Vodafone and Imperial Brands both looking for a spark on Tuesday

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Tuesday sees results from a pair of FTSE 100 giants that have been disappointing shares for a number of years: Vodafone and Imperial Brands.

In the market’s eye, Vodafone Group PLC (LON:VOD) is far from the sexy stock it was when it was sitting on a pile of Verizon Wireless shares, with a discouraging couple of years and a dividend cut last year leading to an 18-year nadir being reached.

But, helped by the announcement of a share buyback earlier this March, interest in the mobile phone networks operator has perked up since these lows last autumn, meaning Tuesday’s fourth-quarter (Q4) and full-year results should give some clues whether the revived interest is justified.

“We see scope for a gradual re-rating in the stock as top-line trends continue improving,” said UBS.

The market is expecting fourth-quarter organic revenue growth of 0.6%, following on from growth of 0.4% in the third quarter and a 0.4% decline in the second quarter.

Analysts are braced for a 0.7% organic service revenue decline in Europe for the quarter after declines of 1.8% and 1.1% in the second and third quarters, respectively.

Full-year adjusted underlying earnings (EBITDA) are expected to show organic growth of up to 1%, with the decline in roaming revenues as the result of travel restrictions responsible for the decline, with the market expecting 4% growth in the new year.

Lingering subjects of interest will be those factors that have dragged on the shares in recent years: competition in Europe and debt, where a €44mln millstone has dragged on the shares since its acquisition of European cable TV assets from Liberty Global.

Imperial Brands looking for spark 

Towards the end of last year, Imperial Brands PLC (LON:IMB) fell to its lowest point since 2005 and are still only back at 2009 levels, amid interest from secretive billionaires.

Investors are likely to be looking for reassurances in its half-year results on Tuesday as the maker of John Player and Gauloises cigarettes continues its portfolio transition towards vaping and other next-generation products (NGPs).

Imperial’s reduced-risk brands, such as Pulze, iD and Zone X, have not done as well as its traditional tobacco products in recent years, so shareholders will likely be looking to hear whether new chief executive Stefan Bomhard’s five-year plan, including a reset and more “disciplined” and “targeted” NGP business, is starting to have an effect.

The company’s views of the proposed ban on menthol cigarettes and nicotine reductions in the US will also be eyed closely, as well as how the firm plans to offset any potential impact.

In a pre-close trading statement on March 30, Imperial said it expects its first-half earnings (EBIT) to grow by at least mid-single digits, so the numbers will be watched to see how they align with predictions.

Analysts at Barclays said that if this target is hit Imperial will be “comfortably on track to hit its FY21 guidance of low mid-single digit EBIT growth”.

Significant news expected on Tuesday May 18:

Finals: Vodafone Group PLC (LON:VOD), Land Securities Group PLC (LON:LAND), Assura PLC (LON:AGR), First Derivatives PLC (LON:FDP), Homeserve PLC (LON:HSV), McKay Securities PLC (LON:MCKS), Minds + Machines Group Ltd (LON:MMX), Sanderson Design Group PLC (LON:SDG), Cranswick PLC (LON:CWK), DCC PLC (LON:DCC)

Interims: Imperial Brands PLC (LON:IMB), UDG Healthcare PLC (LON:UDG), Benchmark Holdings PLC (LON:BMK), Hyve Group PLC (LON:HYVE), Sureserve Group Plc (LON:SUR), Watkin Jones PLC (LON:WJG), Britvic PLC (LON:BVIC), Topps Tiles PLC (LON:TPT), Shoe Zone PLC (LON:SHOE)

Trading announcements: TBC Bank Group PLC (LON:TBCG)

Economic data: UK unemployment

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