Earnings look ahead – Vodafone, British Land, Taylor Wimpey

A look at company earnings next week.

Source: Bloomberg

Vodafone (first-half earnings 14 November)

Good customer growth suggests that the market may be understating the potential of higher earnings. Earnings were up 17.00% in the last full year, with a steady expansion of market share suggesting more good times to come.

The current worry is that the dividend, currently 6.1%, is not fully covered by earnings. Further increase in 4G customer numbers would help improve cash flow. Vodafone is expected to report earnings per share (EPS) of 5p, up 62.00% year-on-year, but revenue is expected to fall 14.00% to £23 billion.

If the shares continue to turn lower, then they will have created a new lower high, maintaining the downtrend off the May 2015 highs. First 215p, and then the September low at 205p come into play. A move above the recent highs, around 223p, would suggest 230p, and then 235p are the next targets. 

British Land (first-half earnings 16 November)

Investors have not yet rediscovered a love for Real Estate Investment Trusts (REITs), with worries about Brexit, and its impact on the city undoubtedly playing a part. Underlying profit rose 7.4% in 2016 however, showing that business has held up relatively well.

A £300 million buyback has been launched, as the shares currently trade at a significant discount to net asset value. The firm still looks to have tough times ahead of it, as Brexit hits confidence and UK consumers spend less, hitting the shopping centre element of its portfolio.

British Land shares seem to be about to challenge the area around £5.90, which has provided support since September 2016. Below this, the October 2016 low of £5.66 comes into view. It would need a daily close above £6.20 to put a more bullish spin on things, creating a new higher high. 

Taylor Wimpey (Q3 earnings 13 November)

Redrow’s recent update put the cat among the pigeons, reporting a slowdown in sales over the past month, while a Royal Institution of Chartered Surveyors (RICS) survey said that London house price growth was the lowest in several years.

However, the Bank of England’s (BoE) move to higher rates has not hit the mortgage market, as few expect any further interest rate rises in 2018. In addition, the strong balance sheet, good dividends, and undemanding earnings multiple of just 8.5 provide additional reasons to keep a close eye on the stock.

Taylor Wimpey shares have found support at the rising trendline from the November 2016 lows, holding above the 200-day simple moving average (SMA) at 190p. If this creates a new higher low, then we can expect a resumption of the uptrend. A close below 190p would suggest a move to the September low at 183p.

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