Fears the UK economy is slowing down sharply may be realised in Thursday’s Q1 GDP data, while across the Atlantic, the latest CPI inflation figures are set to move higher still, potentially signalling further interest-rate increases in the US. It's a busy week of company earnings updates on both sides of the pond this week, including full-year numbers from BT Group and a quarterly release from ITV. In the US, look out for quarterlies from the likes of AMC Entertainment, Coinbase, Disney and Peloton.
Our top three events for 9-13 May:
Wednesday – US consumer price index (April)
Having seen the US Federal Reserve raise rates by 50 basis points, attention now turns to next month's expected 50bps rise, especially if US inflation shows little sign of slowing when the data for April is released on Wednesday, and given Fed chair Jay Powell's recent comment that inflation is too high. In March, US CPI rose by 8.5%, slightly above expectations, while core prices increased by 6.5%, slightly below expectations, in a sign that inflation pressures could be close to easing. These expectations proved to be short-lived, after the producer price index (PPI) rose to 11.2% in March, and another record high, while core prices rose to 9.2%. With ISM prices paid data still looking frothy, any signs of a peak in headline inflation still seem some way off, with US 10-year yields rising to 3%.
This week’s CPI data could go some way to determining whether we’ve started to see a pause in inflationary pressures, or whether we get a further lift in inflation expectations. The Fed has already said it will go for successive 50bps rate hikes at the next two meetings, as well as announcing the process of its balance sheet reduction, starting next month at $47.5bn a month, increasing to $95bn a month by September. Expectations are for headline CPI to slip back to 8.1%, core prices to 6.1% and headline PPI to fall to 10.7%.
Thursday – BT Group annual results
Initial reaction to BT’s Q3 results was disappointing, with the shares initially falling to three-month lows. This was despite the numbers being better than expected. Q3 adjusted EBITDA came in at £1.96bn, pushing nine-month EBITDA up to £5.71bn. Total revenue for the year rose to £15.67bn, 2% lower than a year ago. BT said its 5G build is on track and that FTTP rollout is now at 6.5m properties, with 662,000 over the recent quarter at rate of over 50,000 per week. The main reason for the initial decline may well have been down to disappointment that they wouldn’t be selling BT Sport to DAZN for £580m, and that they were in discussions with Discovery to create a sports joint venture. The venture would be a 50/50 split between BT Sport and Eurosport UK. The outlook for full-year EBITDA is for a number between £7.5bn to £7.7bn.
Thursday – UK GDP (Q1)
After a solid January, the UK economy appears to have hit a bit of a speed bump in February and March, if recent retail sales and consumer confidence numbers are any guide. Year-on-year to March retail sales growth slumped from 7.2% to 0.9%, as consumer confidence slid to its lowest levels since October 2020. Manufacturing and construction appear to have held up much better in Q1, although like everyone, the sector is facing a huge increase in costs. Having finished last year with an expansion of 1.3%, it’s quite likely we’ll see a slowdown for Q1, although we probably won’t see a contraction. On the monthly numbers, we’ve seen a 0.8% expansion in January and a 0.1% expansion in February. March is likely to show a contraction, which could drag the quarterly number down sharply.
More key events (9-13 May)
Monday 9 May
AMC Entertainment Q1 results
After getting caught up in the pandemic-era meme stock frenzy, AMC shares have seen a lot of the froth blown off them over the last few months. The shares are now trading at the sort of levels they were pre-pandemic. Nonetheless, they remain prone to significant bouts of volatility. Even with the relaxation of most restrictions, the company is still some way from returning to profit. At the end of last year AMC reported Q4 revenue of $1.17bn, its best performance in two years, and above expectations. The company still posted a Q4 2021 loss of $134.4m, but this was much better than the loss of $946m in Q4 2020.
In March, the cinema chain hit the headlines again, this time for paying $27.9m for a 22% stake in gold miner Hycroft Mining. Having just about survived a near death experience last year because of the pandemic, shareholders could be forgiven for asking what on earth management and CEO Adam Aron are playing at, given the company still has net debts of over $9bn. Expectations for Q1 were set quite low at the end of last year, but the bar was raised for the remaining quarters, although it will probably take a lot more than the sale of branded popcorn to get those debt levels down to more manageable levels. Management will be hoping that the release of the new Batman film and Sonic the Hedgehog 2 got people through the doors, pushing those revenue numbers up. Losses for Q1 are expected to come in at $0.55 a share.
