Interactive Investor

Rolls-Royce, BP, Shell, Glencore among FTSE 100 stocks in demand

18th May 2022 15:34

Graeme Evans from interactive investor

Blue-chip shares were mostly lower Wednesday, but these big names have proved popular. Here’s why.

Sideways trading by the FTSE 100 index masked some big individual moves today as Rolls-Royce (LSE:RR.) shares made an unexpected jump and oil giants BP (LSE:BP.) and Shell (LSE:SHEL) rallied.

Other stocks on the front foot included British Land (LSE:BLND) after the retail landlord’s reassuring annual results and insurer Aviva (LSE:AV.) moved higher as its first-quarter update showed continued momentum across its life and general insurance operations.

Offsetting their progress were retail stocks after today’s 9% inflation figure did little to ease cost of living concerns, particularly following last night’s Walmart (NYSE:WMT) profits warning. Tesco (LSE:TSCO) and JD Sports Fashion (LSE:JD.) were among those down 3% today.

The FTSE 100 index stood 15 points weaker overall at just above 7,500, while the domestic-focused FTSE 250 index put on more than 90 points at one point to 20,156 after a buoyant reaction to updates from Premier Foods (LSE:PFD), Vesuvius (LSE:VSVS), Coats (LSE:COA), and Vistry (LSE:VTY).

Their shares rose by between 7% and 14%, whereas in the FTSE 100 Rolls led the way with a surge as high as 6%, or 4.6p to 85.8p. The engines giant slipped below 80p earlier this week despite recently sticking by guidance for 2022 and declaring medium-term expectations for civil aerospace revenues to grow by a low double-digit percentage.

A margin in the high single-digits is also forecast by 2024/25, which bosses referenced when they met analysts and investors at a civil aerospace site visit in Derby last Friday.

Today’s share price rise came even though Bank of America yesterday cut its price target by 20p to 80p. The bank’s analysts claimed that margin guidance is weak versus peers despite a high level of cost cutting and that cash flow targets are being flattered by low levels of R&D spending.

The bank said: “While it was very clear from the investor day that Rolls-Royce has made progress on the cost base in the civil aerospace division, the longer-term group strategy remains a concern for us.

“In particular, we note the size of the investments being made into the 'New Markets' division, which will remain a cash drag for the foreseeable future, in our view.”

Elsewhere in the top flight today, broker upgrades supported shares in the oil sector after HSBC raised its target prices on Shell by 150p to 2,700p and BP by 15p to 455p. A surge in the Brent crude price to $113 a barrel, driven by hopes of a demand recovery after China relaxed Covid restrictions, also helped as Shell lifted 47.5p to 2,398p and BP by 8.95p to 430.2p.

Other broker moves today saw Liberum raise its price target on miner Glencore (LSE:GLEN) from 545p to 610p, but Vodafone (LSE:VOD) shares slipped back below 120p after a flurry of downgrades to reflect its caution on the 2022-23 outlook in yesterday’s annual results.

Analysts at Barclays and Credit Suisse continue to see upside potential but have lowered their price targets by 5p and 10p to 150p and 140p respectively.

Aviva shares were higher after chief executive Amanda Blanc reported the company's best first-quarter sales in general insurance for a decade. She added that UK customer numbers were up by over 100,000 in the last year to 15.4 million, helping life sales to grow 2% to £8.4 billion and the wealth division to lift assets under management to £2.7 billion.

Aviva is in the process of returning £3.75 billion to shareholders through a B share scheme, which should complete on 31 May. Shareholders will receive one B share for each existing ordinary share held, with B shares redeemed for cash.

British Land, meanwhile, rose 11.6p to 518.2p after it reported net tangible assets per share of 727p, a rise of 12.2% as the value of its portfolio improved 6.8% to £6.73 billion.

The property firm, which is focused on London workplace campuses as well as convenience and online shopping within retail & fulfilment, posted a profit of £958 million from a loss of more than £1 billion the year before.

In the context of higher inflation, British Land said it was seeing investors rotate out of bonds and increase their allocations to real estate, particularly in sub sectors with strong pricing power and affordable rents.

In the FTSE 250 index, Mr Kipling to Sharwood’s firm Premier Foods jumped 15.2p to 121.8p after it reported better-than-expected full-year results and offered a reassuring update on current trading as it works to offset inflationary pressures.

Analysts at Peel Hunt have a price target of 145p. They said: “The shares look excellent value given the strong underlying revenue, market share and margin performance, combined with healthy cash generation and improving pension.”

The company underlined its confidence by growing the full-year dividend by a fifth to 1.2p a share. It will be paid on 29 July and comes after Premier’s first award for 13 years last year.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.