Mindful Money’s weekly shares watch: BP, Lloyds, Next & Barclays

27th October 2014

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Given the recent volatility in the oil price, investors will be on the look out for some positive news from BP when it updates the market on Tuesday with its third quarter results.

A collapse in the Russian ruble versus the US dollar is expected to have hit performance and stock in the oil major is already down by some 14% over the past three months alone as geopolitical unrest in Ukraine and Russia coupled with the ongoing fallout from the Gulf of Mexico disaster take their toll.

But despite the headwinds, ahead of the update the analyst consensus opinion currently denotes a ‘cautious buy’.

Sheridan Admans, investment research manager at The Share Centre, who has the firm on his ‘buy’ list asserts that the recent plunge in the price of oil is likely to be the most detrimental factor to the company’s earnings prospects.

He says: “Investors will therefore look to see what management say the likely magnitude of this could be and whether it will impact major projects and exploration. Aside from the fall in the price of oil, it is likely that the company will continue the recent theme of improving levels of production.”

From a more upbeat perspective, Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers says: “Underwritten by BP’s significant cashflows and the board’s commitment to review the dividend at both the first and third quarter results, an increase in the payment could be declared.”

Tuesday also sees the still partly taxpayer backed Lloyds publish its own set of third quarter numbers. The banking sector has come under pressure again this year notes Admans and Lloyds has been no exception with its shares down 4% over the past 12 months.

He says: “Long suffering shareholders will be hoping that the group remains on track with its restructuring and targets. Areas to concentrate on will be bad debts, costs and regulatory issues.  As the group is geared to the UK, its outlook on the economy and housing market will also be of interest. We currently list Lloyds as a ‘hold’.”

But Bowman highlights with the benefits of the ongoing UK economic recovery viewed as highly beneficial to the company, ahead of the announcement analyst consensus opinion amongst brokers points towards a ‘cautious buy’.

He adds: “Exposure to both the improving UK and Irish economies should again see the bank reporting reduced bad debt impairments – similar exposure recently saw Royal Bank of Scotland lower its expected impairment provisions. The group’s ongoing drive to cut costs is likely to be underlined, whilst any comments regarding the potential resumption of a dividend payment later in the year will be closely watched for.”

Wednesday sees High Street fashion retailer Next unveil its latest interim management statement. Shareholders have enjoyed a 25% hike in the firm’s stock over the past year but right now analyst sentiment is pointing towards a ‘neutral’ stance with Investec Securities and Deutsche having both recently reiterated ‘hold’ recommendations.

Admans who is also rates the group a ‘hold’ notes that the market will be interested to hear if the weather continued to impact trading, following the company’s comments to that effect in late September. He says: “The strength of sales in its high street stores relative to online trading will also be at the forefront of investors’ minds. Additionally investors will hope for guidance on full-year profit expectations.”

On Thursday Barclays delivers its latest interim management statement. Troubled by the so-called ‘dark pool’ scandal, Barclays has seen its stock fall by 10% over the last six months. But despite its challenges the market appears to view the bank’s stock in a positive light with analysts at Numis Securities, JP Morgan Casenove and Citigroup having all recently re-confirmed ‘buy’ positions.

For his part Admans is calling Barclays a ‘hold’. He says: “The share price has underperformed the market so far this year, as pressure grows on the sector. As has been the case for many years, investors focus will be on the performance of its investment banking arm. Any further increases in provisions, regulatory issues, its cost base and how the restructuring plans are proceeding will also be worth noting.”

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