It looks likely that G4S’s results next week (Wednesday 12 March) will prove to be something of a difficult occasion.
Chief among the concerns is that the company’s operations in developing markets will see a slowdown, as the impact of Federal Reserve tapering hits emerging markets. As the Fed reduces the volume of its asset purchases, investors have opted to shift some funds away from government bonds in developing nations and buy US government treasuries. As a result, countries have been forced to raise interest rates in order to retain these investors (as higher rates make a currency more attractive). Higher rates can often signal lower economic growth, and this will result in lower business activity for G4S.
Set against its outsourcing peer Capita, G4S looks like a fairly dismal performer. The shares are down over 11% so far this year, and while the dividend of over 3% looks attractive, it is fairly certain that the company will struggle to turn around many of its businesses in emerging markets.
On a daily chart, the situation looks fairly bleak, as the 200-day moving average begins to turn lower again, while the 50-DMA drops back from the steady uptrend we saw during the second half of 2013. The price remains firmly below both of these averages, although for the moment it is holding above the February lows just below 230p.
G4S looks to remain a sell at present, and a break below 230p could clear the way for a probe towards the July 2013 lows just above 200p.