5 stocks to watch in November

Important information – the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

A number of household name companies report financial results in November, including Marks & Spencer, Sainsbury’s, Vodafone, BT and easyJet. Here we look at what investors in these businesses might expect. 

This article is not a recommendation to buy or sell these investments; it is purely insight into some of the companies that announce results this month. 

BT  

Interim results 7 November 2024 

It’s never a dull moment at BT. While it’s busy connecting millions of homes and businesses to its fibre optic network, billionaire foreign investors are exchanging huge stakes in the company. It’s also shedding tens of thousands of jobs and seeking to put its perennially troublesome final salary pension scheme on a sound financial footing. 

In August it was announced that India’s Bharti Enterprises, founded by the billionaire Sunil Bharti Mittal, was buying the 24.5% stake in BT previously owned by Altice, a telecoms group founded by the French-Israeli telecoms tycoon Patrick Drahi. Mr Bharti has said he has no intention of making a bid for BT but he clearly regards its shares as undervalued, even after a rise of almost 50% since late April.  

There are signs that the company’s profitability, and its ability to generate cash, are heading in the right direction. Analysts point out that the expensive process of building its fibre optic network is only a couple of years from completion, which will allow significant reductions in capital expenditure and the workforce. BT also hopes to have eliminated the deficit in its pension scheme by 2030. Meanwhile, rivals such as Virgin Media O2 and TalkTalk have big debts and may struggle to offer much competition. 

Analysts at Redburn Atlantic, the broker, wrote in a report last month: ‘The past eight years have been miserable for BT shareholders, with a series of self-inflicted and competitive mishaps … However, BT’s challenges are trivial versus rivals’, most of whose finances are in tatters … we expect a cleaning up of BT’s cash flow and earnings, alongside swingeing cost reduction, to rebuild investor confidence and help lift deeply discounted multiples [of the share price relative to earnings].’ They said that from 2027 BT’s dividend should be comfortably covered by free cash flow while net debt decreases. 

The analysts added: ‘No company is doing more to help drag the UK into the digital 21st century than BT. This, of course, is hardly reflected in its price-to-earnings multiple of 8 and its 5.6% dividend yield … we see BT’s recent share price recovery as the start of its renaissance after eight years in the doldrums.’ 

More on BT  

Vodafone  

Interim results 12 November 2024 

Vodafone is another company in the midst of significant change. Its Spanish arm has been sold and its Italian business is going the same way, while its plans to merge with Three in Britain are currently being looked at by the regulator. The company has also sold stakes in two subsidiaries, Oak Holdings and Indus Towers, for a combined total in the billions of pounds. 

But we may be on the brink of a more stable period for the telecoms giant. When it announced in March the planned sale of the Italian arm for €8bn, it said it marked the ‘final step of the portfolio right-sizing announced in May 2023’. It said a ‘reshaped European footprint’ would enable it to be ‘focused on growing markets, with strong positions and local scale’. Alongside the transactions Vodafone said it would halve its dividend but spend €4bn on share buybacks, while aiming to cut debts relative to earnings. 

Investors would certainly welcome some stability after years of wildly fluctuating profits, as we described in this article about dividend sustainability. Their frustrations are visible in a share price that has more than halved over the past five years to levels not seen since the previous century. 

Analysts at Deutsche Bank say the shares are primed to recover all that lost ground, however: their price target, in a note on the company published last week, is 140p, compared with about 72p at the time of writing this article. They wrote that the ‘unfortunate events’ of Vodafone’s recent past were giving way to a period of ‘careful and unhurried actions’ from the company, whose stock ‘looks very cheap’ on a forecast price-to-earnings ratio of 11.2 and a yield of 4.9%. 

More on Vodafone 

Marks & Spencer 

Interim results 7 November 2024 

While investors in BT and Vodafone may have to wait for promising-looking developments to bear fruit, Marks & Spencer has already turned the corner. After years if not decades of treading water despite a succession of turnaround plans and new bosses, it can boast steady progress both in food and clothing & homeware. Investors have not failed to notice and the share price has roughly quadrupled from lows of about 85p in the dark days of the pandemic to about 375p now (although, to give a sense of how long M&S spent in the wilderness, that is still less than the 400p a share that Sir Philip Green offered in his rejected takeover bid 20 years ago).  

