Earnings look ahead – 16-20 January

Burberry (update due 18 January)

Burberry shares opened 2016 in fine form, then stumbled from March until June, before staging an impressive recovery, undoubtedly helped by sterling’s weakness in the aftermath of the Brexit vote. However, this positive effect for the share price could be undone to some extent if the upcoming trading update fails to improve on the dismal outlook from November.

At 19.9 times forward earnings, the shares trade above the five-year average of 18.2, and as a result could be vulnerable to a re-rating if the trading update disappoints.

The steady trend in Burberry off its lows remains intact, but it looks rather overextended. Thus we could see a drop back towards £15, which would provide another strong buying opportunity. The push to a new high for the year (indeed, since late August 2015) means that bullish momentum remains intact. 

Cairn Energy (update due 17 January)

The year 2016 was one which saw oil price recover in spectacular form, and this helped Cairn Energy as well, although the share price did endure some volatile periods. Nonetheless, the company could see some good news from its operations in Senegal, plus its efforts in the North Sea could also provide indications of more good news to come. Nonetheless, in common with many oil stocks, the share price is highly dependent on whether the OPEC deal manages to hold together.

Cairn shares hit a new peak at the beginning of the year, touching their highest level since the beginning of 2014. The push above 232p indicates that the buyers are in control, so a dip towards 212p or 200p could be a buying opportunity akin to September or November 2016.