The Week Ahead: Analysts expect sales rise at coveted Burberry
Monday 11 October 2010
The luxury fashion group Burberry is due to announce a first-half sales update on Wednesday, shortly after market speculation re-emerged that it could be the subject of a takeover approach.
The US luxury brand Coach had been mooted as a buyer back in 2008, but nothing came of it. The focus was then on PPR, owner of Gucci, when the talk was reheated during the summer. But the rumour mill is now backing a move from a private-equity buyer.
Investors and analysts will be interested in what Burberry chief executive Angela Ahrendts has to say, although the strength of sales will be more in focus. JP Morgan Cazenove expects underlying sales up 17 per cent, while Nomura expects organic sales up 14 per cent in the first six months. Burberry's shares have been on a strong upward trend, rising from a low of 160p in late 2008 to an all-time high of 1,029p this month. But JP Morgan Cazenove now considers them fully valued. "We believe most of the good operational news is now factored into the price," agreed Allegra Perry of Nomura. Both analysts call it a "hold".
Nautical Petroleum recently extracted light oil at its Catcher field in the North ea, which sent the shares up from 50.75p as recently as 2 June to 387p last week. The finding of heavy oil – which is harder to get at – in its Kraken field would drive further rises.
Results/Updates: Ladbrokes, John Wood, X5 and Nautical Petroleum
Punch Taverns has endured a tough time as it struggles to free itself from £3.1bn of debt. At 90p, its stocks have hardly begun to recover their pre-crisis peak of nearly £14, but the company will be hoping for a new start since Ian Dyson took over as chief executive last month.
Analysts are agreed that pre-tax profits should be about £131m off the back of £1.26bn of sales, giving estimated earnings per share of 14.7p. The company reported in August that failure rates among its tenants had halved, even as the Campaign for Real Ale says 35 pubs are still closing every week. Sales at Punch's managed pubs fell 2 per cent last year, but the worst may be over, according to Numis. The broker thinks managed pubs should return to profit in 2011, leading it to set a target of 135p a share.
The oversize home-shopping group N Brown, which supplies high-end clothing, is also due to issue interim results. Panmure Gordon expects pre-tax profits of £42m and an interim dividend of 5.6p, although assumptions relating to bad debt add some uncertainty. Panmure still reckons the stock is undervalued at 243p and rates it a buy up to a target of 320p.
Few industries took such a hit in the recession as private-jet hire, but Air Partner appears to be flying high again. It lagged the wider economy going into the downturn so it is not surprising that it has been slow coming out, and has yet to return to profit. But Arbuthnot reckons this year will represent the trough, with Air Partner expected to bring in £3.1m after tax in the year to July 2011 and £4.3m for 2012. The broker calls it a buy at 324p and sets a target of 435p.
Results/Updates: Air Partner, Summit, Punch Taverns and N Brown
Fresnillo releases its third-quarter production report on Wednesday, followed by mining peer Rio Tinto the next day. With prices for gold and silver at all-time highs, analysts will be looking to see if Fresnillo has continued to ramp up its production.
Rio looks healthy even as its much-publicised joint venture with BHP Billiton in Western Australia now seems a touch rocky. BMO Capital Markets identifies the stock as a "key buy" with highly desirable global exposure to iron ore, copper and coal.
BMO estimates that Rio will have cut its debt burden from a mountainous $40bn (£25bn) at the end of 2008 to just $4bn (£2.5bn) by the end of this year. Trading at 3,763p, its stock is below the analyst's target price of 4,700p. "Financial markets are overlooking excellent operational management and a presumed more conservative M&A stance going forward," says BMO's David Radclyffe.
Results/Updates: Acergy, Walker Greenbank, Burberry and Fresnillo.
Diageo, the brewer behind Guinness, Smirnoff and Johnnie Walker, will release first-quarter sales figures on Thursday which are expected to show a robust start to the financial year. Nomura rates it a buy at its current level of 1,107p, short of a target of 1,450p. The analyst said Diageo's momentum has come from emerging markets. UBS gives a lower target at 1,250p, but it is a buy. While UBS also emphasises the role of emerging markets, it points out that the US spirit market may be recovering too. Only Europe remains in the doldrums.
Results/Updates: Booker Group, WH Smith, Diageo, Rio Tinto, Ashmore, ASOS and Mothercare
Results/Updates: Ferrexpo, Computacenter and Hargreaves Lansdown
Royal Institution of Chartered Surveyors (RICS) house-price balance for September.
Consumer Price Index for September.
Department of Communities and Local Government data on house prices for August.
Trade balance for August.
UK unemployment count for August/September.
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