Tuesday’s will see some well-known names reporting results on both sides of the Atlantic, with hotel operator Whitbread and consumer goods maker Reckitt Benckiser showing both sides of the pandemic coin at the start of London’s session.
Later, New York’s contingent ranges from new tech in the form of Google owner Alphabet Inc (NASDAQ:GOOG) and Twitter Inc (NYSE:TWTR), to blue-blooded blue chips 3M, Visa (NYSE:V), General Electric (NYSE:GE), Texas Instruments and Lockheed Martin (NYSE:LMT).
Can Reckitt continue to clean up?
Unilever reported sales growth above analysts’ forecasts for the third quarter but it also reported unprecedented cost inflation.
Reckitt, which saw its shares near all-time highs last year, in September issued an update that revealed trading since late July had been in line with expectations.
The company also held an investor event where management reiterated confidence in the group meeting medium-term targets of 4-6% like-for-like sales growth from the end of 2022 onwards and mid-20%s operating margin by 2025.
Analysts at UBS said the keyword was “inflection point” as Reckitt faces a more “normal” trading environment and begins to benefit from its last 18 months’ investments.
From the second half of 2021, there should be tangible evidence emerging of the company being on an upward earnings growth trajectory, UBS said, including a marked pick-up in over-the-counter medicines as the flu season begins, signs of stabilisation for Dettol at 40% above pre-pandemic level, margin improvement excluding the Chinese infant nutrition, and nutrition LFLs improving post the China disposal.
Positive LFL sales growth surprises and improved credibility of the group’s medium-term targets “should drive a meaningful re-rating” of the shares, the analysts said.
Whit and wisdom
The FTSE 100 is taking advantage of its strong balance sheet to turn this situation on its head, and investing in growth while asset prices are depressed and competitors are either on the back foot or have hit the wall.
It has so far invested in a marketing campaign (announced in April), in pre-Covid-19 levels of refurbishment spend, adding rooms to its enhanced Premier Plus category, and in further expansion in its new market of Germany.
“The long-term value creation is clear and that – plus the asset backing – could attract private equity interest,” said Peel Hunt in a preview note.
Despite possible short-term challenges from Covid-19 trading disruption, the broker reiterated a ‘buy’ recommendation and 3,600p price target ahead of the interim results.
Significant announcement expected on Tuesday 26 October:
Interims: Whitbread PLC, e-Therapeutics PLC
Economic data: New home sales (US), Case-Shiller home prices (US), Consumer confidence (US)