Forthcoming UK Earnings – The Short Perspective
Against a backdrop of rising global markets, we look at investor sentiment in a selection of stocks in the Banking, Retail and Real Estate sectors that are due to report full year and fourth-quarter earnings this week. Companies covered include; Royal Bank of Scotland (LON:RBS), Lloyds Banking Group (LON:LLOY), Hammerson Plc (LON:HMSO), Segro Plc (LON:SGRO), Capital Shopping Centres Group (LON:CSCG), The St. Joe Company (NYSE:JOE), Saks Inc (NYSE:SKS) and Macy’s Inc (NYSE:M).
Two UK Government owned banks, Royal Bank of Scotland (LON:RBS) and Lloyds Banking Group, are due to report full year earnings on Thursday and Friday respectively. Short interest is generally low in banking stocks with RBS and Lloyds being no exception. However, holdings of funds who lend, which can also be used as a proxy for institutional ownership, increased by 10% in both banks since December.
In the UK, Real Estate stocks have been in demand as investors seek to hedge against rising inflation. The share price of Hammerson Plc, reached an annual high, bolstered by news of its joint venture acquisition of a shopping centre just outside of Paris. Ahead of its full year earnings update, short interest has doubled to 1.3% of total shares outstanding since December. However, institutional investors have been bullish towards this stock and have increased their holdings to 20% of total shares.
Segro Plc is due to report full year earnings on Thursday. The share price of the Commercial Property group continues to surge following media reports that it could be a takeover target. The stock is usually thinly traded in securities lending but short interest has been gradually building over the past six months. It currently stands at an annual high of 2% of total shares outstanding on loan. Positive sentiment has been observed from institutional investors with ownership having surged to 22% of total shares.
Capital Shopping Centres Group is expected to release its preliminary 2010 earnings later this week. The group now owns 14 UK shopping centres following its acquisition of the Trafford Centre. Despite a recent recovery, the shares are still down 20% on the year. Last year short interest reached an annual high of 6.7% of total shares outstanding on loan, which accounted for 50% of the lendable supply. However, there has been a shift towards positive sentiment in the stock from both the long and short sides of the market since November. Rapid short covering has decreased short interest to 1% of total shares outstanding on loan, whilst institutional ownership has increased 20%.
US Real Estate company St. Joe is due to report fourth-quarter earnings on Thursday. The group is undertaking a review of its strategic options, which could result in a possible merger, sales of assets or even the sale of the company. It has been a regular feature on the Data Explorers screen for stocks seeing an annual high in short interest, which recently peaked at 27% of total shares outstanding on loan. Investor sentiment does seem to be turning as short interest has since decreased to 21% of total shares outstanding on loan, as the share price rallied since December.
The S&P Retail Index fell by 0.1% last week following weak retail sales figures. This week, investors will look to the leading US department stores for direction as they report fourth-quarter results. Saks Inc has seen a good rally in its share price over the past six months ahead of results. Short interest has been trending downwards over the year, yet is still high at 20.9% of total shares outstanding on loan.
Macy’s Inc is due to report earnings on Tuesday. Investor sentiment is generally positive towards this stock as short interest stands at an annual low of 1.4% of total shares outstanding on loan and institutional investors continue to increase their holdings, which currently represent an impressive 31.6% of total shares outstanding.
