BP, Saudi Aramco, Uber and interest rates

Earnings season continues and investors have high expectations for the results of some of the big companies reporting next week, such as BP and Uber. In the UK, investors are eagerly awaiting the latest interest rate decision from the Bank of England.

So far, 78% of the companies listed in the S&P 500 (^GSPC) have reported their results, with 77% beating expectations.

In the Middle East, the world's most profitable company, Saudi Aramco, will show whether oil is still king.

What you should pay attention to:

BP (BP.L) – Reports from Tuesday, May 7

Analysts expect BP's profits to decline due to lower oil prices, weaker refining margins and concerns about the group's energy transition strategy.

The consensus is for the refining margin to shrink by almost 30% to USD 20.10 per barrel. According to Bloomberg, the USD 1.75 billion buyback tranche made in the first quarter is expected to be repeated in the second quarter.

Revenue for the first quarter is estimated at around $49,315 billion, down significantly from around $56,951 billion in the first quarter of 2023, with pretax profit declining from $8,535 billion in the first quarter of 2023 to $6,371 billion in the first quarter of 2024. Earnings per share are estimated at $0.18, down from $0.27 per share last year, according to IG.

When evaluating first-quarter results, investors will look at four headlines, said investment platform AJ Bell.

“The first is underlying replacement cost profit. This is not a statutory figure, but one that irons out all exceptional items and also fluctuations in the value of the company's oil and gas inventories. The analyst consensus forecast is $2.9 billion, not far below the fourth quarter 2023 result, but well below the $5 billion earned in the first three months of last year,” wrote Russ Mould, investment director, Danni Hewson, head of financial analysis, and Dan Coatsworth, investment analyst, all of AJ Bell.

“The second point is net debt. BP has done an excellent job of reducing its debt since the terrible scare it suffered during the pandemic with the collapse in oil and gas prices. Cost cutting, capital expenditure cuts and asset disposals have helped reduce net debt to $18 billion from a peak of $51 billion in 2020.

“The third factor is investment and the mix of hydrocarbons and renewables. After spending $15.6 billion in 2023, BP has steered the market to expect $16 billion in 2024.

“Finally, attention will turn to cash returns. In 2023, BP paid $4.8 billion in dividends and $7.9 billion in share buybacks. The dividend was 7.27 cents at the end of 2023 and analysts expect an average of 7.6 cents per quarter this year, while the company has already announced $3.5 billion in buybacks for the first half of 2024. Add that to the forecast dividend, and BP is already expected to return $8.5 billion to shareholders this year, about 8% of its current market valuation.

The story continues

Saudi Aramco (2222.SR) – Reports on Tuesday, May 7

OPEC+'s production cuts are expected to hit Aramco's profits, but investors will be keen to hear any news on payout levels after the oil major pledged £43 billion in performance-related dividends for 2024.

According to Bloomberg Intelligence, oil prices remain favorable and support the company's “strong financial position.”

The state-owned company will pay out a total of $124 billion in dividends this year, an increase of 66% since 2021.

Aramco has been pushing ahead with its expansion in key regions to attract new investment in the Saudi downstream sector. Recently, the company signed an agreement with China's Rongsheng Petrochemical to expand its liquids-to-chemicals project at the Saudi Aramco Jubail Refinery Company (SASREF).

In addition, the company has entered the Pakistani fuel retail market by acquiring a 40 percent stake in Gas and Oil Pakistan (GO).

According to Yahoo Finance data, the stock currently has a recommendation rating of 2.9, with the consensus being Hold. It is currently trading at 29.95 SAR (£6.36), but the market sets its price target at 33.60 SAR (£7.13).

Uber (UBER) – Reports on Wednesday, May 8

The market expects Uber Technologies to report year-over-year profit growth when it releases results for the quarter ending March 2024, driven by higher revenues.

According to Zachs Equity Research, Uber is expected to report a loss of $0.19 per share for the current quarter, a change of -143.2% year over year.

Revenue is expected to reach $10.08 billion, an increase of 14.2% over the same quarter last year.

Thousands of London taxi drivers filed a lawsuit against the ride-sharing app this week, demanding hundreds of millions of pounds in damages. They are accused of operating illegally in the capital.

The stock is priced at $68.57, with analysts estimating the price target at $87.77. Given the discount, traders' consensus is “Buy” or “Strong Buy.”

Bank of England interest rate decision – Thursday, May 9

Obviously not a stock, but one of the biggest market-moving decisions in the UK. Threadneedle Street is not expected to cut rates at this meeting, but investors should watch for cues from Governor Andrew Bailey and the other members of the Monetary Policy Committee (MPC).

The key interest rate is currently frozen at 5.25 percent and has remained at this level for several months.

Financial markets consider a rate cut on May 9 after the next MPC meeting to be almost unlikely. They do not expect a first step until September, but some economists are pointing to June.

Deutsche Bank economist Sanjay Raja said: “We expect the MPC to keep the policy rate at 5.25% for the sixth consecutive meeting. But that does not mean that the May meeting will be uneventful. We expect the MPC to set the stage for a rate cut in June.”

HSBC Chairman Mark Tucker predicts that the BoE will cut interest rates by 1.5 percentage points by the end of next year. That would lower the base rate from the current 5.25 percent to 3.75 percent.

“We expect the ECB and the Bank of England to cut rates in June, by 150 basis points by year-end 2025. We expect the Fed to cut in September, by 100 basis points by year-end 2025,” Tucker said.

Last month, Bank of England chief economist Huw Pill stressed that the economic outlook had not changed significantly, but that interest rate cuts could now be “somewhat closer” than they were last month.

“Markets have recalibrated their expectations and now expect only two cuts this year, to 5.00% in August and then to 4.75% in December. The UK two-year government bond yield, which has an uncanny history of rising six to nine months ahead of the Bank of England, is at 4.51%, implying only three cuts over the next two years,” said AJ Bell.

The OECD has warned Britain that credit is likely to remain expensive until price increases continue to moderate and remain at this level.

“The mix of fiscal and monetary policy is sufficiently restrictive and should remain so until inflation returns to target on a sustained basis,” says the Organisation for Economic Co-operation and Development (OECD)’s economic outlook for 2024.

Other companies releasing their reports next week include:

Monday, May 6

Microchip (MCHP)

Palantir (PLTR)

Simon Property (0L6P.L)

BioNTech (22UA.F)

Tyson Foods (TSNF34.SA)

Loews (LTR.BE)

Coty (COTY)

JLL (JLL)

Goodyear (GT)

Coca-Cola Consolidated (COKE)

Tuesday, May 7

UBS (UBSG.SW)

Unicredit (UCG.MI)

Lyft (LYFT)

Nintendo (7974.T)

Walt Disney (DIS)

Wednesday, May 8

Fox Corporation (FOX)

NewsCorp (NWSA)

BMW (BMW.DE)

Anheuser-Busch InBev (BUD)

Airbnb (ABNB)

Toyota (7203.T)

Thursday, May 9

Nissan (7201.T)

Panasonic (6752.T)

ITV (ITV.L)

Friday, May 10

Honda (7267.T)

International Airlines Group (IAG.L)

Tata Motors (TATAMOTORS.NS)

You can find the full Yahoo Finance calendar here Here.

Watch: What slowing April job growth means for the Fed

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