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The week ahead...
By Patrick Smith | Fri, 14th December 2012 - 17:04
As stock exchanges ease towards the Christmas break there will be little major corporate news, but economic releases may keep investors on their toes.
Monday 17 December
Once again Monday will prove a quiet one, with no big economic or corporate news in the diary.
PROACTIS Holdings, Churchill Mining.
Tuesday 18 December
Keller Group (KLR) will release a pre-close update on Tuesday.
Recent news: Keller's November interim management statement indicated strong trading in the four months to October. Progress was being driven by its North American operations which was benefiting from "gradual improvement in construction markets". Asia was also trading well, Australia is ahead of last year and emerging markets were resilient.
Analysts' expectations: Analysts at Panmure Gordon comment: "While many of its end markets remain difficult, early action on costs and improving efficiency is working. We expect confirmation of a good year with the pre-close update. We also upgrade our forecasts and target price to reflect this improvement.
"Following the November interim management statement we belatedly update our forecasts. Our new 2012 full-year pre-tax profit is £40 million, earnings per share 43.7p."
Valuation: The stock trades on a full-year 2012 price/earnings ratio (P/E) of 14.6 times.
The consumer prices index inflation rate will be released on Tuesday. Inflation began its ascent in October, rising from a recent low of 2.2% in September to 2.7%.
Investec economist Victoria Clarke says: "In broad terms we view this as marking the start of a longer climb, with Consumer Price Index (CPI) inflation on our forecasts rising to a peak of just above 3.5% by mid-2013 as upward pressures from higher food prices and utility bill hikes feed in. However, for the immediate November release we expect CPI inflation to moderate.
"That view is based on our expectation that only one of the energy company price increases, SSE's (SSE), will be caught in the latest survey period, leaving the hikes by the other major utility companies to follow in the months ahead."
Datang Intl Power Generation, dotDigital Group, Park Group.
Wednesday 19 December
The minutes from December's meeting of the Monetary Policy Committee (MPC) of the Bank of England will be released on Wednesday.
While the MPC recognised that there was a case for providing the economy with more stimulus in November, only David Miles backed an increase in asset purchases beyond the current stock of £375 billion. Most subsequent domestic economic news has been weaker, with a greater chance of a decline in GDP in the third quarter and more talk over a possible triple-dip recession.
"This raises the chances of more quantitative easing at some stage, although we note that inflation is likely to rise beyond 3%," says Investec economist Philip Shaw.
"Though we expect the committee to have given more consideration to another easing, we expect that the vote remained 8-1. Recently there has been some talk that the government could replace the MPC's inflation target with a nominal GDP goal."
Noble Investments, Sportingbet, JSC Acron, Axa Property.
Thursday 20 December
Thursday will see the Office of National Statistics retail sales figures released. On the corporate front, Carnival (CCL) will release its full-year results.
Recent news: Carnival's third-quarter earnings per share of $1.53 (95p) was 6% ahead of the mid-point of its June guidance and 7% ahead of consensus expectations. Net ticket revenue declined 7.3% but net on-board revenue yields increased 2.7%. Net cruise costs excluding fuel declined 3% and fuel costs decreased almost 4%.
The dividend was maintained at $0.25 and the group repurchased two million shares at a cost of $67 million.
Analysts' expectations: Panmure Gordon analysts comment: "Our 2012 earnings per share forecast of $1.87 is in line with consensus expectations and compares to the company guidance mid-point of $1.85. Our 2013 earnings per share forecast of $1.97 is 19% below consensus estimates of $2.44.
"With the 'fiscal cliff' looming in its hitherto resilient home US market, signs of other economies slowing rapidly and the impact of Costa Concordia on the new to cruise market more significant than management expected, we think the increase in net revenue yield in 2013 will be just 2%."
Valuation: The stock trades on a 2013 P/E ratio of 16.4 times consensus earnings, or 19.9 times on Panmure Gordon's below-consensus forecast.
The British Retail Consortium's (BRC) retail sales monitor showed sales recovering in November, with like-for-like sales values standing 0.4% up on the year after falling 0.1% in October, albeit with November's report potentially flattered by the late half-term school holiday. What will data for the same period from the Office of National statistics show?
"It is possible that the better November BRC report was boosted by a rebound in consumer confidence, with some proceeds of that flowing through to the high street helping to get the pre-Christmas spending spree started," comments Clarke at Investec.
"We expect to see these same drivers carry through to the Office of National Statistics measure of sales volumes for November, with volumes perhaps also getting a lift from pre-Christmas discounting through the month as consumers, according to the BRC, sought out lower price gifts.
"As such, we expect to see headline sales volumes stand 0.3% up on the month, after October's 0.8% drop, leaving volumes 1.4% up on the year."
Mothercare, SimiGon, Air China.
Friday 21 December
Friday will see the second revision of third-quarter GDP. The first revision saw the figure left unchanged, showing a 1.0% quarterly increase.
Clarke says: "In reality, the quarterly outturn was on the cusp of a downgrade to +0.9%, leaving it vulnerable to a downward revision at the next estimate, due next week. Since the first revision we have seen estimates of industrial output over the third quarter updated; the sector is now seen as having expanded by 0.7% rather than the 0.9% rise built in previously.
"We judge that this downgrade will be enough to tip the estimate of output and force a downgrade to 0.9% this time around."