Equities Update: Next, GSK, Smith & Nephew, Shell…

Colder weather boosts Next past the billion

Adam Vettese, market analyst at investment platform eToro, says: “There weren’t many people encouraging an abrupt end to the unreliable and often too short British summer but the bosses at Next certainly aren’t complaining. The early arrival of cold weather meant consumers had to wrap up early this year, fuelling yet another outlook upgrade for Next which is now expected to break the billion mark for profit this year.

“The Next juggernaut rolls on with full price shares growth beating estimates by 50%. If the firm is a barometer of consumer sentiment, then with the all important Christmas season just around the corner retailers could stand to cash in. Investors will be pleased to see shares up this morning and will undoubtedly be keen to see by how much that billion pound milestone can be broken.”

GSK profits fall as company hopes to draw a line under Zantac affair

Mark Crouch, market analyst at investment platform eToro, says: “In what’s been an up and down year for GSK, a cloud of negative sentiment has been gathering over the company in recent months. Leading into Glaxo’s Q3 earnings, the bar on analysts’ expectations was set pretty low, and it’s easy to see why. Glaxo’s total operating profit fell by 86% in the period, and while strong general and speciality medicine sales helped to offset weaker vaccine sales in the US, the massive drop was in large part due to the company agreeing a $2.2bn settlement for over 90% of cases involving its heartburn drug Zantac.

“While GSK did not accept liability, the company admits this has been a significant distraction in recent years and so with a line being drawn under the Zantac affair, it’s now hoped this will unshackle the pharmaceutical giant opening the door for investors previously unwilling to risk parting with their cash with further litigation risk hanging over the company.

“GSK remains confident on delivering the company’s long-term targets and has once again maintained their dividend payout to investors which has and remains a dependable income staple in shareholders portfolios.”

Smith & Nephew trims outlook on China struggles

Adam Vettese, market analyst at investment platform eToro, says: “The largest UK medical devices maker, Smith & Nephew, has cut its full year revenue growth forecast based on weaker than expected performance in China.  Lower demand in the surgical business has seen the trimming of the forecast from 5-6% down to 4.5%, a significant shortfall and shares are hurting for it this morning.

“Other regions are showing growth as well as some successful cost cutting in areas, but headwinds in China are offsetting this progress. With shares now within 10% of year-lows, some investors could bet on a turnaround but the indication is that the issues could take some time to resolve.“

Shell surprises investors by beating expectations

Mark Crouch, market analyst at investment platform eToro, says: “Following BPs dismal earnings this week Shell investors were braced for a similar outcome. So, Shell’s third quarter results might have caught some shareholders off guard, reporting profits of $6bn comfortably surpassing analyst expectations by 12%.

“The UK’s two oil supermajors, whose shares so often move in unison, have started to diverge in recent months, and investors are starting to see why. Despite lower oil prices and weaker refining margins, Shell’s free cash flow has increased during the period, while the company’s net debt has fallen.

“BP’s underperformance on the other hand is starting to look less to do with oil and gas and more to do with the wishy-washy direction the company is heading. It’s Shell’s commitment to hydrocarbons that is setting the oil giant apart from its rival. And despite facing criticism these earnings seem to vindicate Shell for sticking to their guns.

“It remains a challenging period for the oil and gas sector whose future still looks uncertain. However, with potential catalysts in every direction, from China’s sleeping economy, to conflict in the Middle East and Ukraine, the oil market, whose reaction so far could almost be described as nonchalant, may reverse quickly, and send oil prices soaring.”