Earnings look ahead – ITV, Vodafone, AstraZeneca

A look at company earnings next week.

Source: Bloomberg

ITV (first-half earnings 25 July)

ITV is expected to report earnings of 6.8p per share, down 11.3% year-on-year, while revenue rises 2.5% to £1.5 billion. The average move on the day is 4.16%, while current options pricing indicates a move of 4.6%.

Investors will be hoping that the firm can paint a more positive picture than was seen in the full-year numbers in February, when the firm suffered a tough year thanks to political and economic uncertainty. The group will continue to talk up the performance seen over the World Cup, which will have boosted revenues, helping to offset last year’s tough performance. Further improvement in content and its broader video offering should help it compete in an increasingly difficult marketplace.

At 11.1 times earnings, the share are trading below their five-year average of 13.3, while a 4.3% dividend adds to the attraction of the stock for income investors.

ITV shares have rallied sharply since the March lows, and the surge shows little sign of slowing. Crucially, the price broke above the 170p zone of resistance that prevailed in late 2017 and early 2018, and a turn higher would target 183p and then 201p, last seen in mid-2017. A close below 170p would suggest a broader retracement.

Vodafone (Q1 trading statement 25 July)

Vodafone’s performance in the first quarter (Q1) will likely see a slowdown in Europe, hurt by tougher competition in Italy and difficult comparisons with the previous quarter in its German division. Higher prices in Spain and a better performance in the UK should help to offset this.

Vodafone currently trades on a forward earnings multiple of 16.4, more than one standard deviation below its five-year average of 28.4. In addition, it currently trades at a 15% discount to its peers, versus an average 5% discount in the past two years. The current dividend yield is 7.5%, above the two-year average of 5.9%.

Vodafone’s bounce into early July did not last, creating a new lower high and reasserting the ongoing collapse seen so far in 2018. It is now at vital support around 175p, a key level around the turn of 2017. Any bounce must clear the trendline resistance around 183p, and then push on above 192p to break early July’s lower high.

AstraZeneca (first-half/Q2 earnings 26 July)

AstraZeneca’s Q2 earnings are expected to see a 25% drop in headline earnings per share, to 64.6 cents, while revenues rise 2.2% to $5.16 billion. The average move on the day of results is 3.9%, but current options pricing suggests a move of 3.37%.

New product launches should be a key feature of the quarter, with launches beating expectations, but weaker divestment levels will hit income. However, the firm is expected to reiterate earnings guidance for the full year.

At 20.2 times forward earnings, the shares are well above their five-year average of 15.9. This expensive valuation is combined with a 3.6% dividend yield, compared to a two-year average of 4.4%.

AstraZeneca shares have clocked up new record highs this week, as the strong uptrend of the past two years refuses to slow down. Possible near-term support comes in at £55.19 and then £52.74, with any dip even back to £49.00 and the post-June 2016 rising trendline still serving as a buying opportunity. 

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