FTSE 100 round-up: AstraZeneca tip, Aviva, Glencore

A confident update by Aviva (LSE:AV.) and reassuring figures by Spirax Group (LSE:SPX) and B&M European Value Retail SA (LSE:BME) today played their part in keeping the FTSE 100 index above the 8000 threshold.

The blue-chip index started today’s session at a three-month low of 8012, having fallen from the near record level of 8385 seen towards the start of the current earnings season.

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The downturn reflects factors including the higher-for-longer interest rate outlook, the impact of a stronger dollar on the commodity sector and weakness for some heavyweight stocks.

The biggest of them is AstraZeneca (LSE:AZN), which is down by 14% over the past month after the company disclosed investigations by Chinese authorities into current and former staff.

To the best of Astra’s knowledge, the matters include allegations of medical insurance fraud, illegal drug importation and personal information breaches. It has said it will fully cooperate with the authorities and remains committed to delivering medicines to patients in China.

The investigation overshadowed Tuesday’s strong third-quarter results, which contained upgraded guidance for annual high-teens percentage growth in revenues and earnings per share.

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After the initially cautious response, shares have since risen by more than 4% to reach 10,248p.

The turnaround benefited from Tuesday’s subsequent disclosure of plans to spend $3.5 billion on growing its R&D and manufacturing footprint in the United States, part of Astra’s wider ambition to achieve $80 billion in total revenues by 2030.

Bank of America, which yesterday raised its bottom-line estimates for this year by 2%, said a current valuation of 14 times forecast 2025 earnings looked attractive. It has a price target of 14,500p, representing an upside of more than 40%.

The bank added: “We believe the share price move on China concerns is overdone, and coming quarters giving evidence of limited business impact should reassure investors.”

Glencore (LSE:GLEN) shares have also fallen by a double-digit percentage in the past month, leaving the mining giant close to its low point for this year at 373p.

This is part of an ongoing de-rating for shares after it paused top-up returns so it could focus on deleverage in the wake of buying the steelmaking coal business of Canada’s Teck Resources.

Shareholders are now wondering whether Glencore will bolster dividends alongside annual results in February or opt to pursue further growth through M&A, potentially involving a deal to buy the coal business of Anglo American (LSE:AAL).

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UBS recently held a poll of 46 mining investors, including many Glencore shareholders, and found that 57% favoured cash returns against 33% in support of growth through M&A.

The bank has a price target of 520p, believing that the miner is well positioned due its product mix and growth optionality. It sees the potential for Glencore to use the annual results to announce a distribution of about $4 billion  - equivalent to 6% market cap - through a base dividend coupled with a $2.1 billion special dividend or buyback. This falls to just the base dividend in the event of another coal acquisition.

Aviva shares have also struggled in recent weeks, easing from this summer’s peak above 500p due partly to fears over the cost of storm, hail, wildfire and flooding events in Ontario, Alberta and Quebec.

In today’s third-quarter results, the insurer reassured that strong operating capital generation had been sufficient to absorb the impact of these “exceptionally high” catastrophe events in its general insurance business in Canada.

Shares rose 18.8p to 473.5p as chief executive Amanda Blanc also reiterated full-year guidance, which includes mid-single digit growth in the cash cost of the dividend.

She said that trading had been “extremely positive right across the business”. General insurance premiums rose 15% to £9.1 billion in the first nine months of the year, with the UK performance ahead of expectations following growth of 18%.

Wealth net flows of £7.7 billion were 21% higher, driven by workplace pensions and strong demand from its financial adviser platform business. Aviva said the bulk purchase annuity market had been very active, with the company increasing volumes to £6.1 billion.

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Blanc said: “Quarter after quarter, we are delivering consistently superior results and growing Aviva, particularly in the capital-light businesses.” Morgan Stanley highlighted a price target of 560p after the results.

In other blue-chip updates, the thermal engineering firm Spirax rose 325p to 6695p after reiterating expectations for mid-single digit organic revenue growth for the full year. The profit margin is broadly in line with the 2023 performance of approximately 20%.

Shares are still down more than 30% this year, reflecting continued weakness in global industrial production and the uncertain China economic outlook.

B&M European Value Retail also recovered lost ground today, adding 14.5p to 394.3p after reporting half-year earnings rose 2% to slightly above City expectations at £274 million.

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Like-for-like sales in the UK fell 3.6% in the period, but the trend showed improvement in the second quarter after weather and calendar effects caused a 5% fall in the first quarter.

Bank of America has a price target of 600p and believes the de-rating for shares has been too extreme for a business that it expects to resume sales growth in 2025-26.

It said: “A return to like-for-like sales growth should help alleviate concerns about the structural story, as B&M remains well positioned in a UK market that doesn't feature the type of disruptors seen in the US.”