The Week Ahead: Corruption probes fail to dim outlook for BAE

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The Independent Online

The recent anti-corruption probes have failed to dim analysts' expectations of BAE Systems.

Andrew Gollan, of Numis Securities, said: "The stock is trading well, especially after last week's finalised takeover of Armor Holdings' Landing Armor, which manufactures tactical vehicles and body armour in the US, was seen as a coup by the market. Armor is expected to increase the BAE's sales across the Atlantic by more than $3bn (£1.5bn)."

Last month it signed a joint venture agreement with VT Group to combine warship building and maintenance that should consolidate the industry, avoid risks of over-capacity and reduce ship-building costs.

The noise surrounding the anti-corruption probes shows no sign of relenting, which has caused the share price to sink about 20 per cent below its US peers. Mr Gollan does not believe there will be serious repercussions from the investigations and estimates BAE's profits will be about £1.6bn, up £556m from last year. Numis has the stock on a "buy" rating.

TODAY: Results: First half - Morgan Sindall

TOMORROW: Standard Chartered, the UK's sixth largest bank, should announce better than expected income growth as its extensive interests in emerging markets continue to perform. Asia-Pacific has been especially profitable and the Middle East has also posted significant growth. An average of three estimates suggests that pre-tax profits will be up 21 per cent from the same period last year at $1.85bn (£907m). Analysts will be focusing on announcements surrounding the firm's rising costs, particularly in the consumer banking arm, which have risked running ahead of income growth. While the bank's credit conditions are expected to be less troublesome than a year ago, concerns have been raised over its exposure to the Hong Kong mortgage market.

Industrial materials group Fiberweb has already released two profit warnings in its seven-month existence, blaming higher than expected raw materials prices. Since becoming an independent company, shares have tumbled from a peak of 225p in March to 127p on Friday. The group admitted last week that "if these price levels are sustained during the second half of the year, there will be downward impact on profit." Fiberweb specialises in non-woven materials, especially the absorbent materials used in babies nappies. An analyst added: "The firm is facing a number of headwinds, including weak markets, a weak US dollar and rising raw material costs, as well as a significant restructuring in the wake of its demerger from BBA."

Results: Full year - Bglobal; Reflec. First half - Amco Corp; Fiberweb; Inmarsat; Pendragon; RPS Group; Standard Chartered; XP Power. Fourth quarter - NDS Group.

WEDNESDAY: Results: First half - patsystems

THURSDAY: Anglo-Swiss mining giant Xstrata remains bullish despite the ongoing strikes at one of the world's largest copper mines, Collahuasi in Chile. Credit Suisse expects solid first half results given the strong copper and nickel market in 2007, and put earnings ahead of consensus at $5.2bn (£2.5bn). Given the firm's timely acquisition of Falconbridge, a major nickel supplier, it has been able to capitalise on the strong nickel market which peaked in May and is still 158 per cent higher than it was at this time last year.

In the copper market, the Chilean strikes have kept prices consistently high, and as yet Xstrata has been able to maintain scheduled output using contingency plans. Earnings from the two metals businesses should contribute to around 75 per cent of Xstrata's profits.

Royal and Sun Alliance Insurance's share price has dipped recently in line with the market, but analysts at JP Morgan believe a turnaround is likely. They have upgraded the stock to a "buy" ahead of their first half results. The UK insurer could be a major beneficiary of recent flood damage due to their extensive reinsurance coverage that limits payouts of all natural disasters to £75m.

It may also release strong UK and Nordic growth figures, and announce further plans to expand into the Chinese non-life-insurance market after being given approval from Chinese authorities last week. The firm already has a branch in Shanghai, but will now be able to build a nationwide branch network. The Chinese insurance industry is one of the fastest growing in the world.

Results: First half - BAE Systems; BPP Holdings; Crosby Capital Partners Inc; Ladbrokes; Royal & Sun Alliance Insurance Group; Schroders; Spirent Communications

FRIDAY: Results: First half - Old Mutual; Portmeirion Group

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