The coming week will see updates and results from several notable blue-chip names including post carrier Royal Mail, airline easyJet, consumer goods giant Unilever and mobile network Vodafone.
Investors will also be keeping a close eye on the US as quarterly earnings season picks up the pace on the other side of the Atlantic.
Miners unearth updates
The potential “read across” trends from Rio were rising costs, largely caused by increased labour costs and a hike in the price of diesel, and the strong recovery in the first half of the global economy, especially in China.
easyJet comes in for landing
Budget airline easyJet PLC (LON:EZJ) will report a trading update on Tuesday, although given the yo-yoing state of UK travel restrictions how the future will pan out remains anyone’s guess.
The carrier was previously flying high amid expectations of an easing of restrictions, however, the impending return of several Spanish islands to the amber list may have dented the outlook somewhat.
However, easyJet will be hoping other countries that have since been added to the green list will help offset the shortfall, with any details on summer bookings likely to draw scrutiny.
Investors will also be hoping for an improvement in revenues, which last quarter were down 91% year-on-year.
Royal Mail posts update
A trading update from Royal Mail PLC (LON:RMG) on Wednesday will see all eyes on the outlook as investors continue to assess how the post carrier will adapt to the reopening of the economy and the likely drop in demand for its parcel delivery services.
The company saw profits soar last year thanks to a surge in parcel volumes during the pandemic, however, with high street opening their doors again there will be questions about how this momentum can be maintained, although there may be some cheer from the fact that online shopping levels continue to be higher than before COVID-19 hit.
Another area of interest will be the company’s cost control as it focuses on the more expensive business of delivering parcels over letters.
Unilever tea-leaving eyed
On Thursday Unilever PLC (LON:ULVR) reports second-quarter results with its shares still slightly lower than where they finished 2019 and still 16% below the all-time high seen in September that year.
In the past year and a half, the consumer goods company has benefitted from its strong homecare products range as people got more fastidious with their household cleaning and handwashing during the pandemic.
The stock was one of the most bought at all three of the UK’s largest investment platforms, with investors keen to hear the Anglo-Dutch giant’s decision on how to spin off its tea business later this year, whether by IPO, a demerger, a joint venture or disposal.
In recent weeks, with inflation on the rise, JP Morgan said Unilever is one of the companies most exposed to rising prices among the consumer goods sectors.
Commodity inflation has been strong this year overall, however, as the global economy has recovered and though JP Morgan sees some levelling off, it is still predicting raw material (RM) cost inflation to be at “highly elevated” levels this year and next.
Unilever reported better-than-expected underlying sales growth of 5.7% in the first quarter – it’s best since 2015 – with analysts expecting this to ease to 4.2% for the second quarter.
Daily Mail heads for stock market off-ramp
Rothermere Continuation said it would make an offer worth around 251p per share of what’s left of the newspapers and exhibitions company after two deals happen: the potential sale of its insurance risk business, RMS, and the flotation of online car dealer Cazoo, in which it has a 16% stake.
Analysts will be keen to discern whether this move has been sparked by the core group showing signs of doing better than expected or the reverse; in the case of the latter, owners often like to take the company private to put in some long-term fixes away from the public eye.
Workspace eyes reopening recovery
Workspace’s like-for-like rents declined 24% over the year to March 2021, far more than the 9% in 2008-09, as around a tenth of its predominantly small and medium enterprise customers took advantage of flexible leases to leave and others to downsize.
Management noted that the pickup in letting activity in the fourth quarter continued into the new financial year, with viewings ahead of pre-pandemic levels. Thursday’s statement, to be issued on the day of the annual general meeting, should indicate whether that trend has continued.
Vodafone calls in with update
Mobile network Vodafone Group PLC‘s (LON:VOD) trading update on Friday will likely see the main focus on the company’s plans to expand its digital services in Europe and Africa, as well as how the company has fared in the first quarter of its current year after a somewhat neutral performance in its last one.
Shareholder focus is likely to be on the company’s performance in its core German market, as well as any updates on the progress of its plan to power its entire European operation using renewable energy and cut its carbon emissions to net-zero by 2030.
US earnings season – two sides of the pandemic coin
Results season gets into second gear on both sides of the Atlantic on Tuesday, with results in the US including updates from Netflix Inc (NASDAQ:NFLX), and United Airlines, tobacco giant Philip Morris and oilfield services colossus Halliburton, followed on Wednesday by fellow titans Coca-Cola, Johnson & Johnson, and Verizon.
Thursday sees Intel, Twitter and Snapchat owner Snap Inc all report, with American Express, Chevron and Schlumberger on Friday.
