Mindful Money’s weekly shares watch: Royal Mail, Unilever & Kingfisher

20th July 2015


Royal Mail shares have jumped almost 20% over the past six months helped partly by the problems being endured at competitors CitySprint and Whistl.

But on Tuesday the FTSE 100 group delivers its latest trading statement and shareholders will be very keen to hear about what Royal Mail has be doing to control costs, which has been a high priority for both managements and its investors.

Ahead of the market update, the general broker feeling has the stock edging into ‘buy’ territory, marking an improvement over the past three months. However Graham Spooner, investment research analyst at The Share Centre, is calling them a ‘hold’. Looking to this week’s statement he is anticipating that there will naturally be a keen interest to hear about parcel volumes and the possible effects of competition.

He says: “Any further pressure on margins will be worth noting and expect management to continue to describe trading conditions as ‘challenging’.”

Consumer goods giant Unilever is expected to follow-up with its second quarter/half-year results on Thursday. The firm’s stock has moved some 7% higher over the past six months but in this week’s update emerging market sales, in the wake of slowing growth, remains high on the agenda.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers highlights that growth of 5.4% for the first quarter was reported, down from 5.7% for the full year 2014. He says: “Performances across countries are likely to have remained mixed, with Russia, due to squeezed consumer incomes, a weak first quarter feature. More favourably, management may reiterate first quarter comments noting that ‘despite high levels of currency and commodity volatility, we are now starting to see more tailwinds than headwinds in our markets’.”

Ahead of the announcement, and with growth for its expanded emerging market exposure slowing, analyst consensus opinion currently points towards a ‘hold’.

B&Q and Screwfix owner Kingfisher, up 8% over the past six months, also reports its second quarter trading update on Thursday.

Spooner, who has the firm on his ‘hold’ list, says: “This statement comes ahead of interim results in September, but with inflation at very low levels the market will also be looking for any comments on whether profit margins have changed significantly.”

Bowman notes that French same store sales are expected to have remained in negative territory, having fallen by 1.2% in the first quarter.

“UK like-for-like sales are likely to have continued to grow, supported by its Screwfix business and the benefits it is enjoying from consumers’ ongoing demand for using trades people. An update regarding the Chief Executive’s reorganisation or ‘ONE’ Kingfisher strategic plan could also feature,” he adds.

Prior to the announcement, and with the company battling a number of headwinds, analyst consensus opinion currently signifies a ‘weak hold’.

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