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Earnings look ahead: Antofagasta, Balfour Beatty, Admiral

A look at company earnings next week. 

Balfour Beatty
Source: Bloomberg

Antofagasta (first-half earnings 14 August)

The rout in copper prices means that Antofagasta’s latest update might not be as cheery as other recent ones have been. The focus will remain on whether demand will recover later into the year, or whether trade wars will act to crimp economic growth in China and other emerging markets. The firm is expected to report a 20% drop in earnings over the year, to 23.7 cents per share, while revenue is forecast to be 7% higher, at $2.192 billion. The average move on results day is 4.2%, but current options pricing suggests a 2.4% move. Having seen a sharp drop in the share price since mid June, the shares now trade at 13.7 times forward earnings, well below the five-year average of 22.1. A 3.9% dividend yield is comfortably above the 1.8% average for its peers, and well in excess of the recent average yield. In addition, the firm trades at a 3% discount to its peers, and while this is not huge, it is better than the 6% premium seen on average over the past two years.

Antofagasta’s rising trend from its January 2016 low remains intact, despite the sharp pullback seen since June. If it can hold the rising trendline then a push back towards £10.40 could be on the cards, the stock having held the support zone around £9.30.

Balfour Beatty (first-half earnings 15 August)

Broker Barclays recently began coverage on Balfour Beatty, noting that the turnaround since 2015 had gone well, but was now reflected in the share price. The May update noted that the firm continued to trade in line with forecasts, with industry standard margins still expected despite the collapse of Carillion, its joint venture partner in the Aberdeen Western Peripheral Road project. At 14.1 times earnings the shares are well below the five-year average of 17.1. UK construction has been a weak element in gross domestic product (GDP) earlier in the year, but a modest recovery continues here, but watch for any commentary on higher inflation due to the recent dramatic acceleration in sterling weakness.

Balfour Beatty has climbed steadily since February, having bounced off firm support at 255p. A sequence of higher lows since then suggest that the buyers remain in charge, even if the July bounce faltered at 295p. A push above here would bring the 309p and 316p highs from May and June into play. Below 283p the price will head towards 275p and potentially lower.

Admiral (first-half earnings 15 August)

Admiral is expected to report earnings of 63.5p per share, up 11% over the year, while revenue is forecast to be 68% higher at £926 million. The average results day move in the share price is 5.25%. Falling UK motor rates and continued expenditure on overseas operations mean that there may not be too much in the way of good news for investors. Perhaps the best option will be to hope for signs of progress that will indicate that these new operations are poised to turn a profit. Admiral shares trade at 16.1 times earnings, in line with the 15.7 five-year average.

The uptrend is in place here too, with the price recording higher lows over the past few months. Recent gains have taken the price back to £20.00, with £20.17 and then £20.59 as the next targets. A close below £18.50 would be needed to reverse the current bullish view, opening the way to £17.70 and then £17.43.

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