GG now spends rainy days trading equities and currencies. He likes to use a combination of technical analysis and news flow to make trading decisions.
Anglo-Irish Bank and Easyjet
As the immortal Harry Callahan said ……’Do I feel lucky? Well do ya punk?
Similar thoughts cross my mind at the moment when I start to look at bank stocks, in any shape or form. Given that there may yet be more rounds in the cylinder (in the form of additional credit crunch writedowns) I’ll come quietly!
This week is littered with updates from bank stocks, including LloydsTSB, UBS, HSBC, Standard Chartered and AIB. Lloyds looks the least vulnerable to any horror stories, whilst you can usually rely on UBS to find a few more billion of writeoffs!
AIB is the first of the Irish contingent to report this week, out of the traps on Wednesday when it releases interim results. Analysts are looking for earnings to rise by around 15% to 69 cents, a hike of similar proportions in the dividend is predicated on pre-tax profits up 20% to about €660m.
One key area of focus will be loan impairment-further provisions on the SIV and other assets are to be expected in the light of the Royal Bank of Scotland writedowns last week. The bad debts charge is expected to be about 0.15%. An update on current trading and the outlook for the remainder of the year is also expected.
Clearly, ’some punks do feel lucky’ with the shares on a roll, rising by 11% last week.
Personally, I think that appears to be taking a lot on trust given the general downturn in the Irish economy and the commercial property sector in particular-where AIB has some significant exposure.
Keep an eye out for comments from the CRH AGM also being held on Wednesday. The USA is likely to be pretty dreadful, whilst demand in Eastern Europe and the FSU might just keep the European division’s head above water!
Also due on Wednesday are interim results from low cost airline Easyjet. I was intrigued by the rise in airline stocks (go on check ‘em out!) last week on the back of a relatively small (and it appears temporary!) setback in the oil price.
Easyjet is expected to post a loss of around £60m-somewhat wider than the £17m last time as restructuring and higher fuel costs bite. In March, the company warned that rising fuel costs were likely to add about £45m to costs, and the oil price is about $20 a barrel more expensive now.
So short term pain for long term gain? High oil prices will make weak competitors exit the market (there are oodles of low cost, poorly financed operators across Europe) and the financially stronger companies like Ryanair and Easyjet should eventually benefit. But that is not before some quite considerable pain is taken as the combination of a consumer downturn and high fuel costs bite into near-term profitability.
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May 6th, 2008 at 3:39 pm
Couple more BOTD’s
Probably get nailed by the FSA for ‘front running’ but who is certain they will get published anyway and ‘if only’ my commentary had that much clout it could move markets! None of it is price sensitive anyway!
Company and reporting date Rolls Royce AGM 07 May
Text:
Can Rolls-Royce chairman Simon Robertson continue to deliver an upbeat message at the AGM on Wednesday? The group chose to return cash to shareholders by raising the dividend by 35% at the Final Results stage, but delays in the rollout of the Boeing 787 ‘Dreamliner’ may affect sales of the new Trent engine.
Company and reporting date Next: IMS update 08 May
Text:
Next is likely to unveil disappointing trading news when it updates the market on Thursday. Tough comparative numbers, flagging consumer confidence and the dismal Spring weather suggest that like-for-like sales could plunge to -10%. Whispers that the group could become a target for M&S appear to have put a base under the shares recently-but is this justified?
May 7th, 2008 at 9:06 am
Looks like a reasonable set of numbers from AIB;
EPS in line, divi up by more than expected by 20%. Couple of wrinkles nevertheless-lending growth was a net €6.1bn-somewhat slower than the market was going for, albeit at better margin. Plenty of additional provisioning, and some good cost control-overall looks relatively solid, rather than spectacular-IMHO.
Results from Easyjet look a bit better than expected, driven in part by the strength of the Euro. Revenue outlook positive as people trade down from British Airways, forward bookings ‘robust’ particularly at Gatwick. 40% of fuel hedged at $750 per tonne (now $1100) £2.5m hit for every $10 move. Eeek!
As I suggested in the TWL ’short term pain’-in that estimates could come lower on the back of fuel price rises.Well financed operators like Easyjet and Ryanair should come out the other side stronger as weaker competition cuts capacity (I think SAS has grounded half a dozen of its low cost fleet this last week)-which in turn should lead to an increase in fares and an eventual return to profitability.