Marks & Spencer (first-half earnings 7 November)
Marks & Spencer (M&S) is expected to report a 6.4% drop in headline earnings, to 10p per share, while revenue is only expected to dip by 0.9% to £5.08 billion. The average move on results day is 4.56% while current options activity suggests a move of 4.4%.
For M&S, the focus remains on cost-cutting and making sure the food division continues to gain market share, which remains relatively low compared to its rivals. A reduction in store numbers will of course hurt market share in the near term. A shift to full income statements for the clothing division will also help to progress the painful process of realising that this arm is no longer a powerhouse for Marks & Spencer. At 11.5 times earnings, the shares are broadly in line with their five-year average valuation of 12.4, and while this is not exactly inspiring the shares trade at a 23% discount to peers, versus a more usual 29%, indicating that near-term upside may be limited.
The shares have rallied off the lows of the year and have remained notably immune to the general sell-off in the broader FTSE 100. However, they have now run into resistance around 300p, coinciding with the downtrend line from the 2017 highs. A breakout above here targets 307p and 314p in the near term, while a decline would see the shares head back towards rising support from the 2018 lows, around 285p.