Must read: US earnings season, Persimmon, Whitbread

US BANK EARNINGS

Victoria Scholar, Head of Investment, interactive investor says, “It’s that time of year again – US earnings season is back next week, kicking off with fourth-quarter results from Wall Street’s top lenders including JPMorgan Chase & Co (NYSE:JPM), The Goldman Sachs Group Inc (NYSE:GS) and Citigroup Inc (NYSE:C). According to FactSet, Q4 2025 earnings growth for the S&P 500 is seen coming in at 8.3%, the tenth straight quarter of expansion.

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Last year was a strong one for US financials, with earnings season set to be another potential positive catalyst for the sector underpinned by a stronger-than-expected US economy. Over the last year, the US has proven to be more resilient than anticipated with strong consumer spending, relatively tame inflation and robust growth despite the pressures from Trump’s tariffs. This is likely to help to support banks’ loan growth in the fourth quarter and in the year ahead amid the White House's pro-growth agenda.

Investors will be looking to see how net interest margins, NIM (the difference between interest earnings on assets versus interest paid on liabilities) performed last quarter. Recent rate cuts from the Federal Reserve would typically have a downward impact on NIMs, although they also help cut liabilities by reducing interest paid on deposits.

There are high hopes for investment banking (IB) revenues after a strong rebound in dealmaking activity in the prior quarter. Investors will be watching to see how IB fees performed in Q4 to gauge whether M&A and IPO activity continues to make a comeback.

Trading activity is likely to have performed well in Q4 particularly in equities around the bout of stock market volatility in November when there were heightened concerns about an AI bubble. Banks’ FICC (fixed income, currencies and commodities) trading revenues will also be closely watched.”

PERSIMMON – 13 JAN

Richard Hunter, Head of Markets, interactive investor says, “The forward order book and reservations will be in sharp focus for Persimmon (LSE:PSN)'s update, while a dividend yield of 4.4% effectively leaves shareholders being paid to wait amid these turbulent times.

The sector is highly cyclical and the current UK economic backdrop is unstable. General uncertainty, mortgage availability and affordability concerns, slowing construction activity and pressures arising from increases to the likes of National Insurance and stamp duty are meaningful headwinds. Indeed, a recent construction survey confirmed subdued demand and fragile confidence towards the end of last year, even after the Budget passed by.

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That being said, there are a number of tailwinds which could yet revitalise the sector. More broadly, there remains a noticeable supply shortage of homes domestically, government reforms to planning should oil the wheels of being able to break ground, and the recent interest rate cut is a step in the right direction if not the ultimate goal. At the same time, the group has noted that for some, inflation-beating pay rises and the relaxation of lending rules has led to higher enquiry rates.

In the meantime and for its part, Persimmon is opening its strategic doors where possible. Over the first half, the group made £210 million of land purchases at what it describes as “excellent margins”, adding to one of the core parts of the investment case for the housebuilder, namely its land bank.

In addition, the group operates three manufacturing facilities to make its own timber frames, bricks and tiles. It estimates that this saves around £5500 per plot on building costs, and indeed there is now demand coming from elsewhere for its bricks in particular. At the same time, the group has launched its “New Build Boost” scheme in an effort to ease some of the affordability concerns of potential buyers.

Even as a preferred play within the sector, Persimmon has been hamstrung by the wider factors over which it has little influence, including but not limited to a faltering domestic economy. Even so, the share price has managed a gain of 17% over the last year, although the price remains 51% shy of its level five years ago.”

WHITBREAD – 13 JAN

Richard Hunter says, “It has been and could continue to be a tough environment for Whitbread (LSE:WTB). The sale of its jewel in the crown, Costa Coffee to Coca-Cola in 2019 for £3.9 billion somewhat left Whitbread flying on one engine, largely reliant on its Premier Inn business. The situation was then compounded by the onset of the pandemic, and more recently the rise in interest rates and inflation, and therefore consumer confidence.

The negative momentum has continued, leading to a decline of 14% over the last year for the share price, despite the group confirming previously that its German business was likely to contribute a profit for the first time over the course of this year. This would be an important milestone in a market which Whitbread believes to be an area ripe for the picking and a source of medium-term growth. Further out, the aims are clear – by 2,030, Whitbread expects adjusted pre-tax profit of £70 million emanating from what should then be 20,000 rooms.

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In the meantime, Premier Inn UK continues to do much of the heavy lifting and is by far the group’s most important business at present. While accommodation sales have been flat, the group is introducing measures to fine tune profitability. It is, for example, looking at ancillary revenues where guests are able to pay extra for the likes of early check-in and late check-out, “Rooms with a view” and parking. Indeed, Premier Inn has become the largest hotel chain in the UK, with a 12% share of total hotel room supply. In relative terms, Premier Inn has consistently outperformed the market since the end of the pandemic and continues to do so.

Cost savings will be in sharp focus also at the update, where the group previously raided its target for this year to a range of £65 million to £70 million, helping to mitigate an estimated £40 million to £50 million impact from Budget measures on business rates.

Any update on Whitbread’s property valuation could be a positive, where a previous estimated worth of between £5.5 billion and £6.4 billion provides the group with additional flexibility in achieving its costly aims of a revamp within the Food and Beverage unit. It is hoped that the moves will unlock 3500 high margin extension rooms, 500 to 700 of which should take place this year.

This long-established and well-regarded company continues to attract the support of investors, although it is increasingly clear that patience will be required for the long haul as it moves through its five year transformational plan.”