The week ahead: General Election, Sainsbury's, GlaxoSmithKline, BG Group

Monday 4 May

Bank holiday - market closed.

Tuesday 5 May

Trading statements

Greene King, HSBC Holdings.

AGM/EGM

Randgold Resources, Bioquell, Sherborne Investors (Guernsey) B, Stratex International.

Wednesday 6 May

Sainsbury's will be the last of the "Big Three" supermarkets to report full-year numbers on Wednesday, with broker Jefferies expecting the group to confirm more pain in the year ahead.

The food retailer has already released details of its sales performance for the year with like-for-like sales of -1.9% (split between -2.1% in H1 and -1.8% in the H2).

Jefferies predicts Sainsbury's will confirm that its priority is to remain competitive on price and that a combination of  "stepped up reinvestment" together with "persisting deflationary headwinds" is likely to make for another challenging year in 2015/16.

"We remain concerned that improving execution at Tesco may hit Sainsbury's harder than most given higher local store overlaps", adds Jefferies.

"However, we see increasing levels of free cash flow as a potential downside protection to the shares, with a free cash flow yield approaching 10% a helpful feature (hence our neutral stance on the stock)."

The broker expects full-year revenue of £23.5 billion, earnings before interest and taxes (EBIT) of £746 million and profit before tax (PBT) of £645 million. "Hold".

For analysis on the sector, read: The supermarket shares to buy and sell.

Pharmaceutical giant GlaxoSmithKline will release Q1 results halfway through the week. UBS remains bullish since upgrading GSK to a 'buy' rating in January.

Detailed data from a recent phrase III study released on the firm's Zoster (shingles) vaccine addressed one of UBS's key outstanding questions: does it work in all age groups?

"The efficacy of GSK's vaccine (97.2% overall, which we had already seen) was maintained in all age groups, including a very impressive 98% efficacy in patients >70 years" says the broker.

"Efficacy in elderly individuals is critical: these have the greatest risk of shingles, and highest rate of complications. An NEJM editorial calls GSK's efficacy results 'remarkable'."

UBS's price target (1,700p) is based on a price/earnings (P/E) multiple of 16.7x 2016E core earnings per share (EPS).

Insurer Prudential will report its 1Q15 interim management statement, updating the market on new business sales and new business margin.

For the firm's Q1 broker JP Morgan Cazenove forecasts new business sales (APE) to decrease by 4% year-on-year to £1.128 billion due to lower new business sales in the UK (-28% year-on-year) and the US (-18% year-on-year) partially offset by strong growth forecast in Asia (+18% year-on-year).

They also expect new business margin (post tax basis) to come in at 41% in Q1 which is four percentage points lower year-on-year due to declining interest rates across markets.

"We maintain our Neutral recommendation on PRU as we see reducing risk from US and Asian businesses but we see that to be reflected in the share price already," says JPM, which has a 1,280p price target.

Legal & General, another insurer, will also post Q1 numbers on Wednesday.

The group reported a strong set of 2014 results, according to Shore Capital, accompanied by a "robust outlook statement".

Investors have been rewarded with 21% growth in the dividend with Shore Capital's forecasts assuming further increases of 15% and 9% in 2015 and 2016 respectively.

Shore Capital's Eamonn Flanagan says the group's "disruptive model has much further to run, offering shareholders significant upside potential".

"The income attractions are evident, transparent and considerable. We reiterate our BUY recommendation on this impressively managed, powerfully positioned and focused business," adds Flanagan.

Economic news

The Services PMI for April is due on Wednesday, which given the softness of Q1 GDP will be looked to for reassurance that Q2 is on a better footing, according to Investec's Victoria Clarke.

"The UK services PMI rose to its highest level since August at 58.9 in March, suggestive of solid recovery momentum in the sector that accounts for nearly 80% of UK output," says Clarke, who expects the PMI to more or less hold its gains at the start of Q2. The analyst pencils in a reading of 58.7.

"Although first quarter UK GDP figures showed the UK economy growing at its slowest pace since Q4 2012 at 0.3%, with services output expanding by just 0.5%, we judge that services output will firm into Q2 reflecting the strength evident in survey data and supporting a pick-up in UK growth."