Vroom Q1 results
For a company that was set up to take advantage of the online market place for buying and selling cars, the share price performance of Vroom over the last 12 months has been nothing short of a car crash. Having launched to much fanfare in 2020, and peaking just above $75, the boom in used and new car prices hasn’t helped it in the slightest, with the shares now down below $2. The company appears to be selling more cars on a quarter-by-quarter basis; however, its operating costs are rising equally as fast. This is its main problem, and is something it needs to get to grips with, and doesn’t look likely to do so. During its last quarter, the company generated revenue of $934.5m, but spent $166m on various administrative costs, while generating profit on the sale of its vehicles of $33m, meaning losses of $133m. This isn’t expected to improve, posing the question as to how much longer before the company runs out of money. Management expects Q1 revenue of $875m and sales of between 18,000 and 19,000 vehicles. Losses are expected to come in at $1 a share.
Tuesday 10 May
Coinbase Q1 results
Despite reporting Q4 numbers that beat expectations, as volatility in cryptocurrencies pushed revenues up to $2.5bn, Coinbase's share price has continued its decline from November peaks of just below $370. For all of last year the shares appeared to have found a base just above $205, however this gave way in January, with the shares now trading close to record lows. Profit in Q4 also came in better than expected, however that hasn’t been enough to stop the rot in a share price that has been falling quickly on concerns over the company’s wider valuation, as well as cryptocurrencies that have also started to come under pressure from their recent peaks. The decline has also been exacerbated by concern over trading volumes as a result of continued weakness in crypto prices, along with uncertainty over new regulations. Profit is expected to come in at $0.20 a share.
Peloton Q3 results
The last few months have been a horror show for Peloton’s share price, with shares trading at record lows, a huge contrast to the lockdown period. The back-to-normal trade, as well as a number of business missteps, have seen this particular bubble burst spectacularly. When the company reported in Q2, investors had to absorb yet another downgrade. At the end of Q1 management slashed full-year revenue guidance from $5.4bn, to a range of $4.4bn to $4.8bn, which at the time was somewhat of a surprise. After a dismal Q2, the company went further, cutting it further to between $3.7bn and $3.8bn.
Third-quarter revenue is now expected to come just below $1bn, with an EBITDA loss of between $125m to $140m. CEO John Foley is set to be move upstairs to the position of executive chairman, to be replaced by Barry McCarthy, former Netflix CFO. Peloton also said it is also cutting 2,800 jobs as it looks to make savings of $800m, as it restructures the business. There has been widespread speculation that the company could be subject to takeover interest, with the likes of Apple, Amazon, Nike and Disney all variously linked with the business, and while McCarthy has ruled out a sale, there may come a point where shareholders thrown in the towel and invite one.
Last month the company raised its subscription prices, while at the same time slashing the price of its hardware; that is, its treadmills and bikes, in an attempt to reach new clients. A bike will cost $1,445 instead of $1,745, while its treadmill has been reduced to $2,695 from $2,845, though given that shipping and setup costs $250 and $350 respectively, you have to wonder why they bothered at all. At those sorts of prices, buyers don’t tend to be less price sensitive. The company is also testing a rental option. Losses are expected to come in at $0.81 a share.
Wednesday 11 May
ITV Q1 results
The last few months haven’t been kind ones for the ITV share price. In March, the shares plunged over 30% and have struggled to recover since then. The announcement of a $180m investment into yet another streaming service, ITVX for Q4, on top of its investment in BritBox and ITV Hub, has understandably got investors asking questions as to what their long-term strategy is. Reports that they might be interested in bidding for Channel 4 have been equally lukewarm. It has been suggested that the acquisition of Channel 4 could be a net positive for ITV, however it doesn’t change the story when it comes to its disjointed approach on its streaming services. For a start they need to decide on a specific model; this ad-hoc chopping and changing speaks to a management who can’t make up their mind about what type of streaming model they want to pursue. If they can arrive at a settled approach, it might give investors more confidence that they can achieve their target of digital revenues of at least £750m by 2026.
