LONDON MARKET MIDDAY: Stocks mixed as BP and Ocado contrast

(Alliance News) - Stock prices in London were mixed on Tuesday at midday as investors digested earnings from a slew of blue-chip names.

Across the Atlantic, drug maker Pfizer reported earnings before the open in New York, as did reported takeover target Peloton Interactive.

The FTSE 100 index was up 10.65 points, or 0.1%, at 7,584.12. The mid-cap FTSE 250 index was down 9.95 points, or 0.1%, at 21,787.34. The AIM All-Share index was down 2.18 points, 0.2%, at 1,083.46.

The Cboe UK 100 index was down 0.1% at 752.90. The Cboe 250 was down 0.3% at 19,438.76, and the Cboe Small Companies was 0.2% higher at 15,381.12.

On the continent, the CAC 40 stock index in Paris was up 0.4% and the DAX 40 in Frankfurt was 0.1% higher.

"The UK market was driven by miners, oil producers, financials and utilities, helped by well-received figures from BP," said AJ Bell's Russ Mould.

"Inflation figures from the US on Thursday will be a major influence on the direction of markets as the figures will be digested by the Federal Reserve in its next decision on whether to raise interest rates or not. With expectations that inflationary pressures are going to get worse in the near-term, markets could get jittery as we approach the data release."

In the FTSE 100, miners Anglo American, Glencore and Rio Tinto were up 2.9%, 2.7% and 2.2% respectively.

St James's Place was up 2.1%, after Morgan Stanley raised the wealth manager to 'overweight' from 'equal weight'.

M&G was up 1.5%. Morgan Stanley also raised the asset manager to 'overweight' from 'equal weight'.

BP rose 0.7%. The oil major hailed a year of "performing while transforming" as it posted a swing back to profit on improved oil prices after a pandemic-battered 2020.

At the same time, BP set out plans to accelerate its move to net zero and plough a greater proportion of funds into businesses such as electric vehicle charging, renewables and hydrogen.

Underlying replacement cost profit for the fourth quarter of 2021 was USD4.07 billion, surging from just USD115 million a year before.

Based on an average Brent price of USD60 a barrel, BP expects to be able to deliver share buybacks of around USD4.0 billion a year and have room for an annual dividend uplift of 4% through 2025.

For the fourth quarter of 2021, BP declared a dividend per share of 5.46 cents, up 4.0% from 5.25 cents a year ago, bringing 2021's total to 21.63 cents, down 18% from 26.35 cents in 2020. It completed share buybacks worth USD1.73 billion in the fourth quarter, and plans to carry out a further USD1.5 billion from surplus cash flow before announcing its first quarter results for 2022.

SSE was up 0.6% after the energy utility upgraded its expectations for adjusted earnings per share following a strong performance in the year so far.

The Perth, Scotland-based firm now expects adjusted earnings per share of at least 90 pence for its financial year ending March 31, up from previous guidance of at least 83p. SSE attributed this to strength and stability from its "balanced mix of regulated and market facing businesses".

Strong performances were seen from its flexible thermal and hydro plants. This helped to offset renewables output that had come at only 81% of planned levels of 7,304 gigawatt hours at 5,920 gigawatt hours for the nine months to December 31. This was also 16% lower than the output in the comparable period of the year before of 7,046 gigawatt hours.

At the other end of the large-caps, Ocado was the biggest faller, down 10%. The online grocer pointed to labour shortages for containing growth, as it struggled to find workers to keep up with increased demand.

However, it hailed its new technologies as the retailer ramps up investment into its end-to-end e-commerce, fulfilment and logistics Ocado Smart Platform.

For the financial year that ended November 28, Ocado generated revenue of GBP2.5 billion, up 7.2% from GBP2.33 billion in financial 2020. The figure was in line with market forecasts.

The Hatfield-based firm posted a pretax loss of GBP176.9 million, widened from a loss of GBP52.3 million. Ocado said the loss reflected increased investment in its Solutions business, particularly the increasing roll out of the Ocado Smart Platform.

Looking ahead, Ocado said capital expenditure is set to rise to around GBP800 million in 2022, driven by the worldwide roll-out of its platform. This was higher than the GBP590 million expected by analysts at Jefferies.

Chris Beckett, head of equity research at Quilter, commented: "Ocado's 2022 guidance includes increased costs set to support long-term growth and higher capital expenditure that will more than halve the GBP1.5 billion cash balance. Ultimately, this is a growth stock that needs new orders to justify the valuation. This will likely come, but timing remains uncertain."

