Lloyds annual results – what now for the shares after their recent surge?

The Q4 2020 rally in Lloyds has hit a wall at 40p, and it is unclear whether annual results will provide much reason for the bounce to keep going.

When is Lloyds’ earnings date?

Lloyds reports full-year (FY) earnings on 24 February.

Lloyds earnings – what does the City expect?

Lloyds is expected to report adjusted earnings per share (EPS) of 1.4p, down 82% over the year, while revenue is forecast to drop 17% to £15.2 billion. It has beaten earnings forecasts in six of the last eight results, but missed on revenue in five of the last eight.

For a share price that has rallied 60% since the September low, Lloyds’ results may not offer much comfort in the near term, and perhaps provide little in the way of fresh reasons to buy into the rally.

The Covid-19 pandemic might have begun to ease, but the economic consequences will remain with us for quite some time. A route out of lockdown is now planned by the government, but only slowly, and as a result the economic outlook is not likely to improve any time soon. Low rates mean profitability will remain under pressure, but at least any further disruption to the UK high street and consumers is likely to be minimal.

Ultimately, Lloyds will struggle to find a meaningful catalyst for the time being, although the second half of the year might begin to provide more good news.

How to trade Lloyds’ earnings

Lloyds currently has a median broker target price of 41.1p, compared to a closing price of 38.3p on 19 February. Of the 26 brokers covering the stock, 13 have ‘buy’ recommendations, with nine ‘holds’ and four ‘sells’.

The average move on results day is 4.1%, with current options pricing pointing towards a 4.4% move for this week’s earnings.

Lloyds’ share price – technical analysis

Like many UK stocks, the fourth quarter (Q4) of 2020 rebound in Lloyds’ shares has hit a wall, in this case around 40p. Gains above this level have proven impossible to sustain, but from a bullish perspective the price has avoided falling below trendline support from the September low, finding support around 33p for the second time in two months.

A dip towards 35p might test rising support once again, while a more long-term bullish view requires a move back above 40p.

Lloyds – solid but uninspiring

Most of the good news appears to have been factored into the share price of Lloyds and other UK banks, and for now this might mean that they continue to struggle, or at least have difficulty in continuing the rally from late September 2020.

While not cheap, the shares trade on a price-to-earnings ratio (PE) of 10.6, far from overly expensive. But after surging over 50% since late September the next move higher will require a new catalyst, something that has yet to arrive.

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