Mindful Money’s weekly share watch: Prudential, G4S, Serco & Glencore

11th August 2014

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Shareholders will be hoping to hear Prudential has managed to maintain its recent positive momentum in operating profits when it reports its half year numbers on Tuesday.

The FTSE 100 listed insurer has enjoyed a strong run on the back of robust growth in its Asian and US operations and over the past year its stock has firmed by 12%, with 4% growth achieved in the past six months. Ahead of its update sentiment towards the group remains very upbeat with the analyst consensus opinion continuing to point towards a ‘strong buy’.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers says: “Higher US markets are likely to have assisted profit performance at its North American business, although currency headwinds may drag on its Asian operations. An update with regards to the insurer’s target to generate cash from its expanding Asian business along with an underlining of its intention to grow its distribution channels in the region could both feature.”

Sheridan Admans, investment research manager at The Share Centre, who inline with the market, rates the shares a ‘buy’ notes that given the improvement in markets and progress in investor sentiment, shareholders will also be expecting Prudential’s wealth management operation, M&G, to have continued to attract strong levels of inflows as it continues to expand its operation across Europe.

He adds: “Investors will be keen to see what impact the Government rule changes around taking an annuity in retirement could have on future expectations.”

Tuesday also sees embattled support services firm Serco publish is second quarter results. The FTSE 250 constituent which has witnessed its shares collapse by 47% over the past year, is being questioned by the Serious Fraud Office over allegations it had charged for ‘tagging’ criminals who were actually in prison or did not even exist.

Ahead of the update, the consensus is pointing towards a ‘sell’; and notably Numus Securities recently downgraded its recommendation on the stock to ‘reduce’.

Admans however is calling the stock a ‘hold’. He says: “There has been a relentless flow of bad news for Serco recently, which has seen the share price fall to a five year low. Investors will be focusing on comments regarding the strategic review and restructuring of its Far East operations. Alongside this, commentary on the group’s margins, potential contract wins and the need for a rights issue will also be welcomed.”

G4S, which has seen its stock rise by 8% in the past six months and by 10% over the last year, reports its half year results on Wednesday. Admans, who rates the business a ‘hold’ highlights that the group has faced a number of challenges in recent years, with the latest investigation being on its contracts in Israel.

He adds: “Investors will be hoping that the improving trend for its services in emerging markets has continued. They will also be looking for signs of improvement in Europe and the US, where recent updates have pointed to challenging conditions. The group’s debt situation is another area that the market will be focusing on.”

Bowman says: “Plans to sell further businesses could be announced, whilst news of any contract wins for its still significant customer, the UK government, would likely prove well received by investors. In all, analyst consensus opinion currently points towards a ‘hold’.”

Wednesday also sees miner Glencore, up 30% over 12 months, unveil its latest interim management statement. The shares are presently in ‘buy’ territory according to the Digital Look, with Deutsche having just reiterated its own upbeat recommendation.

Admans says: “With commodity prices holding up during the last quarter, investors should be confident of some half decent revenue and earnings numbers. While some of the larger miners have been holding back on large scale expansion projects, others have still been fairly aggressive, so investors will want a clearer idea of Glencore’s position in regard to this. Progress on the Xstrata merger will be welcome, along with any news on other acquisition plans.”

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