Next week’s interims coincide with the two-year anniversary of the launch of M&S’s new strategy under Stuart Machin, who became chief executive in May 2022 on the retirement of Steve Rowe. Mr Rowe and his chairman, the veteran retailer Archie Norman, had laid the foundations for the recovery of Marks & Spencer. Clive Black, a retail analyst a Shore Capital, the stockbroker, told The Daily Telegraph in 2021: ‘Archie Norman has brought some clear thinking. He has realised that M&S doesn’t need fireworks. Customers want a clearly understandable product range that offers reliable quality and value. 

‘The pandemic has been tumultuous but it has enabled them to make changes much more quickly. There is not a corner of M&S that hasn’t been looked at … the store estate, head office, buying, logistics, IT, the loyalty programme, the clothing and home ranges – all have been changed and for the better.’ Three years later, the City agrees on the improvement in the retailer’s fortunes: analysts at the investment bank Morgan Stanley, for example, in marking what they called M&S’s ‘strategic scorecard’ in October, said ‘progress is palpable, with 14 out of 19 key performance indicators flashing green’. 

After the recovery, investors’ attention turns to how the company can maintain its momentum. Analysts at JP Morgan Cazenove, the investment bank, wrote in October that they saw some promising ‘low-hanging fruit’ for M&S in the form of childrenswear, of which it currently sells much less as a proportion of total sales than rivals Next and Primark. They said the store rotation and renewal programme, along with the opportunity in childrenswear, should support sales growth across the group. The bank increased its profit forecast for the full year to £810m. 

More on Marks & Spencer 

J Sainsbury 

Interim results 7 November 2024 

Asda and Morrisons did their listed competitors, Tesco and J Sainsbury, a big favour when they were bought by bidders who promptly loaded them up with debt, with the result that they became less able to compete in this most competitive of sectors. Investors will therefore be hoping for some decent numbers from the latter when it reports its half-year results next week. 

The environment for Britain’s two big, listed grocers looks more benign than it has for a long time. BNP Paribas Exane, the broker, said in a note two weeks ago: ‘We think the backdrop is about as appealing as we have ever seen it in the 15 years we’ve been covering the [sector]. Their pricing position versus the discounters has never been sharper, their balance sheets have never been less levered [indebted], their market share momentum (now unaided by the capital-intensive store expansion) has never been higher, their core competition has never been so capital-constrained and space growth from the discounters [Aldi and Lidl] is at its lowest in at least 10 years.’ 

It said Tesco and Sainsbury’s were both ‘firing on all cylinders’ while rivals struggled and that the taming of inflation and avoidance of deflation meant that margins were not under pressure. The broker said the market was also failing to appreciate the true value of the data collected by the two big grocers via their loyalty schemes. ‘Personalised pricing and promotion is where most value could be created and Sainsbury’s is among the most advanced’ in this respect, it said, although it cautioned that risks included heightened exposure to any weakness in consumer confidence thanks to Sainsbury’s non-food business, which accounts for 20% of sales, alongside lower-than-expected food price inflation and higher-than-forecast wage inflation. 

More on J Sainsbury 

easyJet 

Final results 27 November 2024 

Oil prices recently fell back sharply after the market perceived Israel’s retaliation against Iran for its earlier missile strikes to have been relatively restrained. In fact the price of crude has been on a downward trend after the severe spike caused by Russia’s invasion of Ukraine. Among the most obvious beneficiaries are airlines, for which fuel is a major cost. Airlines are also enjoying strong demand as the post-pandemic recovery in travel continues. 

In a trading update for the third quarter of the current financial year published in July, easyJet reported passenger growth of 8% year-on-year, alongside a 1% rise in the much-followed ‘revenue-per-seat’ measure. It also reported a strong rise in profits from its package holiday arm and said the division should deliver profits before tax of more than £180m for the full year. This compares with analysts’ predictions of £607m for the group as a whole. 

BNP Paribas Exane said in October that it expected positive trends in both revenue per seat and profit before tax in the next financial year. 

The airline also reported a very solid balance sheet with net cash of £456m at 30 June. 

More on easyJet 

Other companies due to report in November include: 

Compass  

Severn Trent 

United Utilities 

National Grid 

Sage  

British Land 

Land Securities 

Imperial Brands 

Five-year share price performance table 

Past performance is not a reliable indicator of future returns. 

Source: FE, 30.10.19 to 30.10.24 Basis: Total returns in GBP. Excludes initial charge. 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.