The week ahead
This is definitely one of the threads that is likely to run through narrative surrounding three of the major firms putting out numbers this week: Barclays, BP and Rolls Royce.
BP is the first to report and is interesting for a number of reasons, not least of all because investors now know the size of the fine the firm has to pay in relation to the Deepwater Horizon disaster.
“Investors will be hoping for some discussion of life after the Macondo spill,” said Moore, adding that they will also be looking for the implications of the lower oil price.
“A low oil price is clearly an unhappy environment for an oil major. But, I personally find BPs statements about cutting their coat to match their cloth more comforting than what Shell has been saying.”
Much of the focus with regards to BP will be on the sustainability of its dividend, a focus that will also be evident in relation to Barclays. Although, both McGarry and Moore expect much of the initial attention to centre on the comments by new executive chairman, John McFarlane.
Although Moore doesn’t expect much in the way of a comprehensive strategy update, he says there is likely to be some sort of agenda setting on the part of McFarlane.
As for Rolls Royce, the firm has clearly been beset with problems and issued its third profit warning since October last year, two weeks ago – largely on account of its Marine division.
But, McGarry says, although these profit warnings have helped knock 27% off the share price over the last year there are reasons to be optimistic especially after the appointment last month of Warren East as CEO.
“His track record at ARM from 2001 to 2013 was excellent and given his deep technological knowledge and expertise at developing long-term partnerships he would appear to have the ideal skillset to engineer this turnaround. Despite the recent turbulence they still have more than 50% global market share in wide-body engines and as such they are well positioned to benefit from the largest wide-body fleet replacement cycle and market expansion in history,” he said.
This view, he added, is underpinned by a £76bn strong order book, equal to five and a half times 2014 revenue.
