Thursday preview: Diageo, IMI

Shareholders in Diageo should be in good spirits when the drinks brands owner reports full year results on Thursday.

Charles Stanley is expecting the firm to deliver a good set of full year results. "Asia, Africa and Latin America are expected to have been the drivers of growth, with more subdued performances in North America and Europe," notes Charles Stanley analyst Sam Hart.

Charles Stanley has pencilled in £10,750m for full year revenue, up from £9,936m the year before. "We forecast group sales to be up by 6.5% on an organic basis, driven by a mixture of volume growth and improved mix," Hart revealed.

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The broker is tipping earnings before interest, tax and amortisation (EBITA) of £3,185m and profit before tax of £2,925m.

On a regional basis, the broker predicts 7% organic growth in North American EBIT and just 1% organic growth in European EBIT. Africa's EBIT is forecast to grow by 19% on an organic basis, while Latin America is tipped to grow faster still, with growth of 23%. Asia Pacific is seen weighing in with organic EBIT growth of 16%.

Metal basher IMI said in April it had made a positive start to the year and its interim results should see the firm reporting year-on-year improvements in turnover, operating profit and earnings per share.

Market consensus is for turnover of £1,095m, operating profit of £185.6m and earnings per share share 38.8p.

Nomura recently started covering the stock with a 'reduce' recommendation and a 750p price target. It is below consensus with its full year earnings forecasts owing to: "1) weakening European industrial indicators; 2) North American trucks inventory build leading to a manufacturing decline in 2H12 [second half of 2012]; and 3) European construction weakening."

The broker is especially concerned at expectations for IMI's Fluid Power division, noting that "in the past 10 years, there has not been a time when Fluid Power (FP) grew organically when our EU leading indicator was as weak as now."

Jeremy Batstone-Carr, head of equity research at Charles Stanley, said he will be looking "for continued margin improvement particularly in the Fluid Power and Beverage businesses - Severe Service margins are expected to be similar to those in H2'2011 (15.2%) reflecting the increased lower margin valve shipments from Brno. Improvement should be seen in the H2. In Fluid Power we will also be looking for any further deterioration in the European outlook - in Q1 [first quarter] weaker European sales off-set good growth in the US and Asia."

INTERIMS

Aegis Group, Alpha UK Multi Property Trust, AZ Electronic Materials SA (DI), Camellia, Delcam, Genel Energy, IMI, Kazakhmys, New World Resources A Shares, Petropavlovsk, Premier Oil, Salamander Energy, Signet Jewelers Ltd., Sportech, STV Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Bloomberg Consumer Confidence (US) (14:45)

Consumer Confidence Indicator (EU) (10:00)

Continuing Claims (US) (13:30)

House Price Index (US) (15:00)

Initial Jobless Claims (US) (13:30)

New Homes Sales (US) (15:00)

Q2

New World Resources A Shares, Signet Jewelers Ltd., Wentworth Resources Ltd (CDI)

Q4

Haynes Publishing Group

GMS

Norseman Gold

FINALS

Diageo, Haynes Publishing Group

AGMS

Aberforth Geared Income Trust, Ten Alps

UK ECONOMIC ANNOUNCEMENTS

BBA Mortgage Lending Figures (09:30)

CBI Distributive Trades Surveys (11:00)

JH