- UK markets down a touch, UK gilts tick higher.
- Admiral shifts gears, but there’s trouble ahead.
- Reckitt’s outlook catches a cold.
- US markets finally get a breather.
- Oil finds a floor.
- Entain’s overseas bets start to pay off.
- ITV’s busy content slate delivers the goods.
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“The UK markets have failed to latch onto the positive momentum seen from its US peers last night, with the FTSE 100 opening on the back foot, though only marginally. There’s a string of results to get through, from a giant in motor insurance to the world of legacy media, all while investors are trying to digest a major sell-off in European bonds yesterday, led by Germany, where there are expectations of a loosening of the country’s strict borrowing rules. UK Gilts followed suit, and yields have ticked higher again in early trading this morning, with rate cut expectations coming under fresh scrutiny.
Admiral has shifted gears and capped off a strong year with a special dividend, but there’s trouble on the road ahead. UK motor insurance has had quite the ride, with aggressive price hikes in 2022 and 2023 finally paying off last year. Admiral even managed to ease off the accelerator, reducing rates ahead of the market and helping to grow customer numbers by 15%, hitting a record 5.7 million. But the road ahead isn’t without its bumps – pricing dynamics have shifted, and concerns about the outlook for early 2025 are starting to rear their heads as the market begins to soften. Still, Admiral remains a best-in-class operator and with a valuation that’s some way below its longer-term average, there’s plenty to like.
Reckitt’s fourth-quarter performance didn’t quite clean up, with sales growth falling short despite strong price increases, held back by a delayed cold and flu season – echoing similar challenges across the sector. While the company posted solid profits in 2024, the outlook for next year has caught a cold, with slower growth expected in a few key areas. 2024 can be put down as a win, but the cautious 2025 outlook will be giving investors cause to think twice.
US markets finally caught a break as President Trump granted a one-month tariff exemption to automakers like General Motors and Ford, sparking a rebound in the S&P 500 after a week of tariff-driven turbulence. The ADP jobs report underwhelmed at 77k against an expected 140k, casting a shadow ahead of Friday’s nonfarm payrolls, though strong service sector numbers – PMI topping 50 and ISM Services at 53.5 – offered a counterweight to lift equities. As markets slowly re-acquaint themselves with Trump-driven turbulence, there are opportunities cropping up to grab some high-quality names at attractive prices.
Brent crude oil futures clawed their way toward $70 in early trading, after plummeting to multi-year lows. Tariff talk works both ways, this time offering some reprieve with oil getting a lift from hints that President Trump might scrap the 10% tariff on Canadian energy imports tied to trade deals. Still, the overbearing mood is a cautious one, with oversupply fears and weakening US oil demand keeping prices low.”
Derren Nathan, head of equity research, Hargreaves Lansdown:
“Betting group Entain’s interim CEO Stella David will be hoping that today’s robust results will divert investor’s attention away from recent boardroom drama. As flagged in January, EBITDA came in at the top end of earlier guidance. The core UK market proved to be a game of two halves with NGR dipping in the first six months and then recovering in the final furlong as regulatory headwinds were lapped and marketing initiatives had the desired effect. There was a mixed performance in international markets, with Brazil being the standout – growing 41%. Regulation in that market is providing opportunity for licensed operators but it’s also a double-edged sword with new gaming taxes expected to dent margins this year.
The US-facing joint venture – BetMGM’s growth of 7% was solid, but below the high-octane levels of recent years. Profitability is in sight for this year, but there’s a lot of work to do to meet the mid-term target of $500mn EBITDA. Entain is in a strong position to grow its share of the world’s most lucrative gambling markets, but until a permanent replacement is found for recently departed CEO Gavin Isaacs question marks will remain over the strategy. Activist Investor Eminence Capital already has one seat in the boardroom and is likely to have some names in mind for the top job, but so far Entain’s staying tight lipped about its succession plans.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“ITV shook off the aftereffects of 2023’s writers’ and actors’ strike and put in a strong performance in 2024. Underlying cash profits moved higher at double-digit rates, fuelled by a tight grip on costs and a busy content slate in the final quarter, which saw ITV Studios deliver record profits.
The Media & Entertainment (M&E) business also performed better, with margins widening over the year. Within M&E, ITVX continued its stellar run, becoming the UK’s fastest-growing streaming platform over the last two years as streaming hours and monthly active users were both up at double-digit rates. With more eyeballs on ITV’s screens, advertising revenues are flowing in and giving management the confidence that by the end of 2025, the group will have recouped its investment in the platform, much earlier than expected. This is vitally important for ITV’s transition away from the declining audiences that traditional broadcast attracts. But keep in mind that it’s a very competitive space, and the likes of Netflix and Amazon Prime Video have substantially deeper pockets to throw at growing market share.”
