Read our pick of the top stories to look out for this week (9-13 August), and view our key company earnings schedule.
Michael looks back at last week's record highs for European and US markets, and ahead to the latest UK Q2 GDP and US CPI data, plus the latest results from Deliveroo, Cineworld, AMC and Disney.
China trade balance (July)
Sat 7: The jury remains out on how well the Chinese economy has been performing in recent months, with some evidence from PMI data that the economy is slowing. Recent trade data has been encouraging, however we are starting to see evidence that imports have been slowing, although it's difficult to get an accurate picture due to the comparatives from last year’s lockdowns skewing the numbers. In May, imports rose by 51.1%, before slowing to 36.7% in June. The July numbers are expected to see another modest slowdown to 34%, as Chinese authorities try and slow the recent sharp rises in commodity prices. The People’s Bank of China also recently cut banks' reserve requirements in an attempt to help the domestic economy. In terms of the global economy, Chinese exports have been performing well, but even here, with the slowdowns in Asia as well as some of Europe by rising infection rates, we could see a sharp slowdown from the 32.2% rise in June. Forecasts are for a 20% increase year on year.
AMC Entertainment Q2 results
MON 9: Cinemas have borne the brunt of the lockdowns, not that you’d know it from the performance of AMC's share price this year. The shares finished 2020 at a lowly $1.35, as speculation abounded that it was on the verge of bankruptcy. That outcome was only averted at the end of January with a $917m cash infusion, with half coming from investors who purchased shares in a stock offering. At the end of its last fiscal year, AMC was burning through $125m a month to keep 438 of its US real estate open, with little or no customers and not many films to show. In 2020 the company lost $4.6bn, and while some US states have allowed cinemas to open, they have all been on condition of various restrictions.
AMC has enjoyed some good fortune on the way: without the Reddit meme stock fallout which saw it get swept higher along with GameStop, it probably wouldn’t have been able to raise any of the additional capital, as shares soared to record highs of $72, valuing the business at over $30bn, despite having little or no revenue. The rise in US vaccination rates has seen more people return to the cinema, however AMC’s biggest problem is a lack of big box-office films to get customers through the door.
As AMC’s share price hit a new record high in June, management seized the opportunity to raise more money by selling another 11.5m shares to pay down debts, as well as build its balance sheet. The shares dropped back modestly, but not by enough to suggest the air was coming out of this box-office turnaround story. In May, just a month before the June share sale, AMC posted a quarterly loss of $567m on revenue of $148.3m. With a lot of the new shareholders among the so-called Reddit traders, the shares seem on a much firmer base despite the awful state of the finances. AMC still expects to be cashflow negative for at least the next two quarters, and will be hoping the release of summer blockbusters like Black Widow will have helped boost its numbers in Q2.
AMC’s biggest problem will be persuading cinema-goers to come back, having got used to streaming on demand, as well as the luxury of the pause button on a 55-inch TV. The shares did come under pressure after Marvel’s Black Widow release at US cinemas, when the data showed that $60m of streaming transactions took place for the film. If this was replicated with other simultaneous releases, and facemasks remain a requirement, it suggests the loss of 5-6m in potential footfall. Losses are expected to come in at $1 a share, or $510m.
Coinbase Q2 results
TUE 10: It’s been three months since Coinbase listed on the Nasdaq back in April, and to say the share price performance has been less than impressive would be an understatement, with the shares languishing just above $200. On the first day of trading the shares shot up above their $250 reference price peaking at $381, before sliding back. In their prospectus the company said it expected to make between $730m to $800m in Q1. The company also said it had 56m verified users and expected to turn over $1.8bn in the first three months of its fiscal year. When it confirmed these numbers in its May update, they were pretty much in line, but the market reaction was disappointing. Q1 net income came in at $771.5m, while revenue rose to $1.8bn, which was still more than Coinbase turned over in the whole of 2020. It was a little lower than market expectations and probably helps explain why the shares have struggled a little. With all the volatility across the crypto space, maybe expectations were a little on the high side. The number of verified users was confirmed at over 56m. In terms of the outlook, management were cautious, predicting flat transaction volume for Q2, though they did revise up guidance on the number of monthly transacting users to 7m from 5.5m. Talk of crackdowns and increased regulation could weigh on the numbers in Q2, along with recent declines in bitcoin and cryptos in general, meaning these numbers could be at risk of missing expectations. Profit is expected to come in at $2.41 a share.
Intercontinental Hotels half-year results
Tue 10: Hotels have been another area hard hit by the pandemic, however Holiday Inn and Crowne Plaza owner IHG has managed to cope better than most. Its international footprint has helped it in ways that more localised hotel chains haven’t. Improvements in its US and Chinese markets in Q1 saw it perform better than anticipated. With its Q2 numbers set to cover the start of the US driving season, there is significant optimism that the momentum built up in Q1 will continue into Q2, as the rebound from pent-up demand starts to ripple into the summer months, and resorts and theme parks reopen. In terms of internal travel, there has been a decent rebound inside the US which should also boost occupancy rates. In Q1, Group revenue per available room declined 50.6% versus 2019 levels, with occupancy levels of 40%, with management saying that 99% of its US real estate was open at the end of March.
