5 stocks to watch in August

AS we head into August, headlines are focused on the housing market potentially crashing and the heatwave in southern Europe. Here are five well-known names reporting in August which, for all but one of them, are impacted in some way by the challenging economic or climate conditions that have been causing chaos of late. This is not a recommendation to buy or sell these investments and is purely insight into some of the companies that will be announcing results or releasing trading updates in the weeks ahead. 

Read on or jump to the relevant company below.

• Rolls-Royce  
• Wizz Air  
• TUI 
• Bellway  
• Persimmon

 
Rolls-Royce  

Is Rolls-Royce about to go nuclear? According to Britain’s energy secretary Grant Shapps, the UK engineering company is in a “good position” to develop the technology needed for next gen nuclear power generation here in the UK. 

Launching “Great British Nuclear”, something of an arms-length government body that will oversee the development of new reactors here, he revealed that Rolls-Royce has already been the recipient of £210m in government grants for the project, which is aimed at helping reach the UK’s target of net zero carbon emissions by 2050.  

With defence spending rising (as the nuclear reactor grants shows) and the aviation sector firmly in recovery mode, as we have seen from the airlines’ trading updates of late, Rolls-Royce - which is a major player in both these areas - is one to watch.  

Rolls-Royce is due to post its half-year results on 3 August.

Wizz Air

Talking of a strong recovery underway in the airline sector, Wizz Air will be the latest to fill us in on the state of play this summer, when it gives its first quarter update on 3 August. 

Record turnover and passenger numbers and an expectation that full-year net profits will come in between €350m and €450m for the current financial year, would certainly be a turnaround for the low-cost airline, which only managed a modest narrowing of losses last year, from €642.5m to €535.1m (£460m). 

Judging by the latest updates from the airline sector that’s entirely feasible though, easyJet recently reported a pre-tax profit of £203m, reversing last year’s £114m loss. Citing strong passenger demand it is now forecasting record profits in the fourth quarter. 

That was before the latest unexpected travel drama though. Wildfires in the Greek islands broke out, prompting airlines and travel operators to cancel flights and decide how to repatriate holidaymakers as their holidays go up in flames - metaphorically and in some cases, literally. 

For Wizz Air passengers, and investors, this might feel horribly familiar after last year’s summer of chaos - albeit for entirely different reasons. Then a surge in demand and a sufficient number of crew led to cancellations and chaos and Wizz Air’s customers ended up suffering more delays than any other airline. That was the pattern in both 2021 and 2022. Hardly surprising then that its poor service record generated twice the number of complaints of its competitors - and earned it the title of UK’s worst airline by consumer group Which? 

According to its UK managing director Marion Geoffroy Wizz though Wizz Air has learned from its mistakes. It has invested £90m on making its operations “more resilient and agile,” and the airline will have 11% more aircraft capacity this summer and 10% additional crew members, to provide a buffer against disruption.  

None of this can be cheap and as an ultra-low-cost airline, whose USP is its cheap fares, Wizz Air will surely have an especially tricky task on its hands to avoid passing these costs on to its customers.

Tui

In a not dissimilar boat to Wizz Air is tour operator Tui.  “Why did you fly us and hundreds of other people in when hotels are cut off by wildfires? Totally irresponsible,” tweeted Jess Bailey, a British tourist to tour operator Tui.  

The wildfires have been yet another unforeseen disruption for the travel sector at the start of what is the busiest time in the travel calendar. With flights cancelled and plenty of distressed holidaymakers, the survival of these travel companies’ reputations is hanging on how they handle a crisis - yet again.   

And it had all been looking so promising. Despite the cost-of-living crisis (which saw three-quarters of British holidaymakers who travelled abroad last year blow their budget for weekly spending by an average of 38%, according to research carried out by TUI), pent-up demand for travel meant sales were booming at the tour operator. 

Back in February it said summer bookings were ahead of pre-pandemic levels as travellers shrugged off cost of living concerns to enjoy the first full year of holidays without restrictions. It carried 3.3m customers in the first quarter, up a million on a year ago, and almost back to 2019 levels. Revenue at Tui reached €3.8bn thanks to positive winter and summer bookings in the three months to the end of December. Losses before interest and taxes were €158.7m, compared with a loss of €271.4m a year earlier. It had a decent first half, with a particularly strong Easter weekend and good numbers booked in for summer.   

News that strikes by some of the workers at Gatwick Airport involved in pay disputes had been suspended, meaning action scheduled to take place from 28 July to 1 August wouldn’t go ahead, felt like the travel industry had finally got a much-needed break. That was until the ferocious heatwave and the wildfires erupted. 

TUI is due to post its third quarter results on 9 August.

Bellway  

With the government plans to seize control of brownfield sites and relax planning restrictions to push through projects in urban areas, this could be boom time for the housebuilders; even if the government’s manifesto commitment to build 300,000 homes a year by the mid-2020s is likely to fall significantly short. 

Housebuilder Bellway posted a dip in pre-tax profits in its half-year results, even as revenue ticked up 1.6% on the back of inflation And with persistent talk of a property price crash, as the cost of living crisis continues and mortgage rates climb to a 15-year high, the housebuilders could certainly do with some much-needed positive news.  

The end of Help to Buy, which accounted for 22% of Bellway’s revenue last year, was a blow and is why the company said its forward order book is down to £1.6bn from £2.21bn this time last year. Bellway says it is “well placed” to build around 11,000 homes in the 12 months to 31 July 2023. That compares with 11,198 homes for the previous period and would only represent a slight decrease, but with houses being sold for less and construction costs higher, a drop in revenue and earnings for this financial year now seems likely. 

The question for investors is whether all this bad news has already been priced into the shares.  

Bellway’s next trading update is due on 9 August.

Persimmon 

A day after Bellway gives its trading update, we are due to get half-year figures from Persimmon and the expectation is that we’ll be looking at more of the same. Barratt, the UK’s largest housebuilder set the tone when it warned that demand for new homes was drying up. It saw the number of willing and able buyers fall by a third over the year to 30 June. 

The most recent update we have from Persimmon only covers the period to March, before interest rates climbed, but even in the first quarter, new home completions dropped by 42% compared to the same period last year. 

At that stage, according to chief executive Dean Finch, the group was still looking at full-year 2023 volumes coming in towards the top end of the previously indicated range of 8,000 to 9,000 completions. Whether that view has changed now in light of the hike in mortgage rates will be something to watch out for when Persimmon posts its half-year results on 10 August.

Five-year share price performance table

Past performance is not a reliable indicator of future returns

Source: FE, as at 26.7.23 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. Overseas investments will be affected by movements in currency exchange rates. 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.