Tuesday preview: BP and Just Eat to deliver quarterly updates
Tuesday offers some key UK economic data and trading updates from FTSE 100 pair BP and Just Eat, though many round the world will be enjoying the Labour Day holiday, including much of Europe, South America and China.
BP's first-quarter numbers come a week after those from rival Shell, which were boosted by a rise in crude oil prices, with Brent averaging around $67 over the month.
Expectations have risen for BP through January and February as Canada's WCS spreads implied high profitability at BP's Whiting refinery, analysts at UBS said, with the Downstream business expected to benefit from a rebound in trading.
"Upstream we see no obvious reason for the company sensitivities not to be a good guide although 1Q is often a light quarter for costs. Rosneft will be impacted by duty lag effects.
"Special scrutiny will again be reserved for the cash costs and any further guidance on the final full cost of Macondo even as we tick through its 8th anniversary."
For Just Eat, the online delivery ordering service, all eyes are likely to be on UK order growth, given concerns on competition from Deliveroo and Uber Eats, but the company should benefit from a softer comparable quarter last year and the ongoing roll-out of delivery services. JE shares have been under pressure since prelims in March.
Broker Numis forecasts Just Eat will deliver UK LFL order growth of 14% versus 19% last year, with group-wide order growth of 22% and revenue growth of 25% down from 30% in 2017, with a material contribution from the Skip the Dishes acquisition completed in December 2016.
Given the new focus to expand into the delivery space, risk to order growth should be on the upside, Numis said. "Given the lack of granularity surrounding this new channel and the anticipated capital markets day in June, we do not think this update will be overly price sensitive.
UBS expects UK order growth in the first quarter to be a robust 18% excluding HungryHouse, having perceived a healthy search showing on Google Trends, with group revenues of £160m. For the full year, management guidance is for £660-700m sales, with the average analyst forecast pointing to £705m.
"Beyond Q1 numbers, the market will likely focus on forward commentary around 1) the ramp-up and successful scaling ofown-delivery in the UK, 2) HungryHouse customers migration to the Just Eat platformand 3) the FY18 revenue guidance, where we see more upside than downside riskgiven ongoing delivery investments."
Connect Group also has interim results due, following a trading update in January that highlighted further issues across a number of Connect’s businesses that contributed to a 10-12% downgrade to consensus full year profit forecasts.
The newspapers and magazines distributions business was said to remain on track with the decline in readership print volumes in-line with expectations and offset by price increases and revenue growth in Mixed Freight and Pass My Parcel. However, lower margin activity in PMP and the need to protect service levels and delay restructuring in mixed freight hit profitability led to lower profitability in these units.
Numis said its concern remains that given the competitive nature of the industry, "targeted cost savings in freight will need to be reinvested in price and service levels in the future" and the impact of the above issues implies full year pre-tax performance weighted 65% to the second half, "and given the high operational gearing of mixed freight and PMP, forecast risk remains on the downside". There is a "strong case" for cutting the attractive dividend.
Later in the morning we will have UK economic data that comes on the back of Friday's super-soft UK gross domestic product figures, which led to the pound falling back to lows not seen since early January as traders take bets off the table that the Bank of England will hike rates any more than once this year.
The results of the Markit/CIPS survey of manufacturing purchasing managers for April is due at 09:30 BST and could shed some light on whether it was just the Beast from the East that weighed on economic activity in Britain during the first quarter or if there was something more to it. Ahead of the 10 May meeting of the BoE monetary policy committee, these questions take on more importance.
The manufacturing PMI is expected to fall to 54.8 in April from 55.1 in March.
Economists at Pantheon Macroeconomics predicted a fall to 54.5 after the eurozone flash PMI dropped to 56.0, from 56.6, while the UK's new orders index fell to a 10-month low in March, while stocks of finished goods accumulated for a second month.
The BoE itself will release its Money & Credit report at the same time, giving details on mortgage approvals and consumer credit.
After the main high street banks revealed house purchase approvals dropped to 37.6K in March, from 38.0K in February, the consensus forecast is for the broader official measure to fall to about 63K from 63.9K.
Net consumer credit is expected to have increased by £1.5bn in March.
Tuesday May 01
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Auto Sales (US) (10:30)
Construction Spending (US) (15:00)
ISM Manufacturing (US) (15:00)
ISM Prices Paid (US) (15:00)
PMI Manufacturing (US) (14:45)
UK ECONOMIC ANNOUNCEMENTS
BRC Shop Price Index (01:00)
Consumer Credit (09:30)
M4 Money Supply (09:30)
Mortgage Approvals (09:30)
PMI Manufacturing (09:30)
BP, Dunedin Enterprise Investment Trust, Jardine Lloyd Thompson Group, Just Eat, Plus500 Ltd, Smith (DS)
Virgin Money Holdings (UK)
FINAL DIVIDEND PAYMENT DATE
Essentra, Foreign and Colonial Inv Trust
Apax Global Alpha Limited , Barclays, EMIS Group, Jardine Lloyd Thompson Group, M Winkworth, RPS Group
INTERIM DIVIDEND PAYMENT DATE
NWF Group, Smith (DS)