Our head of investment rounds up the morning's big news.
After UK markets rallied on Wednesday, with British housebuilders enjoying their biggest percentage gain since 2008, European markets have opened mixed with the FTSE 100 extending gains, trading back above 7,600.
Housebuilders are in the green again, with Persimmon (LSE:PSN) towards the top of the blue chip index. Miners are also rallying with Anglo American (LSE:AAL) leading the charge after it reported strong first-half copper production.
Premier Foods (LSE:PFD) reported first quarter group sales up 21.1% year-on-year and said it expects full-year profit to come in at the top end of market expectations. It said the recent period of input cost inflation is past its peak, with no further price increases planned for the rest of 2023.
The company behind Mr Kipling cakes and OXO cubes has enjoyed strong sales thanks to the resilience of its product offering. Its well-known, well-loved brands in the consumer staples category have enjoyed strong sales despite price increases and the cost-of-living crisis. Its brand investment and innovation around new products have supported customer demand, allowing Premier Foods to forecast a strong full-year performance. With inflationary pressures starting to cool, pressure on margins is easing, allowing the company to refrain from further price hikes, which should help support demand.
Shares have outperformed the wider market so far this year, up over 17% with shares in the green today.
INTERNATIONAL DISTRIBUTION SERVICES (ROYAL MAIL)
International Distributions Services (LSE:IDS) has appointed Martin Seidenberg as its new CEO who will take up the post next month. He is being promoted from GLS CEO, a role he has held since June 2020. The company said Seidenberg will be appointing two new CEOs of its GLS and Royal Mail divisions.
Meanwhile, group first quarter revenue rose 0.3% while Royal Mail revenue fell by 4% and GLS revenue grew by 7.4%. The group’s outlook remains unchanged, aiming for adjusted operating profit in 2023-24. Domestic and international parcels revenue fell while letters revenue grew.
Last week, the dispute between Royal Mail and the Communication Workers Union (CWU) representing staff officially, ended after a pay deal was reached in April between the two following months of strikes last year.
Investors are cheering the appointment of a new CEO to help steer the letters and parcels company in a more positive direction, after the recent turmoil with heavy industrial action, a structural decline in demand for letters and the end of the pandemic-era boom in parcel deliveries with the increased preference for in store shopping over e-commerce.
Despite a better-than-expected performance for letters, Royal Mail continues to struggle, with revenues under pressure while GLS outperforms. Focus for Seidenberg will be to revamp Royal Mail and to call on the government to reform the Universal Service. However, last month, the government blocked Royal Mail’s plans to axe Saturday letter deliveries.
Shares in IDS are trading higher today, bringing its year-to-date gain to over 20%, outperforming the FTSE 100 and FTSE 250.
Tesla Inc (NASDAQ:TSLA) reported second quarter earnings per share of 91 cents beating analysts’ expectations for 82 cents and up from 76 cents in Q2 last year. Revenue jumped 47% to $24.9 billion, $500 million higher than forecasts. However, its automotive gross margin fell to 18.1% from 19% in the first quarter, and sharply lower than 26% a year earlier, sending shares lower by over 4% after-hours. And overall gross margin hit 18.2% fell to the weakest level in 4 years.
Amid the macroeconomic backdrop of sluggish global growth and a softening consumer, Tesla has been cutting prices several times to try to preserve demand. However, this has been weighing on its profit margins. Despite this, Elon Musk did not shy away from suggesting there could be further price hikes to come in ‘turbulent times.’
Tesla is focusing on expanding market share at a fiercely competitive time for the electric vehicle (EV) market, with many traditional automakers bringing new models to market. Plus there is stiff competition for global penetration from Chinese EV players like BYD. Tesla has also been investing heavily in R&D to try to capitalise on this year’s AI boom.
Shares in Tesla have been rebounding significantly this year, after last year’s ‘tech wreck’ which heavily punished the stock. However, there’s still a long way to go to reclaim the post Covid highs.
Netflix Inc (NASDAQ:NFLX) reported weaker-than-expected third quarter revenue and its revenue outlook for the current quarter also came in shy of estimates, sending shares in the streaming giant sharply lower after-hours. That’s despite a strong rebound in subscriber numbers, adding 5.9 million customers in the second quarter, almost three times higher than Wall Street analysts’ expectations.
Netflix has been navigating the challenging macroeconomic backdrop by introducing a cheaper ad-supported model and clamping down on password sharing, boosting subscriber numbers. However, the streaming sector has become fiercely competitive, with a slew of competitors like Disney Plus, Amazon Prime, HBO, Hulu and more. While it has been adding new subscribers, many have been in countries where Netflix charges lower prices, having a more modest positive effect on revenue than analysts had expected.
Shares in Netflix have been bouncing back in 2023, after the tech sector turmoil last year. However, it faces a daunting task ahead as the competition for eyeballs intensifies and household budgets continue to feel the squeeze.
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