Thursday preview: Shell, Astra, BSkyB ...

28th Jul 2010 16:54

Anglo-Dutch titan Royal Dutch Shell is the last of the major integrated oil companies to report in the current results season. Until the recent Gulf of Mexico oil spill debacle it had been languishing somewhat in the shadow of long time rival BP but the travails of its beleaguered rival has taken some of the heat off it.Analysts are expecting an increase in underlying profits to around $4bn in the second quarter, a gain of around 25% from the year before. Panmure Gordon is forecasting "net income of US$3,748m, towards the top end of market expectations (US$3.5bn-4.0bn).""Upstream earnings will come under some pressure from seasonally lower gas and LNG [liquefied natural gas] volumes," the broker believes. "Profits will also be hurt by lower trading profits. The downstream operations should benefit from higher refining margins."Panmure Gordon predicts the dividend will be maintained at 42 cents a share."The key with these numbers will be the group's ability to grow production volumes after years of declines. We saw the first tentative signs that it might at last have turned a corner in the previous quarter," Panmure Gordon suggested.Charles Stanley acknowledges that the first quarter was a good one but thinks things have already tailed off, with second quarter earnings expected to be lower sequentially, "due mainly to a heavy maintenance and downtime."The broker expects clean earnings of $4bn versus $3.2bn in the second quarter of 2009 and first quarter 2010 earnings of $4.8bn."In Upstream (Exploration & Production, Gas & Power and Oil Sands), we expect a small increase in volumes for the year and at the end of Q1 [first quarter], the Perdido field came on stream in the Gulf of Mexico. In Q2, the oil price has averaged $78/bbl compared to about $59/bbl in the same period a year ago. However, in Q2 there has been a high level of maintenance in the North Sea and Canada. Q2 Upstream earnings could be $3.1bn (2009; $2.2bn) but lower than in the first quarter. Downstream activities include Refining, Marketing, Chemicals, Trading and Alternative Energy," Charles Stanley said. "In Refining, the strategy is to focus on profitability and the group plans to dispose of 15% of its refining capacity. In Refining, margins have recovered from the depressed levels over the winter and we expect that in total, Downstream could post Q2 earnings of $1bn (2009; $0.4bn)," the broker continued."Gearing at the end of Q1 had risen to 17% and cash flow performance will be closely examined especially after a burst of acquisition spending," Charles Stanley suggests."In conclusion, the Q2 results may not be as exciting as Q1 but the group is now well placed to grow production and cash flow," says Charles Stanley analyst Tony Shepard.Drugs giant AstraZeneca also announces second quarter figures on Thursday. Panmure Gordon forecasts revenues will be 16% higher year on year at $8,086m, while it has pencilled in a gross profit figure of $6,533m. Core earnings per share (EPS) are tipped to be $1.66."Overall, we expect AstraZeneca to report a good quarter driven by strong growth to Crestor and emerging markets," the broker said.Nomura thinks the company could unveil a share buy-back scheme, with the market consensus being that $1.6bn will be set aside for 2011 to this end.The Japanese broking house is going for second quarter EPS of $1.58, marginally above market consensus of $1.57. It is going with market consensus of $8,009m with its revenue forecast, with sales driven by 20.2% year on year growth in Crestor sales, though the company has been affected by generic competition for Toprol-XL and Pulmicort.Charles Stanley's EPS forecast falls somewhere between the Panmure Gordon and Nomura figures at $1.60, with earnings helped by a currency tailwind of around 2%. Turnover is forecast to hit $8,000m."Newsflow has been positive to date and results are expected to follow an important FDA [US Food and Drug Administration] decision on Brilinta... AstraZeneca has already guided for an up to mid-single digit decline at constant exchange rates for the full year and we note that further down the P&L [profit & loss] account the positive margin trends achieved in previous quarters may prove increasingly difficult to sustain going forward without a radical overhaul of R&D [research & development] costs," the broker believes.Pay TV and internet service provider British Sky Broadcasting (BSkyB) is in the sights of major shareholder News Corp but the independent directors are holding out for a better offer than the 700p indicated by the Rupert Murdoch controlled media conglomerate, and have suggested that a bid north of 800p could do the trick. As such, a sparkling set of full year results is likely to up the ante, though it is unlikely that Mr. Murdoch, whose son James is chairman of BSkyB, is unaware of the company's performance in the year to end-June.Charles Stanley is predicting profit before tax of £740m, up from £638m the year before, on revenue of £5,900m, up from £5,359m a year earlier. The market is expecting underlying operating profits to be up 9% from a year ago at £851m."Operational performance is anticipated to have remained strong during Q4 [fourth quarter]. We forecast net additions of 90,000 subscribers, taking the total to 9.8m. Sky+HD is likely to have remained the key driver, with a forecast 300,000 additions, taking the total to 2.5m. Broadband is expected to have added a further 100,000 subscribers, taking the total to 2.5m. We forecast average revenue per user at £505 and churn broadly in-line with the company's long term target of 10%," the broker predicts."Financial performance is also expected to have been strong, driven by lower broadband related investment. Indeed, the broadband business is expected to have broken even for the first time in Q4. Profit growth will have been held back, however, by stong growth in the number of Sky+HD customers, which have an associated acquisition cost of c£240," Charles Stanley added. Daniel Stewart is more bullish on customer numbers than Charles Stanley. "We expect Sky to add 97,000 (net) DTH subscribers, increase its Sky+HD base by 514,000 and broadband by 100,000," the broker said.It is predicting revenue of £5,984m and earnings before interest and tax of £868m, up 6.8% year on year. Average revenue per user is tipped to be £43.64 per month.Yet another FTSE 100 constituent bringing out figures is telecoms leviathan BT, where underlying first quarter earnings are expected to be little changed from a year earlier at £1.37bn.Investors may be just as interested in the company's burgeoning pension fund problem, however. Last week telecoms regulator Ofcom ruled out changes to BT's funding that would have allowed it to raise wholesale prices to help close the huge deficit in its pension fund. The telecoms giant had wanted to put wholesale prices up by 4% to help plug the near £9bn deficit in its pension scheme. Ofcom said that after a period of consultation there was no 'compelling evidence' to change the way it takes BT's pension costs into account when setting regulated charges.Odd though it is to think of a £6,5bn valued company struggling to gain coverage, business publisher Reed Elsevier may find its interim results overshadowed on Thursday.Charles Stanley has forecast a dip in revenue to £2,980m from £3,080m at the interim stage last year, while profit before tax is tipped to fall to £575m from £644m a year ago. The broker thinks the interim dividend will be held at 5.4p."Reed is expected to report a soft set of interim results, reflecting the impact of late cycle pressures on the more economically sensitive parts of the business. The pressures have been well flagged, however, so the focus of investor attention will be on whether there are any signs that trading conditions are starting to improve," the broker said.On the economic side of things, the Bank of England is set to release mortgage approvals for house purchases data, with economists suggesting that the number will have eased back to around 48,500 in June from May's 49,815.Net mortgage lending is expected to have fallen to £1bn in June from £1.2bn in May. The Nationwide building society is scheduled to release house price data. The market thinks the building society's index fell 0.5% in July after rising 0.1% in June. Net consumer credit data from the Bank of England is also due for release. Credit edged up by £0.2bn in June, economists say, after falling £331m in May. INTERIMSAstraZeneca, BAE Systems, Coca-Cola Hellenic Bottling Company SA, Collins Stewart, Dairy Farm International (Singapore), Hongkong Land Holding Ltd. (Singapore), Hutchison China Meditech, Mandarin In.Sg, National Express Group, Rank Group, Reed Elsevier, Royal Dutch Shell 'A', Royal Dutch Shell 'B', RPS Group, Travis Perkins, Trinity Mirror, VernalisINTERNATIONAL ECONOMIC ANNOUNCEMENTSFed Beige Book (US) (19.00) Business Climate Indicator (EU) (10:00)Industrial Confidence (EU) (10:00)Consumer Confidence (EU) (10:00)Economic Confidence (EU) (10:00Service Sector Confidence (EU) (10:00)Continuing Claims (US) (13:30)Economic Sentiment Indicator (EU) (10:00)Initial Jobless Claims (US) (13:30)PMI Retail (EU) (09:00)PMI Retail (GER) (08:55)Unemployment Rate (GER) (08:55)Producer Prices (FRA) (07:45)Retail Sales (JPN)Q2AstraZeneca, Royal Dutch Shell 'A', Royal Dutch Shell 'B'GMSMitchells & Butlers, Monitise, QonnectisFINALSAngle, Antisoma, British Sky Broadcasting GroupIMSSHalma, Northumbrian Water Group, Titon Holdings, United DrugAGMSAcal, BSS Group, Byotrol, Chariot Oil & Gas, China Private Equity Investment, Elektron, GB Group, Halma, Hornby, Hyder Consulting, Northumbrian Water Group, Opsec Security, Pennon Group, QinetiQ Group, Record, SerVision, Torotrak, Yell GroupTRADING ANNOUNCEMENTSInchcapeUK ECONOMIC ANNOUNCEMENTSConsumer Credit (09:30)M4 Money Supply (09:30)M4 Sterling Lending (09:30)Mortgage Approvals (09:30)PMI Retail (09:30)Nationwide House Prices (00:01)FINAL DIVIDEND PAYMENT DATECaffyns, Rensburg AIM VCTQ1Toshiba