Markets Defused is an easy-to-understand and straightforward recap of the week’s most engaging business and stock market news.
- Lloyds results were more or less as expected
- BT Group trading update failed to inspire
- British Gas owner slumped after profits “normalised”
- Vodafone’s decent financials supported forecasts
- Ford plummeted after it missed Wall Street forecasts
- IBM: AI-boosted financials beat expectations
- AMC blamed Hollywood for new profit warning
- Easyjet: upbeat financials and bright summer outlook
- Tesla profit fell 45% and it lost market share
- Google’s Alphabet mostly beat expectations
- Spotify cashed up on job cuts and subscriber growth
- Coca-Cola stock fizzed on stronger financials
- Reddit teamed up with US sports leagues
- Ryanair warned of softer summer fares
Lloyds results were more or less as expected
Lloyds Banking Group PLC (LSE:LLOY) on Thursday saw a small dip in price after releasing second-quarter results that underwhelmed, without offending.
“Pretty much in line with expectations”, was how one market reporter put it.
The company said the decline was due to tougher trading conditions and rising costs. Operating costs rose by 7% to £4.7 billion.
Lloyds retained its guidance for the year and said it was confident in meeting its targets.
The bank announced an interim ordinary dividend of 1.06 pence per share, up 15% from the previous year.
The company's Chief Executive, Charlie Nunn, highlighted the tougher-than-expected environment and pointed to stubborn inflation and a slower economic recovery as key challenges.
Whilst the bank was resilient in some areas, including lower-than-expected impairment charges for the motor finance kerfuffle and stable profit margins, the market's reaction has been less positive.
But what was the market saying? … here, we take a curated look at some of the commentary from the City of London’s talking heads.
BT Group trading update failed to inspire
BT Group PLC (LSE:BT.A) shares finished Thursday nearly 1% lower, after the telecoms blue-chip told investors that it had remained on track to deliver its financial outlook for the year.
Also, it said it was sticking with its existing cash flow targets up until 2030.
BT said tight cost controls helped increase earnings in the first quarter, despite a fall in revenue that was in line with expectations.
Looking ahead, it plans to double free cash flow over the next five years.
BT, meanwhile, continues to roll out fibre at apace, but associated increases in revenue have not matched kept up with the rollout.
In London, BT shares closed 1.1p or 0.8% lower at 138.65p.
British Gas shares slump after profits “normalised”
British Gas owner Centrica PLC (LSE:CNA) slumped on Thursday, losing just over 8% to close at 131.54p, after this morning reporting a significant drop in its first half profits.
Earnings (EBITDA) fell to £1.1 billion, down from £2.3 billion during the same period last year. British Gas, Centrica’s consumer-facing gas business, reported a first-half operating profits of £159 million, versus nearly £1 billion a year ago.
The utility pointed to a ‘normalisation’ of the international energy market, following the elevated levels in period following the war in Ukraine.
Centrica meanwhile increased its interim dividend to shareholders by 13%, to 1.5p, and extended its share buyback program by £200 million.
Natwest reported upbeat financials, analysts cheered
NatWest Group PLC (LSE:NWG) quarterly results were roundly cheered on Friday, with the banking share finishing the session at 361.9p, up just over 7% for the day.
The UK lender reported an operating profit of £3 billion – albeit, pre-tax profit was down 4.1% at £1.7 billion.
Additionally, Natwest announced the acquisition of a £2.4 billion mortgage book from Metro Bank adding to a recent deal to acquire Sainsbury's Bank accounts, adding about one million accounts.
It also revealed it had incurred £24 million in costs from an abandoned campaign, initially planned by the previous government, designed to privatize a portion of NatWest’s state-owned shares but was halted due to the early election call.
The government’s divestments of its holding in Natwest resumed following the election.
NatWest also upgraded its full-year profit forecast, expecting a return on tangible equity to rise above 14%. The bank’s net interest income fell by 2.4% to £2.8 billion.
Generally speaking, analysts praised the impressive earnings, improved margins, and strategic deal making. Now, here, we curate the most engaging and insightful comments from some of the City of London’s talking heads.
