Thursday preview: BoE rate decision, Shire, Diageo

9th Feb 2011 15:03

It is a big day for company results but even equity traders will be keeping an ear cocked for the Bank of England's announcement of its interest rate decision. Though two members of the Monetary Policy Committee (MPC) voted for a rate increase last month, up from just one the month before, the smart money is still on the benchmark lending rate being kept at its historically low level of 0.5%. Likewise, the Bank of England's asset purchase target is tipped to remain at £200bn.However, it would not be too big a surprise should more than two members vote for a rate hike this time round, what with the consumer prices index expected to show an annual increase of 4% or more this month, way above the Bank's target rate of 2%.Unfortunately, unless the Bank makes a special announcement we will not know the voting patterns until the minutes from the meeting of the MPC are released later this month.On the company results front, strong results are expected for pharmaceuticals firm Shire, with continued buoyant demand for its Vyvanse, Intuniv and HGT product lines."Consensus full-year forecast sales, as collated by Shire, are for $3.108bn, with total revenues, including royalties, of $3.445bn, profit before tax of $1.063m and net income (excluding amortisation) of $796m, net income of $532m and non-GAAP [generally accepted accounting principles] earnings per share of $4.23 (per American Depositary Share)," notes financial services group Matrix.Matrix's own forecasts are for full year revenues of $3.41bn and non-GAAP earnings per American Depositary Share (ADS) of $4.24."We expect Shire to report strong double-digit sales growth, driven by Vyvanse (+22% to $616m), Intuniv and its biologicals franchise (HGT, which includes Replagal, Elaprase and Vpriv)," Matrix forecasts.Artificial joint specialist Smith & Nephew has been the subject of merger speculation of late, with US healthcare giant Johnson & Johnson said to be interested, so the spotlight on its fourth quarter figures will be brighter than usual."Since early January we note mixed results from the global peer group, indicating that the industry continues to face a challenging operating outlook despite the perceived improvement in economic activity since the summer," said broker Charles Stanley.The broker is forecasting full year turnover of $3.91bn, up from $3.77bn the year before, and earnings per share (EPS) of 71 cents, up from 68.3 cents the year before.Matrix goes for revenues of $3.95bn, pre-tax profit of $849m and EPS of 65.7 cents. "Orthopaedics is still likely to be under some pressure, but we expect S&N to deliver a more confident outlook. Endoscopy and Advanced Wound Management are likely to show good growth," the broker reckons.Engine designer Rolls-Royce seems to recovered from its spell of bad publicity in December of last year when an engine oil leak caused the explosion on a Qantas A380 super-jumbo that forced it into an emergency landing in Singapore.As with the BP oil spill in the Gulf of Mexico, however, there are still clean-up costs to deal with and these will be disclosed in more details in Thursday's full year results. The bulk of the costs relating to the incident will be charged to the 2010 accounts."We are encouraged by relatively swift progress on implementation of a remediation programme and votes of confidence from several airlines (£3.2bn contract with British Airways), but some further costs could drag into 2011. Otherwise, industry watchers are likely to focus on the potential for improvement in Civil Aerospace profitability in the coming year and the broader competitive environment (impact of new programme launches)," believes Charles Stanley.Market consensus is for pre-tax profit of £937.1m on sales of £10.86bn. Charles Stanley is on the optimistic side, predicting pre-tax profit of £944m, EPS of 38.3p and a dividend of 15.9p, up from 15p the year before."While Marine and Defence businesses are performing slightly better than expected, Civil Aerospace profits will be lower than originally anticipated due to the additional charges. A small cash inflow is anticipated in 2010 with average net cash balance similar to the first half," the broker said.Diageo is primarily an owner of spirits brands though, perversely, it is best known as the brewer of Guinness, the Irish stout. Weak markets in Europe have been counter-balanced by strong growth in North America and in emerging markets, and with North America being such a crucial market for the group the interim results should be fairly upbeat."Recent data from the Distilled Spirits Council of the US suggest a strong recovery of premium-priced spirits. Positive earnings surprises from other consumer groups also bode well for Diageo's US outlook, in our view," opined Matrix Group.Matrix predicts 5.7% organic sales growth and 8% organic earnings before interest, tax and amortisation (EBITA) growth of 8%. It thinks first half net sales will hit £5.57bn, EBITA will be around £1.79bn and pre-tax profit will be about £1.7bn. It is predicting earnings per share (EPS) of 50.6p. "We are slightly below consensus at the sales level, but slightly above at the EPS level," Matrix said.INTERIMSAquarius Platinum Ltd., Diageo, Hargreaves LansdownINTERNATIONAL ECONOMIC ANNOUNCEMENTSIndustrial Production (FRA) (07:45)Manufacturing Output (FRA) (07:45)ECB Report (EU) (09:00)Weekly Jobless Claims (13:30)Wholesales Inventories (US) (15:00)Monthly Budget Statement (US) (19:00)Q4Anglogold Ashanti Ltd., Smith & NephewFINALSAnglogold Ashanti Ltd., Catlin Group Ltd., Rio Tinto, Rolls-Royce Group, Shire Plc, Smith & NephewAGMSFrutarom Indstries Ltd.GDR (Reg S), Hargreave Hale AIM VCT 1, Paragon Group Of Companies, Pressure Technologies, ZytronicUK ECONOMIC ANNOUNCEMENTSIndustrial Production (09:30)Manufacturing Production (09:30)BoE Interest Rate Decision (12:00)NIESR GDP estimate FINAL DIVIDEND PAYMENT DATECardiff Property, Redhall Group