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Earnings look ahead – easyJet, Unilever, Sports Direct

A look at company earnings next week. 

Sports Direct
Source: Bloomberg

easyJet (Q3 statement 18 July)

easyJet goes into its third quarter (Q3) statement having reported excellent numbers for June, seeing 2.3% growth in passenger numbers and a load factor of over 95%. Consumer spending fears have not been reflected in its performance, and it continues to maintain a strong showing against rival Ryanair. At 12.5 times forward earnings, the shares trade around their longer-term average, although it should be noted that the dividend, at 2.5%, is well below its two-year average of 4.1%.

June saw easyJet shares record a new all-time high, breaching £18.00 for the first time. Since then, a pullback towards £15.60 provided a buying opportunity, with the shares bouncing back above £16. The next areas to watch are £17.69 and then £18.09. A close below £15.66 would open the way to rising trendline support around £15.10, and below this £14.42.

Unilever (first-half earnings 19 July)

Unilever’s figures will be overshadowed by the ongoing row regarding its planned move of company headquarters to the Netherlands. Key shareholders have urged UK investors to vote against the plan, which requires approval from 75% of UK shareholders and half of its Dutch investors. Strikes in Brazil will have hit performance in one of its key markets, but the firm’s broad footprint will help it ride out this area of possible weakness. Unilever expects to report earnings of €1.16 per share, 2.7% over the year, and a 4.2% drop in revenue to €26.5 billion. At 19 times earnings, Unilever is in line with its two-year average, but while this is not exactly cheap, Unilever’s history of steady returns means it is justified.

Unilever shares have steadily rallied since March, and are tentatively exploring the area above £42.00. The November peak of £42.73 is the next area of possible resistance, and from here the October high at £44.47 comes into play. A retracement may find rising trendline support from the March lows around £41.00.

Sports Direct (full-year numbers 19 July)

Sports Direct management continues to focus on improving its offering in the UK market, and while a weaker performance shown by Adidas might have resulted in an increase in margin-hitting promotions, the firm remains on track to hit targets for the year. One area of concern remains the problems at Debenhams, which continues to clock up profit warnings which will have implications for Sports Direct following its acquisition of a sizeable stake in the firm. The company is expected to report a 53% rise in headline earnings over the year, to 21.1p per share, while revenue is forecast to be 4% stronger, at £3.4 billion.

Sports Direct shares have begun to move above the 2017 high of 424p, creating a new higher low around 400p in June, within the context of a rising trend since June of last year. Below 400p, the 367p and 350p zones act as possible support. If the price can hold above 424p then a fresh push to new multi-year highs seems likely.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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