Mindful Money’s weekly shares watch: Carnival, Smiths Group & Thomas Cook

21st September 2015


Investors have become much more bullish towards Carnival over recent months and will be eager to hear the firm’s latest forecasts when it delivers its third quarter trading update on Tuesday.

The FTSE 100 firm has already enjoyed a 42% uplift in its share price over the past year and ahead of this week’s announcement the broker consensus has the stock firmly in ‘buy’ territory, up from a more neutral stance some three months ago.

Graham Spooner, investment research analyst at The Share Centre highlights that the cruise company has benefited from rising on-board spending by passengers and lower fuel costs, thanks to the falling oil price. This he notes led to a doubling of revenue in the second quarter – as such the market will be keen to hear if that performance level has continued into the third quarter.

Spooner, who has the stock down as a ‘hold’ says: “The shares have recovered strongly from the recent China-related market turbulence. The level of forward bookings will also be a central focus in this update, along with any comments about sales in emerging markets.”

Smiths Group follows on Wednesday with its final results. The multinational engineering firm has endured an 18% share price fall over the past 12 months and the announcement comes just days ahead of its new chief executive, Andrew Reynolds Smith, joining.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers expects that performance at the company’s John Crane division, a supplier of products and services to the currently pressured global energy companies, is likely to head the agenda.

He says: “Weakness at its Detection and Interconnect businesses may have continued, whilst the negative impact of sterling’s strength could also feature. Group revenue is forecast to prove flat year-over-year, whilst pre-tax profit is expected to have declined by around 5% to £423m.”

However Spooner says that recent updates have shown good performances from the Medical and Flex-Tek divisions. But he adds that given the backdrop of oil prices, some in the market have been voicing concerns for the oil services business, despite this division performing relatively well too.

“Therefore investors will pay close attention to the size of the division’s order book. The Detection and Interconnect businesses have held back group performance lately and investors should expect currency movements to still be a drag,” says Spooner.

Ahead of this week’s results, the analyst consensus opinion currently denotes a ‘hold’.

Thursday sees Thomas Cook report its full year pre-closing trading update. Its third quarter results saw management guiding down current full year Earnings Before Interest and Tax by approximately £25m, given tragic events in Tunisia and concerns regarding Greece’s potential exit from the euro. Over the past year, shares in the FTSE 250 travel business have loosened by 2% – and by 18% over the last six months.

However Bowman point out that late summer bookings from its UK business may have benefited from the poor weather and the strength of the pound, partly offset by weakness for its German business and weakness in the euro.

He says: “On balance and with current geopolitical and currency challenges weighed against an undemanding valuation, analyst consensus opinion currently denotes a ‘strong hold’.”

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