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JD Wetherspoon drifts lower

JD Wetherspoon will announce its full-year results on 11 September, and the stock price is sliding despite rising profits. 

A woman pouring a drink into a glass
Source: Bloomberg

For the first six months of 2015 the group revealed a modest rise in earnings of 4.1%, and in 2014 the company revealed a record annual profit. As I previously stated, from a profit point of view, JD Wetherspoon is leading the UK pub sector as its competitors are struggling. Additionally, as pubs close down on a weekly basis, JD Wetherspoon has continued expanding its empire. However, it is not all good news for JD Wetherspoon, as tough competition from supermarkets and the increased pay packets for staff were cited as a concern for the company.

When the chain pub group announces its results, the market is anticipating revenue of £1.51 billion and adjusted net oncome of £58.55 million. These forecasts represent a 7.8% rise in revenue and a small dip in the adjusted net income. The firm will also reports its second-half numbers on the same date, and dealers are expecting revenue of £772 million and adjusted net income of £30.7 million. This compares with the first-half revenue and adjusted net income of £744 million and £27.8 million respectively.

Investment banks are bearish on JD Wetherspoon, and out of the 20 recommendations, three are buys, seven are holds, and ten are sells. The average target price is £7.14, which is marginally below the current price. Equity analysts are bullish on Mitchells & Butlers, and out of the 20 ratings, 134 are buys, six are holds, and one is a sell. The average target price is 483p, which is 37% above the current price.

The share price has been drifting lower since March 2104, and the support at £6.88 is the target. The £7.73 mark is an important level of resistance, and if it is cleared then traders will look to the £8.20 area. 

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