The Week Ahead: Smith & Nephew investors focus on growth

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The Independent Online

Given the rich stock market rating for Smith & Nephew and the recent worries about a slowdown in the healthcare giant's US markets, investors will be hoping for soothing words from the company when it posts second-quarter figures on Thursday.

Given the rich stock market rating for Smith & Nephew and the recent worries about a slowdown in the healthcare giant's US markets, investors will be hoping for soothing words from the company when it posts second-quarter figures on Thursday.

The concerns about S&N started in the middle of last month, with disappointing results from its Michigan rival Stryker. This was followed by evidence of a drop in artificial hip and knee sales from Zimmer, another player in the orthopaedic implants arena. S&N shares were quickly sold off in response. After all, orthopaedics is its largest business. Prior to this, S&N had traded at all-time highs.

So what are investors expecting from the group? Well, they certainly want to see a continuation of double-digit sales growth at the orthopaedic division and that the problems affecting the endoscopy business have now been truly dealt with. In terms of the financials for the whole group, analysts are expecting second-quarter pre-tax profits to rise to £68m from £62m a year earlier.

TODAY: Thanks to HSBC's pre-close trading statement, we know that since the start of 2004, the operating performance of the banking giant has been ahead of expectations. Interim pre-tax profits are tipped to rise to $7.7bn from $6.1bn. But these figures may be a little misleading since the acquisition of Household International in the US was only completed in March last year. As a consequence, investors are finding themselves comparing six months of Household's results this year with just three months in 2003.

Inchcape has experienced a strong recovery in Hong Kong this year, after having to contend with the economic effects of the Sars virus in 2003. Meanwhile, other markets such as Australia, Europe and the UK continue to perform well. Williams de Broe forecasts first-half pre-tax profits to soar to £81m from £66m. A share buy-back is possible in the second half of the year at Inchcape, but that will depend on the company's cash requirement for prospective acquisitions.

Results: Full year - Filtronic; NDS Group. Interims - Ultra Electronics; Statpro; Inchcape; HSBC Holdings; BAA.

TOMORROW: Investors can expect earnings growth to have continued at Royal Bank of Scotland, boosted by its various acquisitions. Pre-tax profits for the first half of the year should have risen to £3.7bn from £3.4bn. Positive news is also likely from BOC's third-quarter statement. Although the industrial gases group is likely to have suffered a negative currency effect, as it did in the second quarter, it will be very modest. BOC should unveil a jump in pre-tax profits to about £131m from £115m. Going forward, if the group's shares are to be held back by anything, it is likely to be the worry of litigation in the US.

Results: Full year - None. Interims - BOC; Datacash; Enodis; Laird; Royal Bank of Scotland; Taylor Woodrow; XP Power.

WEDNESDAY: There was a rush to sell BSkyB shares on Friday, sparked by news that Goldman Sachs had offloaded a 1 per cent stake in the company on behalf of one of its clients. However, City analysts believe investors have little to fear from the results. They should show a healthy jump in subscriber numbers, after the third-quarter lull, as a renewed marketing campaign takes effect.

BSkyB followers are also expecting the satellite broadcaster to have generated some impressive cash flows. On the long-term view, however, worries continue to surround the company. How will it cope with growing competition and a possible saturation point in its business model as it runs out of high-paying customers to target?

The improved credit quality outlook for Hong Kong and strong momentum in some of Standard Chartered's new consumer businesses should see the Asia-focused bank post a strong leap in profits. Gerrard, the stockbroker, tips interim pre-tax profits to rise to $915m from $741m.

Results: Full year - BSkyB. Interims - Aviva; Danka Business Systems; Morgan Crucible; Pendragon; Standard Chartered.

THURSDAY: Reed Elsevier shares have lost 10 per cent of their value over the past month. Williams de Broe believes this has left them looking cheap and that these losses could be recouped should the publishing giant come out with reassuring news for investors about US text book sales next year. The broker may well be right to point to Reed shares as undervalued. They trade at just 15 times this year's earnings while Pearson, its nearest peer, enjoys a rating of 21 times.

Results: Full year - None. Interims - Barclays; Fayrewood; Friends Provident; GKN; Lastminute.com; Randgold Resources; Reed Elsevier; Rotork; Smith & Nephew; Spirent.

FRIDAY: Results: Full year - Osmotech. Interims - Anglo American; Bradford & Bingley; Dignity; Greggs.

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