Quarterly earnings season is about to quick start again, with key companies across the globe providing insights into how certain sectors are performing.
Investors will see updates from the mining world, with our focus staying on Anglo American, while Burberry will provide a gauge on the luxury goods industry after a slowdown in demand from China hit sales.
In Asia, semiconductor colossus TSMC is expected to come in above expectations, amid the artificial intelligence craze and ongoing demand for chips.
Across the pond, Netflix will try to convince investors it is as popular as ever, with revenue and earnings increases in the cards.
Here's what to look out for:
Anglo American (AAL.L) — Reports trading update on Thursday 18 July
Anglo-American was the target of a takeover bid by rival BHP (BHP.L) and it has announced its own restructuring plans in the aftermath of the failed mining mega-merger. So, investors will be sure to put the company’s first-half figures under the microscope.
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Anglo is aiming to sell or separate its coal, platinum, nickel and diamond mining operations. What’s left will be a streamlined business that contains the company’s prized copper mines (BHP’s main target), its premium iron ore business and the Woodsmith fertiliser project in North Yorkshire.
Anglo is heavily exposed to copper and the industrial metal’s price is just starting to pull back after a strong run.
For the actual earnings report, AJ Bell tells investors to look for any hints on production costs.
“The details on the balance sheet, cash flow and profit and loss account will come with the actual first-half numbers, although do watch out for any changes in output forecasts and targets, as well as comments on cost of production and capital investment, since all of those will directly influence profits and cash flow,” Russ Mould, investment director, Danni Hewson, head of financial analysis, and Dan Coatsworth, investment analyst, all of AJ Bell, wrote.
“In the unlikely event that [CEO Duncan] Wanblad discusses annual profits or the dividend ahead of the first-half results in the following week, the current consensus forecast is for earnings before interest, taxes, depreciation and amortisation (EBITDA) to come in broadly flat in 2024, at $9.7bn, while a cut in the dividend to $0.83 per share from $0.96 is expected.”
The share price is still around 20% higher than it was before BHP’s interest became public on 25 April.
Burberry (BRBY.L) — Reports trading update on Friday 19 July
A model presents a creation during a catwalk presentation for British fashion house Burberry's Spring/Summer 2024 collection, at London Fashion Week in London. ·HENRY NICHOLLS via Getty Images
Trenchcoat-maker Burberry is not expected to impress investors next week, with retail same-store sales estimated to come in 16% lower in its fiscal first quarter, a slump made even starker by 18% growth in the same period last year.
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UBS expects the focus to be on Chinese sales “as well as any signs of stabilisation/improvement among other consumer groups (i.e. Americans and Europeans)”.
JP Morgan has warned that the ‘re-acceleration’ of the luxury sector could be slower than anticipated, leading to downside risk for luxury stocks.
“The troubled times continue for Burberry, which has engaged in a round of sweeping job cuts in order to reduce costs. Sales fell 4% for the year to the end of March, and it looks like demand in the key market of China will continue to weaken,” IG said.
Shares in Burberry are down by more than half over the past year, to take them back to levels last seen in 2010.
Compared to its five-year average PE of 17 times earnings, Burberry now looks cheap at 11 times earnings. IG analysts warned that while the dividend yield is a solid 7%, investors should be aware that the payout may be cut should the group’s sales outlook continue to worsen.
For the year to March 2025, analysts currently expect sales to drop 6% to £2.8bn.
TSMC (TSM) — Reports quarterly update on Thursday 18 July
The AI craze has pushed Nvidia as other Magnificent 7 stocks to new heights but there is no AI without chips. And they are (almost) all being manufactured in Taiwan by TSMC.
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Taiwan Semiconductor’s key tech giant clients such as Nvidia and Apple have almost nowhere else to turn for next-gen chip manufacturing.
TSMC’s anticipated order for next-generation two-nanometer technology will be a key catalyst in the second half, according to Citi analysts, who see AI and sovereign investment adding upside to the company’s 2030 revenue target of €44bn to €60bn, Bloomberg reported.
The Taiwan-based silicon giant disclosed in its latest monthly revenue report that net income for June was NT$207.87bn billion ($6.4bn), an increase of 32.9% compared with a year ago.
Figures for May and April were NT$229.62bn ($7.04bn/) and NT$236.02bnn (£5.41bn/$7.24bn), both up on the same period last year. TSMC is projected to grow sales by roughly 21% in FY24 and FY25.
“Taiwan Semiconductor is one of the most straightforward buy-and-hold options in all of technology alongside the likes of Nvidia and others because chips are the lifeblood of the economy and TSM is the semiconductor manufacturer,” according to Zachs Research.
“Any near-term pullback down to some of Taiwan Semiconductor stock’s key shorter-dated or longer-dated moving averages could mark a screaming buy signal for long-term investors,” Zachs’ analysts added.
Netflix (NFLX) — Reports second-quarter results on Thursday 18 July
Synonymous with streaming services, Netflix will show investors how it is fighting to stay on top and prove it can keep attracting new subscribers amid fierce competition.
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Netflix expects its revenue to increase 16% year-over-year (YoY) to $9.49bn (£7.3bn) in the second quarter of 2024 but analysts predict Netflix's Q2 revenue will be slightly higher at $9.53bn. In the first quarter of 2024, Netflix's revenue was $9.37bn, up 15% from the prior year.
Morningstar equity analyst Matthew Dolphin provides a guide to what investors should focus on. “We're most interested in details on Netflix's ad-supported service, especially regarding how the firm is coming along in monetising it, as well as an update on the size of the ad-supported user base," he said.
“Generally, we'll be looking to see if subscriber growth is slowing substantially after Netflix passed the tailwind from its password-sharing crackdown, and whether it will stop regularly disclosing this metric in 2025.
“We will also be interested in international sales and subscriber growth. This will be a key driver for the company when/if domestic growth slows,” he wrote.
As AJ Bell writes, Netflix no longer gives specific guidance for quarterly net subscriber additions, although co-chief executive officers Greg Peters and Ted Sarandos did suggest at the first-quarter stage that net adds would come in below the first quarter’s bumper 9.3 million (the best first quarter since the pandemic and lockdowns in Q1 2020). That took the total subscriber base to a fraction under 270 million, up from 233 million in Q1 2023 and 167 million before the pandemic swept the globe.
Matt Britzman, equity analyst at Hargreaves Lansdown, is also keen to look at subscribers: “One thing to watch for is the number of new paid subscribers in the second quarter. Management has already warned it’ll be lower quarter-on-quarter due to the normal seasonal demand patterns. These have been a little skewed in recent years, but looking at 2018/19 numbers, net new subscribers were down 34% and 70% respectively across the first and second quarters – so don’t be surprised to see something in that range.
“Best in class content is one of the reasons Netflix has been able to consistently deliver sector leading churn rates. It’s expensive, but Netflix remains the only company set to increase content spend, giving a comparative advantage versus legacy media and its challengers.”
