The Short Perspective: Forthcoming Earnings Printing and Media, Telecoms and Retail Companies

The earnings season picks up momentum in Europe this week as key names are expected to update the markets. Hot sectors reporting earnings are the printing and publishing sector with Yell Group (LON:YELL), Johnston Press (LON:JPR) and Trinity Mirror (LON:JPR) updating the market; and the telecoms sector, with announcements expected from Inmarsat (LON:ISAT), Vodafone (LON:VOD) and BT Group (LON:BT.A). Extending the retail theme from last week, Asos (LON:ASC) and Marks and Spencer (LON:MKS) will report interim 2010 earnings.

In printing and publishing, Yell Group is due to report interim 2011 earnings on Tuesday. The company is plagued with debt and is struggling to adapt to changing consumer habits which have put the traditional directory business model under strain. Short interest has almost doubled since May to 15% in October and has held steady at this level until now while the shares continue their downward trajectory. Yet, institutional funds who lend continue to hold steady at the annual average of 350 million shares.

Johnston Press and Trinity Mirror are due to update the markets with interim management statements this week. Short interest in Johnston Press jumped from less than 0.1% to 2.2% in early August and has been holding at this level since. Trinity Mirror has been the subject of positive sentiment from the short market, with investors covering positions since July, reducing short interest from 5% to 2% of total shares outstanding on loan.

Inmarsat kicks off earnings in the communications sector today with third-quarter earnings. Its share price has recovered over the past month following the announcement from Harbinger to sell half of its stake in the mobile satellite communications provider. We see an increase in institutional ownership over the past months from 60 million shares to a 52-week high of 74 million shares. There is currently no short interest activity in the stock.

Telecom’s giant Vodafone will report interim 2010 earnings on Tuesday. The share hit a 52-week high last week whilst short interest remains insignificant at less than 0.5%. There has been a sharp decline in the lendable quantity, ahead of the dividend expected later this month.

Positive investor sentiment is also evident in BT Group, which is set to report second-quarter and interim 2010/11 earnings on Thursday. BT shares also hit a new 52-week high last week. Short interest is low, with short covering over the past month reducing the total shares outstanding on loan from 2% to 1.5%. However, the amount of stock in the hands of investors who lend has been in gradual decline over the year and currently stands at 1.7 billion.

In retail this week, Asos and Marks and Spencer will report interim earnings this week. Asos has been subject to falling short interest for the majority of the year as short sellers rushed to cover positions as the share price continued to hit new highs. Short interest currently stands at 4% of the total shares outstanding on loan, well down on the highs of 15% seen in May. Yet, funds who lends have also halved their holdings over the year to 7 million shares.
Marks and Spencer has also been subject to short covering over the past month with short interest decreasing from 4% to 3% of the total shares outstanding on loan.