HSBC Holdings plc (LON:HSBA)
The China-focussed British bank is expected to report fourth-quarter revenue and EPS at US$12.27 billion and US$0.07 respectively. That compares to US$11.77 billion in revenue and an EPS of US$0.02 in the year-ago quarter, hit by weakness in China amid a low interest rate environment.
HSBC shares are up 60% over the past year. While HSBC’s US$2.5 billion share-buyback announcement last year (and indication of even more in 2017) had already reassured shareholders of its commitment to improve capital returns, reported growth in adjusted profits in the last quarter across divisions, along with a capital position strong enough to sustain dividends despite volatility in earnings made it one of the most bought UK-stocks.
The only potential headwind in the form of slowing down housing markets in the UK and Asia could be offset by an improvement in its net interest rate margin with recent increases in the Hong Kong Interbank Offered Rate. The bank may well surprise the market, given the resilience shown by housing in the UK post-Brexit and strong investment trends in China, despite a slowing economy.
HSBC has a healthy balance sheet and it yields 5.9% currently. Its PB ratio of 0.9 is in-line with the industry average. With the interest rate environment improving, HSBC earnings are set to grow significantly — analysts project a three-year EPS growth of 38%.
BHP Billiton plc (LON:BLT)
The second largest miner in the world will be judged for its performance in the most recent half-year against market’s expectations of US$18.92 billion in revenue and US$0.66 EPS. A year ago, BHP reported half-year revenue of US$15.7 billion and an EPS of US$0.08, prompting first dividend cut in more than a decade.
The recovery in commodity prices, primarily the bulk commodities used in steel manufacturing such as iron ore and coal, has analysts expecting core earnings growth of over 50% on the back of nearly 20% jump in revenue. Improvement in oil and gas prices also helped BHP improve margins.
Leading the recovery in the mining sector, BHP shares are up 100% over the past year as the improved earnings outlook attracted both growth and dividend investors, who are seeking higher dividend payments based on the company’s commitment to return at least 50% of underlying attributable profit to shareholders.
Both companies are set to report on Tuesday (02/21).