Tesla shares were 10% higher in the US premarket after the EV maker released earnings in which revenue missed despite broad price cuts.

Musk outlined a strategy to take on increased competition by integrating next-gen technology into ranges targeted at the mass market.

Plans to accelerate the launch of robotaxis and autonomous vehicles were an integral element of Musk’s strategy as the billionaire set out his plans for the group to bolster its AI credentials.

The 10% jump in Tesla shares raised some eyebrows, given the general slowdown in sales, but the move was part of a general uptick in US stocks overnight, with a number of upbeat releases helping lift the mood.

“Tesla was one such positive story, after the market responded well to news it’s planning to accelerate the launch of its new models. This will put the brakes on planned cost cutting, but is a way to hopefully boost volumes,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“In the increasingly competitive space of EVs, Tesla’s must-have status is one element it has above the others. In a way, it’s modus operandi isn’t too dissimilar to what Apple did for smartphones.

“While revenue missed the mark compared to analyst expectations, investors have been encouraged to hear of Musk’s plans to make bold decisions. Sentiment is likely to remain slightly subdued until we have further clarity on how the group plans to combat falling demand and price competition, on a more permanent basis.”

After near-constant disappointment for Reckitt Benckiser investors since the pandemic, they finally have something to cheer about.

Like-for-for like sales grew 1.5% in the first quarter as a mix of higher sales prices and steady volumes culminated in a robust period for the group.

Prices did most of the heavy lifting, rising 2% while volumes fell 0.5% – an improvement on last year. Reckitt was upbeat about the performance of its ‘power brands’ Lysol, Dettol, Durex and Finish with all showing positive volumes.

The hygiene unit was the standout performer in the quarter with like-for-like sales jumping 7.1% and volumes increasing 2.9%. Hygiene is Reckitt’s largest unit by revenue and strength here offset weakness in nutrition where volumes sank 9.4%.

Reckitt Benckiser shares were over 5% higher at the time of writing but are still substantially below all-time highs.

“To say Reckitt Benckiser has had a tough year would be a significant understatement with the price plummeting almost a third since February off the back of poor Q4 results and litigation facing their baby formula brand. With that said, many shareholders may well have been bracing for impact this morning but in fact the results offer a timely reprieve,” said Adam Vettese, analyst at investment platform eToro.

“Even when consumers are tightening their belts, Reckitt’s array of consumer staples in well-known brands are still well in demand with consumers even upgrading to premium versions as smaller luxuries take the place of bigger, more extravagant purchases. Sales jumped despite price increases showing strong brand loyalty to the likes of Finish, Dettol and Nurofen and the increase is coming not only from price but volume also.”

Vettese also pointed to share buybacks helping improve investors’ mood:

“More buybacks are on the way in July and provided legal issues do not bring too much more trouble to the door, investors could see value at the current levels with the price 38% away from its 2024 high which was only at the end of February.”

Lloyds shares were marginally lower on Wednesday after the bank said profits fell in line with expectations but reaffirmed guidance for 2024.

When we previewed Lloyds earnings last week, we questioned whether the higher rates ‘party’ was over for Lloyds, and it appears it is. 

Net interest margin (NIM), the key profitability metric dictated by interest rates, fell to 2.95% after being well above 3% for most of 2023. Although Lloyds NIM has fallen sharply, the group expects it to remain steady around the current level for most of this year.

“Management still expects the full-year NIM will be greater than 290 basis points, even though interest rates may be set to fall later this year,” said Garry White, Chief Investment Commentator at wealth manager Charles Stanley.

The drop in NIM dragged on income, which fell 9% to £4.2bn, and statutory profit after tax fell to £1.2bn in the first quarter. However, the slowdown has been well-telegraphed and is largely priced into Lloyds shares, which dipped 1.5% in mid-morning trade on Wednesday.

“Lloyds is doing exactly what it needs to do. Don’t focus on the year-over-year numbers too much. Yes, the drops look substantial from this time last year but that’s been expected for some time, the environment is simply not as favourable as it once was,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“That said, Lloyds is showing why the UK banking sector is an attractive place to be right now. Consumers remain resilient to cost pressures and default trends look stable, at or below pre-pandemic levels. At the same time, the economic outlook is improving, and impairment charges came in lower than analysts had expected.”

