Equities Update: FTSE hits record high, Goldilocks scenario for US stockmarket bulls

Sharp gains for Experian help fuel new FTSE highs

Adam Vettese, analyst at investment platform eToro, says: “Strong corporate earnings continue to support the FTSE 100’s advance, with the index hitting a new all-time high on Wednesday. Credit reporting firm Experian pushed 8% higher after reporting strong full-year results, holding near its high by mid-afternoon in London and making it the biggest gainer in the index on the day by some margin.”

“Experian has delivered an encouraging performance over the course of its last financial year, with solid organic revenue growth across its various geographic areas of operation including eye-catching double-digit growth in Latin America. Crucially, this revenue growth flowed through into strong earnings growth.

“Adding to the feelgood mix for investors, the company announced a 7% dividend increase, along with forward guidance that points to 6% to 8% organic revenue growth in the year ahead and improving margins.”
 

US CPI report signals goldilocks scenario for stock market bulls

Bret Kenwell, US analyst at investment platform eToro, says: “Stock market bulls may have gotten another Goldilocks report, this time as inflation was mostly in-line with expectations. The not-too-hot report should boost investor confidence that we could see more than one rate cut from the Fed this year, which should be a positive for equities.

“After a series of higher-than-expected inflation reports to start the year, worries of reflation had surfaced as investor expectations for rate cuts continued to fade. Although energy prices jumped in April, utilities like electricity and gas services turned lower, while the all-important services component dipped slightly month over month.

“Coming into 2024, the bond market was pricing in upwards of six rate cuts this year. Now teetering between one or two cuts, an in-line inflation report should tip the scales toward the latter, while potentially allowing the discussion for three cuts — in-line with the Fed’s prior dot plot outlook — to gain some traction.”
 

Sage software paying off as margins and profits boosted

Adam Vettese, analyst at investment platform eToro, says: “It seems to be Sage by name and sage by nature with another update which includes profits, revenue and margins all expanding. The shares have been on a charge since the beginning of last year, rising 60%, which is all the more impressive given the challenging macroeconomic conditions we have experienced in that time. The HR and payroll provider has seen renewals and subscriptions remain robust even while small and medium sized businesses have faced higher costs, which demonstrates its importance to its customers.

“The outlook doesn’t seem to show any signs of momentum waning with new AI integration on the horizon and forward guidance affirmed. Investors will also be pleased so see a healthy increase in the dividend. It is very surprising to see shares down so significantly this morning and many investors could see this as an opportunity to get in at a discount.”

Revenues on the up for BT as investors are rewarded with dividend rise

Mark Crouch, analyst at investment platform eToro, says: “On the face of it, BT’s full year earnings look positive. Average revenues per user increased by 10% year-on-year, investors are getting a small bump in the annual dividend and the business added nearly 400,000 Openreach customers in Q4 alone.

“Under the bonnet however, things don’t look quite so rosy. While revenues increased, BT’s profits actually fell by 31%. Another growing concern is the firm’s mounting debt pile, which has risen by another 4% and now stands just short of £20bn. The company has set out £3bn of annualised cost savings to be reached by the end of 2029 and vowed to double free cash flow, which will go some way in countering this.

“The biggest issue BT faces is the ferociously competitive market in which they operate. Broadband providers seek to undercut rivals – forcing down prices which in turn has heaped pressure on BT’s margins.

“With hungry competitors ready to gobble up disgruntled customers, BT will have to work even harder to retain them. It’s no surprise then that the company has hinted at disposing of its global business in order to focus on the UK where they are working hammer and tongs, investing in a rapid rollout of full fibre broadband and 5G to millions of us by 2026.”

EasyJet looks to summer season to reverse winter losses

Mark Crouch, analyst at investment platform eToro, says: “EasyJet’s half year results indicate the company is making headway, albeit slowly. The winter period, which is always a case of damage limitations for the budget airliner, has been less severe, with EasyJet reporting a £61m reduction in losses for the period. EasyJet’s newest bases, Birmingham and Alicante, are achieving passenger numbers well above the network average and a tenth UK base at London Southend has been announced.

“With the peak summer season nearly upon us, the early signs are positive. Passenger numbers continue to climb, and bookings are gathering pace as sun-seekers seem determined to get away. EasyJet’s package holidays have stood out as a high-flyer, expected to deliver 40% year on year growth.

“As is always a potential spanner in the works for airlines, investors will have one eye on fuel costs, which have been creeping higher in 2024, weighing down EasyJet’s profit margins. Conflict in the Middle East has already cost the airliner £40m, causing chaos to flights, and should tensions re escalate it could send oil prices soaring, which for EasyJet will cause major turbulence.”