British Airways and Iberia parent International Consolidated Airlines Group (LON:IAG) has remained among this month’s UK share prices to watch, trading little changed in a sea of red, with the broader market suffering amid the ongoing trade tensions between the US and China. Tomorrow meanwhile is set to provide more excitement on the corporate front, amid updates from blue-chip engine maker Rolls-Royce Holdings (LON:RR) and Holiday Inn and Crowne Plaza owner InterContinental Hotels Group (LON:IHG).
IAG outperforms in sea of red
IAG is one of the few stocks trading in positive territory, partly benefitting as a proposed strike at London’s Heathrow airport was delayed. Proactive Investors further quoted JPMorgan as commenting that the stock was still its top pick in the sector after Friday’s update from the airline. The British Airways owned said then that its profit had climbed in the second quarter of the year. The group’s fuel unit costs for the quarter, however, rose.
Hargreaves Lansdown’s analyst George Salmon commented in a note on Friday that “the shares have been weighed down by the potential uncertainties ahead, which means they trade at 1.4 times book value, a more conservative way of valuing intensely cyclical and asset-heavy businesses like airlines”.
“The PE ratio is just four times expected earnings. Both measures are well below the longer-term average,” the analyst continued, adding that this “could look attractive to investors willing to stomach the macro risks”. IAG’s share price is about 0.08 percent lower in early afternoon trade, as compared with about a 2.3-percent slump in the benchmark FTSE 100 index.
HSBC Holdings (LON:HSBA) is also among today’s UK share prices to watch, trading in the red, but outperforming the broader market selloff, as it updated investors on its interim performance, positing a rise in revenue and profits and announcing a share buyback. The Asia-focused lender, however, cautioned that it might not achieve its six-percent return on average tangible equity target in the US by next year amid prospects for falling interest rates in the US, geopolitical worries as well as Britain’s departure from the EU.
“With the retail bank doing well when others are struggling, and the outlook for the investment bank set to improve, the change of leadership could be particularly confusing,” Nicholas Hyett, an equity analyst at Hargreaves Lansdown, commented, as quoted by Proactive Investors, adding, however, that “the very cautious outlook statement might provide the explanation”.
“With macroeconomic and geopolitical headwinds mounting, the HSBC board could be looking for more radical reform,” he pointed out. HSBC’s shares are down by about 1.8 percent this Monday.
Marks & Spencer Group (LON:MKS) and Ocado (LON:OCDO) are underperforming the broader market as they announced the completion of their 50-50 joint venture. Shares in the high street retailer are changing hands about 4.6 percent in the red, while the online grocer is about three percent worse off.
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Tomorrow’s UK share prices to watch
The ongoing earnings season is set to continue with Rolls-Royce, which said earlier this year that it was confident in its underlying operating profit and free cash flow guidance of £700 million +/- £100 million. The Guardian meanwhile quoted David Perry, an analyst at JP Morgan Cazenove, as commenting that there are problems ahead because the company has underestimated the cost of developing electric engines in response to pressure on the industry over emissions. The newspaper further reports that for the first half of 2019, analysts expect the underlying pre-tax profit, which excludes Trent 1000 costs and other one-offs, to have climbed to £95 million from £81million.
InterContinental Hotels will also be among tomorrow’s UK share prices to watch with its interims to come after a recent rise in the shares of the Holiday Inn and Crowne Plaza owner. Proactive Investors reports that analysts at UBS had warned last month that while the stock was benefiting from the weak pound, the premium to the market was “pricing in too much future growth” amid slowing revpar trends which are expected to worsen.
The newswire also quoted Barclays as suggesting that InterContinental’s valuation was a bit toppy, seeming to ignore “the significant downside risks associated with a macro slowdown,” with hotels being a highly cyclical industry meaning that any decline in revenue per available room tends to be significant. Proactive Investors notes that the consensus forecast is for revenues of $1 billion and underlying earnings (EBITA) of $410 million.
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