Investors hoping to gain clarity on the motor finance fine would have been disappointed to learn they will have to wait until later in the year to learn more about the extent of the cost to Lloyds. 

“There is yet to be an update on the regulatory probe into past motor finance commission arrangements, with the bank already setting aside £450m against any potential liabilities,” Garry White said.

“The Financial Conduct Authority will update on 24 September and investors keenly await the outcome as the potential fines and compensation could be higher.”

The scale of the fines isn’t likely to be as large as previous provisions for wrongdoing, but the uncertainty will weigh on sentiment.

As if Covid was not impactive enough, last year this company was hit for six by a bout of strikes within the industry of its main clients. 

This Friday morning will see the business reveal just how badly it fared – but it could also declare just how it will be fighting back this year, as it looks to strongly recover its earnings. 

The Business 

The Bridgend, Wales-based Facilities by ADF (LON:ADF) provides premium-quality serviced vehicle hire for TV and Film productions. 

It specialises in support for high-end TV and major feature films for the highly competitive video-on-demand market led by the major streaming giants, such as Netflix, Apple, Disney +, HBO Max, Marvel, NBC Universal, and Amazon. 

The £40m capitalised group’s expert team has many years of experience throughout the UK and Europe, enabling it to offer a reliable and professional service, from artiste trailers to departmental vehicles.  

The business is a 24-hour, 7-days-a-week operation with a fleet of over 600 super quality location vehicles, capable of servicing 25 large productions at any one time.  

The company’s fleet is made up of mobile make-up, costume and artiste trailers, production offices, mobile bathrooms, diners, school rooms, and technical vehicles.  

It also supplies mobile and key location facilities for television and film productions. 

With operational bases in London, Glasgow, Cardiff, Manchester, Birmingham and at Pinewood Studios in Slough, which are organised into dedicated departments including account management, logistics, transport, factory, workshops, HR and accounts. 

The Strikes And ADF Mitigating Actions 

After a record first half of 2023, the group was hit hard by the onset of the USA Writers (Writers Guild of America) and Actors (Screen Actors Guild – American Federation of Television and Radio Artists) strikes, with several large productions that ADF was working on stopped filming immediately, impacting revenue levels in the second half of the year. 

In response the group took several mitigating actions to maximise profitability in the second half year, including securing shorter duration domestic productions, and cutting the use of more expensive agency drivers, thereby enabling the group to price its services more competitively and win a larger share of available business. 

Overall, ADF supported 84 high-profile productions in FY23 with an average revenue per production of £302,000 (£381,000).  

Notable productions included The Crown season 6, Slow Horses, Star Wars Andor, The Gentlemen, Rivals and The Diplomat. 

At the end of February, the company issued a statement noting that following the end of the Strikes in November 2023, and the continued growth in demand for ADF’s services as evidenced by the current order book, the company expects the financial performance of H1-FY24 to be significantly ahead of the H2-FY23. 

The group will provide further guidance when it announces its full year FY23 results later this week. 

CEO Marsden Proctor stated that: 

“Our performance in FY23 demonstrates the Group’s resilience with a strong first half countered by the first joint strike of Hollywood actors and writers in over 60 years.  

The effects of the strikes will continue to be felt through the first half of the current year, but we will carefully manage our cost base during the period.  

The long-term market dynamics remain very much in ADF’s favour with continued high levels of investment in the UK HETV industry and the Board is confident that we will return to pre-strike order levels and beyond as conditions normalise.” 

Analyst View 

Andrew Renton at Cavendish Capital Markets has estimates out for the year to end December 2023 for higher revenues of £34.8m (£31.4m), but with adjusted pre-tax profits collapsing to £1.1m (£4.8m), slashing earnings down to 1.3p (5.8p) – but an air of confidence of recovery this year is indicated by expectations of a maintained but uncovered 1.4p (1.4p) dividend per share. 

For the current year Renton is going for a leap in sales to £47.0m, taking profits up to £5.0m, with 5.8p earnings and a healthy 1.9p dividend per share. 

He has a 76p per share Target Price. 

My View 

Those strikes were like a body blow to ADF, but it appears that the company is standing a lot straighter now after the wincing agony. 

