Earnings look ahead – Berkeley Group, Mulberry, Carillion

A look at company earnings next week.

Houses
Source: Bloomberg

Berkeley Group (first-half earnings 8 December)

Berkeley's position as a builder of luxury homes means that it has seen its demand take a hit in the wake of the EU referendum, as concerns over the attractiveness of London as a financial centre rose. However, those concerns seem to have taken a back seat, and the rally in the share price to new record highs in October reinforces the more positive outlook. At around 10.8 times earnings, the company’s valuation is not ambitious, and even though earnings are expected to weaken in the coming year, the relatively undemanding price-to-earnings (P/E) ratio suggests much of that is being factored in. In addition, the firm’s operating margin of 25.5% is much healthier than the 19.7% for its rivals.

A strong trend prevails here, as the shares hit a record high. The pullback to the 100-day simple moving average (SMA), currently £36.64, created a new higher low, so it looks like we will continue to see further gains. Areas of support to look for include the September high at £37.64, then £35.79 and £34.65. 

Berkeley price chart

Mulberry (first-half earnings 6 December)

June saw the firm report a 21% rise in profits, to £7.5 million, while revenue rose 8% to £168.1 million. A recovery in performance in recent years has helped revive investor confidence in Mulberry, but it still has its work cut out for it trying to compete with the luxury brands.

Being a smaller, high-growth firm, it currently trades at 87.5 times forward earnings, versus a global average of just 25.4. However, given that the two-year average is 93.5, the shares are slightly cheaper relative to recent history.

Carillion (trading statement 6 December)

Carillion is one of the major stories of the year, with the decline in the company’s fortunes and share price providing a cautionary tale. With a trading statement looming, what can be said to help lift the shares from their current doldrums.

A rescuer could cause the shares to shoot higher, but at present the financial conditions look dire, while trading conditions for the firm and the broader sector do not look encouraging. While it may trade at just 0.8 times earnings, common knowledge suggests P/Es of 0-5 are warning signs, not indications of cheapness.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.