- FTSE 100 hits new heights, following positive trading in the US led by strong earnings.
- Tesla plans to accelerate launch of new models.
- TikTok ban in US gets one step closer.
- Scandal-struck Boeing is expected to report higher levels of cash burn.
- Oil heads towards $90 a barrel on supply surprise.
- Energy equipment specialist Baker Hughes sees shares slide.
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“The UK market has demonstrated yet more stamina, with further gains achieved on what has already been a record-breaking week. A slight cooling of Middle Eastern tensions, coupled with broad based corporate earnings optimism are both helping the FTSE. In the US, markets have also continued to rally, based on strong earnings figures from high calibre and closely monitored companies. The large volume of company results this week gives investors a lot more to focus on than purely macro events, which is leading to the extra levels of market vitality.
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. 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.
TikTok is one step closer to being banned in the US, after the Senate passed a bill that aims to force the Chinese parent company to sell the app. The motivations are around concerns that China could misuse American user data. The broader ramifications for tech remain unknown, but it is a clear signal of the US’ willingness to crack down on big tech, when it’s deemed unsafe. The immediate ramifications for other social media platforms are limited, because this move is more related to political tension. That said, it’s still something the likes of Meta will be keenly monitoring. Although the bill is progressing, nothing is set in stone – TikTok is likely to mount a legal challenge to the ruling.
Boeing’s safety crisis is due to show up in the numbers. The aviation giant is expected to announce an expedited level of cash burn as it throws its weight behind fixing multiple, and highly publicised issues. Designing and building commercial aircraft isn’t the highest-margin activity at the best of times, so when things go this wrong, there isn’t too much of a safety blanket to muffle the financial effects.
A surprise drop in US stockpiles and a lack of movement on OPEC+’s production mandates, has helped pushed the price of Brent crude up to $88.6 per barrel. There’s also growing hope that interest rate cuts could be on the agenda in the near-term, which would boost demand for the black stuff.”
Baker Hughes, Derren Nathan, Head of Equity Research, Hargreaves Lansdown
“Shares in energy equipment and services provider Baker Hughes slid 2.4% in after hours trading despite a small beat in first quarter revenues and earnings. There may be some disappointment that order levels haven’t reached the heights seen last year, but they still nearly matched revenues of $6.5bn meaning that the company’s impressive backlog should still be holding firm. By nature, orders for expensive capital equipment such as gas turbines can be lumpy but management is encouraged by some of the big projects awarded in the period, in particular Gas Technology Equipment for the third phase of Saudi Arabia’s Master Gas System project (MGS3).
It clearly sees further growth opportunities in the region doubling up on the workforce at the manufacturing facility in Modon. New energies are another area of focus, even in Saudi which has built its wealth on the back of rich fossil fuel reserves. Baker Hughes also delivered hydrogen compression equipment for the NEOM green hydrogen project in the Kingdom, the largest such project in the world. But to put things in perspective, new energy orders made up under 4% of total intake in the period. Baker Hughes is making good on its efficiency targets. Underlying cash profit (EBITDA) growth of 21% outpaced revenues, helped by a strong operational performance in the Industrial Energy and Technology division, enabling margins of 17% to surpass the midpoint of guidance. Baker Hughes looks to be well on target to meet full year expectations.
Growth may not turn out to be as exciting as the levels seen in 2023 the group is well positioned to take advantage of long-term opportunities across the entire energy spectrum.”