Looking forward this group could well show an excellent recovery this year, leading into even more positive results in 2025. 

Its shares, which were up to 81p two years ago, have subsequently been down to 37.26p in response to the strikes. 

Ahead of Friday’s results announcement, they are looking stronger at 49p, at which level investors taking a positive view of the group’s recovery potential could well see an early advance in price towards the broker’s objective. 

Enthusiasm for UK stocks continued Tuesday as London’s leading index extended its record-breaking streak into a second day.

Easing geopolitical tensions is helping find buyers for cyclical sectors as investor concerns about higher oil prices and their impact on inflation subside. 

“The FTSE 100 has spring in its step at the start of the week, amid an easing of geopolitical tensions. The pulse of positivity comes in the absence of fresh retaliatory attacks by Israel or Iran and the US flexing its funding muscle and passing a crucial aid package for Ukraine,” explained Hargreaves Lansdown’s Susannah Streeter

Higher oil prices were the main protagonist in a global equity sell-off last week, and its retreat will combat fears about the timing and frequency of interest cuts.

After setting a new record high of 8,023 yesterday, the FTSE 100 was trading 0.5% higher at 8,063 at the time of writing.

Corporate earnings 

Investors will be looking forward to a busy week for corporate earnings. Lloyds will kick off FTSE 100 banking updates in the UK, while many of the US ‘magnificent 7’ technology shares will report this week.

“The focus is switching to earnings season kicking off, and tech giants have a lot to prove as concerns grow about the era of high interest rates continuing. With the S&P 500 dipping below the psychologically important 5,000 mark, some negative sentiment continues to bubble,” Streeter said.

Tesla is first up this evening, although the EV maker has done nothing to justify the ‘magnificent’ label in 2024.

AB Foods was the standout FTSE 100 performer after the Primark owner said group profits jumped 39% on strength in the retail outlet and the food business. AB Food shares were 9% higher at the time of writing. 

“After a strong trading update in January, Primark-owner Associated British Foods has built on this momentum with its first-half results,” says Russ Mould, investment director at AJ Bell.

“It delivered an impressive set of numbers with strength across all areas of the business, including the less-heralded food and ingredients arm. The performance of Primark was particularly stunning, suggesting its value offering in clothing is resonating with cost-conscious consumers.”

Taylor Wimpey was among the best performers after releasing a trading statement highlighting steady performance in the first months of 2024. Sales rates and the order book were pretty much in line with last year, representing a stabilisation in activity.

“Despite the UK housing market sitting on uncertain ground, Taylor Wimpey’s made a solid start to 2024 with the Spring selling season progressing as expected,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“Affordability pressures remain a key issue to wrestle with, but the group called out good mortgage availability and sustained consumer confidence as tailwinds supporting firm levels of buyer interest. Tough trading conditions in 2023 saw revenue and profits fall significantly.”

Primark owner AB Foods shares soared on Tuesday as the company announced growing profits across the board with notable improvements in the food business.

While investors will be happy to see strength in the food business, Primark is always the main event for AB Foods and a 7.5% increase in sales fired up the bulls on Tuesday.

“After a strong trading update in January, Primark-owner Associated British Foods has built on this momentum with its first-half results,” said Russ Mould, investment director at AJ Bell.

The group was top of the FTSE 100 leaderboard, gaining 9% after posting a 39% increase in first-half profits. 

Primark continued its recovery from the pandemic as new initiatives such as click-and-collect helped bolster sales and increased store space. Primark’s budget range was been particularly well received during the cost of living crisis and like-for-like sales rose 2.1%.

“This is another very strong earnings report from Associated British Foods. The British multinational food processing and retailing company reported a 39% jump in first half profit and expects to deliver significant growth in all of their operating sectors,” said Mark Crouch, analyst at investment platform eToro.

“ABF’s jewel in the crown Primark, delivered strong sales revenues and improved margins. Disruption that had hindered supply chains earlier in the year seems to have subsided and the business has pushed ahead with their store expansion programme and increased roll out of click & collect service. 

“Grocery, ingredients, sugar and agriculture arms all enjoyed increased profitability and as a result, shareholders have been rewarded with an interim dividend increase of 46%. 

AB Foods’ hiked the interim dividend to 20.7p.