SSE earnings preview

Tuesday, 16th May 2017 14:56 - by Rajan Dhall

Oh dear rising energy prices! HSBC recently downgraded the company due to the Co. rising prices for domestic customers from 1 April 2017 by 6.9%, or £73 per year. In a note to clients, SSE stated that: “According to a statement published by the Telegraph on 17 March, Prime Minister Theresa May stated that the government is considering how to ‘step in’ to control energy prices because the market is 'manifestly not working” for consumers'”.

This could therefore mean that the utilities companies may then face a cash constraint which might impede their ability to grow dividends.

From a technical perspective the sector is underneath the value area at present, given the recent information about PM May's price cap this is probably warranted. If the company reports well look for the value area of 1500p as the first target, but if the report is weak 1400p may be the target near the trendline under current price. Volume has recently pressuring price as any move higher has been quickly rebuffed by large volume on the sell side and at extreme levels 1380p could also provide support.

This is not only the case for SSE, all of the major gas companies have increased their prices. Interestingly the spread between Centrica and SSE has contracted leading into the report. This could be due to both JPM and Cazenove both downgrading Centrica in quick succession. Also another thing to mention is that wholesale gas prices have risen some 20% since March so we may see some mention of this too.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.