Earnings look ahead: Greggs, London Stock Exchange, Hargreaves Lansdown

Baker Greggs, the London Stock Exchange and wealth manager Hargreaves Lansdown all publish trading statements next week.

London Stock Exchange (LSE)
Source: Bloomberg

Greggs (Q3 update 9 October)

A profit warning back in May shook confidence in Greggs and its farinaceous products, and even a rosier first-half update did little to lift sentiment. Hopefully the warm weather will have seen UK shoppers in more of a mood to part with cash in exchange for the firm’s sugary goodies. At fifteen times earnings the shares trade below their five-year average of 17.4, and a 22% rise in annual retail sales for specialist food shops for August could be a sign that the quarter was a better one.

Despite a rebound from the July lows, the shares have refused to try and close the gap created at May’s profit warning. A move above £11.00 would take it above the bottom end of the gap, but above this the downtrend line from the December highs comes into play around £11.25. A decline below the £10.10 lows of August and October would suggest a deeper retracement towards the July low at £9.30.

London Stock Exchange (Q3 update 10 October)

Rumours of a merger and acquisition (M&A) in the area of global exchanges persist around London Stock Exchange (LSE) shares, but the main focus of the firm continues to be capturing more trading activity, now that the furore of the boardroom battles has faded. The third quarter (Q3) was a quieter period for global markets, but the recent pickup in activity, thanks to Italy and trade wars, may well lead to a healthier outlook for the end of the year. The shares have become steadily more expensive over the past three years, and now trade at 23 times earnings versus a five-year average of 20.9. This valuation is also well above the 18 times for its peers.

Since the end of 2016 investors have been happy to chase these shares higher, and the latest dip from £48.00 may well be another strong buying opportunity. A dip below the 100-day simple moving average (SMA) at £45.20 would bring the £43.30 area into play. A rebound would target £48.00 and then fresh highs.

Hargreaves Lansdown (Q1 update 11 October)

The wealth manager Hargreaves Lansdown should continue to report inflows for Q1, as assets under management (AUM) continues to rise. Recent weakness in UK equities may dampen performance this time around, but the overall trend remains intact. At 35.7 times earnings the shares are quite expensive, and well above the five-year average of 30.4. This suggests some near-term struggle lies ahead, and a 134% premium to peers versus a two-year average of 83% also indicates that much of the good news is already priced in on a short-term basis.

The momentum trade continues to play out here, as the shares continue their steady uptrend since the beginning of 2017. Dips such as we have seen since the beginning of the month have seen steady buyers, but a close below the 50-day SMA of £21.43 would be a short-term bearish development and bring £20.00 into play.

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