eToro: Talking equities

Disappointing AstraZeneca earnings drag on FTSE – Mark Crouch

Drugmaker AstraZeneca today plunged around 7% after reporting weaker-than-expected earnings. The company issued strong guidance for growth in 2024 and its revenue numbers were solid, but there were some red flags for investors, including rising costs and softer-than-expected margins.

AstraZeneca has a considerable influence on the FTSE 100 as one of its highest weighted components and if not for its negative influence, the index would otherwise be in the green today. At the other end of the spectrum, packaging companies DS Smith and Smurfit Kappa were among the top gainers in the FTSE for a second day in a row, with Smith soaring more than 10%.

These firms enjoyed a boom during lockdown, riding on a swell of e-commerce activity, but volumes suffered last year from changing consumer habits. Smurfit Kappa CEO Tony Smurfit yesterday said he thinks the worst is behind them though and the recent flows of money into these stocks suggests the market is buying into this perception of having passed an inflexion point.

BAT could be in for a slow burn in 2024 – Adam Vettese

It’s been evident for some time that cigarette companies will need to reinvent themselves as smoking rates decline and non-combustible alternatives become more and more popular. British American Tobacco has been going through this process for a few years now, and after a tough 2024 which saw 30% trimmed off its share price, its latest profits have beat estimates.

However, these profits, along with dividend growth of 2%, may not be quite enough to appease shareholders who have taken quite the hit in the last 12 months, some of whom may be joining the flurry of litigation currently being filed against the firm. This morning’s bid in the share price will be welcomed but against the prospect of a slow recovery in the US, 2024 may not be a comfortable ride.

Big tobacco has generally been able to corner the market over the years but with the vape industry fast-moving and highly competitive, there are question marks over whether the old guard are the ones who really know what these consumers want.

Unilever posts a strong finish following new CEO appointment – Mark Crouch

Once a consistent outperformer of the FTSE 100, Unilever has struggled since the pandemic. Upon his appointment last July, new CEO Hien Schumacher vowed to turn the company around, with a focus on the 30 biggest brands, which generate over 70% of turnover, whilst moving away from social justice messaging pressures that he feels are acting as a distraction.

Investors will be pleased to hear that the new man in charge is starting to deliver, with increases in underlying profit, EPS and free cash flow in 2023, in addition to the welcome news of a 1.5bn Euro share buyback scheme to commence in Q2 this year.

Inflation has been a giant thorn in the side of every consumer goods retailer so having established household names like Dove, Magnum and Hellmans to fall back on is vital when price increases are necessary to maintain healthy profit margins. So far, these popular brands have held up, however the longer cost of living pressures squeeze consumers, the more chance that we’ll see customers avoiding premium labels and trading down to cheaper store-brand alternatives.

Chinese CPI fell at fastest pace since 2009 Josh Gilbert

 
“There was no respite for China today, as consumer prices fell at their fastest pace since September 2009, marking four straight monthly declines with deflation showing signs of being entrenched at -0.8% year-over-year.

“There was some optimism at the start of this week that policymakers would take action on China’s stock market rout, which lifted the CSI300 index, but today’s news may dash those hopes.

“However, this bad news could actually be good news. Today’s result is further evidence that the economy needs support. There needs to be a big lift in demand in order to see China lift out of deflationary territory, and that needs to come in the form of a more aggressive policy stance.

“There is a risk is that we may not see that, which would further dent confidence, hold back spending and ultimately mean the rout in Chinese equities ensues.”