BP (Q1 earnings 1 May)
Following on from Shell's results last week, the focus will be on BP and whether it can also post a good set of numbers. Cash flow is on the up, with the increase in production providing a further positive flow for revenues. It has more work to do on reducing debt however, and with more money having to be allocated to this, BP’s dividend will remain weak relative to peers. Over time, free cash flow will continue to rise, as six new upstream projects come online.
BP shares are making another attempt to move above the £5.27 high, the high watermark from 2014. The shares have attempted to hold above this twice in the past six months, with only temporary success. Further gains will mean that the shares are now at highs not seen since 2010, with the 2008-2009 peaks of £6.50 as a long-term target. Possible areas of near-term support come in at £5.27, £5.21p and then £5.00.
Sainsbury’s (full-year earnings 2 May)
Sainsbury's is expected to report a 6% drop in headline earnings for the year, to 19.2p per share. Meanwhile, revenue is expected to rise 8% to £28.3 billion. It has beaten expectations on the former seven of the last eight times, but missed six out of the last eight on the latter. Current pricing suggests a move of 2.3% on the day, against an average 3.35% move on results day. Better conditions for food retailing, as consumer price index (CPI) caught up with increased producer prices, will have helped performance, but volume growth in food is still needed. The Argos purchase continues to be a major factor, hitting general merchandise performance as the firm brings Argos into its own stores. Ongoing efficiency savings between the two are helping performance, with an extra £15-£20 million in earnings expected over the past year, reaching almost half the projected total of £160 million.
Having firmly broken above the Q1 2018 highs around 260p, the price is now targeting 274p, 277p and then the 2017 high at 283p. The broader trading range of the past four years is still intact, with the 230p and 211p levels providing strong potential support.