Daily market update: Greggs, Barclays, AstraZeneca, WH Smith, Card Factory

“The FTSE 100 enjoyed another good start, lifted by positive market reaction to AstraZeneca’s numbers and Games Workshop delivering yet another strong set of results,” says Russ Mould, Investment Director at AJ Bell.

“It’s a busy week for corporate earnings in the UK and US, and investors have plenty of news to digest. The latest set of UK results were generally well-received apart from Barclays’ numbers which didn’t trigger the all-important upgrade to guidance from management.

“Gains were recorded across all the major European indices, with investors sitting more comfortably after the US/EU trade agreement at the weekend.

“In the US, the Vix measure of volatility sat at its lowest level since mid-February which indicates how investors are feeling much calmer after a whirlwind period on the markets.”

Greggs

“Greggs might have maintained full-year guidance, but its lack of information on current trading has left investors wondering if the business has become as stale as a day-old Belgian bun.

“There is a month’s worth of trading since the end of the reported half-year period, so the lack of information is perplexing. It’s an important four weeks for Greggs given it covers a time when the UK should be bustling with domestic and foreign tourists and people seeking food on the go.

“Some people might think no news is good news, yet it also begs the question as to why Greggs is keeping a lid on things. The lack of dividend growth is also telling, suggesting that management is cautious – although it does justify the decision on a plan to improve dividend cover to twice underlying earnings.

“This situation won’t stop the growing debate about whether Greggs has reached peak sausage roll. There are suggestions it has grown too fast, the menu is too bloated, and consumer tastes are changing. People want healthier options, and while Greggs has some of these in its stores, the core pastry-based items remain its bread and butter and the doctor says these should only be eaten in moderation.”

Barclays

“Barclays has turned in a respectable performance with notable growth on the corporate and investment banking side. Investors are being treated to a new share buyback programme and a small increase in the dividend.

“On paper, that should have been enough to win over the market, but the shares have slipped on the results. Investors will be disappointed at the lack of upgraded earnings guidance for the full year, particularly as second quarter profit beat expectations.”

AstraZeneca

“AstraZeneca has reminded the market why it commands a premium rating. The pharmaceutical company has beaten half-year revenue and earnings expectations, drug trial news flow has been generally positive, and it is making decent money to help fund big investment into manufacturing capabilities.

“Chief executive Pascal Soriot will be sitting comfortably with these results, and so are investors judging by the positive share price reaction.”

WH Smith / Card Factory

“WH Smith continues to slim down its portfolio, this time offloading its online greeting cards business Funkypigeon. It was inevitable that either Card Factory or Moonpig would buy this operation, as it was a direct rival, and the former has scooped it up. Paying five times EV/EBITDA looks a good deal, implying that WH Smith simply wanted to get rid of it at any price.

“Funkypigeon has always been non-core for WH Smith, a bright idea that just happened to wash its face. However, it’s of much greater value strategically to Card Factory as it should help it gain a stronger foothold in the digital channel for greetings cards. Card Factory plans to use the acquired technology platform to support its broader online operations, and there are operational synergies to enjoy as well.

“Investors seem to like the deal, perhaps focusing on the headline details rather than digging into the release where a cheeky trading update has been buried at the bottom of the announcement. First-half profit will be diluted by accelerating a technology upgrade project, but full-year guidance remains unchanged.”