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Earnings look ahead – BP, Sainsbury’s, Imperial brands

A look to company earnings next week.

Source: Bloomberg

BP (Q1 earnings 2 May)

Quarterly figures are expected to show healthy improvement at BP, with revenue expected to rise 34% and earnings per share to more than double. In comparison to last year, the oil price is solidly higher, and with OPEC hinting at more cuts the risk of another slump in oil prices appears reduced. Refining margins have remained resilient, and coupled with higher oil prices have meant that the outlook is relatively stable. In the longer term, oil prices need to move firmly back above $50, and higher, to really create a bullish environment for the shares, but BP appears to have weathered the storm.

Since the beginning of the year, the shares have fallen sharply from the $5.20 high. They have found some support at 440p, but will need to break above 460p to break the downtrend from the 2017 high. Below 440p, 432p and then 406p come into view as support. 

Sainsbury’s (full-year earnings 3 May)

The big question for Sainsbury's shareholders at the moment is whether the supermarket is managing to get its Argos acquisition working for it. Argos could well bring in more customers, but the market has not really woken up to the possibilities yet. It is up to Sainsbury’s to spin the right kind of story in its earnings and outlook to convince investors that positive effects are being seen. The recent bounce in the pound has probably come too late to have any positive effects for the firm yet, but it will make the shares more attractive to international investors. A yield of 4.4% means Sainsbury’s remains one to watch for income investors.

The 273p – 280p area has proved to be a major stumbling block for the shares since the beginning of the year essentially stalling what has been a steady uptrend from the summer 2016 lows. A breakout above here clears the way to 294p and the April 2016 high. A drop back would first find support at around 253p, and then further losses would put us back to the rising trendline off the July 2016 low.  

Imperial Brands (half-year 3 May)

Imperial Brands remains a prudent play in an uncertain environment – growth stocks have been the favourites of late, but a shift in markets over the summer to a more cautious outlook could benefit the stolid players such as Imperial. Its recent move into e-cigarettes provides it with an extra string to its bow, helping to boost cash flow and protect the all-important dividend.

A rally in Imperial Brands in the middle of April took it to the downtrend line off the summer highs. The pullback following this saw the price move back to the rising trendline from the December lows. This narrowing wedge means that at some point we will see a significant breakout in volatility, with the price either continuing its move higher, or turning lower once more.

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