Earnings look ahead – Vedanta, Sky, Provident Financial

A look at UK earnings for next week.

Source: Bloomberg

Vedanta (H1 earnings Tuesday 10 October)

Quarterly earnings for Vedanta were encouraging, with a 48% rise in earnings to $777.8 million. Revenue was up 32% to $3.09 billion, with the zinc and oil and gas businesses making up most of the strong performance. Since then the global economic outlook has continued to improve, with the performance exemplified by the US Institute of Supply Management (ISM) readings in the first week of October, both of which hit multi-year highs. Earnings are expected to be 18 cents per share, with revenue up 26% year-on-year at $6.14 billion.

Vedanta shares have held their steady uptrend from the lows of the year, pushing back above £9 per share. Above £9.2, and the £9.72 and £11.12 levels come into play. It would take a move below £8 to negate the sequence of higher highs and higher lows seen since June.

Sky (Q1 earnings Thursday 12 October)

The main story around Sky remains the potential takeover by 21st Century Fox. It looks like the broadcaster could face a rebellion by shareholders, with some demanding that investors vote against James Murdoch’s re-election as chairman. The performance of the European operations will be in particular focus, to see if the overall improvement in the eurozone economy is being reflected in Sky’s numbers. Earnings are expected to be 15p per share, with net income down 2% at £250 million. Sky shares have lagged the broader FTSE 100 this year, down 6.9% on a total return basis versus an 8.8% gain for the index.

Having drifted lower throughout the year so far, we now look to see if the £9 level can hold, and whether the turn higher seen over the past week can move back to the 50-day simple moving average (SMA) at £9.44. Above here £9.6 and then £10.17 come into play. 

Provident Financial (Q3 trading statement Friday 13 October)

It will have hardly escaped investors that Provident's latest update comes on Friday the thirteenth. It seems all too appropriate for a company that has seen such a dramatic about-turn in its fortunes. The update will be the perfect time for management to enlighten the market on its turnaround plan. At just seven times forward earnings, along with a forward yield of 6%, the shares do qualify as attractive, but the need for further improvement will undoubtedly deter many.

So far the shares have endured two gaps down since the beginning of the year. A bounce from the 400p low has seen them double in value, but the price has not yet begun to enter the gap created in August. Above £10.04 the next level to watch would be the top end of the gap lower, at £17.44.

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