Vodafone’s decent financials supported forecasts
Vodafone Group PLC (LSE:VOD) shares traded higher on Thursday, closing up 2.2% at 72p, after the telecoms blue-chip reported a 2.8% rise in first-quarter revenue, to €9.0 billion.
Service revenue experienced organic growth of 5.4%, amounting to €7.5 billion. This growth was driven by strong performances in Africa and Turkey, though the German market saw a decline due to regulatory changes affecting TV service sales.
Elsewhere, Vodafone took a €6.1 billion impairment charge in Europe, primarily in Spain.
The company retained its full-year guidance, which anticipates an underlying cash profit of €11 billion and free cash flow of €2.4 billion.
Vodafone's chief executive, Margherita Della Valle, highlighted ongoing improvements and the company's focus on customer experience, business growth, and operational execution in Germany.
Ford stock dropped after it missed Wall Street forecasts
Ford Motor Company (NYSE:F) stock crashed more than 10% lower in Wednesday’s ‘afterhours’ trade, after quarterly results that the market evidently took to be dismal.
Ford pointed to the impact of persistent warranty issues, as the reason for the drop in its profitability.
Revenue for the quarter came in at $47.8 billion, shy of Wall Street’s consensus forecast of $48.09 billion.
Earnings per share was, meanwhile, significantly below expectations reported at 47 cents, versus 68 cents.
The carmaker revealed a 26% drop in operating profit to $2.8 billion compared to $3.8 billion this time a year ago.
The company is still sticking with full-year earnings guidance, which pitches earnings (adjusted EBITDA) between $10 billion and $12 billion.
In ‘afterhours’ trading, Ford stock gave up $1.44 or 10.3% priced at $12.27.
IBM: AI-boosted financials beat expectations
International Business Machines Corp (NYSE:IBM) shares turned higher in ‘afterhours’ dealing, after its second-quarter financials beat Wall Street expectations.
The IT firm reported $15.77 billion of revenue, ahead of consensus analyst' forecasts of $15.62 billion. At $2.43 per share, earnings per share was comfortably above the market’s forecast of $2.18. IBM said it generated $1.83 billion of net income for the quarter, equating to $1.96 per share.
Given the AI-boom perhaps it's unsurprising that IBM’s software division performed well with the unit’s revenue contribution coming in at $6.74 billion, which was a 7% improvement year-over-year.
IBM highlighted strong demand for its AI-related services – which includes machine learning OG ‘Watson’ as well as as its newer ‘Watsonx’ and the ‘Granite’ family of AI models. Growth in IBM’s AI business was sharp at $2 billion having doubled, adding $1 billion in the second quarter alone.
IBM, meanwhile, upgraded its forecast for full-year free cash flow which it now predicted to exceed $12 billion.
AMC blamed Hollywood for new profit warning
AMC Entertainment Holdings (NYSE:AMC) told investors (and memetraders) that it expects to report a net loss of $32.8 million for its second quarter of 2024, which would mark a reverse from the $8.6 million profit for the same period last year.
On 2 August, the company will release its actual results for the quarter.
The cinema operator blamed Hollywood – well, more accurately, the lighter movie release slate this year, which is a downstream impact of last year’s writers and actors' strikes.
It said that revenue for the quarter is projected to fall 24% to $1.03 billion.
This softness was seen in April and May, though AMC chief executive Adam Aron said there had been a rebound in June and daily revenues increased significantly.
In New York, AMC stock was down 38 cents or 7.6% changing hands at $4.70.
Easyjet: upbeat financials and bright summer outlook
easyJet PLC (LSE:EZJ) shares traded up on Wednesday, finishing the session more than 5% higher, thanks to upbeat financials for its third quarter.
The short-haul airline reported quarterly profit some 16% higher to £236 million. Revenue also saw an uptick, rising 11%, to £2.6 billion as the airline saw an 8% increase in passenger numbers, selling 28.1 million seats in the three months and marking a load factor (which measures how full flights are) of 90%.
Its package holiday business, EasyJet Holidays, meanwhile, upped its profits by 49% to £73 million.
Looking to the peak summer season, EasyJet highlighted that its bookings so far already cover 69% of its availability.
In London, EasyJet shares closed Wednesday up 22.4p or 5.34% at 450.1p.
