Mindful Money’s weekly shares watch: Easyjet, Wolseley & Amec

23rd March 2015

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With Wolseley shares up by 27% over the past six months investors will be hoping to hear the momentum can be maintained when the heating and plumbing giant reports its half-year results on Tuesday.

Brokers assert that the focus of the FTSE 100 constituent remains on on improving customer service, maintaining market share and margins, cash generation and cutting costs.

Sheridan Admans, investment research manager at The Share Centre who is calling the stock a ‘hold’, highlights that shareholders will also be hoping that its all-important US business has continued with its recent improvement and that margins have improved on the back of further cost cutting.

He says: “This will help offset the struggling European operations. Dividend growth has been boosted by its improving cash position and with the shares trading close to a seven year high, the market looks to be expecting positive results.”

Keith Bowman equity analyst at Hargreaves Lansdown Stockbrokers notes that in contrast to its US business, marginally slower growth for Canada, the UK and the Nordics is expected, “while still challenged conditions for its Central European and French businesses are again expected to see falls in like-for-like revenues generated”.

Ahead of the announcement, and despite some valuation concerns, and the already robust share price rise over the last six months, the overall analyst consensus opinion is bullish and currently points towards a ‘buy’.

Thursday sees discount carrier Easyjet publish its own second quarter/half-year trading update.

Its stock has enjoyed a very strong rally over the past six months, after jumping by 39%. The update comes ahead of interim results in May and will indicate whether the company is still achieving the strong growth in revenue per seat and growing its overall capacity.

The current guidance from the airline points to a first half pre-tax loss of between £10m and £30m, which marks a decent improvement on the £53m loss for the prior half year, with capacity measured in seat numbers up by around 3.5%.

Looking ahead to the market update, Admans, who has the shares on his ‘buy’ list says: “Recent monthly data suggests it is, since passenger numbers in February were up 6.1% on last year. Investors will also be interested to hear if the company is still predicting a first half loss in the range of £10m-£30m, and whether it has yet been able to pass on the fall in fuel costs, due to the fall in the oil price, to its customers.”

Bowman adds: “Business passenger and investment in digital and revenue management initiatives are again likely to be underlined, whilst recent presentation comments regarding UK leisure demand offsetting cost pressures from a weaker euro may be reiterated.” Prior to the release, consensus opinion currently points to a ‘strong buy’.

Thursday will also see the FTSE 250 listed Amec deliver its fourth quarter results. The oil support services sector has gone through a difficult few years, and over the past 12 months the group’s shares have slid by 13% – enhanced by the recent slide in oil prices and cutbacks in capital expenditure.

Looking ahead to the update, Admans, who inline with the market consensus has the firm down as a ‘buy’ says: “Investors will acknowledge that Amec’s contract awards have been affected, as has been reflected in the share price. However, looking forward investors will be keen on finding out to what extent this is affecting the order book and management’s outlook for the sector. Progress on Foster Wheeler’s integration will be welcome as would any hints on further acquisitions.”

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