JD Wetherspoon earnings preview: sales recover but costs remain high
Upcoming earnings from JD Wetherspoon are likely to see strong sales growth, but the problem of rising costs remains.
Q3 earnings likely to see higher sales but rising costs
Pub chain JD Wetherspoon is set to report third-quarter (Q3) earnings this week against a backdrop of rising costs that are overshadowing a recent revival in sales. Despite seeing a jump in revenues, chairman Tim Martin has warned that elevated energy and labour expenses continue to weigh heavily on the business.
JD Wetherspoon shares struggle due to lack of dividend
Shares of the FTSE 250-listed company have fallen around 9% year-to-date as investors remain discouraged by slowing sales growth and Wetherspoon's lack of a dividend payment since 2019. The absence of capital returns has dampened sentiment despite the firm's efforts to bounce back from pandemic disruptions.
Cost pressures cloud outlook
While higher sales provide some relief, Martin has stressed that soaring utility bills and wage inflation are hampering profitability across Wetherspoon's nationwide pub network. The company continues to grapple with elevated operating costs that are disrupting earnings recovery.
All eyes will be on Wetherspoon's ability to pass through price increases to consumers when it reports Q3 results this week. However, persistent cost headwinds may limit near-term upside for the beleaguered pub operator's shares amid a still-challenging operating landscape.
Analyst ratings for JD Wetherspoon
LSEG Refinitiv data shows a consensus analyst rating of ‘hold’ for JD Wetherspoon with 2 strong buy, 3 buy and 7 hold – and a mean of estimates suggesting a long-term price target of 879.55 pence for the share, roughly 20% higher than the current price (as of 7 May 2024).
Technical outlook on the JD Wetherspoon share price
JD Wetherspoon’s share price has been oscillating between its 200-week simple moving average (SMA), now at 833.60 pence, and its 55-week SMA at 726.5p since the beginning of the year with the latter likely to be revisited for the eights consecutive week.
The major pub company’s share price has been hovering above its mid-March 712.0p low ever since, a fall through which would put the 2022-to-2024 uptrend line at 700.0p on the map.
JD Wetherspoon Weekly Candlestick Chart
For the JD Wetherspoon’s share price to break out of its near three-month sideways trading range and do so to the upside, a rise and daily chart close above the 12 April peak at 770.0p would need to occur. Only then would the February high at 862.5p be back in play. If then also overcome, the December 2020 low and the January 2022 high at 960.0p to 989.5p would be back in sight.
JD Wetherspoon Daily Candlestick Chart
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