Daily market update: Diploma, Cranswick, Greggs, CATL, Vodafone

“European markets took their cue from a recovery in US stocks overnight as market concerns eased and US government bond yields pulled back a touch,” says AJ Bell Investment Director Russ Mould.

“The downgrade to the US credit rating from agency Moody’s and fears about the impact on an already-large deficit of a package of tax cuts making its way through Congress had resulted in a weak start on Wall Street. However, investors soon shrugged off the news to buy the dip and extend a recent winning streak for the S&P 500.

“Suggestions this rally was largely driven by retail investor flows raises the question of whether institutions will join in with the buying – something which is probably required if the buying is to be sustained.

“Among the big winners in London was Diploma, the supplier of specialised technical products and services. It announced a big increase in first-half profit, raised its growth forecast for the current financial year, and sounded a bullish tone about the longer term. This provided some reassurance to investors that the company can deliver, even against an uncertain and tricky economic backcloth.

“After Cranswick made the headlines for all the wrong reasons, with operations at one of its farms suspended over animal abuse claims, the food producer won over the market with its full-year numbers and raised dividend. This helped to repair the damage done to the share price by the allegations.”

Greggs

“Greggs’ sales are moving in the right direction, yet there is a lingering feeling the business could be doing a lot better. Warm, dry weather will have encouraged people out of the house and Greggs has long been a popular choice for food on the go. With this positive backdrop, to only grow sales by 2.9% on a like-for-like basis so far this year is fine but not fantastic.

“Sentiment had waned towards the stock over the past year as its growth has moderated. The latest update contained enough golden nuggets to win back some investor support and trigger a new rally in the shares. That’s fine for now, but Greggs needs the bright weather to remain in place throughout summer if it wants to get back on top.

“Menu innovation is clearly a priority to keep getting shoppers through the doors. Pizza, mac and cheese, chicken goujons and potato wedges are as far removed from its bakery roots as you can get. If that’s what the public wants, Greggs might as well serve them up, but it mustn’t lose sight of what made the business successful in the first place. There is a danger it becomes the kebab shop of the high street and not a pleasant place to go for a coffee and a cake.

“Large sums are being spent on manufacturing, distribution, logistics and new sites, so Greggs is making a big commitment to try and gobble up even more market share. It wouldn’t spend all this money if it didn’t see a big opportunity to keep growing. The proof will be in the pudding and whether this investment translates into a meaningful increase in profits.”

CATL

“Strong demand for shares in CATL on its stock market debut implies investors still believe they can make money from the electric vehicle revolution.

“Offering the public the chance to buy shares in an EV battery maker was a big gamble given what’s happened in the automotive industry of late. Take-up of electric vehicles hasn’t been as strong as previously expected, particularly in the West, and that’s led many investors to lose interest in the sector.

“CATL is arguably in the firing line to lose out from slower industry growth given it produces more than a third of all EV batteries sold globally, including ones used in Tesla models. Add on top the prospect of tariffs causing further disruption to the industry, such as through price hikes that make cars less affordable, and there was a risk CATL might not have been the red-hot investment proposition it could have been five years ago when sector enthusiasm was at euphoric levels.

“Investors buying CATL shares seem to have focused on its big exposure to the Chinese EV market which is motoring along nicely. That’s the company’s bread and butter – sales in other parts of the world are the jam on top, and perhaps investors are hoping that component will become tastier in time.”

Vodafone

“While Vodafone’s latest update hasn’t exactly got investors jumping up and down, there was enough for them to dial up a little enthusiasm.

“Crucially, there is an improving signal on the company’s German business – its largest geographic operation and one which has been badly affected by regulatory headwinds.

“After years of a moribund share price, Vodafone has worked hard to reshape the business but it feels like there has been a lot of running to stand still.

“It might be difficult to get back to significant growth but at this point shareholders would probably take the company becoming a more streamlined operation which can generate reliable cash flow to fund regular dividends and share buybacks. In this vein, Vodafone has announced plans to repurchase a meaningful chunk of its shares.

“These were still a messy set of numbers with impairments leading to the company posting a loss on a statutory basis. However, with most of the planned disposals now out of the way and the merger with Three in the UK set to complete imminently, Vodafone is slowly grinding its way back into the market’s good books.”

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