Airtel Africa was the second worst FTSE 100 performer, down 9.6% at 140.09 pence. Citigroup Global Markets said it placed 58 million shares of Airtel Africa, a 1.5% stake, on behalf of shareholders Warburg Pincus and Morningstar Investment. The shares were sold at 140p each, raising GBP81.2 million.

Citigroup didn't say how many Airtel Africa shares the two sellers have remaining, but noted they have agreed to a 90-day lock-up period for any they own. Airtel Africa won't receive any proceeds of the sale, as it was of existing shares.

DCC was down 2.1%. The support services firm said operating profit for the third quarter ended December 31 was in line with expectations and ahead of the prior year.

The Dublin-based company said it delivered a good trading performance and benefited from acquisitions completed in the prior year. Looking ahead, DCC continues to expect that the financial year ending March 31 will be another year of strong operating profit growth, in line with current market consensus expectations.

In the FTSE 250, Micro Focus International was the worst performer, down 13%, after the enterprise software group said revenue had continued to decline in financial 2021.

The Newbury, England-based firm said revenue slipped in the year that ended October 31 to USD2.9 billion from USD3.0 billion the year before. However, Micro Focus noted the rate of decline had improved year on year, dropping by 5% compared to 10% in the previous year on a constant currency basis.

On AIM, Numis Corp was down 3.7% after the stock broker revealed a slower start to its second quarter amid damped risk appetite among investors concerned by surging inflation and rising interest rates.

Numis said: "Mounting inflation and interest rate concerns have impacted broader equity markets in recent weeks, with a reduction in investor risk appetite and capital markets activity. As such, we have had a slower start to our second quarter, albeit our pipeline and outlook for the second half across both M&A and Capital Markets is encouraging."

The pound was quoted at USD1.3553 at midday on Tuesday, up from USD1.3534 at the London equities close Monday.

The euro was priced at USD1.1420, down from USD1.1438. Against the Japanese yen, the dollar was trading at JPY115.30, higher than JPY115.05 late Monday in London.

Brent oil was quoted at USD90.78 a barrel on Tuesday at midday, down sharply from USD92.98 at late Monday. Gold stood at USD1,817.83 an ounce, slightly higher against USD1,816.81.

New York was pointed to a subdued start.

The Dow Jones Industrial Average was called up 0.2% while the S&P 500 and the Nasdaq Composite were both called flat, based on futures trading. The indices had closed flat, down 0.4% and down 0.6% respectively on Monday.

Ahead of the bell, Pfizer reported a jump in net income in the fourth quarter, up to USD3.39 billion from USD847 million a year before. For all of 2021, net income more than doubled to USD21.98 billion from USD9.16 billion.

Home fitness company Peloton reported a net loss of USD439.4 million in its financial second quarter, swung from earnings of USD63.6 million a year before. Peloton said it has been a "humbling time" for the company, as announced a "meaningful reduction" in its workforce to cut annual run-rate costs by USD800 million.

Pfizer was up 1.8% in pre-market trade, while Peloton was down 6.3%, having closed up 21% on Monday amid reports that both Amazon and Nike are considering making offers for the company.

Amgen shares were 0.5% lower in pre-market trade. The drugmaker late Monday said it ended 2021 with a solid profit rise in its final quarter, although this was not enough to lift the overall profit figure against higher costs.

In the three months to December 31, revenue rose 3.2% to USD6.85 billion from USD6.63 billion a year earlier, as a result of the contribution from the Eli Lilly & Co Covid-19 manufacturing collaboration, more than offsetting a 1% drop in product sales. As a result, pretax profit for the quarter climbed 14% to USD2.13 billion from USD1.88 billion.

Thousand Oaks, California-based Amgen reported annual revenue of USD25.98 billion, a 2.2% rise from USD25.42 billion in 2020, due to the Eli Lilly Covid-19 partnership, in spite of flat product sales.

Pretax profit, however, fell 18% to USD6.70 billion from USD8.13 billion, mainly as a result of a USD1.5 billion write-off in required in-process research & development, associated with the group's acquisition of Five Prime Therapeutics, completed in April 2021.

Nvidia was down 1.2% in pre-market after SoftBank confirmed it has terminated its agreement with the Santa Clara, California-based firm to sell UK computer chip maker Arm due to "significant regulatory challenges".

In September 2020, the Jensen Huang-led firm had agreed to buy Arm for USD40 billion. However, the deal faced pressure from US, UK and EU regulators amid fears it would undermine competition as the merger could restrict the access of Nvidia's rivals have to Arm's technology, which is used by firms in making semiconductor chips and other products.

SoftBank said it now plans a public offering of Arm by March 2023.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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