Last year, ITV's revenues was £3.45bn, a decent improvement on the previous year, although 2020 was impacted by a sharp fall in advertising revenue. Expectations for this year are for revenues to improve to £3.56bn, with Q1 advertising demand expected to rise 16%, and April expected to rise 10%, although the rest of Q2 will be impacted by tough comparatives due to the delayed Euro 2020 men's football tournament, which took place last year.
Disney Q2 results
In Q4 Disney+ only added 2.1m new subscribers, however in Q1 this saw a big surge to 11.8m, well above expectations of 8.1m, pushing total subscribers up to 129.8m. Its biggest market has been in India, with its Disney+ Hotstar offering, which has 45.9m subscribers and operates at a loss. Disney is still maintaining its guidance that it can reach its 230m subscriber target by 2024. This certainly seems plausible, especially given the growth in its Indian market, and the fact that it is available free of charge on the no subscription basic package model.
The theme parks business also saw a decent rebound, as revenues there surged to $7.2bn, helping to push total revenues for Q1 up to $21.8bn, and profits to come in at $1.07, well above expectations of $0.59 a share. For these Q2 numbers, the most attention will be on whether the company sees a similar slowdown in subscriptions that we saw for Netflix, as consumers cut back on unnecessary expenditure. Profits are expected to come in at $1.17 a share.
Rivian Q1 results
The $78 IPO price seems a long way away now, after the initial spike to $179. Since then, the shares have collapsed, with further weakness to record lows since the company reported a Q4 net loss of $2.5bn, pushing full-year losses up to $4.7bn. Total revenue for the year was $55m, which was generated by the sale of 920 of its trucks. In terms of orders, the company has 83,000 for its pickups and SUVs, however it will struggle to get anywhere near that number in terms of annual deliveries any time soon. Notwithstanding supply chain concerns over semiconductors, the firm's target of 25,000 annual deliveries still seems optimistic. Its factory in Illinois still needs to get up to speed, while the company intends on spending $5bn on another factory in Georgia. It still has plenty of cash in reserve, about $11bn worth from Ford and Amazon, and $13.7bn from its IPO, however it will still need to spend a lot of that in boosting its production capacity, with the intention of turning out up to 150,000 vehicles a year. A month ago, the company said it had produced 2,553 vehicles at its Illinois plant, and delivered 1,227, while also saying it remains on course to deliver 25,000 vehicles this year. Losses are expected to come in at $1.45 a share.
US consumer price index (April)
See top three events, above.
Thursday 12 May
Balfour Beatty Q1 results
Since hitting 15-month lows in mid-March, Balfour Beatty shares have enjoyed a decent rebound, after reporting full-year underlying operating profit of £197m, beating expectations of £172m. In December, the company said it expected to see its order book to decline to £15.5bn, however this also came in better-than-expected to £16.1bn, with only 14% of the order book consisting of fixed-price contracts. This is in contrast to 2018, when it was 50%.
Since CEO Leo Quinn took over in 2014, Balfour has increasingly focused on high-margin work, and maintaining a reliable and healthy cashflow. Revenues were slightly disappointing, coming in below expectations at £8.28bn, however the improvement in profits suggests that margins continue to be the main driver of the business, while average net cash rose by 27% to £671m, from £527m a year ago. As shareholders look towards the new financial year, full-year revenues are expected to increase to a record £7.6bn. At the end of last year, Balfour said it would increase its buyback programme to £150m for 2022.
BT Group annual results
See top three events, above.
UK GDP (Q1)
See top three events, above.
Friday 13 May
No major announcements scheduled
Index dividend schedule
Dividend payments from an index's constituent shares can affect your trading account. View this week's index dividend schedule
Selected company results
|Monday 9 May||Results|
|AMC Entertainment (US)||Q1|
|Hilton Grand Vacations (US)||Q1|
|Tuesday 10 May||Results|
|Hyatt Hotels (US)||Q1|
|Liberty Global (UK)||Q1|
|Peloton Interactive (US)||Q3|
|Wednesday 11 May||Results|
|Beyond Meat (US)||Q1|
|Brewin Dolphin (UK)||Half-year|
|Walt Disney (US)||Q2|
|Thursday 12 May||Results|
|3i Group (UK)||Full-year|
|Balfour Beatty (UK)||Q1|
|BT Group (UK)||Full-year|
|Friday 13 May||Results|
Company announcements are subject to change. All the events listed above were correct at the time of writing.
Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.