Markets Defused is an easy-to-understand and straightforward recap of the day’s most engaging business and stock market news.
- Microsoft fell as financials failed to meet high AI expectations
- Starbucks stock jolted higher as turnaround eyed by investors
- AMD soared as AI demand sends financials above expectations
- Lloyds dropped with investors uneasy over motor probe
- Diageo shares dropped despite surge in Guinness sales
- BP’s latest bumper earnings beat expectations
- Greggs dividend boon boosted shares
Microsoft down as financials failed to meet high AI expectations
Microsoft Corp (NASDAQ:MSFT) stock dropped in Tuesday’s ‘afterhours’ trading, losing 3%, after its Azure cloud services operation saw revenues on the light side of market expectations.
The IT giant’s Intelligent Cloud business, which stands over Azure, generated some $28.5 billion whilst the consensus market forecast was pitched at $28.7 billion.
Such has been the general bullishness over AI in the market in 2024, this minor miss for one subsidiary overshadowed what otherwise read as a positive quarter.
Microsoft reported fourth-quarter group revenue of $64.7 billion, better than the $64.39 billion predicted by the market, and, earnings per share of $2.95 beat the consensus forecast of $2.93.
Net income for the quarter was $22 billion, up 10% year-over-year.
The stock was trading down because investors were hoping for an acceleration in cloud growth driven by AI investments, that’s according to Amish Patel, head of equity research at UK stockbroker Charles Stanley (LSE:CAY).
“Ultimately, the payoff from AI investments will take time and we continue to believe Microsoft remains well placed to benefit from AI adoption,” Patel said in a note.
In afterhours trade, Microsoft shares traded as low as $390, but had recaptured some ground – down $14.93 or 3.53%, priced at $408.38.
Diageo shares dropped despite surge in Guinness sales
Diageo PLC (LSE:DGE) shares closed Tuesday’s session more than 5% lower, after its full-year financials fell short of market forecasts.
The Guinness and Smirnoff owner’s group sales for the twelve months to 30 June declined 0.6%, with North American sales down 2.5% and Latin American and Caribbean dropping 21.1%.
Beer sales, meanwhile, were up18% globally thanks mostly to the Guinness brand enjoying a strong year – and, notably, the popularity of the its alcohol-free versions.
Diageo lifted its marketing spend by 4%, with the money pouring into its tequila, beer, and Johnnie Walker brands.
“[It] was a challenging year for both our industry and Diageo with continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves,” chief executive Debra Crew said in a statement.
Crew added: “With iconic brands that have been enjoyed for decades, Diageo takes a long-term view, and will continue to invest in our brands, people and diversified footprint to deliver sustainable long-term growth and generate shareholder value.”
In London, Diageo shares finished 129.5p or 5.08% lower priced at 2,418p each.
AMD soared as AI demand sends financials above expectations
Advanced Micro Devices Inc (NASDAQ:AMD) stock soared in Tuesday’s ‘afterhours’ trade, thanks to second-quarter financial results that surpassed Wall Street expectations.
Revenue for the quarter came in at $5.83 billion, exceeding the consensus analyst forecast of $5.72 billion.
Earnings (adjusted) per share similarly beat expectations, albeit slightly, reported at $0.69 versus $0.68.
AMD highlighted significant growth in its Data Center segment, which saw a 115% year-over-year increase in revenue, rising to $2.8 billion, driven by strong sales of AI chips. The company said it sold over $1 billion worth of its MI300 chips sold in the quarter.
At the same time, AMD's Client segment also performed well, with revenue rising to $1.5 billion, up from $998 million in the same period last year, and, it also noted an ongoing recovery of the PC market.
AMD predicted third-quarter 2024 revenue to be approximately $6.7 billion.
The stock gained $10.19 or 7.4% following the release of the results, in the afterhours session, with the chipmaker priced at $148.70.
Starbucks stock jolted higher as turnaround eyed by investors
Starbucks Corp (NASDAQ:SBUX, ETR:SRB) stock jolted higher in Tuesday’s afterhours trade as investors in the coffeeshop chain brushed off what would superficially appear to be downbeat financial results.
Signs of improving cost control and upbeat executive commentary around the previously announced ‘action plan’ were, evidently, reason enough to be cheerful.
Third quarter revenue, meanwhile, was down 1% year-over-year to $9.11 billion, missing market consensus estimates for $9.2 billion.
Global same-store sales declined by 3%, including a 2% drop in North America.
Earnings (adjusted) per share came in at $0.93 per share, which was a shade above forecasts pitched at $0.92.
“Our three-part action plan is beginning to work and driving operational improvements that we expect to improve financial performance,” chief executive Laxman Narasimhan said in a statement.
Whilst chief financial officer Rachel Ruggeri added: “Our efficiency efforts, which are tracking ahead of expectations, partially offset investments associated with the cautious consumer environment.
“Collectively, our disciplined approach enables us to preserve both balance sheet strength and flexibility, positioning us to successfully navigate through the current macroeconomic environment.”
Starbucks stock traded as high as $80.50 after the results, and having settled somewhat was up $3.12 or 4.11% priced at $79.06.
Lloyds shares fell with investors uneasy over motor probe
Lloyds Banking Group PLC (LSE:LLOY) shares dropped more than 2% as the market reacted to the latest news regarding the UK’s potential clampdown on the motor financing trade.
Britain’s Financial Conduct Authority (FCA) on Tuesday announced it was extending its review of the sector, delaying a conclusion of the probe to May 2025 – rather than September 2024.
The FCA is investigating whether consumers were overcharged, via arrangements previously banned in 2021.
And, the watchdog is also now considering a redress scheme to compensate affected consumers.
In London, Lloyds shares closed at 60.82p, down just less than 0.5%, having traded as low as 59.70p at one stage in the day.
BP reported its latest bumper earnings, beating expectations
BP PLC (LSE:BP.) shares traded on the back foot on Tuesday, losing 0.3% by the close, after revealing second-quarter earnings of $2.8 billion. It was comfortably ahead of expectations which were pitched at $2.6 billion.
On a per share basis, it equated to 17 cents per share, beating the forecast of 15 cents.
It followed a strong performance, despite earlier warnings in the year.
BP announced an upgrade to its dividend, moving the interim payment to 8 cents per share and at the same time reported that it intended to buy back a further $1.75 billion of its shares – now, the oil firm expects to spend a total of $7 billion this year on such purposes.
In London, BP shares closed slightly lower losing 0.3% to finish at 451.65p.
Greggs dividend boon boosted shares
Greggs PLC (LSE:GRG), the baker, reported improved pretax profit for the first half of the year, but noted higher costs.
Nevertheless, a promise of higher dividend payouts boosted investor sentiments despite the softer financial print.
Greggs is raising its interim dividend to 19p from 16p.
The high street food chain, meanwhile, reported to investors a pretax profit of £74.1 million for its first half trading, compared to £63.7 million a year ago.
Meanwhile, Greggs said it expected cost inflation to remain between 4% and 5%.
Sales, meanwhile, rose to £960.6 million from £844 million, and, in its non-franchised stores the like-for-like sales growth was measured at 7.4%.