Mindful Money’s Monday share-tips: Sainsbury, Antofagasta, Next & United Utilities

17th March 2014

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Following Morrison’s underwhelming results last week, investors will be keen to hear how Sainsburys is holding up against the so-called hard-discounters when it updates the market on Tuesday writes Philip Scott.

Like many in the sector, the supermarket chain has been under pressure recently, with its shares off by 12% over the past year.

In its fourth quarter trading update, it is anticipated that its record of 36 consecutive quarters of positive like-for-like or same store sales is likely to end.

The expansion of discount stores Aldi and Lidi, and the trusted product appeal of up-market grocer Waitrose may all contribute.

Nonetheless, Keith Bowman equity analyst at Hargreaves Lansdown Stockbrokers says profit expectations for the full year may remain unchanged, with the retailer to date having avoided aggressive promotional activity.

He adds: “The announcement also marks the last trading update by outgoing chief executive Justin King. Consensus pre-tax profit for the year is forecast to rise by just over 5% to £796m.”

Prior to the update and with sales still expected to fall less than major rivals such as Morrison, analyst opinion currently points towards a ‘strong hold’, although some are more upbeat and Citigroup just reiterated its ‘buy’ recommendation.

Miner Antofagasta, down 24% over the past 12 months, also updates the market on Tuesday. The company, delivering its fourth quarter results, has beaten production targets for 2013 but the underlying revenues will continue to feel the effects of the weak demand environment and the decline in copper and gold prices notes Sheridan Admans, investment research manager at The Share Centre.

Admans, who rates the stock a ‘hold’, in line with the market consensus, adds: “Investors will expect to hear more of the company’s plans on returning capital to investors and what it makes of the most recent downturn in the price of copper, following some poor Chinese economic data. The outlook for 2014 will also be worth noting.”

Retailer Next reports its full year results on Thursday. Aided by new store space and the success of the group’s directory business, Next’s own mid point guidance given at the time of its fourth quarter trading update points towards a pre-tax profit of £692m – an increase of just over 11% year-over-year says Bowman.

With the shares up 59% in the past year, analysts are still positive on the stock, with brokers at Jeffries, Nomura and Bank of America, all having reaffirmed their ‘buy’ recommendations.

Going against the tide, Admans has the shares marked down as a ‘hold’. He says: “Investors will be keen to see if Next can follow its strong results in the last financial year, as it continues to focus on its online business and expand its retail space, whilst remaining focused on cost saving.”

Bowman adds: “Management’s almost customary cautious outlook comments may again be seen, with tough comparatives potentially highlighted. However, with the share price above the group’s own share price target, and ongoing success still fuelling free cashflow, a further special dividend payment of 50 pence per share is expected to be announced. Ahead of the results, analyst opinion currently points towards a ‘buy’.”

Thursday also sees a trading update arrive from United Utilities, although investors are unlikely to be expecting any excitement from the group. Trading has been in line with expectations and the shares are up 12% in the past year. Presently the consensus has the shares down as a ‘buy’, as does Admans.

He says: “Confirmation that it remains on track to hit its regulatory targets is the norm for water companies. The main area of interest will be any comment regarding the next regulatory period, which starts at the beginning of 2015.”

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