October will see only a small number of FTSE 100 companies posting updates. But, among the few, we’ll see a good representation of the various Footsie sectors. Here are five I’ll be paying close attention to as possibly buys.
We have first-half results coming from Tesco (LSE: TSCO) on 6 October. The figures will cover the period to the end of August, so well into post-lockdown conditions. I’ll be wanting to see how home deliveries are holding up now that shoppers have more freedoms to go buy their groceries, however they please.
The first quarter, to May, showed decent growth. Like-for-like retail sales grew by 8.1% over two years, with UK sales up 9.3%. As Tesco said at the time, the two-year UK growth “includes retained benefit of customers consuming more meals at home vs. pre-Covid-19.” Growth did peak in March before slowing as restrictions eased.
I really want to see how the trend has continued now that eating out is becoming more acceptable. I don’t expect we’ll be back to full pre-pandemic levels of social activities for some time yet. But I do wonder if slowing growth might put pressure on the Tesco share price in the coming months.
Tesco shares have been picking up since July. It’ll be interesting to see what happens to them on the day of the results. I suspect it might prove indicative of the rest of the year.
Best FTSE 100 bank?
Barclays (LSE: BARC) is arguably the strongest of the FTSE 100 banks. The company’s due to bring us a Q3 update on 21 October, and it’ll be edging into the post-coronavirus economic environment. We’ve already been seeing rising inflation, with August’s year-on-year figure reaching 3.2%.
And though we saw a bit of an economic boom as things started to open up, that’s gone off the boil a little. Add soaring energy prices and growing supply chain problems into the mix, and that all makes for potentially interesting economic times. What’s this got to do with Barclays? I want to see the take on its outlook for the rest of the year, and what potential impact it might see from the changes in the economy on the bottom line.
Thankfully, Barclays is more immune to UK economic difficulties than a bank like Lloyds Banking Group with its singular UK focus. And I wonder if Barclays’ international outlook and its investment banking arm might give it an the edge in the next year or two.
Barclays shares do command one of the biggest P/E multiples in the FTSE 100 financial sector mind. Could that put some pressure on the share price over the winter months? If the price falls, I might add Barclays to my portfolio.
Also on 21 October, we’re due a Q3 trading statement from Unilever (LSE: ULVR). Its share price outstripped the FTSE 100 in the early days of the Covid-19 pandemic. Cleaning products, especially disinfectants, were in big demand. And the company that makes Dettol was in the money. But the boom was short-lived. So far in 2021, Unilever shares have fallen 8%, and over the past two years they’re down 16%.
One reason is that, as pandemic panic recedes, those boosted sales are going to fall off again. The extra demand for cleaning stuff also hit the supply chain, pushing up prices of the things Unilever needs to make its products.
Inflationary pressures will eventually feed through to consumer price rises. But in the meantime, Unilever could be facing a margin squeeze. In fact, at the interim stage, the company’s operating margin had slipped by one percentage point.
For me, the Q3 update will be all about sales growth. If we see that slowing, especially in the developed world, the share price could carry on down. I’m hoping that happens, as it might make Unilever shares an unmissable buy for me.
FTSE 100 pharma weakness
There’s a Q3 update due from GlaxoSmithKline (LSE: GSK) on 27 October. This is a FTSE 100 pharmaceuticals company that hasn’t been dominated by Covid research, though it has done some work in the field. That probably shows in the share price, which has dropped 15% over the past two years.
By comparison, the AstraZeneca share price has risen 21% over the same period. And over five years, the contrast is starker. GSK shares are down 14%, with AZN up 68%.
But GlaxoSmithKline has still been posting positive results. At the halfway stage this year, Q2 sales were up 6% at actual exchange rates. The firm’s specialist areas of Respiratory, Immuno-Inflammation treatments, and Oncology gained especially strongly. Vaccines sales also showed a big leap.
Where the figures perhaps failed was in reported EPS, which fell 39%. But in adjusted terms, the company reckoned on a 46% gain. There’s another weakness in the dividend, which hasn’t been lifted for years. And it remains only thinly covered by earnings. Still, I’m convinced that, on P/E multiples of only around 12-13, GlaxoSmithKline shares are cheap.
Reliable oil stock?
Finally, we’ve a third-quarter update from Royal Dutch Shell (LSE: RDSB). Energy firms are in the news, due to the ongoing gas price crisis. And Shell shares reached a six-month high during the week, so are oil stocks on the way back?
With the oil and gas sector having taken a hit in these new ‘Net Zero’ days, Shell shares are still down 35% over two years. Shell is selling off some of its assets, and the company revealed the latest update on that strategy on 20 September. The company’s selling its Permian business to ConocoPhillips for $9.5bn in cash.
That seems very likely to be behind the recent price jump, at least in part. What makes it especially appealing is that Shell said some of the cash “will be used to fund $7 billion in additional shareholder distributions.”
While, as a FTSE 100 income investor, I’d welcome that there’s the more important matter of dividends. After 2020’s big cut, the yield isn’t much above 3% on the current Shell share price. Would I buy Shell today? I’m seeing a lot of uncertainty in the sector, so I’ll reserve judgment, at least until Q3 time.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays, GlaxoSmithKline, Lloyds Banking Group, Tesco, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.