Lloyds share price recovering ahead of Q1 results

Having rallied by over 80% since October, can Lloyds’ update this week provide further good news to keep the rally going?

When does Lloyds report earnings?

Lloyds publishes its Q1 statement on 28 April, covering its fiscal first quarter.

Lloyds earnings – what does the City expect?

Investors will be expecting some good numbers from Lloyds, or at least some healthy commentary, for its Q1 statement, given the sharp appreciation in the shares over the past six months. The future does look brighter than in late 2020, when vaccines were only starting to be employed to combat Covid-19. Looking ahead, shareholders and the City will want some reassurance that Lloyds is seeing a rebound in mortgage activity and other business lending as the UK economy returns to normality (or something like it).

Low interest rates will continue to hamper profitability, but it is to be hoped that the sunnier outlook will justify the current price-earnings (PE) ratio of 21 times trailing earnings, and the 85% gain in the shares since October. Net interest margins remain relatively healthy overall, which should support a steady increase in dividends, and the level of loan impairments should continue to drop as the economy recovers.

How to trade Lloyds earnings

At a forward valuation of nine times earnings, Lloyds does not look overly expensive, while a price-to-book value of 0.62 is also an attractive level for investors. Currently, the stock has 15 ‘buy’ recommendations, eight ‘holds’ and just three ‘sells’, with a median target price of 46p versus the current 43p. The average move on results day is 3.8%, versus a currently implied 3.86%.

Lloyds shares – technical analysis

It has been a spectacular rally in Lloyds since the end of September, and so far there is no sign of a reversal. November-January formed a trading range between 32p and 38p, but the breakout in early March has allowed the price to make further gains to a new higher high at 44p. Some brief weakness so far this month has seen the price rebound from 41p, establishing a higher low.

Rebounding UK economy supports stronger outlook for Lloyds

After a dismal 2020, the bank looks in much better form. Housing and loan activity is recovering, supporting the fundamentals, while on the technical side the post-October rally shows no sign of reversing yet.

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