The week ahead: Rio Tinto, BHP Billiton, Vodafone

A couple of heavyweight miners report quarterly updates in the coming seven days, while Moneysupermarket and Vodafone also have numbers to watch.

Monday 17 July

Miner Rio Tinto kicks the week off with a second-quarter update. Having slipped to a six-month low in early May, Rio has climbed by almost one-fifth since. Last month it completed the disposal of Coal & Allied Industries, its Australian thermal coal assets, to Yancoal for $2.69 billion (£2 billion).

For the full-year 2017, broker Investec forecasts pre-tax profit of $12.35 billion on revenues of $42.5 billion. That gives earnings per share (EPS) of 463.8 US cents, for a forecast price/earnings (PE) ratio of 7.5 times.

Rio is Investec's longstanding preferred major as it has the most robust balance sheet, as well as the best growth profile and solid cashflows. "Its exposure to aluminium offers upside as the iron ore price declines," says analyst Hunter Hillcoat.

Dividend upside is key, too, given its 70% payout last year. This year's payout range is 40-60% and Investec's forecast is at the top end, giving a yield of 6%. Its target price of 4,128p implies further upside to come.

Trading Statements

Etalon, Rio Tinto

AGM/EGM

Renewi

Tuesday 18 July

Peer BHP Billiton is another miner on a smooth uptrend. Like Rio, it hit a multi-month low in May, but is up 18% since. It's currently under pressure from activist investor Elliott Management which, along with other shareholders, is pressuring the firm to divest all or part of its petroleum business.

Tuesday's second-quarter report will be the first time we hear from the firm since new chairman Ken MacKenzie was appointed a month ago. A lot rests on the former chief executive of Australian packaging company Amcor's shoulders.

A restart of BHP's Samarco asset in Brazil this year is unlikely, says Investec, due to permitting uncertainties and capital restructuring requirements.

Investec sees a 7-10% reduction in forecast earnings over full-year 2018-2019 due to the weakening oil price. As a result, its target price slips by 6% to 1,395p.

"Notwithstanding weaker earnings expectations, we still see BHP capable of reducing its net debt position to sub US$15 billion by the end of FY18E (June year-end) while still paying out a 6-7% yield," says Hillcoat.

Economic news

UK inflation data for June is released Tuesday, with currency traders looking for clues on the next moves from the Bank of England, says Panmure Gordon's chief economist Simon French.

French reckons the stabilisation in sterling and commodity prices since mid-2016, alongside the absence of a significant second order inflation spiral, means inflation will peak in the second half of 2017 and return to the BoE's 2% target around the turn of the year.

"In our view, this will leave the MPC open to await further Brexit-related details before changing UK monetary policy."

Trading Statements

Synectics, NCC Group, Castleton Technology, IG Group, Ideagen, BHP Billiton

AGM/EGM

Summit Therapeutics, Wizz Air, Bloomsbury Publishing, British Land

Wednesday 19 July

Trading Statements

Drax Group, Wizz Air, Evraz, RPC, Severn Trent, TalkTalk Telecom

AGM/EGM

Renold, Peoples Operator, Weiss Korea Opportunity Fund, Biffa, B.P. Marsh & Partners

Thursday 20 July

Moneysupermarket, which reported a first-quarter in line with expectations led by insurance (+23%) and dragged down by money (-2%), splits opinion.

UBS expects group sales for the first half to be up 11% year-on-year, with gross and operating margins both down at 73% and 31% respectively.

Peel Hunt thinks insurance should have been strong again, with money flat. Energy is likely to disappoint, while travel prospers, says analyst Malcom Morgan.

Morgan is positive on the stock, with a 'buy' rating and 370p target price. That's only 3% upside for a share that's up 22% year-to-date already.

Both brokers have EPS estimates for 2017 of just under 17p, putting the firm on a rather full-looking PE of 21. While acknowledging the structural growth story, UBS's Chris Grundberg says he reckons "much of this growth is already priced in". Therefore, he remains 'neutral' with a 343p target.

Trading statements

Nichols, Unilever, Moneysupermarket.com, Howden Joinery, Kcell, Sports Direct International, SSE, Premier Foods, Anglo American, easyJet

AGM/EGM

Royal Mail, Harbourvest Global Private Equity, Big Yellow, Ashmore Global Opportunities

Friday 21 July

Back in 2013, telecoms giant Vodafone put Project Spring, an investment programme to improve quality for European and emerging market customers, into action. Four years on, and the company is beginning to reap the rewards.

It's managed to arrest years of declines to put in a number of quarters' worth of solid operating results up to now, with organic services revenues and cash profits firmly in positive territory.

A first-quarter update from Vodafone ends the corporate calendar for the week. Barclays analyst Maurice Patrick reckons the company is set to deliver 4-8% organic growth in FY18. However, "we see this moderating in FY19e as tailwinds are gradually replaced with headwinds, limiting scope for positive earnings momentum", he adds.

Patrick says the stock trades at a premium to peers on most multiples. Therefore, his price target of 225p gives limited upside from a current 219p. They're more positive elsewhere, with UBS analysts tipping the shares up to 270p earlier this week.

Trading statement

Acacia Mining, Capital & Counties Properties, Vodafone, Euromoney Institutional Investor, Close Brothers

AGM/EGM

KCOM, Homeserve, Lekoil

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.