The Week Ahead 4 - 20th to 24th May 2013

Markets continue to go up, dips keep on being bought.

A selection of companies reporting this week.

Tuesday, 21st May

Interim - Greencore Group updates the market and has been recovering well after falling heavily back in February due to the horsemeat scandal. That blip in the share price when it fell to around 80p has been more than made up as it now stands at around 118p.

Finals -  Telecom Plus and Vodafone.

We could see two contrasting reports from these two telecoms companies. Telecom Plus just seems to keep on going up and up on the back of good results, it has been a good few years since it has had any blip in performance. As a FTSE250 growth company it will be a surprise if they come up with anything unexpected.

On the other hand Vodafone might be about to make an announcement about the size of likely future dividends if press speculation is anything to go by. There is also the little matter of their Verizon Wireless holding which continues to help keep the price up in recent months on speculation of a buy out, but remains an ace card for the company if ever a deal is done.

Business elsewhere is not so hot.

Meanwhile, Vodafone is expected to reveal annual results that show the impact of the continuing Eurozone crisis and European regulation on its core business. 

Vodafone will report a drop in sales in the wake of heightened competition, analysts predict. 

They have also projected that the company will show its growing reliance on Verizon Wireless for profits. Last week, Vodafone announced that will receive more than £2.0bn from its stake in the US join venture with Verizon. 

Verizon Wireless, which has been at the centre of takeover rumours by Verizon for months, is paying a total of $7.0bn to shareholders at the end of June. 

Vodafone, which owns 45% in VZW, will receive $3.2bn, while Verizon will pocket the rest. 

http://www.digitallook.com/news/20907957/Tuesday_preview_M_S_and_Vodafone_report.html?username=&ac=

Final - Marks and Spencer. Not expected to be that good which given the recent run up in the share price since mid March makes you wonder what is going on. The easy answer is that we are in a bull market which takes everything up with it, but the results this week could see a sell off if profits are down as many expect. Better to have ridden the wave up with this one perhaps.

Analysts forecast M&S will report its lowest annual profit in four years, as the retailer’s struggling general merchandise division continues to offset a rise in food sales. 

The firm’s clothing business has posted seven consecutive quarters of underlying sales declines, prompting an overhaul of the division to draw in more customers. 

M&S is anticipated to post a pre-tax profit of £640 to £670m with a consensus of £658m, according to a company poll reported by Reuters. The group made a £706m profit the year earlier. 

http://www.digitallook.com/news/20907957/Tuesday_preview_M_S_and_Vodafone_report.html?username=&ac=

Thursday, 23rd May

Final - Qinetiq. Will be interesting to see what if anything they report on cutbacks or delayed contracts with the US as budget spending goes on hold. Share price has dipped and struggled recently on fears that spending on defense will be cut going forward.

Greencore Group joins the horse meat controversy

Despite all of the media talk surrounding horse meat being found in the products of many beef ready meal products, so far it has had little effect on the share price of those selling the products. Tesco seems to have survived the initial fallout from the scandal, although it would seem the issue is far wider than first thought and could continue for some time as investigations get under way. Today, news emerged that Greencore Group is the latest to be hit and as a supplier it has arguably more to lose.

Greencore shares fell the most in more than 14 years today, dropping as much as 22 percent to 79.5 pence. The drop reduced the company’s market value by as much as 89 million pounds ($138 million) to 313 million pounds.

Separately, Tesco’s Clarke said in a blog on the grocer’s website that he has ordered a review of the company’s “approach to the supply chain.” Tesco will set a new benchmark for the testing of products, he said, adding that new processes won’t mean more expensive food for customers.

Shares of Tesco, Sainsbury and Morrison fell today, though “that may be due to the noise surrounding the horsemeat issue” rather than “many concerns that it’s going to really hurt long- term business,” according to Andrew Gwynn, a food retail analyst at Exane BNP Paribas in London.

http://www.bloomberg.com/news/2013-02-15/u-k-food-industry-chiefs-determined-to-restore-consumer-trust.html

I've been following Greencore for a while, through its recent bullish upward trend, and noted that Naked Trader Robbie Burns gave it a mention yesterday (he's bought it before and done well out of it), however I suspect that he was not up to date with events when he indicated he would buy big time if it got down to around 90p. It currently stands a little under that having fallen over 22% at one stage today.

The problem with this issue, other than the obvious health concerns, is that the suppliers of the products may well find that regardless of their previous reputation, buyers will simply cut them off because they need to be seen to be doing something and distancing themselves from suppliers of the "horse meat" products.

Greencore may well be a good company, but the share price might be more volatile until the whole issue is sorted out and this is one falling knife where you need to be really confident that the underlying bad news won't keep coming back. No one knows right now where it will end.