The week ahead: Vodafone and Royal Mail

There is still a heavy flow of earnings traffic over the next working week, and all eyes will be on profit and strategy forecasts from these two popular stocks. Lee Wild tells us what to expect.

Monday 12 November

Trading Statements

Dignity, Warehouse Reit, Georgia Healthcare, McKay Securities, Carrs Group

AGM/EGM

Macau Property Opportunities Fund, Afarak Group 

Tuesday 13 November

Vodafone

It's been a terrible year for Vodafone. Its shares have plunged 40% since the early January peak and currently show little sign of being capable of recovery. Big issue here are worries about competition both in Italy and Spain.

Despite the pessimism, analyst at UBS think the market has got it wrong. "We think Q2 results will show that the broader group remains resilient and that underlying estimates should remain underpinned," writes analyst Polo Tang. 

•    Chart of the Week: Is Vodafone on the way back?

•    Here's the share price to catch this falling knife

There's revenue growth across most of the business, but UBS reckons Spain will cause a 0.6% drop in Q2 organic service revenue. However, adjust for the handset financing drag in the UK, and revenue could be up 0.5%.

Underlying cash profit is tipped to rise by 1.6% in the first half, and Vodafone is widely expected to repeat guidance for 1-5% organic EBITDA growth for the full-year, although many think it will be more like 2%.

UBS trims its price target to 230p from 250p to reflect "higher Italian spectrum costs, lower EBITDA in the UK and a lower valuation for the VodafoneZiggo JV. We see the stock as cheap on 11% calendarised equity free cash flow (EFCF) yield and a 9% dividend yield for 2018.

Source: TradingView (*)      Past performance is not a guide to future performance

Trading Statements

Meggitt, Aggreko, BBA Aviation, Taylor Wimpey, Premier Foods, Land Securities, Carclo, Schroder Real Estate, Picton Property Income, Vodafone, FirstGroup, BTG, Castings, McCarthy Stone

Wednesday 14 November

Trading Statements

Workspace Group, SSE, Jackpotjoy, Telecom Egypt, British Land

AGM/EGM

Seeing Machines, Smiths Group, AB Dynamics, Grainger, Aura Energy

Thursday 15 November

Royal Mail

Just six weeks after sneaking out a shock profits warning just before the market closed, Royal Mail will confirm first-half numbers Thursday and give a much-anticipated update on strategy, promised last month. 

Shares in Royal Mail, which said profit would be £500-£550 million this year rather than £650 million, lost over a third of their value in the aftermath, and a wave of bargain hunting has already petered out, leaving the shares to drift lower again. 

Unless new chief executive Rico Back pulls a rabbit out of the hat at these half-year results, relegation from the FTSE 100 index looks a foregone conclusion.

•    Could Royal Mail really fall another 30%?

•    Royal Mail crashes after shock profits warning

"We would expect these events to attempt to answer the key investor issues…framed by the Pay, Pensions and Pipeline Agreement concluded with the CWU in February of this year, with the focus on the latter item," said analysts at Barclays recently.

Over at UBS, they warn that UK productivity appears to be the major issue and that Royal Mail is "still walking a tightrope". 

Back is already busy revising his executive structure, crowbarring out Sue Whalley who'd been at Royal Mail for the past 12 years, most recently running the Post and Parcels UK business. Expect more tinkering with top personnel.

Source: TradingView (*)      Past performance is not a guide to future performance

Trading statements

Close Brothers, TBC Bank, Royal Mail, Romgaz, Mediclinic International, Intermediate Capital Group, Great Portland Estates, Dart Group, 3i Group, Investec, Enteq Upstream, Aston Martin Lagonda, Norcros, Safestore

AGM/EGM

Widecells Group, Avation, Close Brothers, Gunsyndm, Wetherspoon (J D)

Friday 16 November

AGM/EGM

Eagle Eye Solutions

*Horizontal lines on charts represent levels of previous technical support and resistance.