Daily market update: Rolls-Royce, Bellway, Marks & Spencer, Diageo, Filtronic

“Most European markets edged high as investors patiently waited for news on US/China trade talks,” says Russ Mould, Investment Director at AJ Bell.

“Where there is still a sense of cautiousness around how to position portfolios for the longer term, there were enough corporate news flow to spur trading in a range of stocks.

“UK housebuilders were at the top of the wish list for many investors after Bellway reported ‘robust’ spring trading. It was enough to drive a rally in the sector, putting the likes of Persimmon, Barratt Redrow and Taylor Wimpey at the top of the FTSE 100 risers’ list.

“The blue-chip UK index moved 0.4% higher to 8,868, helped by strength in energy producers Shell and BP amid oil price resilience, and Rolls-Royce moving up on success with its nuclear operations.”

Rolls-Royce

“It may not move the dial much for earnings, yet Rolls-Royce winning the Great British Nuclear competition is a big strategic achievement. It is ringing endorsement for its capabilities in small nuclear reactors.

“The engineer has long held the view that these products would soar in popularity and its strategic decision to try and get a first mover advantage now looks to be on the money.

“Rolls-Royce has spent a long time talking up its strengths in facilitating nuclear power expansion that doesn’t come with a blockbuster price tag.

“Other countries might look at the progress it is making and how the UK is ploughing a path to nuclear expansion, potentially leading to more contract opportunities for Rolls-Royce down the line home and abroad.”

Bellway

“The latest numbers from Bellway offer evidence of an improving outlook for UK housebuilders.

“Borrowing costs have eased a touch and the industry continues to benefit from strong market dynamics as the UK struggles to build the number of homes it needs to meet the demands of its population.

“There are a couple of caveats to the positive headlines. The increased guidance for average prices reflects a change in the mix – amid robust demand for larger, more expensive homes – rather than a broader uptick in values. The reservation rate was also boosted by an increase in bulk sales rather than selling more to individual purchasers.

“The company still has some way to go to build back margins and volumes to the levels seen in 2022 and 2023. However, this is still an encouraging update from Bellway, with its growing order book providing some visibility on future revenue, with the company also enjoying a strong balance sheet and land position.

“Bellway and its peers will be hoping for some clarity on further rate cuts to help unlock demand.”

Marks & Spencer

“Marks & Spencer has finally resumed online orders after a devastating cyber-attack knocked the business for six.

“Shoppers can buy from a selection of fashion ranges, implying it is taking a step-by-step approach to getting its website back into full transactional mode.

“The retailer will want to make sure everything is functioning smoothly before turning all the lights back on, as it cannot risk any further disruption to customers. It’s already having to work hard to regain their trust.”

Diageo

“Companies often have a few surprises up their sleeve in the form of assets which might seem odd alongside their core divisions. Over the years, we’ve seen electricals retailer AO run the UK’s biggest fridge recycling plant, clothing seller Laura Ashley have its name above various tea rooms and hotels, and builders’ merchant Travis Perkins own a workwear fashion brand.

“It has now come to light that Guinness maker Diageo owns the Indian Premier League cricket franchise, Royal Challengers Bengaluru.

“There is speculation it could get as much as $2 billion from selling the franchise. In a world where companies are focusing on what they do best and offloading non-core stuff, Diageo may not have to think too hard about its sports assets, although it has been a helpful route by which to promote its products.”

Filtronic

“Filtronic has been on a roll with contract awards from Elon Musk’s SpaceX outfit and this could prove to be a double-edged sword.

“One on hand, it shows considerable momentum in the business and that Filtronic has something significant to offer. On the other hand, the more contracts it wins with SpaceX, the more Filtronic is stuck in the crossfires between Musk and Donald Trump as their relationship falls apart.

“We’ve already seen Filtronic’s share price wobble as a result of association with Musk. There’s a good chance the tension between him and the US president will blow over, yet the tension needs to be considered a major risk near-term for anyone holding Filtronic shares.

“The tech firm now winning its largest contract award to date with SpaceX means Filtronic is confident of exceeding full-year revenue expectations yet notice there is no reference to beating profit forecasts.

“Filtronic is investing heavily in its business which essentially means it is spending money today to make money tomorrow.”

FirstGroup

“The latest results from FirstGroup provide evidence to investors there is life after rail nationalisation for the business.

“The bus division is proving to be the engine of growth as the company prepares for the railway network to return to broad public ownership.

“FirstGroup continues to invest in a roll-out of electric buses and the acquisition this year of RATP Dev Transit has given it a meaningful tyre print in London.

“The company is developing an open access rail portfolio which could operate alongside newly nationalised rail services – having enjoyed success with its Lumo low-cost London to Edinburgh service.

“The company’s strong financial position – in marked to contrast to UK rival Mobico – has allowed it to demonstrate significant generosity to shareholders through a fresh £50 million buyback.

“There may have been wrong turns along the way but FirstGroup is doing a decent job of navigating a period of transition in both bus and rail. This is reflected in the shares trading at their highest levels in more than a decade.”

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