Shares in Europe opened mixed on Tuesday as investors reacted to corporate results and awaited the open on Wall Street after a long holiday weekend. The FTSE 100 was held back by mixed results from HSBC (LON:HSBA), BHP Billiton (LON:BLT) and InterContinental Hotels Group (LON:IHG). Both HSBC and BHP results were characterised by missed estimates mixed in with signs turnaround plans are nearly complete.
HSBC turnaround on track despite Q4 miss
Following the decline in its Hong Kong-listed stock in response to full-year results, HSBC shares took a shallow dip at the open in London. There is clear evidence of a turnaround afoot at HSBC, but just not quite at the pace anticipated by investors. HSBC reported pre-tax profit of $2.30bn in Q4, meaning full-year pre-tax profit at $17.7bn, below the $19.55bn forecast. We think that when the dust settles over the missed estimates in this set of results, shareholders will feel happy about the direction of travel.
Outgoing CEO Stuart Gulliver has done the job he set out to do. Incoming chief executive John Flint will have the advantage of a honeymoon period to establish himself, stronger global growth and higher interest rates. The bank’s biggest footprint is in Asia and Europe where lending should benefit from the best economic growth in years. It feels like HSBC is shifting from turnaround to growth. HSBC shares have been consolidating around 770p, which capped three price rallies since the 2008 financial crisis. We expect HSBC shares to finally breakout, targeting 900p this year.
BHP Billiton shows boom time for miners
Barring the bottom line, which slightly missed expectation it was a bumper half-year for BHP Billiton. It is really a goldilocks time for mining company shareholders. The rally in oil and copper prices means revenues have jumped but the cost-base is still drastically down because of cuts made after commodity prices crashed in 2014. We think while shares hold above 1300p, the uptrend can continue towards 1800p this year.
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