Look Ahead To Q2 Earnings: Tesla, Ryanair, LVMH And More

Look ahead to UK & US companies reporting from 26 to 30 July

Q2 2021 hedge fund letters, conferences and more

Tesla, Q2 Results, Monday 26 July

Nicholas Hyett, Equity Analyst

“With production coming in ahead of expectations Tesla has clearly navigated the computer-chip shortages that have hit the wider industry well. However, tighter supply chains together with changing product mix (Model 3/Y deliveries continue to grow while premium Model S/X sales fall) mean margins will be the main area of focus once again. Increasing competition in the electric car market will also spark extra interest in any comments on the outlook for future deliveries – particularly in China where local competitors have been ramping up sales. That extra competition could also undermine the group’s lucrative line in selling carbon credits to other manufacturers. While we don’t see a collapse in credit revenues as imminent, any suggestion this crucial source of cash is under threat would raise questions about whether Tesla can fund future expansion without further shareholder support.”

Ryanair, Q1 Trading Statement, Monday 26 July

Laura Hoy, Equity Analyst

“The big question for Ryanair is whether it is still on track to breakeven for the current financial year. The group said it would avoid another loss in the 2022 financial year if travel restarted between July and September. However, the yo-yo restrictions over the past few months have added some turbulence to the sector. We’re keen to see how Ryanair’s responded to the uncertainty and whether it will be enough to push profits into the black. Capacity and passenger numbers in the current quarter will be top of mind as we work out whether Ryanair will be able to make good on its ambition to breakeven. We suspect they won’t be quite as strong as the group had been hoping. But with internal EU travel flowing more freely, it should be enough to piece together something of a summer travel season. We’ve also seen peers like easyJet aim to capitalise on travellers’ willingness to pay more for things like additional baggage and priority boarding. We’d like to see Ryanair pounce on this trend as well, particularly because roughly a third of the group’s passenger revenue comes from spend on extras.”

LVMH, Interim Results, Monday 26 July

Susannah Streeter, Senior Investment and Markets Analyst

’’Steering the big LVMH ship through the pandemic has been far from plain sailing for management, but overall, the group has weathered the storm admirably. Even though some shops have remain shut in many markets, and all-important tourist numbers are low, sales still thrived in the first quarter. It’s not just testament to the group’s online strength, but its 24-carat brand. Even when socialising opportunities have been limited, wealthy shoppers have shown they still want to reward themselves with high end treats. After a bitter spat over the price of the acquisition, LVMH has also now welcomed Tiffany with open arms, heralding the prestigious arrival of the American jeweller to its luxury stable. However, the deal came with a hefty dose of debt, so sales trajectories here will be a key metric to watch. With worries about new Covid variants swirling there will also be concern that international travel will not rebound as quickly as hoped, and with LVMH somewhat reliant on well-heeled tourists splashing the cash, this is likely to act as a drag on sales for some time.’’

Moonpig, Full Year Results, Tuesday 27 July

Susannah Streeter, Senior Investment and Markets Analyst

‘’Moonpig flew into the FTSE 250 at the June reshuffle after rooting out a hefty valuation at its IPO launch. The company had been living high on the hog during the pandemic as demand for cards and personalised gifts ordered online soared. But the easing of shopping restrictions mean consumers are now free to browse real rather than virtual piles of cards once more, and there are concerns its flying sales may have come down to earth with a bump. Reflecting those worries, the share price has fallen by a fifth since reaching a high at the beginning of June. By positioning itself as a digital sales platform, using data to predict consumer preferences, Moonpig seemed to have succeeded in positioning itself as a big e-commerce player, rather than an online card retailer. But whether it can capitalise on those data sets to boost sales of other ranges is far from clear.’’

Microsoft, Q4 Trading Statement, Tuesday 27 July

Steve Clayton, Manager of the UK Select Funds

“Microsoft report on their Q4 trading on Tuesday. All eyes are likely to be on its Azure cloud computing division where growth has been extraordinarily strong in recent quarters.”

Alphabet, Q2 Trading Statement, Tuesday 27 July

Steve Clayton, Manager of the UK Select Funds

“Alphabet needs to show that momentum in its core Google Search and Advertising products remains buoyant to support the strong performance the stock has put on so far this year. Can the company show any signs of their Google Cloud division becoming a serious contender against the runaway market leaders of Amazon Web Services and Microsoft Azure?”

ITV, Interim Results, Wednesday 28 July

Susannah Streeter, Senior Investment and Markets Analyst

“ITV is trying to change channels to make the business less reliant on advertising as a driver for growth. Developing its Studios arm which creates content for other platforms and channels is a big part of this strategy. But the move is taking time, not least because of the production setback brought on by Covid and any update on progress will be one to watch. The recent share price plunge, off the back of concerns about new variants causing a drag on the recovery, demonstrates why the pivot is so important. Sentiment is highly sensitive to any factors which could affect ad revenues. The picture remains fuzzy regarding the impact this current spike of infections will have for the economy, but overall advertising revenue has been recovering. ITV’s schedule is looking brighter with the return of big shows like Love Island following cancellations during the pandemic.’’

