Must read: new high for FTSE 100, oil, Disney, Wetherspoons, Direct Line

GLOBAL MARKETS

After hitting a record closing high on Tuesday, the FTSE 100 has opened higher again amid a sea of green across European indices.

Informa (LSE:INF) is the top gainer on the UK blue-chip index after an upbeat annual revenue forecast and an increase to its share buyback programme. Elsewhere in Europe, Anheuser-Busch InBev SA/NV (EURONEXT:ABI) and Wetherspoon (J D) (LSE:JDW) are enjoying an earnings boost while results for Bayerische Motoren Werke AG (XETRA:BMW) are punishing the automaker. 

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Oil prices are under pressure today, with Brent crude down around 1%, inching closer to $82 a barrel following reports that Russia’s deputy PM Alexander Novak suggested that OPEC+ is considering increasing crude production. Industry data also showed increased stockpiles of crude inventories in the US in a sign of weaker demand. Meanwhile, gold is trading lower on the back of a stronger US dollar. 

Amid the backdrop of persistent US inflation, Minneapolis Fed President Neel Kashkari said the US central bank will need to keep borrowing costs on hold for an ‘extended period’, potentially all year. But he said a rate cut this year is still a possibility. Investors will be listening for fresh clues today from Fed speakers Jefferson, Collins and Cook. 

Shares in The Walt Disney Co (NYSE:DIS) fell almost 10%, logging its worst session since 2022 after its traditional television business suffered an 8% quarterly revenue slide and this division’s operating profit slumped 22%. Investors shrugged off a surprise $47 million profit for its Disney+ and Hulu streaming services, versus a loss of $587 million in the same period last year. And its quarterly earnings per share came in at $1.21, also ahead of forecasts for $1.10. 

Lyft Inc Class A (NASDAQ:LYFT) and Reddit Inc Class A Shares (NYSE:RDDT) both staged gains after-hours on the back of stronger-than-expected results. Focus now turns to results in the US from Airbnb Inc Ordinary Shares - Class A (NASDAQ:ABNB) and Uber Technologies Inc (NYSE:UBER) later today.

JD WETHERSPOON

JD Wetherspoon said it expects profits in the current financial year to be towards the top of market expectations. Meanwhile, the pub chain reported year-to-date like-for-like sales up 8.3% and a 3.3% increase in quarterly total sales across the 13 weeks to 28 April. It opened two pubs this year and disposed of 18, generating a net cash inflow of £6.8 million. 

According to Chairman Tim Martin, Wetherspoons has enjoyed a boost from a rebound in demand for traditional ales which was weak immediately after Covid, as well as strong appetite for Guinness and vodkas which are selling well among younger generations. Wine has also been on the comeback while sales of Lavazza coffee have increased. 

Wetherspoons faced tough year-on-year comparisons during the quarter, given that the same period last year enjoyed a bank holiday boost, whereas the day off work fell outside the quarter in 2024. Nonetheless Wetherspoons has proven that customers still enjoy visiting its pubs and remain willing to spend despite cost-of-living pressures. That’s thanks to its low prices and long opening hours which separate its pub chains from the competition. Price sensitive customers may be curtailing their spending in more expensive restaurants and bars, but are trading down to cheaper boozers instead which plays well into the hands of Wetherspoons. 

For investors though the story is more challenging, with shares in Wetherspoons down over 7% year-to-date. The company hasn’t paid a dividend since 2019, and until profit returns to pre-Covid levels it is unlikely to resume that payout. It only managed to return to profitability for the first time since the pandemic in October, following three consecutive annual losses in 2020, 2021 and 2022. 

Wetherspoons is also facing difficult cost pressures from wages to energy which are punishing the stock despite resilient demand. There’s a lack of confidence too from the analyst community with mostly ‘hold’ recommendations on the stock. Today’s full-year profit forecast has provided a boost to shares of more than 2.5% helping to narrow its year-to-date stock market losses. 

DIRECT LINE 

Insurer Direct Line Insurance Group (LSE:DLG) has made a robust start to the new financial year. Gross written premiums at its ongoing operations during the first quarter are up 15% from a year ago to £706.8 million. Core category motoring is up 18.3% to £424.3 million, with home related insurance premiums up 14.2% to £147.3 million.

A repricing of its motor insurance offering was behind a 1.8% fall in total policies year-over-year to 9,268, as management expected, with home related policy numbers seeing modest growth. A further detailing of its refreshed strategy is expected at a Capital Markets Day on 10 July. 

Overall, for investors, a near 40% drop in the insurer’s share price over the last five years offers clear room for improvement. The FTSE 250 insurer lacks the overseas exposure of FTSE 100 rival Admiral Group (LSE:ADM). Climate change is arguably making the weather evermore unpredictable, while rival insurance providers such as Aviva (LSE:AV.) also offer business diversity given their exposure to other areas such as savings. 

On the upside, the company announced plans to realise £100 million of annualised cost savings to the end of 2025 after rejecting a takeover approach from Belgian insurer Ageas SA/ NV (EURONEXT:AGS). The relatively new chief executive Adam Winslow has been busy strengthening his management team, the dividend payment has been reinstated, while any further stumbles could put Direct Line back in the takeover spotlight. 

For now, and given new management, an evolving strategy refresh plus hopes for growth in the dividend payment, City opinion currently points towards a ‘buy.’

Direct Line written by interactive investor equity analyst Keith Bowman.