Daily market update: Rio Tinto, BT, EasyJet, Johnson Matthey, QinetiQ

“Market weakness across Asia and Europe only looks like a minor pullback rather than anything to worry about,” says Russ Mould, Investment Director at AJ Bell. “Futures prices imply a better day ahead for Wall Street and that could help to lift market spirits.

“The FTSE 100 was dragged down by energy stocks and a negative reaction to BT’s results. Marks & Spencer extended yesterday’s small advance as investors saw a path out of the cyber-attack disruption.

“Among mid-caps, Bloomsbury Publishing dived after saying trading for the new year is expected to be ‘broadly’ in line with market expectations. ‘Broadly’ is not a term that investors like, as it implies the company is on the verge of missing expectations. Its academic arm has let the side down, with Bloomsbury blaming US and UK budgetary pressures. Recent revenue growth rates for its consumer arm also look lacklustre.”

Rio Tinto

“Four years isn’t very long at the wheel of a FTSE 100 company, so it’s a surprise to see Rio Tinto announce the forthcoming departure of chief executive Jakob Stausholm. The boss is thanked for ‘shaping’ a pathway to profitable growth, yet there is a lingering feeling that a 15% share price decline since he took the top job might have influenced his departure.

“What happens on the commodity market is mainly out of Rio Tinto’s control and the price of its key products – copper and iron ore – have been held back amid slower than expected growth in China, and globally, with the energy transition.

“A sharp rise in activity for things like electric vehicles and wind turbines was meant to have driven up metal prices, but activity levels have disappointed. Concerns over a global economic slowdown amid a trade war and Trump’s tariffs also haven’t helped matters for miners.

“During Stausholm’s tenure, arch-rival BHP tried to buy Anglo American and that raised questions as to why Rio Tinto wasn’t also doing big deals.

“Earlier this year, there was speculation that Rio held merger talks with Glencore but nothing came of it. Rio’s board might have felt that Stausholm was too conservative with his strategy and now is the time to be bold and grab market share. All we’ve had is a $6.7 billion takeover of a lithium company which is small fry in the bigger scheme of things.

“It feels inevitable that Rio will recruit a dealmaker as its next CEO, rather than a company fixer. Rio is running smoothly but its position as a listed business means success will also be judged on its share price performance. That needs to be fired up, and M&A is the way for Rio to show it is the king of the miners given the industry follows the mantra of ‘biggest is best’.”

BT

“A clear sign a company is lacking in focus is when they attempt to do too much and BT is a classic example. Typically, it is the job of new management to come in and streamline operations and bring their attention back to what they are good at.

“That is the role BT CEO Allison Kirkby has been attempting to fulfil since her appointment at the start of last year and the latest results suggest she is getting some traction.

“The company has been busily selling assets in Europe and is reportedly looking to offload its 50% stake in TNT Sports – ending its expensive foray into sports broadcasting. This service may have garnered plenty of attention for the brand and attracted some broadband customers, but at an eyewatering cost.

“Kirkby has also been putting the squeeze on costs and that meant BT was able to boost profit and cash flow, underpinning a modest increase in the dividend.

“There may be some nervousness about a lower-than-anticipated cash flow in the current year as the company invests in a roll-out of fibre broadband, even if it is still sticking with its longer-term cash flow targets. Mounting competition in the UK is also a concern and explains guidance for flat profits in the current year.”

EasyJet

“Travel companies rarely make a first-half profit as their earnings are seasonal. Airlines are busy over the winter, but nothing like the summer when they run flat-out. In that context, EasyJet’s first-half loss does not indicate a business in trouble. What’s more important is forward booking trends, how the airline is dealing with cost pressures and any signs of disruption.

“EasyJet comes across as upbeat in its outlook, indicating it should meet full-year earnings expectations. The package holiday arm continues to be the bright spot, growing fast and on track to meet its £250 million pre-tax profit target earlier than previously expected. This would be a massive win for the company, which only launched the package holiday business in November 2019. It’s come a long way in a short time, capitalising on the strength of its brand and getting customers to trust it for accommodation as well as getting people from A to B and back again.

“EasyJet is trying to get closer to its UK customers by not making them travel to major travel hubs like Gatwick or Manchester airports. A new base will open at Newcastle airport in spring 2026, adding to its growing presence in regional locations following recent expansion in Birmingham and Southend. Consumers value their summer holidays highly, making sure they squirrel away enough money for a week of sun and sand, even if that means cutting back on other items. EasyJet wants to make their life as easy as possible, so adding more regional hubs and expanding routes is essentially the airline bringing the departure gate to the customer’s doorstep.”

Johnson Matthey

“Johnson Matthey is following a well-trodden path of companies who veered out of their comfort zone, couldn’t make it work on a grand scale, and who are now retreating back to what they do best.

“Having sold its battery materials business in 2022 after failing to make sufficient returns, last year it also offloaded its medical device components arm, and there’s now another disposal. The chemicals group is selling its Catalyst Technologies operation, which is involved in decarbonisation.

“Johnson Matthey is one of several companies on the UK stock market including Smith & Nephew which feel as if they’ve been in turnaround mode for years, but where progress has been slow. It’s been under pressure from activist investors to reshape the business and no doubt the latest disposal will have been influenced by such shareholders.

“The sharp rise in the share price implies that investors are happy with the new strategic move and its latest numbers. The full-year results talk about driving a ‘step change’ in sustainable cash generation by having a tighter grip on costs, much lower spending in the business and working capital benefits. That’s exactly what investors want to hear.

“Johnson Matthey is finally making progress with the ‘shrink to greatness’ strategy that many companies have been following in recent years. Today’s share price rebound is impressive but the stock is still trading at less than half the peak achieved in 2018.”

QinetiQ

“Emerging out of the Ministry of Defence arm believed to be the inspiration for James Bond’s gadget-man Q, a profit warning two months ago from QinetiQ was more akin to a whoopee cushion than a jet pack.

“The company’s operations on both sides of the Atlantic both fell victim to delays resulting from the UK’s Strategic Defence Review and proposed spending cuts in the US by the Trump administration.

“However, today’s update will have restored a bit of confidence in the technology-focused company. It has recognised a need to rejig operations so it is more aligned with current spending priorities and it has secured an extension to a key Ministry of Defence contract.

“That said, there is still a real sense QinetiQ is being left behind by its peers who have notably more positive outlooks. To avoid coming under pressure, longstanding CEO Steve Wadey will likely need this to change in future updates.”

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