Mindful Money’s weekly shares watch: Prudential, Royal Mail, Centrica & QinetiQ

17th November 2014

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Tuesday sees Prudential publish its third quarter results and with the insurance giant’s stock up 16% over the past 12 months, investors will be keen for more progress.

The business has recently enjoyed robust operating profit momentum, led chiefly by growth in its US and Asian franchises. Presently the market consensus has the shares in ‘buy’ territory and analysts at both Deutsche and Panmure Gordon have just reiterated positive notes on the firm.

Sheridan Admans, investment research manager at The Share Centre also has the stock on his ‘buy’ list. He says: “Investment conditions may have weighted on performance a little at M&G, the group’s wealth management operation. However, investors will be interested to see if the company continued to attract strong levels of inflows as it continues to expand operations across Europe.

“Finally, investors will be keen to see what impact the Government rule changes regarding retirees taking an annuity in retirement, is having on future expectations.”

Royal Mail follows with its half year results on Wednesday. The stock which only listed just over a year ago, after initially soaring is now down by 16% over the past 12 months.

Looking ahead to the update Hargreaves Lansdown Stockbrokers, equity analyst, Keith Bowman asserts that performance at the group’s competition-hit parcels business will provide the priority. He says: “An update on counter initiatives such as cost reduction and a Sunday delivery service at Parcelforce Worldwide for online shoppers could feature. The strength of the pound and its impact on its European focused General Logistics Systems (GLS) business may again be underlined, whilst more favourably, and in the wake of its recently announced Paddington land site sale, the company’s ongoing push to optimise value from other no longer required sites could again be highlighted.”

Ahead of the update, and with the group’s key Christmas trading period still to be battled, the analyst consensus opinion currently points towards a ‘hold’.

Admans, who also has Royal Mail shares down as a ‘hold’ adds: “The share price has significantly underperformed this year as concerns grow over the increasing competition, especially regarding delivering parcels. Other areas for investors to concentrate on will be margins and cost cutting measures. Furthermore, there may also be an update on the company’s intentions about some of its property assets and on its request for help from the regulator concerning letter delivery.”

Defence technology and security company QinetiQ reports its half year results on Thursday. Following the chief executive’s October 2014 decision to move to Balfour Beatty, the FTSE 250 group’s search for a replacement sits high on the agenda.

Following a series of downbeat trading comments from rivals, a reiteration of in line trading provided as of the CEO’s resignation announcement will also be closely watched for notes Bowman. He says: “An update on the group’s £150m share buy-back programme could also feature. Ahead of the announcement and with QinetiQ having undergone transformation and a strengthening of its balance sheet under the departing CEO of the last five years, analyst consensus opinion currently denotes a ‘strong hold’.”

Thursday also sees Centrica’s latest interim management statement arrive. The British Gas owner has endured a 14% share price fall over the past 12 months and as such investors will be looking for signs of improvement after another disappointing year.

Admans, in line with the consensus, is calling the stock a ‘hold’. He says: “An update on its US operations, where margins have been under pressure, along with any comments on its cost cutting will be worth noting. The group’s earnings outlook for 2015 will be another area for the market to focus on given the recent mild weather is expected to have hit demand over the quarter.”

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