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“Markets struggled to find direction as investors were busy trying to digest a wave of corporate updates, some good and some bad. The FTSE 100 was flat at 7,634, the Stoxx 50 nudged ahead by 0.2% while the Dax was static,” said Russ Mould, Investment Director at AJ Bell.
“Maersk slumped after warning that an oversupply of container vessels would lead to price pressure and hurt its earnings. That suggests it is looking through the current Red Sea crisis which has caused capacity constraints and higher rates and is seeing longer-term pressures. The warning caused a tidal wave of worries in the sector and industry peer Hapag-Lloyd also saw its share price tumble.
“Unilever’s boss may have flagged areas of disappointment but a healthy increase in volume growth during its fourth quarter and a new €1.5 billion share buyback was enough to win over investors and give a boost to its share price, making it the biggest positive contributor to the FTSE 100 in terms of index points.”
Astrazeneca
“Many investors view AstraZeneca as invincible given its success in recent years, yet its latest results showed that even the mighty can disappoint.
“The drugs giant missed fourth quarter earnings expectations due to more money being spent on research and development and a greater contribution from lower-margin sales in emerging markets. However, the business remains optimistic about the prospects for its cancer and rare disease drugs.
“Pharmaceutical companies typically prosper from having a mixture of blockbuster products, treatments with limited or no competition, and a healthy pipeline of new drugs. AstraZeneca is under constant pressure to keep driving growth and that means success in the laboratory as well as products already on the market. AstraZeneca’s pipeline looks busy, but success is never guaranteed.”
Unilever
“A return to volume growth and improved sales margins on a group basis would suggest Unilever is getting back in the groove. However, the journey still has some way to go as there are pockets of weakness which it needs to resolve.
“Big brand companies like Unilever have faced a big test over the past two years. High levels of inflation prompted companies to push up prices as a way of passing on extra costs to the consumer. This could have gone one of two ways – consumers either pay more and continue to buy the products they love, or they trade down to cheaper alternatives.
“On the whole, Unilever has managed to pass on these extra costs without a significant decline in sales volumes. On a more granular basis, some areas have come under pressure from consumers opting for cheaper supermarket own-brand products such as with ice cream, or in the opposite direction as the public buy more super-premium products where Unilever has less of a presence.
“Trading down will remain a competitive threat for Unilever until interest rates start to fall and consumers feel more confident about their finances.
“One of the benefits of having a broad spectrum of brands is that the diverse portfolio will act as a cushion if a few areas go through a bad patch. However, it is interesting to note comments from chief executive Hein Schumacher that overall performance needs to improve. It shows the new boss is striving for more and that new-found energy needs to resonate across the whole business.
“Unilever has been a bit sleepy in recent years with accusations that it spent more time on ESG matters than it did on trying to drive the core business forward. Schumacher clearly wants to reinvigorate things and he will have his work cut out trying to achieve this goal as Unilever is a big juggernaut that will be hard to accelerate quickly.”
ARM
“UK investors feeling peeved that Cambridge-based chips champion ARM didn’t return to the London stock market will have that feeling magnified by the company’s latest update.
“ARM was a UK market darling before being taken over by Japan’s Softbank in the wake of the Brexit vote in 2016. Its model of creating and licensing semiconductor designs rather than manufacturing chips meant it was able to grow fast without employing a lot of capital.
“These attributes still exist and are now being supercharged by AI, and that is reflected in the substantially higher royalty and licensing revenue being reported by the company.
“The nature of its business model should allow ARM to be flexible and capitalise on this opportunity. This is significant given the current boom in AI chips relative to more sluggish sales for traditional hardware used in areas like personal computing.
“The company also saw strong growth in China, though there will be inevitable questions over whether its US stock listing could create headaches down the road given the strained relationship between Washington and Beijing.”
British American Tobacco
“Usually, a company announcing losses running into the tens of billions of pounds wouldn’t be cause for celebration among investors. However, British American Tobacco has done just that this morning and been rewarded with share price gains.
“The impairments which have tipped British American Tobacco into a mega loss are non-cash items, relating to a write-down of the value of its acquisition of the part of Reynolds American it did not already own in 2017. While the size of the write-down has grown slightly, it was previously flagged in December.
“There was also a nugget of good news in today’s results for the market to latch on to – the company has hit profitability with its ‘new categories’ products.
“These include its big vaping brands Vuse and Velo and these ‘new categories’ sales are seen as the company’s answer to declining levels of cigarette smoking in the West.
“Heated tobacco products are another area British American Tobacco is looking to expand in – although rival Philip Morris has stolen a march on the company in this market.
“As the push for new rules on vaping in the UK demonstrate though, the regulatory pressure on British American Tobacco is likely to remain unrelenting.”
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