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Lloyds share price: what to expect from annual results

Lloyds faces a difficult 2020, with the share price already looking at risk of further declines after elevated volatility over the past two months.

When is Lloyds’ earnings date?

Lloyds reports earnings on 20 February, covering its final quarter and full-year period.

Lloyds earnings: what does the City expect?

Lloyds is expected to report pre-tax profit of £7.5 billion, down from £8 billion a year earlier. Revenue is forecast to soften to £17.75 billion from £18.1 billion last year.

It is expected to be another reasonable, but tough, year for Lloyds, but investors will be expecting some relief for the final quarter as the election result helps to alleviate some of the Brexit gloom. However, pressure on margins is expected to remain as revenue growth eases off, particularly in the vital mortgage arena, where Lloyds is facing greater competition. The bank continues to keep a close lid on costs, but with income growth limited the overall impact is fairly minimal.

As a UK-focused play, Lloyds is perhaps now more attractive given the election result and the passage of the withdrawal agreement. Those looking for a company with a concentrated focus on the UK economy and housing market will find Lloyds to be almost tailor-made for their purpose. But as the economic outlook softens globally, and the Bank of England becomes more vocal about loosening policy, Lloyds can expect a hit to margins, even if mortgage lending picks up over time.

How to trade Lloyds earnings

The average move on results day is 4.2%, while current options pricing suggests a move of 3.75% on the upcoming results day. For reference, third quarter (Q3) results on 31 October witnessed a decline of 1.5%. Of 27 analysts covering the shares, 13 have ‘buy’ recommendations, with ten ‘holds’ and just four ‘sells’. The current target price is 64.0p, around 14% higher than the current price of 56.6p.

The shares trade at 8.1 times earnings, below the five-year average of 8.8, although this is more expensive than the 6.4 rating seen in H2 of 2019.

Lloyds share price – technical analysis

The election result in December saw the price surge through key resistance at 65.3p, which had held the share price back three times since early 2017. But the gains did not last and there followed a dramatic pullback which has stopped for now at 56.0p. A rally through 60.0p would mark a more bullish development, while below 56.0p the price will head to 50.0p, 48.2p and then 46.8p.

Lloyds bounce fizzles out

The hope of December, when a breakout seemed to be at hand, has been replaced with a more sober view. Brexit is not going away, and while the bank continues to exercise restraint on costs, it is not growing its bottom line sufficiently to warrant a higher valuation. More bad news could easily spark another sell-off in the shares.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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