US CPI (July)
WED 11: The temperature in the US economy went up a notch in the most recent June consumer price index (CPI) data, as headline inflation saw another big increase, rising to 5.4%, with core prices increasing to 4.5%, the highest level since 1991, largely driven by another 10.5% rise in used car prices. There was also a 1.5% increase in energy prices, while food and rent inflation also climbed more than expected. PPI prices also had a big increase in June, which if recent trends are any guide could trickle through into the July CPI data. In the most recent core PCE deflator, this trend went in the other direction as prices fell back a touch, in an encouraging sign that inflation pressures may have peaked. While the Fed may well still be able to argue the continued rise in prices is transitory, given where the increases are occurring, if June’s number doesn’t mark the high-watermark, then Fed officials may start to shift a little bit more uncomfortably as we head into the autumn. For now, markets are buying the transitory narrative, however if the current trend continues, “transitory” will be doing a lot more heavy-lifting than it is doing now. Expectations are for July CPI to soften a touch to 5.3%, and core prices to fall back to 4.3%, however if recent trends with respect to PPI are any guide, we could actually see prices rise even higher.
Deliveroo half-year results
WED 11: Having got off to a disastrous start after launching its IPO in March, it's been a long slog back for the Deliveroo share price and while it's still below its 390p listing price, there's been a slow recovery from the April lows of 225p. In Q2, the company said it had seen an 88% rise in orders, while raising its gross transaction value guidance for the full year from 30-40% to 50-60%, helping to push the shares to the highest levels since the opening day of trading, and up more than 40% from the record April lows. Deliveroo has undoubtedly benefited from the slightly slower relaxation of restrictions that we’ve seen over the summer, as well as the summer of sport, including Euro 2020. It's also been extending its reach to a range of new destinations and retailers across the UK. Full-year revenue is estimated to rise by 53% from 2020 levels of £1.2bn to £1.8bn, so any sort of number close to £1bn for the first half is likely to be well received.
Vroom Q2 results
WED 11: In June last year, online car retailer Vroom decided to join sector peer Carvana in floating on the New York Stock Exchange, in an IPO that saw the fledgling business rise from $22 to close at $47.90, and a market cap of $5.52bn. Since then, the shares have drifted lower, with the prospect of profit no nearer now than they were in 2012 when the company started. Losses increased in 2020 to $202.8m from $143m in 2019. The lack of improvement in 2020 was troubling for a business that saw a decent increase in revenue, to $1.36bn, $915.5m of which came from e-commerce. The number of cars sold is certainly going up, with a rise of 21%, however the company is spending a lot of money on marketing, as well as administration. These expenses increased by $60m to $245.5m in 2020. In January, Vroom completed the $120m acquisition of CarStory, a digital services business that uses AI to help make inventory predictions, which should help make the delivery process more efficient. There was some improvement in Q1, with revenue at $591.1m, while losses also came in lower-than-expected at $0.57 a share, still higher than the same quarter a year ago. E-commerce sales increased by 81%, however expenses have also increased, rising by 87% to $109m. As a result, the shares have continued to drift lower over the last three months. Vroom expects Q2 sales to come in between $618m and $640m, with losses in the region of $0.55 a share.
UK Q2 GDP
THU 12: Having seen the UK economy contract by -1.6% in Q1, a much shallower contraction than was originally estimated at the start of the year, when most estimates were over double that, expectations are high that Q2 will compensate, and reverse the damage imposed by the three-month lockdown at the beginning of 2021. Since March, PMI readings have been above the 60 level across the board for manufacturing, construction and services. Retail sales growth has also been decent, helped by falling unemployment as businesses reopen, and while rising prices have been a headwind, the comparatives from last year will also add a boost. These comparatives could flatter the numbers somewhat, due to the Q2 lockdown from last year, as the UK economy contracted by -19.8%. Private consumption is expected to make a significant contribution to the headline number, of 5.7%, while inventory restocking could also add a tailwind, as all the lost output from Q1 gets dragged into the Q2 numbers. Expectations are for the UK economy to expand by 4.8% on the quarter, and by 22.1% year on year with decent jumps in imports of 9.6% and exports of 7.7%.
