Daily market update: Rolls-Royce, WPP, Ocado, Howden Joinery

“On a busy day for corporate results the FTSE 100 was flat as some names impressed but others suffered significant setbacks,” says AJ Bell Investment Director Russ Mould.

“US stocks moved higher overnight in anticipation of Nvidia’s results. However, shares in the chip giant were down modestly in pre-market trading following the results and Asian stocks were mostly lower amid continuing concern about the threat posed by tariffs.

“Strong results from Rolls-Royce helped give fellow aerospace engineer Melrose a lift, with BAE Systems also higher. London Stock Exchange Group was in demand on higher profit and a positive outlook for 2025.”

Rolls-Royce

“There was always a risk that Rolls-Royce’s recovery story would lose momentum as it runs out of easy wins. Its latest results and upgraded guidance show that is not the case.

“It’s no longer about stabilising the business; the narrative has shifted to growth and Rolls-Royce is making solid progress. A £1 billion share buyback is akin to Rolls-Royce sticking its head out the window of a moving car on a warm summer’s day, enjoying the ride and knowing everything is going well.

“The company is ahead with its targets for operating profit and free cash flow, which is impressive. Orders are piling up for areas like small modular reactors and submarines. It continues to invest in the business to grow capacity, capture more business in the future and most importantly, make its products more useful for customers. This includes a new blade which should last longer and upgrading an engine to improve fuel efficiency.

“It expects bigger profit margins across its core markets of civil aerospace, defence and power systems.

“Rolls-Royce is delivering every bit of good news imaginable, and it’s no wonder the share price has hit a new record high.”

WPP

“The best adman in the world would have a hard task to sell WPP’s latest results. Not only were the numbers themselves short in some areas of what was expected but the company was gloomy on the outlook for 2025, too.

“Pinning its hopes on artificial intelligence investment to come to the rescue is not an argument which is carrying much weight with the market. Generative AI is perceived to be more of a threat than an opportunity for the business, and in early trading the shares slumped to their lowest level since the pandemic.

“Advertising agencies are seen as good bellwethers for the economy because companies will increase spending on ads when they are feeling positive and scale back during tougher times. Despite its recent struggles, WPP still has significant scale, breadth and geographic reach. For this reason, WPP’s update may be a canary in the coalmine for a downturn in wider economic conditions.

“Pressure is likely to ramp up on Mark Read, who has led the business since the controversial departure of founder Martin Sorrell in 2018.

“Despite making some progress in simplifying the business, WPP can look from the outside like a bit of a jumble and more sweeping changes may be required if the company is to get back on track.”

Ocado

“Being a shareholder in Ocado must feel like being kept waiting on a grocery delivery indefinitely as the promised profit never materialises.

“For now, the company continues to chalk up material headline losses as it pledges to turn cash flow positive in the year to November 2026. The longer Ocado goes without generating cash, the more nervous investors are likely to get about the company’s level of borrowings.

“There are some signs of improvement in the latest results. Losses are narrower and revenue performance is fairly strong, however the market reaction suggests patience with the business is running out nearly 15 years on from its IPO.

“The group’s Technology Solutions division – intended to provide its technology and logistics expertise in online groceries to global supermarkets – has reasonably positive guidance but not enough to justify the excitement it once generated. Crucially, there are few new deals in the pipeline while some of its existing arrangements have been scaled back or suspended.

“Ocado is reaching the point where more radical action is required, whether that involves a new management team being given a shot, or hiving off its retail venture with Marks & Spencer.”

Howden Joinery

“There have been mixed messages from the home improvement sector in recent months.

“While DIY retailer Wickes and tile specialist Topps Tiles were remarkably upbeat, B&Q owner Kingfisher warned last November that uncertainties around budgets from new governments in the UK and France had a negative impact on demand for its products and services.

“Howden Joinery has now followed in Kingfisher’s steps by highlighting challenging market conditions and guiding for its kitchen market to contract further in 2025.

“The UK economic outlook is far from rosy and consumer sentiment has deteriorated since Rachel Reeves made ‘tough decisions’ in her Budget last October. Prices could go up and jobs could be cut as companies look to offset a rise in employer-related costs from April. That’s disastrous for a company like Howden Joinery which relies on people being in a happy place to hand over thousands of pounds to do up their kitchen.

“Howden won’t be suffering alone and it could still gain market share. However, that’s not enough to stop investors fretting about near-term headwinds, hence why the shares sank on the news.”

Taylor Wimpey

“While Taylor Wimpey's 2024 results followed the sector trend of being relatively weak, the housebuilder struck a positive tone, seeing robust sales in the spring selling season so far.

“The concern for investors will be that the looming increase in stamp duty thresholds, which has helped drive demand will dampen it once the deadline has passed.”

These articles are for information purposes only and are not a personal recommendation or advice.