wrestling with near double-digit build cost inflation, which eats into profitability. Luckily, the group had a large net cash position of £965m at the last count, so there’s plenty of cash available to help smooth out any bumps in the road. Next week’s trading statement should give us a clearer picture on how the balance sheet’s holding up against the challenging economic backdrop.”

Haleon LON:HLN Q1 Trading Statement, Wednesday 3 May

Steve Clayton, head of equity funds, Hargreaves Lansdown: “Few surprises are expected in Haleon’s Q1 trading update given the group provided an early look at the outcome ahead of their Annual General Meeting just last week. Revenues should be up 99% organically, largely driven by price. Growth was strongest in the emerging markets and the group’s cold and flu treatments were strong performers within the sales mix.

The group raised its full year guidance to be toward the upper end of the previous 4-6% range. Given the brief period between the AGM and this next update, we would be surprised to see any further changes.”

Lloyds Banking Group LON:LLOY Q1 Interim Management Statement, Wednesday 3 May

Matt Britzman, equity analyst, Hargreaves Lansdown: “There’ll be a few things for investors to unpack in Lloyds’ first quarter results. Net interest margin (NIM) is always crucial, especially for a bank like Lloyds that generates most of its income from interest. Like many of its peers, management’s warned they expect NIM to drop from levels seen in Q4 last year, but we should see levels above 3% for 2023. We think that’s a little conservative, and that figure could have some upside – especially when you consider UK inflation remains high and the chance of another rate rise in May has increased.

More specifically to Lloyds, the large mortgage book is worth some attention. High-margin loans issued during the pandemic are coming up for renewal, and the environment isn’t as favourable as it once was. That’ll be a drag on NIM that some of Lloyds’ peers won’t be quite as exposed to.

Then, of course, we have loan loss provisions to watch for. £15bn was set aside last year in preparation for debt defaults. We’ll be looking for an update on how much debt is in default and what level of provision Lloyds sets aside in the first quarter. Analyst consensus is for similar levels over 2023 to what we saw last year.”

Apple [NasdaqGS:AAPL] Q2 Results, Thursday 4 May

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Global smartphone shipments fell by 13% in the first quarter of the year but, once again, Apple appears to be bucking the trend – growing its deliveries by 3% instead. This should help bolster Q1 revenues but investors will want to know if this is all about Apple playing catch up from production delays, rather than a more sustainable boost to sales.

China’s re-opening after lockdowns should provide resilience on two fronts; an end to the production issues that plagued the tech giant and also renewed appetite for shiny gadgets among consumers freed from rolling lockdowns. Keeping iPhone sales brisk is crucial for its Services arm to keep growing its services business and other highly lucrative products like AirPods. Guidance will be closely watched, particularly with American shoppers becoming more worried about the health of the US economy. Purse strings are set to be tightening and investors will want to find out to what extent this expected trend will take a bite out of Apple’s sales.  The tech giant has immense brand power, but with a recession looming stateside and a global slowdown on the cards, even it won’t be completely immune.”

Next LON:NXT Q1 Trading Statement, Thursday 4 May

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “As cost-of-living headwinds continue to blow a storm, sales at Next will be watched closely to see if recent price hikes are putting off shoppers from filling baskets in-store and on-line. Although Next delivered full year profits ahead of guidance, painfully high inflation may mean loyal customers will be visiting less frequently, lured away by offers further down the value chain.

Shoppers have already started to limit their spending trips out, with fewer feet tramping up and down UK high streets in the five weeks to the start of April. Footfall has gone into reverse again -18.7% below pre-pandemic levels and down 0.6% compared to March 2022, according to Springboard.

However, Next’s focus on out-of-town retail outlets should help provide more resilience given they have been sunnier spots, away from the clouds gathering over the high street. Growth in its third-party LABEL operations, which charge a commission for sales through the Next platform, is another bright light. With big names like Reiss and Gap now participating in the programme, opportunity lies ahead. These sales are lower margin, but they also come with very little risk.’’

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