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

19th January 2015


It appears the froth has come off Royal Mail with the shares down by 29% over the past year.

Currently trading at circa the 428p mark, the stock maybe still 30% above its initial launch price of 330p but it has come significantly down from its 12 month high of 617p.

Scheduled to announce its nine-month trading update on Thursday, having already flagged the company’s full year outcome as dependent on Christmas, third quarter performance for its UK Parcel business will be closely scrutinised – given volumes reached 115m in December 2013.

Ahead of its market report, Keith Bowman equity analyst at Hargreaves Lansdown highlights that prior to the update, and with prospects for the firm seen as finely balanced, analyst consensus opinion currently denotes a ‘hold’.

He says: “Preparation for the increasingly important Black Friday weekend is likely to have proved important, whilst reference to the fall of rival CityLink into administration could be made.”

Sheridan Admans, investment research manager at The Share Centre, who in line with the general sentiment, has the shares down as a ‘hold’ broadly agrees. He adds: “Investors will be keen to see how the company performed over the important Christmas period, especially with regard to the number of parcels and its control of costs. Both aspects will be important for the group in order to hit its targets for the year. Other areas to note will be any further comment regarding its restructuring, updates on property assets and the growing threat of competition.”

But before Royal Mail takes centre stage, multi-brand owner Unilever, up 14% over 12 months, is expected to provide its fourth quarter/full year results on Tuesday.

For the Persil and Dove parent emerging market sales – in the wake of slowing growth is likely to lead the agenda given that growth of 6.2% over nine months and down from 6.6% for the half year was previously reported. Ahead of the announcement, the analyst consensus opinion currently points towards a ‘weak hold’

Bowman says: “China remains a core focus, whilst price deflation in Europe has also hindered performance. More positively, an update on an improvement for its North American business highlighted at the third quarter results will be watched for.”

The shares have recovered well since October’s third quarter trading update notes Admans, who is calling the business a ‘hold’. “The market reacted to a warning from the group’s finance director about a slowdown in the global consumer goods market. As a result, investors will be interested to see if there are any signs of that in the Q4 trading update and any outlook comments that come with it. Trading in Europe and China will be the main focus of scrutiny,” he says.

Overall, sales are expected to have rise by 5% in the fourth quarter. Admans says: “Unilever pays quarterly dividends so income-focused investors will be interested in any comments about future dividend growth.”

Dixons Carphone follows on Wednesday with its Christmas trading update and the market is optimistic that the momentum reported in its half year results will have carried on, aided by the demise of rival Phones 4U and free warranties on products such as high-end TVs.

Over the past three months, the newly formed group has enjoyed a 23% share price rise and Bowman highlights that at this week’s report investors are likely to hear that sales for the group’s core UK and Irish markets are again likely to have led, whilst an update regarding a recently commenced relationship with Telefonica to distribute the products and services of Movistar in its stores may be provided.

He adds: “In all, with merger cost savings being squeezed and the company seen as a likely beneficiary of the expected growth in the so-called ‘internet of things’, analyst consensus opinion currently signifies a ‘strong buy’.”

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