Thursday preview: Shell, Glaxo, Unilever

2nd Feb 2011 16:28

It might be wise to batten down the hatches on Thursday as a flood of company updates is predicted. Oil giant Royal Dutch Shell, pharmaceuticals colossus GlaxoSmithKline and household goods and foods leviathan Unilever are all set to declare full year figures while telecoms titan BT weighs in with a third quarter update. There are also trading updates expected from mobile phone network Vodafone and package tour travel firm TUI Travel.Royal Dutch Shell declares fourth quarter results two days after BP's slightly disappointing update. Charles Stanley has pencilled in $5bn for net income, up from $2.8bn the year before. The dividend is expected to be maintained at 42 cents."Contrary to recent market comment, we do not think that Shell's Q4 results will disappoint and also we believe that the new management team has a great opportunity to raise its game further and so the strategic update on 15th March may carry more significance than the preliminary results," Charles Stanley opines."Royal Dutch Shell is moving into a growth phase. This should be confirmed with the 2010 preliminary results which are expected to show earnings of $18.5bn (+63%) for 2010 with a $5bn contribution in Q4. Current operating performance is encouraging with Q4 expected to show upstream volume growth of 3% and production is expected to continue to grow in 2011 and 2012," the broker continued. "In Q4, the Upstream activities are expected to deliver earnings of $4bn (2009; $2.8bn). In Q4, the Brent oil price averaged $86/bbl compared to $75/bbl some 15% higher than a year ago. The Downstream activities are expected to contribute $1bn earnings (2009; Loss of $0.4bn). Although this represents a big improvement year-on-year, there is quite a short-fall on the Q3/10 performance of $1.4bn. Refining throughputs are lower due to planned maintenance and outages," Charles Stanley added. Panmure Gordon thinks the fourth quarter results from Glaxo will not present "a pretty picture", though the broker does not share some of the market's concerns on a liquidity crunch. "We do not believe the company will cut its dividend payment and as such we expect the shares to rally even though outlook for 2011 will be largely unexciting. Consensus forecasts for Q4 are for revenue decline of 11.3% to £7,181m, resulting in gross margin of 73.0% and EPS of -6.4p (pre-exceptional -8.7% to 29.4p)," the broker said."On other KPIs [key performance indicators], consensus forecasts for Advair is revenues of £1,408m, Avodart £164m, Vaccines £916m and Consumer Healthcare £1,259m. On gross margin, consensus expects a modest erosion of 80bp to 73.0%," Panmure Gordon said. Matrix Group thinks the results will show that pressures from competitors producing generic versions of Glaxo's drugs are easing. "Focus will now return to the pipeline and key assets being delivered to the market, including Benlysta for lupus," Matrix reckons.Matrix predicts full year revenues will be £28.5bn, slightly above consensus of £28.4bn. It is forecasting a pre-tax profit of £5.5bn, also slightly above consensus, which is £5.5bn. "We think it unlikely that GSK will restart a share-buyback programme in 2011. Instead, we think it is likely to use any excess cash to undertake bolt-on acquisitions," Matrix said.Charles Stanley is predicting full year group sales of £28.5bn, and core earnings per share of 57.0p, while it reckons the group may well decide to pass on paying out a fourth quarter dividend as a result of a requirement to take an additional £2.2bn legal charge."Even without the impact of legal charges, the decision by US and EU industry regulators to withdraw the high margin Avandia (diabetes) will exert adverse near-term pressure on gross margins. This, coupled with the ongoing impact of Valtrex generics and the effect of EU austerity measures on product pricing, could make for a difficult H1 2011 before washing out of annualized comparisons over H2," Charles Stanley observed. Turning to Unilever, Panmure Gordon thinks the Anglo-Dutch company is likely to produce its best volume growth for decades. "Margins are also likely to be ahead, albeit modestly, and earnings growth should be high-teens on a normalised basis. The geographic and category mix continues to improve, suggesting a higher, sustainable growth rate going forwards," the broker notes.Panmure Gordon has pencilled in like for like (LFL) sales growth of 3.9% year on year in the fourth quarter, with pricing turning positive at +0.4% for the first time since the second quarter of 2009."In total we expect sales growth of 10.9% to €10.7bn, with currency accounting for the difference. We expect underlying margins to fall by 10bp [basis points] to 13.0% and we forecast reported EPS [earnings per share] of €0.29, only ahead 1.5% but up 21% on an underlying basis. For the year, that gives LFL sales growth of 3.9% (Volume +5.4%, Price -1.5%), underlying margins up 20bp to 15.0% and EPS up 22% to €1.42 (or up 18% to 122.1p, or up 17% to 124.8p on a normalised basis)," the broker said.On the economic front, despite ECB president Jean-Claude Trichet talking tough at the World Economic Forum on the determination of the major central banks to keep the inflation genie in the bottle, expectations are that the bank's key lending rate will be left unchanged.INTERIMSAlumasc GroupINTERIM DIVIDEND PAYMENT DATEMitie Group, Robert Wiseman DairiesINTERNATIONAL ECONOMIC ANNOUNCEMENTSPMI Services (FRA) (08:15)PMI Composite (GER) (08:55)PMI Services (GER) (08:55)PMI Composite (EU) (09:00)PMI Services (EU) (09:00)Retail Sales (EU) (10:00)ECB Interest Rate (EU) (12:45)Productivity (US) (13:30)Unit Labour Costs (US) (13:30)Weekly Jobless Claims (US) (13:30)Non-farm Productivity (US) (13:30)ISM Services (US) (15:00)Factory Orders (US) (15:00)Q3BT GroupQ4Royal Dutch Shell 'A', Royal Dutch Shell 'B', UnileverGMSF&C Asset ManagementFINALSGlaxoSmithKline, Royal Dutch Shell 'A', Royal Dutch Shell 'B', UnileverIMSSCreston, Metric Property Investments , Vodafone GroupAGMSCompass Group, Edinburgh Worldwide Inv Trust, TUI TravelUK ECONOMIC ANNOUNCEMENTSPMI Services (09:30)FINAL DIVIDEND PAYMENT DATEWH SmithQ1TUI Travel