Market analysts at AJ Bell expect these blue-chip UK stocks to make headlines this week.
Unilever
Household goods giant Unilever (LSE:ULVR) will release first-quarter trading numbers on Thursday, 27 April. And AJ Bell’s analysts have identified three areas they believe they will be judged against.
These are:
- Signs that underlying growth for the year will hit the upper end of the long-term target range of 3% to 5%
- Indications that high price growth is likely in the first half of 2023
- Hints that the full-year underlying operating margin will rise modestly from 16.1% in 2022
Unilever’s share price has risen an impressive 26% during the past 12 months. It’s a rise that Hewson and Mould attribute to
A strong trading performance in Q3 and Q4 2022 (thanks to the pricing power generated by its brands), a group-wide restructuring plan, an ongoing share buyback programme and potentially also news that current non-executive director Hein Schumacher will take over as chief executive officer from the retiring Alan Jope in July.
The exceptional brand power of Unilever’s products allows the business to grow revenues and profits even when consumer spending weakens. The desirability of goods like Dove soap and Magnum ice cream allows it to hike prices without it suffering a meltdown in demand.
This allowed the FTSE 100 firm to post more impressive results in the fourth quarter of 2022. Turnover grew by a better-than-expected 9.2% as price increases boosted the top line. Price growth of 13.3% in the period more than offset a 3.6% volume decline.
However, investors will keep a close eye on first-quarter margins as cost inflation bites. Unilever’s underlying operating margin dropped 230 basis points last year.
NatWest Group
NatWest Group’s (LSE:NWG) first-quarter update on Friday, 28 April is also tipped to grab the market’s attention.
First off, AJ Bell’s market experts say that “shareholders will look for any signs of fall-out from the bank runs in the US, which ultimately claimed Silicon Valley Bank, and had the knock-on effect of driving Switzerland’s Credit Suisse into the arms of bitter rival UBS.”
Mould and Hewson aren’t expecting to see any similar signs of distress. This is because UK banks are more tightly regulated than those across the Atlantic and less exposed to niche areas, they say.
Instead, investors will be focused on four key things at NatWest, they reckon. These are:
- Signs of deposit flight (or deposit increases if customers are moving from smaller banks)
- Slowing loan growth
- Pressure on net interest margins (NIM)
- An increase in loan impairments (due to the slowing UK economy or US banking system malaise)
NatWest’s NIM — which measures the difference between the interest it offer savers and what it charges borrowers — rose 3.2% in the final quarter of 2022. This was up from 2.99% in the prior quarter and 2.3% a year earlier.
Further Bank of England interest rate hikes mean the reading could have kept rising strongly in quarter one. The benchmark has risen half a percentage point since the start of the year to 4%. And it looks set to keep rising amid persistently high inflation.
However, any good news here could be overshadowed by news of weak loan growth and rising bad loans. Impairments clocked in at £144m between October and December.