Trading statements

Sainsbury's, Sage Group, Inmarsat, Imperial Tobacco Group, GlaxoSmithKline, Intu Properties, National Express Group, Smith (DS), Legal & General Group, Wetherspoon (J D), CRH, Carillion, GKN, Direct Line Insurance Group.

AGM/EGM

National Express Group, The Renewables Infrastructure Group, Norsk Hydro AS, Medaphor Group, Amerisur Resources, Bank of America.

Thursday 7 May

Aviva will reveal its Q1 numbers on Thursday. The team at JPM will focus on NAV development, the strategic update after the Friends Life acquisition and any comment on Solvency II.

Expect IFRS NAV to come in at 351p per share at 1Q15e versus 341p at FY14. "The increase we see in NAV per share is due to 1Q15e earnings and an actuarial gain on pension schemes partially offset by negative FX movement," says JPM.

"We continue to believe that Aviva is on track to deliver on its de-leveraging plans and we expect NAV to trend upwards, due to strong earnings generation."

JPM has an 'overweight' rating on the insurer, seeing stock as well placed in the UK life insurance market following the acquisition of Friends Life Group, which should help reduce leverage and improve growth prospects.

"We flag that our 1Q15e numbers don’t include FLG numbers as the acquisition took place in 2Q15. Aviva currently trades at 10.9x 2016e operating PE with 4.4% dividend yield."

The broker's price target is 622p, a healthy 18% increase on the stock's current price.

Economic news

The UK General Election takes place on Thursday. Opinion polls have the Conservatives and Labour neck and neck.

"It is difficult to say whether markets will be captivated by or maxed out by the final week of General Election coverage here in the UK," says Investec's Philip Shaw.

The analyst suggests what matters is seats rather than votes due to the "meteoric rise" of the SNP in Scotland, the larger presence of UKIP and the Greens, plus a possible shift in tactical voting.

"At current market prices a tie-up between the Conservatives and the Lib Dems would yield 311 seats (287 plus 24), while Labour and the SNP combined would have 316 (267 plus 49). Neither combination here would have the 326 seats necessary to command a majority (or 323 on the assumption that there will be 5 Sinn Fein MPs who do not take their seats)."

On these numbers it would take a third or even fourth party to enter into an agreement to avoid deadlock, adds Shaw.

Clearly, at this stage a conclusive result seems unlikely, which could open UK markets up to a period of volatility.

For analysis on how elections can affect share prices, click here.

Trading statements

BT Group, Randgold Resources, SABMiller, RSA Insurance Group, EasyJet, Trinity Mirror, Telecity Group, esure Group, Provident Financial, Kennedy Wilson Europe Real Estate, Aviva, Derwent London, Morrisons, IMI, Millennium & Copthorne Hotels.

AGM/EGM

Trinity Mirror, BrainJuicer Group, Rightmove, William Hill, X5 Retail Group, GlaxoSmithKline, Glencore, Gresham Computing.

Friday 8 May

BG Group will report Q1 numbers at end of the week.

Shell's acquisition of BG stole the headlines recently, so investors will be eager to see how the latter has performed.

"We remain surprised that BG still trades at an 11% discount to the merger terms, given limited regulatory and/or asset pre-emption risk, and expected Shell shareholder approval," says Investec.

The broker is sure full-year production will come in at the bottom of its expected 650-690k boe/d range. Pre-tax profit is set to fall by three-quarters to $489 million, giving earnings per share of 8 US cents.

Investec says: "One potential wild-card in the Q1 numbers is the group tax rate. For 2015, BG has guided to a wide range of 40-50%, depending on the oil price - a lower price should imply a higher tax rate. We have assumed 45% for Q1."

Investec has a 'hold' recommendation on the stock and 1,230p price target.

Economic news

The UK's headline goods trade deficit widened to £10.3 billion in February as the value of exports slumped due to weaker sales in the US.

Investec suspect that the impact of crippling strikes at west coast ports in the US may have been a factor and while some overhang from backlogs might persist, we should see an improved picture in March.

"Our forecast is for a narrower visible trade balance of £9.5 billion in next week’s figures," says Clarke.

Trading statements

BG Group, Rolls-Royce, Man Group, InterContinental Hotel Group, Pendragon.

AGM/EGM

Afarak Group, Starwood European Real Est Fin, Clarke (T), Source Markets, Rolls-Royce Group, John Laing Infrastructure Fund, RSA Insurance Group.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.