Mindful Money’s weekly shares watch: Easyjet, Compass Group & ITV

11th May 2015


Easyjet has some hype to live up to when it publishes its second quarter results on Tuesday, given the very positive tone of its last market report when it raised full-year profit guidance.

Shares in the discount carrier have reflected the sentiment too, climbing by 19% over the past six-months. Over one-year however, they are up by just 6%.

But for now Sheridan Admans, investment research manager at The Share Centre is happy to back the firm. Looking to this week’s report, he highlights that in the time that has passed since the last update the company has reported some good traffic figures for March but on the downside, investors have also seen a strike by French traffic controllers and a steady recovery in the oil price.

He says: “News about the level of demand from business travellers and the company’s plans to add capacity will attract attention, as will any hints about the potential for special dividends in future.”

Hargreaves Lansdown Stockbrokers equity analyst Keith Bowman broadly agrees, noting too that the board previously highlighted further potential volatility around currency movements.

He adds: “Ahead of the news, and with the airline’s model seen as remaining in favour with cost conscious European consumers, analyst consensus opinion continues to point towards a ‘strong buy’.”

Compass group follows with its own set of half-year numbers on Wednesday. The FTSE 100 listed global catering giant has enjoyed a 15% rise in its share price over the past six months on the back of some recovery in its trading in Europe and Japan in March. Investors will be hoping to hear that this has continued.

Admans, who has the business on his ‘buy’ list, said: “The performance in North America and some emerging economies has been very positive for the company in recent times. However, the market will be focusing mainly on any comments about prospects in Europe for the rest of the year given the mixed underlying economic picture in the region, due to Greece’s bailout talks and political tensions in Ukraine and Russia. The impact of the rising oil price and exchange rate movements may also be noteworthy.”

Having already reported a “strong” first half Bowman agreed that attention is likely to focus on the outlook and that gains at the company’s North American business may stay front and centre while ongoing growth for its Fast Growing & Emerging business could again be underlined.

He said: “Growing shareholder returns, including a share buy-back programme, also remain in focus. Less favourably, more moderated gains ahead for the Emerging business could be outlined given both challenges for its oil & gas customers and slower progress for key group economies Brazil and Turkey. On balance, analyst consensus opinion currently signifies a ‘strong hold’.”

Thursday sees Downton Abbey and X-Factor broadcaster ITV publish its first quarter trading update. Revenue growth came from all parts of the business last year and over the past three months its stock has edged ahead by a solid 11%.

“Investors will be hoping for more good news, especially from the Studios division,” said Admans, who is calling ITV a ‘buy’. He added: “Other areas to concentrate on will be any updates on recent acquisitions, costs and cash flow. The groups outlook for advertising, although not quite so important as in the past will still be closely followed by investors.”

Bowman noted that the group’s 2014 full year results saw management forecasting 11% growth in Net Advertising Revenue for the first quarter. He said: “Online, Pay & Interactive revenues are expected by the board to grow strongly over the full year, with its Studios business returning to good organic growth. A combination of the UK General Election, comparatives with the 2014 Football World Cup and the pending Rugby World Cup provide the full year backdrop.”

Buoyed by ongoing sector consolidation hopes – Liberty Global, owner of Virgin Media previously acquired a 6.4% stake in ITV – analyst consensus opinion currently denotes a ‘buy’.

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