Inmarsat (Q3 earnings 8 November)
Inmarsat is forecast to see a 22.5% drop in earnings for the quarter, to 9.3 cents per share, while revenue at least is forecast to rise 2.8% to $368.5 million. Results day usually sees the shares move 7% on average.
Steady expansion is expected for the quarter, with stronger growth likely in the aviation division thanks to expansion in its core products such as in-flight connectivity. Further marketing spending and investment in expansion in the aviation division will bear down on margins, but overall earnings growth is expected to continue. At 30.2 times forward earnings, the shares are more expensive than the five-year average of 24.2, while its dividend yield of 3.1% is below the two-year average of 5.8%.
Inmarsat shares have been in a downward channel since May 2017, with a sharp rally almost a year on from that peak creating a notable lower low. The price continues its bounce from the lows of the year, and has rising trendline support from the May low, having moved from around 450p over the past week. Further gains target recent resistance at £5.20 and then on to the top end of the channel just above £5.50.
Sainsbury’s (first-half earnings 8 November)
Sainsbury's is expected to report a 17.4% rise in earnings, to 9.7p per share, while revenue inches up 1.1% to £14.8 billion. On average, the share price moves 5.8% on results day, but current options pricing indicates a move of 4.13%.
While the Asda tie-up is not a done deal, the winds appear to be shifting, with the Competition and Markets Authority (CMA) likely to allow the merger without forcing through a large number of store disposals. Tesco and Morrisons are both enjoying the benefit of new convenience stores, but Sainsbury’s has lagged behind here and so its performance is likely to be weaker than its competitors. Same-store sales may also drop as the introduction of Argos concessions continues, hitting general merchandise revenue, while weaker food price inflation may also hurt like-for-like sales. At 15 times earnings, Sainsbury’s is now firmly above the five-year average of 12, and is far from the bargain on valuation grounds that it was towards the end of last year and into early 2018. In addition, it trades at a premium to its peers of 6%, versus an average 15% discount over the past two years.
The shares declined in line with the broader market during the late summer and early autumn, but have crucially held above the lows of May. A rally from just below 300p has seen them take out trendline resistance around 310p, and a move above 318p would clear the previous high and open the way to 325p and then 342p. A move back below 310p signifies that the sellers are back in control.