Here’s what investors are eyeing on the markets next week, according to investment platform AJ Bell.
BP, Tuesday 11 February
ADVERTISEMENTAt the start of next week, those following oil and gas firms will be paying attention to British firm BP, which releases its full-year results on the 11 February.
The shares are struggling to recover from two-and-a-half-year lows, with investment analysts Russ Mould, Danni Hewson, and Dan Coatsworth from AJ Bell noting that stakeholders “are becoming restless”.
Many hope that BP will currently give more clarity on its future oil and gas production strategy in light of the renewable energy transition.
“Shares show marked underperformance relative to global peers since Bernard Looney announced a major pivot away from hydrocarbons in August 2020,” noted AJ Bell.
Bernard Looney, BP’s CEO until 2023, had laid out a plan to cut oil and gas production by 40% by 2030 and rapidly scale-up investment in renewables.
Shortly before his departure, Looney then reduced this to a 25% target, despite BP recording profits of $28bn in 2022.
BP then abandoned the target under current CEO Murray Auchincloss.
“Investors have continued to question whether the pace of movement is too fast, given the perception that renewable projects offer lower returns on investment, and require different skillsets, since the customers, end markets and supply chains are different from the oil and gas industry,” said AJ Bell.
“US rivals have tended to focus on hydrocarbons, either through exploration work or acquisition, as evidenced by ExxonMobil’s swoop for shale specialist Pioneer Natural Resources and Chevron’s bid to buy Hess.”
Oil prices are broadly flat compared to the year earlier, while natural gas is up by more than 50%.
“By division, BP has already flagged a drop in oil and gas and low carbon output in the fourth quarter compared to the third, weak refining margins in the downstream business, unhelpful currency movements, an inventory adjustment at a bio-ethanol acquisition and a higher-than-expected tax charge,” noted AJ Bell.
Analysts will be closely watching 2025 output targets and capital expenditure, which is expected to increase in 2024 before flatlining.
Investors will also be eyeing potential dividend announcements, with BP increasing its quarterly dividend up to $0.08 per share, or $1.3 billion a quarter.
Combined with buybacks, BP will have returned around $12.3 billion to shareholders in 2024.
British American Tobacco, Thursday 13 February
“Anti-smoking campaigners and investors who run strict environmental, social and governance screens may be disappointed, frustrated or surprised to see shares in British American Tobacco (BAT) trade at two-year highs after a gain of around one third in the last twelve months alone,” said AJ Bell analysts.
ADVERTISEMENTThe firm, which owns brands Kent, Pall Mall, Lucky Strike, and Dunhill, will release preliminary results for 2024 on Thursday.
The rise in share price comes despite an ongoing decline in the volume of cigarette sales.
“BAT has worked to offset this volume slide through price increases, cost efficiencies and the development of new revenue streams from heated products (glo), vapour (Vuse) and new oral pouches (Velo). Traditional stick sales represented 81% of total group revenues in 2023 compared to 88% in 2020,” said AJ Bell.
In 2024, BAT is expected to generate total sales of £26.1 billion, including revenues from next generation products, including Vype, glo and Vuse, of £3.5 billion, compared to £27.3 billion and £3.3 billion respectively in 2023.
ADVERTISEMENTEarnings per share are estimated at 362p, compared to 376p a year ago.
Forecasts for 2025 estimate total sales of £26.6 billion and adjusted earnings per share of 375p.
Management has already suggested a full-year dividend of 238.4p a share, compared to 235.52p in 2023.
A £700 million buyback for 2024 and a £900 million buyback for 2025 are on the cards.
ADVERTISEMENTThe combination of the dividend and the buyback for 2024 gives a sum total of nearly £6 billion in cash returns for the year.
British banks
Other companies also releasing results next week include banks Barclays and NatWest on Thursday and Friday.
“Not every investor will believe it, given the uncertain economic backdrop, but the FTSE 350 banks index is up by almost 50% in the past year. That leaves it ranked second out of the 39 industrial sectors that make up the wider benchmark,” said AJ Bell analysts.
“There has not been a deep recession, lenders have kept out of regulatory trouble and have not found a new or exciting way to lose money in the retail, corporate or investment banking markets, while wealth management continues to generate strong returns, thanks to sticky, well-heeled customers.”
ADVERTISEMENT