Whitbread (first-half update 23 October)
Whitbread’s decision to sell off its Costa Coffee division will allow the firm the time to focus on its other brands, notably its Premier Inn arm. The division has growth possibilities in Germany, to add to its existing strength in the UK, while a downturn in consumer spending in this country is not likely to hurt performance, given Premier’s position at the budget end of the hotel market.
Whitbread is expected to report earnings per share of 132p, down 8.1% over the year, while revenues are likely to fall 15% to £1.42 billion. It has beaten earnings forecasts in seven of its previous updates. At present it trades at 16.8 times forward earnings, just below the 17.2 five-year average but it also trades at 24% discount to its peers, compared to an average discount of 38% over the past two years.
Whitbread has gapped higher twice so far this year, and while it has retraced towards £45.00 and the top end of the latest gap up, the sequence of higher lows from the end of last year remains in place. Below £45.00, £44.00 and then £43.33 come in as possible support, while a breakout requires a move above £48.00.