McDonald’s, Q2 Results, Wednesday 28 July

Sophie Lund-Yates, Equity Analyst

“Overall revenue and profit beat expectations last quarter, partly thanks to a strong performance from the key US market, where comparable store sales rose 13.6%. That’s set the bar high heading into next week’s results, and we wonder if the strong run can be continued. A quick way to check this will be looking at whether the group still expects full-year sales growth in the mid-teens, and operating margins in the low-to-mid 40% range. We have reason to hope sales have remained robust in core markets. The group managed a rapid increase in digital and delivery options in the last few years, and this could be a long-term shift in customer behaviour accelerated by COVID. What’s less clear is what the overall picture will be. Restrictions have lifted at different rates across the globe, and that means we’re probably in for an eclectic mix of regional results. Finally, we’ll be looking out for any updates on the growth strategy. There are some vague platitudes in the current plan, and we’d like a bit more detail, or at least a better idea of when we can expect it.”

Facebook, Q2 Results, Wednesday 28 July

Laura Hoy, Equity Analyst

“Facebook has been a pandemic winner and a result he group will have a hard time besting its 2020 first-half results. However, nothing seems impossible for the social media giant and the world’s shift to digital looks like a long-term behavioural change rather than a passing fad. The second quarter should see revenue growth slow significantly from the 46% increase in the first quarter, but even just maintaining some of the pandemic-driven momentum would be impressive. The driving force behind revenue will be advertising spend, itself a reflection of the size of Facebook’s active user base. The group was able to grow Monthly Active Users by 10% last quarter, but we suspect that could be a bit lower as people are out and about a bit more. Advertising prices saw a double digit increase last quarter and we’d like to see that trend continue without knocking volume growth. Continued revenue growth is important because the group’s spending has been on the rise recently as it works to build out its data centres and keep up with the ever-changing tech landscape. Those dollars are also destined to go somewhere else though—the legal and corporate affairs departments. While the group won the first round of lawsuits, which alleged the company had become an unfair monopoly, the Biden administration is likely to continue pursuing a break-up. We’d like to hear Facebook’s take on the ordeal and get a sense of how much they think the battle, sure to be years long, will cost.”

Dr Martens, Q1 Trading Statement, Thursday 29 July

Susannah Streeter, Senior Investment and Markets Analyst

‘’Dr Martens, made famous for dressing punk and grunge fans had a city style makeover with a successful IPO, but the shine has come off the bootmaker recently. Although its revenues are still forecast to grow at a double-digit pace, guidance shows they are unlikely to match the sales sprint the company saw in 2020, thanks to a 70% surge in e-commerce. Standard sizing of its iconic designs means it is likely to continue to benefit from a lower return rate, which should hold up margins. But with shoppers free to try on other rival brands, the fresh completion may stomp on its sales. The brand will be also sensitive to future fashion trends. It may now be basking in the style spotlight with the grunge look back in mode, but fashion is fickle and that could reflect in its share price down the line. Widening its footprint of styles is likely to be the path trodden in the future, but that also risks diluting the core brand.’’

Compass Group, Q3 Trading Statement, Thursday 29 July

Steve Clayton, Manager of the UK Select Funds

“Compass Group is one of the market’s core “reopening plays” and investors will be all ears as to what they have to say about the pace of employees, students and fans returning to the canteens which the group operate across the USA and beyond.”

AB InBev, Q2 Trading Statement, Thursday 29 July

William Ryder, Equity Analyst

“Brewing giant AB InBev must be looking nervously at the UK’s Covid numbers. After a year in which pubs were shut the brewer made a strong start to 2021, with beer volumes and revenue ahead of 2019. However, that’s come as markets around the world reopened pubs and restaurants after a hard Covid winter. We expect the group’s second quarter, which we will hear about next week, to have enjoyed similar momentum. But, with cases rising quickly in the relatively well vaccinated UK, further trading restrictions may be imposed if hospitalisations follow. By itself the UK is a relatively small market for a giant like AB InBev, but we could be the canary in the coalmine for another major wave. This makes management’s outlook both interesting and somewhat unimportant. AB InBev’s results will depend heavily on the pandemic’s path over the next six months, but we still want to know how the group is positioning itself.”

Intertek, Interim Results, Friday 30 July

Steve Clayton, Manager of the UK Select Funds

“Intertek are a key player in facilitating global trade, and their pace of growth will be keenly watched. With a growing presence in supply chain assurance, Intertek are a potential beneficiary of the growing trend for ESG investing.”

Primary Health Properties, Primary Health Properties, Friday 30 July

Laura Hoy, Equity Analyst

“Primary Health Properties benefits from its location in the healthcare sector—with the NHS and Ireland’s HSE making up the bulk of the group’s tenants. For that reason, we’re expecting strong rent collection to have continued through the second quarter. The larger question for PHP is portfolio growth and revenue growth potential. In the first quarter the group made just one acquisition and Covid-related disruptions kept the group from making progress on pipeline deals. At last check the group had 18 direct development projects at varying stages in the medium-term pipeline and 4 live. We’re keen to know whether progress has been made to shift some of those developments forward. The group’s Nexus acquisition is also one to watch— aside from the development opportunities that come with it, it’s expected to generate annual cost savings of £4m and we’d like to know if it’s on track to meet that goal. Finally, the group’s loan-to-value ratio has been creeping higher, rising nearly a full percentage point to 41.9% over the past year. This could become an issue if interest rates rise, so it’s worth keeping an eye on.”

FTSE 100, FTSE 250 and selected other companies scheduled to report next week

26-Jul

27-Jul

28-Jul

29-Jul

30-Jul

*Events on which we will be writing research

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