Our regular look at the FTSE 350 and a selection of other companies reporting from 23 to 27 January 2023
- Will Microsoft spark a new era for artificial intelligence?
- High hopes for easyJet flying in less turbulent skies
- Tesla falls amidst worries of slowing global demand
- Can Tate & Lyle keep the magic formula working?
- Will Diageo still be raising a glass to growth from its premium brands?
Microsoft, Q2 Results, Tuesday 24 January
Matt Britzman, Equity Analyst, Hargreaves Lansdown: “Microsoft [NASDAQ:MSFT] will be hoping to get 2023 off to a better start than it ended 2022 when it reports second quarter results next week. Back in October, markets were disappointed by a lacklustre first quarter that saw profits fall due to a combination of higher costs and softer demand.
We’re expecting to see second quarter revenue of $52.35-$53.35bn, a miss could add pressure considering this guidance was already some way below expectations when it was issued in October. We’ll also been on the lookout for any information about the potential acquisition of a stake in OpenAI, for around $10bn. OpenAI grabbed headlines with the launch of ChatGPT, an AI system that can answer questions in a human like interaction.
The implications of the underlying technology could be far reaching and this deal, along with the implied valuation of OpenAI, mark a potential turning point for broader adoption of artificial intelligence.”
easyJet, Q1 Trading Statement, Wednesday 25 January
Susannah Streeter, Senior Investments & Markets Analyst, Hargreaves Lansdown: “There are high hopes that the headwinds which faced easyJet [LON:EZJ] have calmed, and that the airline is flying into less turbulent skies. Airport disruption earlier in the year was hugely frustrating and the cost-of-living pressure still facing the company is considerable, with a recession still looming which could make customers more cautious. However, so far, pent up demand seems to be translating into strong bookings for the industry as a whole, with airline ticket inflation rising by 44% in December according to the ONS.
If easyJet has been able to capitalise on this surge in appetite for travel, it bodes well. easyJet has proved it’s super-successful at squeezing more revenue from seat bookings with so-called ancillary revenues. These are add-ons for extras like luggage, on-board meals and legroom. This should also be a strong growth lever for the company over the longer term. The focus on short-haul, rather than long-haul, trips should also bode well, given that travellers who are still money conscious might baulk at the cost of a ticket to the US, but may still be willing to shell out for a quick European jaunt.”
Tesla, Q4 Results, Wednesday 25 January
Susannah Streeter, Senior Investments & Markets Analyst, Hargreaves Lansdown: “Twitter has been such a major distraction for Elon Musk, investors have been concerned that he does not have his eye on the ball when it comes to Tesla’s operations, and that’s partly why the stock fell hard last year. But worries about slowing global demand and the nervousness hanging over the tech sector have also played a part.
The carmaker clearly needs some razor-sharp focus at a time when its being shaken by expectations of falling demand in China, the world’s largest car market, where it already has some formidable rivals such as BYD. There are hopes that the easing of the zero-Covid policy will smooth out the path for Tesla ahead, which has helped lift shares in recent weeks. Investors will be searching for signs that there is indeed a brighter outlook for China that in this update. However, any significant improvement in the outlook is likely to be delayed by worries about rising infection rates across the vast country, which are adding to production concerns.
Although 2022 was a record year for Tesla [NASDAQ:TSLA], in the last quarter deliveries came in below market expectations, signifying how the market has become tougher. Longer-term though, the prospects look brighter. Europe is set to be an EV engine for growth given the ban on the sale of new fossil fuel powered cars by 2035. Tesla has opened a huge new factory in Germany, with another one planned, which should mean it’s well placed to capitalise on the upswing in demand in Europe, as long as the infrastructure grows to match. Tesla’s gigantic giga-factories are expensive to ramp up, but once their costs have been covered, a greater proportion of each car sold drops through to profits. “
Tate & Lyle, Q3 Trading Statement, Thursday 26 January
Matt Britzman, Equity Analyst, Hargreaves Lansdown: “First half performance from Tate & Lyle [LON:TATE] showed resilient demand and a good control on costs, which ultimately helped sales and profits push higher.
Acquisitions are a key part of management’s plans, and the balance sheet’s sitting in a very healthy positions following free cash flow of £62m over the first half. We wouldn’t be surprised to hear news of more add-on acquisitions in next week’s trading statement.
There were some headwinds though. Supply chain issues lingered, strikes in Europe hurt Food & Beverage Solutions (FBS) volumes and performance from the Primient joint venture was a little lighter than expected. Whilst supply chain issues may linger, we’re hoping to hear positive news on FBS and Primient. The latter of which should start to benefit from price hikes over the second half.“
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Diageo, Half Year Results, Thursday 26 January
Derren Nathan, Head of Equity Research, Hargreaves Lansdown: “The Guinness producer has a portfolio of well-known brands that include the likes of Baileys, and Johnnie Walker Whiskey, as well as emerging no and low alcohol products. Last year’s performance benefitted from double digit growth in both price/mix and volumes. Drivers included strong demand from drinkers retuning to pubs and restaurants, and a particularly good result from Diageo’s higher end brands.
Overall revenue growth is set to have slowed somewhat. But last we heard, Diageo [LON:DGE] had enough confidence in its brand power to re-iterate its medium-term guidance of organic net sales growth in the range of 5% to 7%, and organic operating profit growth between 6% to 9%, out until 2025. The forthcoming half year results will reveal whether Diageo remains on track to meet these targets in the face of a challenging economic and geopolitical environment.”
This article has been brought to you in association with Hargreaves Lansdown. All opinions expressed in this article are from the analysts and do not necessarily represent the opinions of The Armchair Trader.
FTSE 100, FTSE 250 and selected other companies scheduled to report
|No FTSE 350 reporters|
|Associated British Foods||Q1 Trading Statement|
|CMC Markets||Q3 Trading Statement|
|Easyjet||Q1 Trading Statement|
|Fresnillo||Q4 Production Statement|
|3i Group||Q3 Trading Statement|
|Diageo||Half Year Results|
|Dr Martens||Q3 Trading Statement|
|Entain – BetMGM Joint Venture||Full Year Performance Update|
|Fevertree||Full Year Trading Statement|
|IG Group||Half Year Results|
|LVMH||Full Year Results|
|Tate & Lyle||Q3 Trading Statement|
|Volvo AB||Q4 Results|
|Wizz Air Holdings||Q3 Results|
|Paragon Banking Group||Q1 Trading Statement|