U.K. 'Blue-Chip' Stocks Worth A Punt & Companies Reporting Next Week

This coming week on the equity markets in London sees a number of companies in the FTSE 100 announcing their results, including big hitters like the miners - Anglo American, BHP Billiton and Rio Tinto - as well as Severn Trent, SSE and Unilever. So, should investors be on standby to snap up a few stocks?

Helal Miah, an investment research analyst at The Share Centre, an award-winning online brokerage and a member firm of the London Stock Exchange, provides a forward look and some thoughts as what to expect from those companies announcing results next week from Monday, July 16 2018.

Monday sees Rio Tinto, which The Share Centre has a “Buy” recommendation on, reporting its second quarter (Q2) earnings to the market in The City of London via the LSE's Regulatory News Service (RNS).

With a current market capitalization of £71.5 billion, Rio Tinto shares are up 16.4% over the past 52-weeks at around £40.18 each, but somewhat down from their high for the past year of £45.41. They are trading on a forward Price/Earnings (P/E) ratio of 11.7, with a yield of around 5.3%.

On Tuesday (July 17), Royal Mail, the listed British postal service that was originally established by King Henry VIII, unveils its Q1 sales and revenue. Currently the broker has a “Hold” recommendation on the shares, with the stock trading at around the £4.87 mark at the close of play this Friday, which places a market capitalization on the company of c.£5 billion.

The price for Royal Mail compares with a 52-week high of £6.32 and a low just below £3.68 a pop. So, the current price is around 32% above its low over this same period, but almost 23% below its peak in the past 12 months. The forward P/E ratio stands at 12.0, with the yield at 4.9%.

"Since [Royal Mail’s] promotion back into the FTSE 100 the shares have become uninspiring again, which were not helped by the full year set of results,” noted The Share Centre’s Miah. “For the first quarter we do not suspect that too much will have changed - including the pressure faced from the structural declines in the letters market - while package deliveries are still facing tough competition, despite the support from ever increasing demands from online orders.”

However, the analyst believed that we can expect that Royal Mail ‘s European package delivery business GLS “may show strong growth.”

Other companies also reporting this coming Tuesday include BHP Billiton, with a £95 billion market capitalization and set to unveil its Q4 earnings, and The Share Centre has a “Buy” recommendation on the mining and commodity company. Though off their past 52-week high of some £18.036, they are still significantly higher (c.30%) - recently at around £16.57 - than compared with the low for this same period of £12.75. The forward P/E ratio for the stock is 13.0 and offers a yield of 4.4%.

On Wednesday, July 18, low cost European airline group easyJet, releases its Q3 sales and revenue release. At present, easyJet is rated as a “Buy” by the U.K. online broker. “Interim results in May were excellent, but the company has been hit by industrial action in France and Italy since then. Investors will be looking to see if full-year profits are still expected to be in the £530 million to £580 million range,” noted Miah.

The key revenue per seat figure will also be watched as that is forecast to rise according the analysts. And, any comments on fuel costs will be noted given the rise in the oil price so far this year. Shares in the carrier were trading late this past week at just above £16 each, having been as high as £18.08 and as low as £11.35 over the past 52-week period. They trade on a forward P/E of 12.1 and yield of 2.5%.

It has also been a tough year so far for packaging group RPC, which unveils its Q1 sales and revenue. The shares have been impacted by concerns about plastic waste and British government action to try to reduce it. Commenting in relation to RPC Group, Miah said: “In June some investors focused on a fall in the cash conversion rate published in the final results, although revenues and adjusted pre-tax profits both rose 36%. Most recently though there have been reports that the accounting regulator has asked for clarity on some figures in the annual report.

As such, the market will be looking for something more positive from the company, which has a market capitalization of £3.1 billion in their Q1 update. The current recommendation on RPC Group is a “Buy” from The Share Centre. Shares in RPC are certainly trading on the lowish side, most recently at £7.63 each and compares with a high over the past 52-weeks of £10.32. They are on a forward P/E of 9.8 and offer a yield of around 3.7%.

Other companies reporting on the same day include Severn Trent, with its Q1 earnings, and which applies to a group of companies employing more than 15,000 people across the U.K., the United States and mainland Europe with some involvement in the Middle East. The Share Centre lists the stock as a “Hold” at the present time.

Shares in the group, which provides drinking water and recycled wastewater products, commands a market capitalization of around £4.6 billion. Trading at around £19.25 per share at the close of play this Friday, they have been as high as £23 a pop over the past 52-weeks and as low as around the mid-£16 level. The forward P/E ratio on Severn Trent stands at 14.8  and the yield some 4.4%.

Next Thursday (July 19) the market will ready itself for Q1 sales and revenue release from SSE plc, a Scottish energy company headquartered in Perth, Scotland, listed on the LSE and is a constituent of the FTSE 100 Index that operates in the U.K. and Ireland. “The full year results were a little disappointing as investors focused on government price caps and customer switching to cheaper alternatives,” Miah stated.

He added: “For the first quarter these themes will still be there, but much milder weather since the end of March will almost certainly result in reduced energy demand. Investors will expect updates on the demerger and merger of various parts of its business with Npower and Innogy.” The Share Centre currently rates SSE as a “Hold”.

Unilever will inform The City on its Q2 earnings release also on the same day. “These figures [from Unilever] should not contain too many surprises for the market as the company said only a few weeks ago that that sales growth in the first half would be below targets as a result of short-term problems in Brazil," Miah remarked. That followed disappointing first quarter numbers and news that pricing in some key emerging markets was weaker than expected.

He added: “Investors will be focused on whether the company retains its full year guidance of 3% to 5% sales growth. Despite the weaker sales the shares have performed well, helped by a €6 billion share buyback, which began in May.”

Some investors will also be looking for comments on the proposed Tesco-Carrefour alliance and how it might impact Unilever as a major supplier. As it stands right now, Unilever shares are rated a “Buy” by the broker. Anglo American also reports alongside announcements from Unilever and SSE with its Q2 earnings. A “Hold” rating has currently been placed on the stock by the broker.

Source: Data provided by Factset and collated by The Share Centre. Figures as of July 12, 2018.