Looking more closely at Netflix, as one of the FAANG stocks but with subscriber growth having hit a snag in the first quarter, these latest numbers are likely to show a further unravelling of the streaming giant’s market share, said analyst Susannah Streeter at Hargreaves Lansdown.
“Not only are the likes of Disney and Amazon luring in new viewers with their latest hit shows and back catalogues, but the long-awaited re-opening of cinemas could also dent sign-ups.”
Netflix added just under 4mln net new paid subscriptions in the first quarter, much lower than expectations, and guidance for the past quarter is for a big slowdown to 1mln additions – which would be its lowest ever quarter.
“The figures may surprise on the upside, but with other entertainment avenues opening up once more, it’s going to be increasingly tough to keep all eyes on the screen,” said Streeter.
Coca-Cola Co (NYSE:KO) numbers on Thursday should show the other side of the pandemic coin, as there were lower sales of Coke in bars and restaurants, which put pressure on pricing and therefore profit margins.
“But now that society is opening back up, this trend can be expected to reverse,” says Streeter’s colleague William Ryder, with overall volumes in March returning in line with 2019.
“Despite gaining market share in both shops and bars, Coca-Cola has managed to lose market share overall. This is because the group has an unusually strong position in bars and restaurants, so falling sales there have been enough to shrink Coke’s share of the market.”
Alongside regional sales patterns, investors will hope for updates on Coke’s new brand launches, with its ‘lift and shift’ strategy designed to lift products that prove successful in one market and shift them to others.
The real US earnings rush comes the week after, with Tesla and the two-trillion-dollar club making an appearance with Microsoft and Apple, along with the merely US$1 trillion names of Amazon.com, Alphabet Inc and Facebook.
Central banks the world over are under the microscope at the moment and in the coming week, it’s the turn of the European Central Bank – especially as some governing committee members have cautioned about the danger that inflation could take a grip.
The latest preliminary inflation reading of 1.9%, down from the prior month’s 2%, “make take off a little of the heat but this could be an interesting meeting all the same”, said analysts at AJ Bell.
UK macro data in the week includes Halifax houses on Monday, government borrowing on Wednesday, GfK consumer confidence on Thursday night and official retail sales figures on Friday, along with the ‘flash’ PMI surveys.
While manufacturing and construction PMI surveys have been strongly positive, above the 60 level for the last three months, the official ONS numbers have shown much weaker economic activity, observed Michael Hewson at CMC Markets, with a similar divergence being seen in the services data while retail sales numbers showed an unexpected decline in June.
“This week’s flash PMI numbers for July are expected to show fairly decent readings once again, however, given recent trends we do have to start treating these PMI numbers with slightly more caution given that they also exclude some important parts of the economy, that are continuing to struggle. One trend to keep a close eye on is the higher cost prices being reported by businesses as they struggle to source the necessary materials for their goods and services,” he added.
Although US stock markets hit more record highs during the past week, market analyst Marshall Gittler at BDSwiss reminded that concern around the coronavirus seems overly short-lived.
“Still, just because the market has for now forgotten about the virus doesn’t mean the virus has forgotten about us. You may not realize it, but globally we’ve had more new cases of the virus so far this year than in all of last year, and this year is barely half over,” he said.
With cases gradually heading higher again across all regions, though the vaccine roll-out means that in many countries, new cases does not lead to more deaths.
“The big problem is in the developing world, where few people have access to vaccines and even when they do, they generally aren’t the more effective vaccines. As long as the virus continues to circulate there, it will mutate and come back to bite everyone. We haven’t heard the last of this story by any means, I’m afraid.”
Significant announcements expected for week ending 23 July:
Monday July 19:
Tuesday July 20:
Wednesday July 21:
Trading announcements: Royal Mail PLC (LON:RMG), Antofagasta PLC (LON:ANTO), Petra Diamonds Ltd (LON:PDL), Close Bros Group PLC (LON:CBG), Euromoney Institutional Investor PLC (LON:ERM), QinetiQ Group PLC (LON:QQ.)
Thursday July 22:
Trading announcements: Daily Mail & General Trust PLC (LON:DMGT), AJ Bell PLC (LON:AJB), Diploma PLC (LON:DPLM), PensionBee Group PLC (LON:PBEE), SSE PLC (LON:SSE), Britvic PLC (LON:BVIC), Countryside Properties PLC (LON:CSP), Workspace Group PLC (LON:WKP)
Interims: Unilever PLC (LON:ULVR), Centrica PLC (LON:CNA), Howden Joinery Group PLC (LON:HWDN), Franchise Brands PLC (LON:FRAN), Breedon Group PLC (LON:BREE), Moneysupermarket.com Group PLC (LON:MONY)
Economic data: US jobless claims
Friday July 23:
Economic data: UK consumer confidence, UK retail sales, UK flash PMIs, US flash PMIs