Shell (full-year earnings 1 February)
As oil continues its ascent, oil majors are coming into favour once more. Shell is forecast to see headline earnings double over the year, rising to $1.92 per share, up 108%, and revenue to rise 24% to $291 billion.
This would mark the first year of growth in earnings since 2014, while fears of a dividend cut have receded, as free cash flow rebounds along with the seemingly-invincible rally in oil prices. A share buyback programme, designed to purchase $25 billion of shares by 2020, is another indication of management’s confidence in cash flow. A yield of 5.8% is notably higher than the comparative average of 4.3%, while analysts continue to upgrade their targets for the shares, with ten boosting their price targets in the past month.
Shell has come a long way from the 2016 nadir of £12.50 a share. The rally goes on, with a fresh higher high of £25.80, crucially above the 2014 high, confirming the uptrend. A modest pullback since then has found support at £25.00. Below this, and below the November high of £25.80, the price may find support at £23.13.
BT (Q3 earnings 2 February)
Earnings before interest, taxes, depreciation and amortization (EBITDA) at BT is expected to fall by 1.7% for the third quarter (Q3), to £1.84 billion. However, while revenue is forecast to be flat at £6.1 billion, adjusted earnings are expected to be 0.5% higher, at 6.6p per share.
For BT shareholders, Amazon is becoming an increasing worry, as the shopping giant looks to muscle in on the traditional battle between BT and Sky over Premier League football rights. This has already been an expensive battle, and would be even more so should Jeff Bezos, Amazon CEO, weigh in. Furthermore, costs are forecast to rise, as the firm has to upgrade the UK’s fibre-optic cable network. Still, the dividend yield of 5.9% is above its peers’ 4.4% average, while its enterprise value of 4.9 times earnings is cheaper than the competitor average of 6.8.
In the ongoing downtrend from the 2016 highs, BT shares clocked up another lower high below 280p. However, if the shares can hold above 260p, then they create a higher high from the 2017 lows at 240p. Nonetheless, it needs a close above 280p to vaguely indicate a rebound could be in the offing.