Compass Group: will earnings kick uptrend back into gear?

When are Compass Group results due?

Compass Group will unveil their full-year (FY) results on Tuesday, 26 November.

Compass Group results preview: main talking points

The world's biggest catering company has been an incredibly consistent performer for shareholders, with management often finding ways of generating new organic sales growth and ensuring high margins for those sources of income. With the firm typically utilising their client’s equipment, much of the business involves low investment and thus high margins.

However, those margins are going to be key, with market forecasts pointing towards a decline in the forthcoming years. Previous years have seen the firm maintain a gross profit margin above 70%, yet that is expected to fall back into 69% this year and 67% in two years time. Nevertheless, the company is expected to continue moving in the right direction, with revenues expected to drive higher profitability through a predicted 7.6% rise to £25.01 billion. That is predicted to take pre-tax profits to the £1.74 billion mark; some 7% higher than in 2018.

What do the analysts say?

There are currently 22 analysts covering the stock, with nine ‘Buy’, nine ‘Hold’ and four ‘Sell’. The current target price of £19.44 is 2.67% below the current £19.97 price.

Compass Group share price: technical analysis

The daily chart tells us both sides of the story for Compass Group, with the long-term uptrend moving into a period of consolidation since the September peak. The declines seen in the aftermath of that long-term uptrend have taken the form of a descending channel, with lower highs and lower lows continuing to play out.

That combination of the two trends highlights how important the current price is, with recent respect of trendline resistance pointing towards a potential breakdown to continue the three-month consolidation/retracement phase.

A break below the £19.87 level would provide confirmation of another bearish turn, signaling a high likeliness of another break towards the downside to continue the recent trend. Conversely, should we see a break up through the £20.83 swing high, that would point towards a resumption of the long-term uptrend for Compass Group.