The Week Ahead: BP looks set to outshine rival Shell again
Monday 01 February 2010
The oil & gas sector is in focus this week, with BP set to kick off the reporting round with its fourth quarter results tomorrow.
Though the company is unlikely to repeat the "outstanding surprise" delivered in the third quarter, it is expected to outshine its peers, according to Deutsche Bank. "We do not expect it, but where a year ago the focus was on dividend cuts, we suspect that this time around it will more likely be on the timing of a return to dividend growth," the broker said, noting the impact of easier comparatives, and the impact of the company's efforts to cut costs.
UBS is also positive, arguing that the company can repeat last quarter's feat in "absolute terms although the element of surprise is probably gone this time". "We believe the third quarter benefited from good assets running well rather than cost reduction or unusual trading revenues and the evidence is that operational performance in the fourth quarter has once again been good," the broker said.
Today - Results/Updates – Sthree and Northumbrian Water.
Tomorrow - Results/Updates – Babcock International, ARM Holdings and BP.
Wednesday – The outlook for the year ahead will be in focus when the software group Autonomy posts full year results mid-week. The headlines for 2009 were pre-announced in a trading update earlier this month, with the company saying it expected to post revenues of approximately $740m (£463m). "The 2010 outlook is the easy part," Panmure Gordon said. "Autonomy rarely guides up at finals – a habit that we do no expect it to break." Numis is more hopeful on this point, noting a possibility "that the company will increase guidance", though warning that "this may not be a good guide to the eventual outturn". "We continue to expect an acquisition sometime during the summer, in line with Autonomy's track record of delivering only one or two clean organic quarters between acquisitions," the broker added.
Also on Wednesday, the power protection company Chloride is due to issue an update, and Numis expects the statement to be in line with expectations. "Chloride has proved to be relatively resilient through the cycle, driven by the annuity characteristics of its service business and its energy facing business," the broker said, forecasting pre-tax profits of £39.9m, with earnings per share of 10.5p, for the 12 months to March. UBS said the company should have seen better order momentum in recent months, adding: "Comments from peers suggest that most of the rebound has been in small systems, although we think larger system demand is beginning to stabilise too."
Results/Updates – Antofagasta, Eurasian Natural Resources Corporation, Workspace, Standard Life, Chloride and Autonomy.
Thursday – Royal Dutch Shell is due to post its fourth results later this week, and Deutsche Bank expects to hear of a "useful pick up" in the upstream business compared with the third quarter of 2009, though challenging gas markets and gas pricing points to a 12 per cent decline in year on year profits. "More significant for the current quarter, and most likely, [for] the first half of 2010 are developments in the downstream," the broker said, noting that, with downstream markets likely to remain challenging, "2010 looked set to be another difficult year".
Results/Updates – Aviva, Unilever, Vodafone, Yell, GlaxoSmithKline, McBride and Royal Dutch Shell.
Friday – BG's fourth quarter numbers should show an "acceleration in upstream growth and an improvement in upstream profits", according to Deutsche. Elsewhere, in the liquefied natural gas (LNG) business, the broker expects the company, which is also due to issue a strategy update at the end of this week, to post results that will see it "modestly outpace" its £1.4bn to £1.5bn guidance for full year divisional profits.
Also on Friday, the house builder Bellway is due to issue a trading statement, and UBS expects to hear of no major change from the guidance given in the recently published AGM statement. "We suspect the group could well still be in a net cash position, although this will depend on the amount of cash laid out for land purchases," the broker said. "The market will likely watch how the spring selling season is progressing, the evolution of pricing and any progress made on land buying."
Results/Updates – Avanti Communications, British Airways and BG.
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