Over the next trading week investors can expect trading updates, AGM statements and interim reports from over 60 companies. ranging from blue-chips to much smaller AIM-listed stocks.
Here are just four that I expect to make Tuesday and Thursday of next week more interesting for some investors — Vodafone (LSE: VOD), Wolseley (LSE: WOS), Burberry Group (LSE: BRBY) and Halfords Group (LSE: HFD).
As you can see from the chart below, all four the companies have underperformed the market over the last quarter. But has the market been too pessimistic? Let’s take a look…
No Longer a target?
Shares in Vodafone have been off of late, mainly due to the termination of talks regarding possible asset swaps with US-based media giant Liberty Global announced back in September.
The end of talks can often lead to worries that the prospective buyer didn’t like what they saw. But it may simply be that management terminated talks because they thought they get better value by going it alone.
That said, Vodafone’s shares currently appear expensive on a basic 12 month forecast price to earnings (P/E) ratio, with the shares changing hands on around 40 times earnings. Additionally, analysts have become increasingly negative on the stock over the last twelve months. The 2016 earning per share (EPS) figure has fallen from 6.47p to 4.91p currently.
Still, investors can still expect a 5% plus yield here while they wait for the investment currently being made in infrastructure to pay off.
Challenging markets
Investors in Wolseley — the specialist distributor of plumbing & heating products and building materials in North America, the UK and Continental Europe — will be hoping for an improving trading environment when management updates the market on Tuesday.
The shares have been under pressure following news that industrial markets in North America, which account for about 15% of revenue in the region, were challenging in the fourth quarter. The company said that this was expected to continue alongside a “very competitive” heating market in the UK, with little growth expected.
Despite this weakness management has pressed ahead with a further £300m share buyback and a 10% increase in the dividend.
Despite the disappointment, the market still prices these shares around 15 times forecast earnings, slightly above the median forecast of all UK stocks with estimates, It also offers an expected yield of around 2.65%, which is slightly below the median forecast dividend yield of 3.05% taken from all dividend payers, according to data from Stockopedia.
Fickle fashion?
It will be interesting to see how the market reacts to interims from Burberry, the manufacturer, wholesaler and retailer of luxury goods. The market was’t impressed with the trading update on 15 October and the shares took a bath, though they seem to have recovered a little since.
Management blamed a more challenging external environment during the half, affecting luxury consumer demand in a number of key markets, particularly Asia Pacific and China.
While swift action was taken to control discretionary spending, management seemed more confident of a return to growth in the second half, with increased marketing aimed at the company’s important Christmas offering. If all goes to plan, it is expected that 2016 results will be “broadly in-line“ (so probably slightly below) expectations.
With broker downgrades, the shares currently trade on just over 18 times 2016 earnings — that’s a rather spicy valuation given the deterioration in trading. However, this is a quality business, which one could argue should be rated higher by the market.
Not the weather for cyclists?
Last up is Halfords, the retailer of automotive and cycling products. The company will report interim results on Thursday, though investors already know what to expect, given the September trading update. In it Halfords highlighted disappointing cycling performance, primarily driven by lacklustre sales in mainstream bikes, as well as associated parts and accessories.
Management considered this to be principally market-driven, reflecting greater levels of discounting, as well as poor weather deterring casual cyclists. Cycle repair like-for-like growth, however, remained strong, growing by 27.6%.
Trading in all other areas of the business remained strong and in line with, or above, expectations, particularly car maintenance, where parts was a stand-out performer. Importantly, customer service metrics continued to improve. The company’s 300+ Autocentres continue to drive profitable growth, too.
So not the end of the world, although the shares seem to still be under selling pressure and remain some 16% lower than the pre trading statement close of 510p.
The Foolish bottom line
As we can see both Burberry and Halfords have underperformed the FTSE 100 over the last 3 and 12 months, and while there can be no certainty of a quick recovery, both are worthy of some further research in my view.
