It’s been a bit of a bumpy ride for the FTSE 100 over the past few weeks, as the index is struggling to build on January’s early gains. But with blue chips like BP, AstraZeneca and Unilever all due to report earnings, will it pick up momentum? We take a look at this week’s upcoming earnings with commentary from CMC Markets’ chief market analyst, Michael Hewson.
BP – 7 February
Having seen how much money Shell made last year, the pressure is now on BP and the amount of tax the company pays on profits made in the UK. Back in August, BP set aside an extra $800m in respect of the increase in windfall taxes for 2023, and has set aside another $800m adjustment in this quarter’s numbers, which pushes the tax take from the North Sea to $2.5bn.
In November, the oil company recorded $8.15bn of underlying replacement cost profit, along with a pledge to buy back another $2.5bn of shares.
“While the headline number was impressive in terms of how close it came to matching Q2’s strong performance, the actual profits attributable to shareholders was zero due to an accounting adjustment which pushed the company into a quarterly loss of $2.16bn”, writes Hewson. This adjustment came from its gas and low carbon energy unit which once again outperformed with profits of $6.24bn, although this has since turned into a loss of $2.96bn due to volatility in forward gas markets and a repricing of forward gas prices.
BP’s oil production and operations division returned $5.21bn in profits. On top of the adjustment in early 2022, which saw BP exit its stake in Russian-owned oil company Rosneft due to the country’s invasion of Ukraine, this means BP has recorded a $13.29bn loss so far year to date.
Unilever – 9 February
It was a rough year for Unilever in 2022. Mid-January, shares tanked after it was reported that the company had made a £50bn bid for GSK’s consumer healthcare business, of which GSK owned a 68% stake along with Pfizer’s 32%. This deterred a large number of shareholders at the time, proving to be “the last straw – not so much that the bid was made, but that it was even being considered given the other problems Unilever had to deal with”, Hewson recalls.
After reaching lows in March, it became apparent that Unilever intended not to go ahead with the offer and the company’s performance started to look up. In Q3, the consumer goods giant reported a 10.6% rise in sales to €15.8bn, and this growth covered all of its divisions, although nutrition was by far the weakest, only rising by 4.8%, with all the others into the low 20%.
Hewson suggests that the company may be undervalued right now and points out that the upcoming change in management will be interesting to monitor, as current CEO Alan Jope is due to be replaced by Hein Schumacher, who will take over the position on 1 July. The company said it expects full year underlying sales growth to be above 8% in 2023.
AstraZeneca – 9 February
On another positive note, back in November, AstraZeneca raised its profit guidance for the year, as well as returning to profitability in Q3. Revenues for the quarter rose by 11% to $10.98bn, driving year-to-date revenues up to $33.14bn. “This is with the addition of the Alexion business also helping to drive improvement”, Hewson notes of AstraZeneca’s 2021 acquisition of Alexion Pharmaceuticals. Q3 profits came in at $1.67c per share with growth witnessed across all business areas.
Since then, AstraZeneca has managed to obtain approval from the EU for its Enhertu, Imfinzi and Lynparza combination drugs. The company has also secured two separate deals to enhance its offering in the chronic obstructive pulmonary disease (COPD) space.
Firstly, it locked in a $402m deal with C4X Discovery to develop treatments for various respiratory illnesses, and secondly, it signed a separate deal to acquire Neogene Therapeutics for $320m. Neogene is a biotech company which focuses on the discovery, development and manufacturing of T-cell receptor therapies to specifically target cancer cells.
At the beginning of the year, AstraZeneca shares hit record highs, but have since slipped back quite sharply on the back of profit taking. Many analysts will be wondering if the company can regain its losses with the impact of its new business ventures.