Please remember the value of your investment can go down as well as up and you may not get back the full amount you invest. We don't provide advice so if you are in any doubt about buying and selling shares or making your own investment decisions we recommend you seek advice from a suitably qualified Financial Advisor.

Wednesday preview: GSK's results and consumer healthcare plans under the microscope

By Oliver Haill

Date: Tuesday 06 Feb 2018

LONDON (ShareCast) - (ShareCast News) - GlaxoSmithKline's full year results will be under the microscope on Wednesday with the shares down by a quarter from last year's summer highs, while there's plenty more for investors who want to focus on the fundamentals rather than the technical levels that were hammering global markets in recent sessions.
Grainger, Redrow, Rio Tinto, Smurfit Kappa and Tullow Oil will all report full- or half-year results at 0700 GMT on Wednesday, with Severn Trent providing a quarterly update.

There will also be a house prices report from the Halifax at 0830 GMT, where year-on-year growth is predicted to ease to 2.4% for the three months to January from 2.7% in December.

GSK last updated the market in October when new new CEO Emma Walmsley, who was promoted in April after running the consumer division, reported sales in line with expectations for the third quarter.

Britain's biggest pharmaceuticals group said sales rose 4% to 7.84bn in the three months to 30 September, versus analysts' average forecast of 7.88bn. Adjusted earnings per share rose 3% to 32.5p.

For the full year, Deutsche Bank expected GSK to deliver adjusted EPS growth of around 3% at constant exchange rates, which would be at the lower end of Walmsley's guidance range for "mid-single digit growth" for EPS at CER.

"We expect '18 guidance to encompass prior cautiouscommentary over margins, given a need to invest in new launches and the pipeline, with a low-to-mid single CER EPS decline likely in the event of a mid year generic Advair launch," analysts said, referring to a rival asthma treatment that would hit sales of GSK's Advair. More positively, DB believes recent US tax reform is likely to be a modest positive and said the shares' valuation looked "undemanding".

UBS forecast fourth-quarter sales of 7.5bn, core operating profit of 2.0bn and core EPS of 25p. GSK's consumer healthcare franchise will be carefully looked at for two reasons, UBS said, first being a possible update Novartis' 36.5% stake which can be put to GSK in 2018 and the second being "GSK's appetite for this business" given Pfizer's strategic review of their consumer franchise and recent press speculation.

"Related to this, and recent earnings downgrades we expect the spotlight in Q&A to focus on dividend sustainability again. We will be particularly interested in any commentary on tax reform...In the longer term, GlaxoSmithKline'sguidance for 2020 (mid-single digit growth for EPS at CER) is currently significantly ahead of us and consensus, we would be interested in any commentary on how company willstretch to reach this target."

GSK's above-market prospective dividend yield of 5.6% reflects speculation that dividend payments could be in the firing line as the pharmaceuticals giant looks to fund further growth, said broker Hargreaves Lansdown. "There's some justification for those fears," analysts said, with some tantalising acquisition opportunities as Pfizer and Merck look to make disposals.

But with GSK's pharmaceuticals business struggling with declining sales from respiratory blockbuster Advair/Seretide and the new pipeline is delivering a steady stream of results but needing time and investment to ramp up sales, "cash is at a premium, and it would be foolish to think the 3.9bn dividend hasn't attracted a long hard look".

Housebuilder Bellway will issue an update for the six months to January 2018 and will be the first in the sector to issue specific figures on 2018 sales rates.

UBS expects completions up 8% to 4,820 and an average selling price up 89% to 279,000, resulting in revenues up 17% to 1,347m.

Looking at sales rates, UBS expects them to be "relatively flat against a high basis of comparison", with reservations per outlet per week during August-October up circa 2% y/y, and Bellway is guiding for 5% volume increase in FY18.

Redrow will issue its interim results, with completion growth seen rising 7% to 2,585 units and ASP of 317,000.

UBS expects PBT of 159m, EPS of 35p and a dividend of 11p. "We expect a more detailed outlook for FY18. We recall that sales rates over Jul/Oct were down circa 2% y/y and the private order book reached 1.2bn."





Wednesday February 07

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Credit (US) (20:00)
Industrial Production (GER) (06:00)
MBA Mortgage Applications (US) (12:00)

UK ECONOMIC ANNOUNCEMENTS
Halifax House Price Index (08:30)

FINALS
GlaxoSmithKline, Rio Tinto, Sampo OYJ, Smurfit Kappa Group, Tullow Oil

INTERIMS
Redrow

TRADING ANNOUNCEMENTS
Anglo Pacific Group, Grainger, Severn Trent, Severn Trent

AGMS
Artemis VCT, Blackrock Frontiers Investment Trust, Daily Mail and General Trust A (Non.V), Grainger, Imperial Brands , Income & Growth VCT , Nektan (DI)

FINAL DIVIDEND PAYMENT DATE
Brewin Dolphin Holdings, Cerillion , Henderson Alternative Strategies Trust , JPMorgan Chinese Inv Trust

INTERIM DIVIDEND PAYMENT DATE
Ashtead Group, Halma, K3 Capital Group , Mitie Group