Week Ahead: Housing focus | Asset managers | US consumers | Quality industrials

Good morning and welcome to the Week Ahead, your weekly destination for discussion and analysis of the largest stocks in the UK and overseas.

This week is another busy period for FTSE 100 earnings. An interesting mix of companies are due to report, including some cyclical names that might provide some clues on the health of the UK economy.

With the UK now technically in recession, UK economic data on mortgage approvals, consumer credit and manufacturing PMIs may provide some insight into consumer confidence and the health of the industrial sector.

Housing is likely to attract particular interest, with results due from Taylor Wimpey (LON:TW.) , Rightmove (LON:RMV) and kitchen specialist Howden Joinery (LON:HWDN). The latest Nationwide House Price Index is also due to be published on Friday. This comes on top of this morning’s announcement from the Competition and Markets Authority (CMA) citing concerns about planning systems and estate management charges. The CMA has also said it is opening a further investigation into eight of the UK’s listed housebuilders who it suspects of sharing information. All of the housebuilders named in the announcement are trading down about 2% this morning.

Across the pond, a raft of US economic data is due that may provide reassurance (or not) about the health of the world’s largest economy in its election year.

Former FTSE 100 member CRH is also due to report its results on Thursday. This will be the building materials group’s first set of numbers since moving its primary listing to New York. That move has coincided with a significant re-rating of CRH shares, so it will be interesting to see if CEO Albert Manifold remains positive on the prospects for the year ahead.

Coming up this week…

FTSE 350 results: good, bad and ugly?

Are asset managers at an inflection point?

Last week was a busy period for UK bank earnings. This week it’s the turn of some of the larger asset managers, with Schroders (LON:SDR), St James's Place (LON:STJ), and Abrdn (LON:ABDN) all due to report. Remarkably, shares in all three companies are currently trading at 10-year lows.

Shares in St James’s Place have completely reversed the 100% gain achieved from 2014-2021 and are currently trading 20% below 2014 levels. Investors will be looking for reassurance that the company’s new fee structure will support the 8% dividend yield and keep the FCA happy.

Abrdn shares currently trade at around 20% below tangible book value and offer a tempting 8.9% dividend yield. However, this payout looks stretched to me and my feeling is that it has only been sustained this far by cash generated from divestments.

The group’s assets under management have now fallen by more than 25% since Aberdeen Asset Management combined with Standard Life in 2017.

The highlights (lowlights?) of Abrdn’s 2023 results were trailed to the market through an update in January, so we already know that AUM continued to fall in 2023, with further outflows during the second half of the year.

Abrdn’s January update also revealed plans for a further £150m of cost savings and a round of job cuts. Not necessarily a working environment that’s conducive to improved performance.

While most asset managers look unloved at the moment, I suspect Abrdn will find it harder than most to win back investor confidence. Investors’ best hope in the short term might be a takeover offer from a larger rival.

My pick of the bunch is Schroders, which is a larger and classier outfit with more stable performance and robust financials. The family-controlled group’s larger scale and considered long-term strategy have supported an unbroken 35-year dividend record.

While Schroders’ yield is more modest at 5.5%, I think there’s little doubt about its sustainability.

Look out for: changes to fee margins and any evidence that net outflows may be slowing or even reversing.

Quality industrials: is the outlook stabilising?

Problems such as destocking and slower-moving order pipelines dogged a number of good quality FTSE 350 industrial firms last year. Perhaps the highest-profile casualty was chemicals group Croda International (LON:CRDA), which disappointed the market with multiple profit warnings.

Despite negative sentiment, I feel this remains a market-leading, high-quality business. However, while Croda shares have de-rated substantially, they continue to trade on 30 times forecast earnings.

Some evidence of a more stable outlook may be needed to prevent further erosion of the share price – note that Stockopedia’s algorithms continue to classify this business as a Falling Star, ahead of Croda’s 2023 numbers.

Elsewhere in the industrial and technology sectors, precision measurement group Spectris (LON:SXS) and distribution specialist Bunzl (LON:BNZL) both reported more resilient trading last year. Both also delivered robust share price performances. Investors will be watching keenly for updated 2024 guidance.

Look out for: any disappointment from last year’s high flyers could be quickly punished. Watch for signs of improving demand and margin recovery.

US earnings: can Bud regain its fizz?

Changing drinking fashions, rising costs and a misfiring marketing campaign for Bud Light have created headwinds for Budweiser owner Anheuser-Busch Inbev SA (NYQ:BUD) over the last year. Net debt of nearly $74bn is likely to be an added pressure, given higher interest rates.

Consensus forecasts for the beer group have edged lower over the last year but continue to suggest a partial recovery in earnings for 2024. Inflation has now eased and some analysts are suggesting that beer companies could benefit from a downturn in more expensive spirit sales - Diageo (LON:DGE) recently reported a drop in North American volumes for 2023.

Elsewhere in the US, results from consumer firms including eBay (NSQ:EBAY), Domino's Pizza (NYQ:DPZ), home improvement retailer Lowe's Companies (NYQ:LOW) and loss-making cinema chain AMC Entertainment Holdings (NYQ:AMC) may provide more insight into the current health and habits of US consumers.

Finally, Q1 earnings from Birkenstock Holding (NYQ:BIRK) will provide a fresh update on the performance of this much-loved footwear brand – Birkenstock shares have risen by over 40% since its October IPO.

Look out for: changing consumer spending patterns, post-IPO progress and debt woes.

Disclosure: At the time of publication, Roland owned shares in CRH.