Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Earnings look ahead – Ocado, Tullow Oil, GlaxoSmithKline

A look at company earnings next week.

Source: Bloomberg

Ocado (full-year earnings 6 February)

The recent announcement of a deal to use Ocado technology for a major Canadian supermarket sent the shares flying. The firm looks to be successfully reinventing itself as a provider of world-class technology for online shopping, and arguably the potential is huge. The deal was the second within a few months, after it said it would build a warehouse in France for Groupe Casino. Ocado is expected to report a 11.6% rise in earnings, to 1.1p per share, while revenue is expected to be 14% higher at £1.45 billion.

The parabolic move in Ocado’s shares, driven by frantic short-covering, has petered out near £5.50. However, it continues to hold above the previous high of 478p, set back in the summer of 2015. If this continues to provide a base, then longs may be able to reap the rewards of further gains. The 2014 high at £6.23 is the next big level to watch.

Tullow Oil (full-year earnings 7 February)

Tullow is forecast to see a 90% rise in earnings for the year, but will still make a loss of 5.1 cents per share. Meanwhile, revenue is expected to be 28% higher at $1.7 billion. A recent trading statement indicated that cash flows were on the rise again, helped by the relentless surge in oil prices. Full-year production also rose to 94,700 barrels a day, from over 70,000 in 2016. Thus the firm’s position is becoming more secure, with debt being steadily reduced to $3.5 billion, down $1.3 billion. At 13.7 times forward forecast earnings, it is well below its two-year average of 26.5 times, while half the analysts covering the firm have upgraded their price targets in the past month.

Since July, the share price has seen a steady progression of higher highs and higher lows, so if the shares, now currently oversold on a daily chart, can create a new higher low above the November nadir at 160p then the uptrend is intact. A recovery would target 216p, and then run into the short-term descending trendline from the January highs, with the 2018 peak at 236p above this.

GlaxoSmithKline (full-year earnings 7 February)

GlaxoSmithKline (GSK) is expected to see a 1% fall in headline earnings, to 25.9p per share, while excluding exceptionals the figure is expected to surge 118% to 11.6p per share. Sterling’s recent appreciation against the US dollar (USD) has hurt performance, as highlighted in the recent trading statement. While the current price-to-earnings (PE) ratio is a rather high 27, this falls to a modest 11.8 for the forward PE. In addition, this latter figure is below the two-year average of 14.7. It should also be noted that the shares currently trade at a 47% discount to its peers, versus an average discount of 32% over the past two years, suggesting that the shares may enjoy relative outperformance versus a basket of its peers.

GSK shares currently hover above the £12.96 support level, with £12.70 below this as a possible further line of support. A bounce would need to move above the recent highs at £13.80, and ideally move above £14.00 to break the steep downtrend in place from the 2017 highs above £17.00.

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.

Find articles by writer