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The week ahead: Marks & Spencer, Kingfisher and Cranswick
By David Brenchley | Fri, 19th May 2017 - 16:52
It's a big week ahead for the retailers, as Marks & Spencer and Kingfisher update the market, while Cranswick also reports.
Monday 22 May
TBC Bank, Cerillion, McKay Securities
Gamma Communications, Brady, Path Investments
Tuesday 23 May
Cranswick's (CWK) share price graph looks like a lesson in building shareholder value over a long timeframe. The stock has grown almost sixfold over the past 15 years – and it's nearly been plain sailing over the period, with just a few slight blips along the way.
It's up 19% since the beginning of the year and Peel Hunt thinks full-year results published Tuesday will show "another good year". This despite having to cope with margin pressure from rising pig prices.
Conversely, that's been offset by strong volume growth and good progress in poultry. However, analyst Charles Hall keeps his 'hold' recommendation and £20.50 target price, suggesting downside of 26.6%.
Renew Holdings, UDG Healthcare, Paragon, Topps Tiles, Greencore, Hibernia REIT, Shaftesbury, Homeserve, Assura Group, De La Rue, Electrocomponents, Cranswick, Big Yellow, Severn Trent, AVEVA
Epwin Group, Easyhotel, Medaphor Group, InterQuest, Golden Prospect Precious Metals, EG Solutions, Marshall Motor Holdings, Forterra, Metminco, Riverstone Energy, Time Out, Zoltav Resources, Datang International Power Generation, Royal Dutch Shell, Inch Kenneth Kajang Rubber, Princess Private Equity Holdings
Wednesday 24 May
It's put in some impressive share price growth so far in 2017, up 8.8% year-to-date. However, Investec analyst Kate Calvert reckons that performance from retailer Marks & Spencer (MKS) is "unjustified" for a number of reasons.
Profit is struggling and Calvert expects the headline pre-tax number to come in 12% down year-on-year at £603 million when the chain reports its full-year results Wednesday. Dividends per share are expected to be flat.
Foreign exchange is still an issue and will be a "material headwind" for the foreseeable future, while benefits of its portfolio restructure set out in CEO Steve Rowe's five-year strategic plan, which is still very much in its infancy, is very back-ended.
Calvert doesn't see the shares as particularly cheap, trading on a forecast price/earnings (PE) ratio of 12.6 times for 2017, falling slightly to 12.4 for 2018. Calvert has a 'sell' recommendation on the stock with a target price of 290p – suggesting potential downside of a quarter.
"This is in line with the 10-year average forward PE of 12.4 times, which seems anomalous given M&S's market position and growth prospects have deteriorated," she added. "We expect the shares to underperform until there is clarity on the long-term sustainable margin."
Fellow retailer Kingfisher (KGF) is a similar case in point, though up a more modest 4.8% year-to-date. It's performed strongly this week, rising almost 6% since open on Tuesday.
Still, it's another company with a valuation that does not look compelling enough to Calvert. It trades on a forecast 2017 PE of 15.6 times and yields just 3%. She says there are "better opportunities elsewhere in the sector", keeping her 268p target price.
The firm's first-quarter trading update is expected to be headlined by a strong performance by Screwfix and stable B&Q, but investors will be more interested in the likely further loss of market share in France, which accounts for almost half of operating profit.
Frutarom Industries, Britvic, Mediclinic International, Vedanta Resources, Pennon Group, Schroder Real Estate IT, Marks & Spencer, Lombard Risk Management, Great Portland Estates, Babcock International, Hogg Robinson, Tungsten Corporation, Dixons Carphone, Kingfisher
Sportech, Sherborne Investors, Providence Resources, Ibstock, Crossrider, Glencore, Camper & Nicholson Marina Investments
Thursday 25 May
Urban & Civic, Schroder Real Estate Investment Trust, Daily Mail and General Trust, Caledonia Investments, Tate & Lyle, United Utilities, Wizz Air Holdings, Halfords, Paypoint, Pets at Home, Intermediate Capital Group, Helical Bar, Inchcape, Card Factory
Amyrt Pharma, Card Factory, Keyword Studios, Air China, Itaconix, Yu Group Vectura, Portmeirion, Concurrent Technologies, Gocompare.com, Kenmare Resources, Gama Aviation, Legal & General, Nahl Group, Cambridge Cognition Holdings, Nasstar
Friday 26 May
IXICO, Volvere, Spectris, Intertek, The Restaurant Group
Circassa Pharmaceuticals, The Restaurant Group, Spectris
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.