Tesla profit fell 45% and it lost market share
Tesla Inc (NASDAQ:TSLA) reported a 45% drop in net income for the second quarter of 2024, as its electric vehicle sales volumes fell 7%.
Gross profit was steady at $4.5 billion, whilst net income had fallen to $1.47 billion from $2.7 billion this time last year. Whilst vehicle sales were down, second-quarter revenue of $25.5 billion was still 2% higher than last year.
Vehicle production numbers were, meanwhile, down 14% at 411,000 vehicles for the quarter. And, Tesla’s EV market share dropped below 50% for the first time ever.
At 52 cents, earnings per share was below the consensus Wall Street estimate of $0.62.
Google’s Alphabet mostly beat expectations
Google owner Alphabet Inc (NASDAQ:GOOG) reported second-quarter earnings mostly ahead of Wall Street expectations.
The company reported $84.74 billion of revenue for the quarter, up 14% compared to this time last year and better than the market’s consensus forecast of $84.19 billion.
Net income totalled $23.6 billion, which was handily above the consensus estimate of $18.4 billion. At $1.89 earnings per share was also ahead of Wall Street’s estimate of $1.84.
Spotify is cashed up thanks to job cuts and subscriber growth
Spotify Technology SA (NYSE:SPOT) New York listed shares jumped around 12% after the music and podcast streamer reported record quarterly profits.
Its second-quarter results highlighted a material turnaround, driven by a substantial improvement in margin, thanks to cost-cutting measures and fresh growth in its premium subscription business.
Revenue was up 20% for the quarter, at €3.81 billion, to drive a profit of €274 million, or €1.33 per share, compared to a loss of €302 million in the same period last year.
Wall Street analysts had expected €1.23 per share, on €4.17 billion of revenue.
Operating costs were reduced by some 16% following cuts to marketing spend and the axing of around 1,500 jobs (around 17% of Spotify’s workforce were let go).
Looking ahead, Spotify said it expects to add 13 million new users in the third quarter, including 5 million premium subscribers.
Coca-Cola stock fizzed on stronger financials
The Coca-Cola Company (NYSE:KO) saw its stock move higher on Tuesday as the soft-drinks and snacks behemoth raised its full-year guidance, after reporting a strong second quarter.
Revenue was up 3% to $12.36 billion, driven by volume growth of some 2% - gains in Latin America and Asia offset a decline in North America.The firm noted a successful phase of price increases and highlighted sales growth of its concentrate products.
On a per share basis, earnings (adjusted EBITDA) was up 7% to 84 cents, beating the forecasts of Wall Street analysts which had consensus pitched at 81 cents. Albeit, net income fell to $2.41 billion from $2.55 billion a year ago. Adjusted earnings per share rose by 7% to 84 cents, surpassing analyst expectations of 81 cents.
It wouldn’t be a financial report in 2024 without an AI angle, and today the soft drinks and snacks company told its investors that it is leveraging technology to enhance sales - testing an AI service to send personalized messages to retailers, resulting in a 30% increase in purchases of recommended products.
Reddit teamed up with US sports leagues
Reddit (NYSE:RDDT) shares traded higher, up more than 5%, with the buzz of a new brand partnership with America’s largest sports leagues - the NFL, NBA, MLB, PGA Tour, and NASCAR.
The social media company, in a statement, said the partnerships will see exclusive video content including highlights, behind-the-scenes footage, and player ‘AMAs’. On the platform the aim is to boost user engagement, meanwhile, on the business side, the collaborations aim to attract more advertising revenue.
It follows a test with NFL content, which found an improved purchase intent, brand favorability, and awareness among users.
Ryanair shares hit after it warned of softer summer fares
Ryanair Holdings PLC (LSE:RYA) New York listed shares plummeted nearly 20% in Monday’s trade, as Europe’s leading budget airline reported disappointing financials and warned of a softening of air fares this summer.
The airline’s first quarter profit fell by 46% to €360 million, as average fares declined 15% to €41.93.
Lower fares took a substantial bite out of Ryanair’s margins, given that passenger numbers actually increased to 55.5 million. Moreover, it warned that fares for the summer season will be significantly lower than last year.
On the other side of the airline’s ledger, operating costs rose by 11% as higher wages more than offset recent savings on fuel costs.