Markets Defused is an easy-to-understand and straightforward recap of the week’s most engaging business and stock market news.
- Next’s surprisingly good sales … here’s what the market said
- BA-owner takes-off thanks to dividend return
- Intel nosedived on $10bn cost-cutting plan
- Apple’s forecast-beating financials get tepid response
- Amazon revenues were short of market forecasts
- Snap slumped as revenue disappointed three ways
- Rolls-Royce strong financials brought dividends back
- BAE impressed, but it was only as good as expected
- ARM plummeted after softer guidance spooked market
- Meta was boosted by bumper results
- GSK vax sales dented otherwise strong quarter
- Microsoft failed to meet high AI expectations
- AMD’s AI demand sends financials above expectations
- NatWest shares won’t be sold on the cheap
Next’s surprisingly good sales … here’s what the market said
Next PLC (LSE:NXT) was a standout UK stock this past week, with a ‘surprise’ strong performance revealed in Thursday’s trading update.
Outsized growth abroad was the focus of a lot of the analysis, whilst in the UK, the retailer had to contend with cost-of-living concerns and wash-out weather
Anyway, without further ado, here’s what the market’s top commentators had to say about it.
BA-owner takes-off thanks to dividend return
British Airways owner International Consolidated Airlines Group SA (LSE:IAG) shares traded higher on Friday, rising more than 5%, after it announced will pay its first dividend since the pandemic.
It also announced it has decided to bail out of a €500 million deal to acquire Spanish airline after IAG (which as well as BA also owns Iberia, Aer Lingus and Vueling) encountered friction on the anti-trust side, after the European Commission launched a probe into the deal back in January.
Meanwhile, quarterly financial results, released after Thursday’s close, revealed that operating profit ahead of market expectations at £1.2 billion – albeit it had reduced year-over-year from €1.2 billion in the same period of 2023.
Revenue for the second quarter climbed 7.7%, whilst the total for the first six months of the year improved by 2.8% to €14.7 billion. Free cash flow for the half amounted to €3.2 billion.
For shareholders, IAG is to pay out a 3 cents per share interim dividend.
Intel nosedived on $10bn cost-cutting plan
Intel Corp (NASDAQ:INTC, ETR:INL) shares nosedived in Friday’s deals, losing 27%, after news of huge job cuts added to earning’s headaches that emerged with last night’s earnings.
The microchip firm is axing more than 15,000 jobs as part of a plan to cut costs by $10 billion. It also announced it would suspend its dividend payout for shareholders, starting in the fourth quarter.
Intel’s earnings report for its second quarter, released after Thursday’s close, missed market expectations for both sales and profit. Revenue totalled $12.8 billion, below the forecasted $12.9 billion, and earnings per share were 2 cents, which was below the expected 10 cents.
Looking ahead, Intel pitched new and lower revenue guidance for its third-quarter anticipating between $12.5 billion to $13.5 billion, versus analyst consensus of $14.4 billion.
Apple stock got a tepid response to forecast-beating financials
Apple Inc (NASDAQ:AAPL, ETR:APC) investors found it hard to be moved by the iPhone maker’s third-quarter earnings – albeit last month’s big AI info-dump had left little room for surprises.
Revenue for the quarter was up 5% to a total of $85.78 billion, better than the $84.53 billion that was estimated by Wall Street analysts.
Net income was marked at $21.45 billion, whilst earnings per share was reported as $1.40 versus a market consensus estimate of $1.35.
Amazon dropped on revenues that were short of market forecasts
Amazon.com Inc (NASDAQ:AMZN) stock dropped around 7% in afterhours trade after revealing second-quarter revenue below market expectations.
Revenue for the quarter totalled $147.98 billion, rather than the $148.56 billion predicted by Wall Street analysts. Earnings per share (EPS) stood at $1.26, beating a market consensus of $1.03.
Amazon pitched guidance for its third-quarter sales in a range of $154 billion to $158.5 billion, which would be an improvement of 8-11% from the previous range – but was shy of a consensus mid-point estimate of $158.24 billion.
Snap slumped as revenue disappointed three ways
Snap Inc (NYSE:SNAP) shares collapsed in afterhours dealing, losing close to 20%, after the social media app disappointed thrice on revenue.
Revenue in Snap’s second quarter was reported at $1.24 billion which was slightly short of Wall Street estimates of $1.25 billion. Average revenue per user was reported at $2.86, below the $2.91 pencilled in by analysts.