Aviva half-year results
THU 12: When Aviva reported its Q1 numbers in May, it announced record net flows into its savings and retirement arm, along with the best sales in general insurance in a decade. This helped to push the share price up to its best levels since December 2019. CEO Amanda Blanc has been on a disposals spree in recent months, as she looks to focus on the core markets of the UK, Ireland and Canada. In June, activist investor Cevlan Capital took a 4.95% stake in the business, while at the same time calling for CEO Amanda Blanc to return £5bn of excess capital to shareholders by 2022. Soon after this intervention the shares started to roll over, and while they are still up on the year, the robust nature of the Q1 update suggests the business does have momentum and that Q2 will be equally as solid. The company is expecting to see the proceeds of the eight recently sold non-core businesses arrive by the end of 2021, a total of £7.5bn, and some of it may find its way into the pockets of shareholders.
Cineworld half-year results
THU 12: The reopening of the UK economy hasn’t had the positive effect on the Cineworld share price that you would have expected with the lifting of restrictions over the past few months. The shares have almost halved from their March peaks, when the company reported an X-rated $2.6bn loss, over half of which was driven by impairments of $1.34bn. Unlike its peer AMC, Cineworld doesn’t have the Reddit crew watching its back, while its finances remain in a very precarious state. Cineworld has bought itself some time with various plans to restructure its finances, as well as raising extra funds last November, when management acquired the extra liquidity it needed to secure a stay of execution, agreeing lending waivers until June 2022, and securing a new debt facility of $450m, which matures on 23 May 2024. In March, the company announced a new facility of a $213m convertible bond due in 2025, with quite a hefty coupon of 7.25%. At the end of July, Cineworld announced another $200m of incremental loans maturing in May 2024, from a group of its existing lenders. This doesn’t change the fact that its debt at the end of 2020 was within touching distance of $8bn. Expectations for 2021 revenues in March were in the region of $2.5bn, with a return above $4bn expected in 2022, however both of these targets look unlikely now if cinema releases follow the Black Widow model and get released at the cinema and online at the same time. While this week’s first half update is unlikely to make for encouraging reading, Cineworld will be hoping that a strong film release slate, hopefully including the new James Bond film, will push its annual revenues up towards the $2bn benchmark of analyst estimates
Airbnb Q2 results
THU 12: Airbnb shares have been on a downward track since they posted record highs in March, as some of the early enthusiasm for the IPO wears off. It’s not hard to see why when you look at its lofty valuation, and even though we’re down by over 30% from those peaks, it’s still worth over $80bn, a figure that puts it well above the likes of Marriott and IHG. In Q1, sales beat expectations with gross bookings surging to $10.3bn, while revenue came in at $887m. Losses widened to $1.95 a share, or $1.2bn, largely due to a debt repayment, while Q2 revenue is expected to be at a similar level to the same quarter as 2019, which is a little disappointing. Over 50% of Airbnb’s revenue came from the US, which suggests there is potential for plenty of upside in a global sense, however given virus flare-ups globally, the rest of the world is likely to take a bit longer to pick up the slack, which suggests that while the US market is likely to show a strong performance, the rest of the world might be another matter. Losses are expected to come in at -$0.36 a share.
Disney Q3 results
When Disney reported its Q2 update in May, there was a lot of anticipation given that US theme parks were starting to reopen, and film and TV production were also ramping up. In March, the shares hit a record high, and while they have since drifted back the outperformance has been remarkable given how much of its core business has been shut down these past 12 months. Losses in the parks were still high, coming in at $406m, while revenue came in at $3.17bn. Total revenue over the quarter came in at $15.61bn, which was below expectations, while the growth of Disney+ subscribers appears to be starting to plateau, as subscribers rose to 103.6m, well short of the 110m target. This shouldn’t be a surprise given the similar slowdown seen by Netflix over the summer months, however there is also an element that a lack of new programming could be a factor. What is more worrying is that streaming revenue declined per head as the company rolled out its India service, where prices are lower.
Disney were more optimistic about this quarter, but still pointed to headwinds on the parks, with an estimate of another $1.2bn impact on revenue due to lower capacity constraints. Profit in Q2 were still better than expected, coming in at $901m or $0.79 a share, while profit for Q3 is expected to decline to $0.56 a share. There is little doubt that revenue from Disney+ has helped through the pandemic, and while the service is still operating at a loss, we are now starting to see a host of new content which may attract new user, including the addition of Loki and a new animated Star Wars series, The Bad Batch For UK, Canada and Australia viewers, the addition of Star, which includes the Fox catalogues of X-Men and Avatar, as well as National Geographic, is also a plus, along with the fact that users don’t have to pay extra for 4K content, unlike with Netflix.
Index dividend schedule
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Selected company results
|Monday 9 August||Results|
|AMC Entertainment (US)||Q2|
|Tuesday 10 August||Results|
|Coinbase Global (US)||Q2|
|Intercontinental Hotels Group (UK)||Half-year|
|Wednesday 11 August||Results|
|Admiral Group (UK)||Half-year|
|Thursday 12 August||Results|
|Palantir Technologies (US)||Q2|
|Friday 13 August||Results|
|No major announcements|
Company announcements are subject to change. All the events listed above were correct at the time of writing.
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