Then, new guidance for the third quarter sees revenue between $1.335 billion and $1.375 billion, versus a prior ‘mid-point’ analyst consensus of $1.36 billion.
It comes, according to market commentators, as Snapchat continues to find tough competition for advertising dollars in a marketplace dominated by TikTok and Meta’s Instagram.
Rolls-Royce strong financials signalled a return to dividends
Rolls-Royce Holdings PLC (LSE:RR.) shares soared on Thursday, closing more than 9% higher, after the British engineer reinstated its dividend, for the first time since COVID.
At one point on Thursday, Rolls-Royce shares touched a new all-time high – trading up to 503p.
Revenue for the first half increased to £8.2 billion, from £7 billion in the same period last year. Underlying profit rose to £1.1 billion. Meanwhile, guidance for the full year was set, above prior expectations, between £2.1 billion and £2.3 billion.
It marks an upgrade of some £300 million on the last estimate provided by the engineer, back in February.
The company is now committing to shareholder returns via dividend for full-year 2024, with the payment expected to equate to 30% of underlying profit after tax.
BAE impressed but its financials were only as good as expected
BAE Systems PLC (LSE:BA.) shares fell on Thursday, closing nearly 1% lower, despite reporting a 13% increase in revenue for the first half of the year, to a total of £13.4 billion.
At the same time the UK’s leading aerospace engineer upgraded its full-year guidance for sales growth to 12-14%, up from the previous estimate of 10-12%, and, similarly, BAE lifted its profit growth forecast to 12-14%, up from 11-13%.
The interim dividend was increased 8% to 12.4p per share.
The company pointed to increased demand for its products amid ongoing geopolitical tensions, as well as a boost from its strategic acquisition of Ball Aerospace which completed in February to expand the company’s capabilities in the space sector.
ARM plummeted after softer guidance spooked market
Arm Holdings PLC (NASDAQ:ARM) shares hit the brakes and went into reverse in Wednesday’s afterhours trade, as softer than anticipated guidance evidently spooked the market.
The UK-headquartered, Japanese-owned and US-listed chipmaker told investors that it was forecasting second-quarter revenue between $780 million and $830 million – with the range falling beneath a prior analyst consensus estimate of $804 million.
Its first quarter was otherwise more than buoyant, driven by rising demand and investment in AI-capable processing technologies.
Revenue for its first quarter was up 39% year-over-year at $939 million, and was comfortably higher than the Wall Street analyst forecast of $902 million. Earnings (adjusted) per share came in at 40 cents, also ahead of market expectations of 34 cents.
Meta stock jumped on impressive market-beating forecasts
Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) jumped in Wednesday’s afterhours trade, after bumper second-quarter results that easily beat market expectations.
Revenue was up 22% year-over-year totalling $39.07 billion and was above the Wall Street consensus forecast which was pitched at $38.31 billion. Net income for the quarter was $13.47 billion, massively higher than the $7.79 billion reported this time last year.
Meanwhile, earnings per share rose to $5.16, from $2.98 a year ago, and was comfortably ahead of the $4.73 predicted by analysts.
GSK investors vexed as vax sales dented otherwise strong quarter
GSK PLC (LSE:GSK, NYSE:GSK) shares closed 2% lower on Wednesday, with its performance held back by lower-than-expected vaccine sales – with the firm’s shingles and chickenpox vaccine Shingrix notably impacted.
Nevertheless, GSK overall showed a strong set of second-quarter results, with sales up 13% to £7.88 billion, beating analyst forecasts of £7.51 billion. GSK highlighted a robust performances in its oncology and HIV treatments which contributed to an 18% rise in core operating profit.
The drug maker revised up full-year guidance, to see sales growth of 7-9% and core earnings per share (EPS) growth of 10-12%.
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.
AMD: AI demand sends financials above expectations
Advanced Micro Devices Inc (NASDAQ:AMD, ETR: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.
NatWest shares won’t be sold on the cheap by UK Govt
NatWest Group PLC (LSE:NWG) shares won’t go on sale to the British public at a cut-price, that’s according to the latest announcement from the UK’s new Chancellor of the Exchequer Rachel Reeves.
In a speech today Reeves cited the high cost such a scheme would cause the national purse.
The British government still intends to fully exit its shareholding in NatWest by 2025-26.
It comes after a review of the prior government’s plan to sell discounted shares, in a scheme that could potentially have introduced investing to a larger public audience.