Apple, Amazon, Snap, Rolls-Royce, Barclays, Next, BAE Systems – News Defused

Markets Defused is an easy-to-understand and straightforward recap of the day’s most engaging business and stock market news.

Apple stock got a tepid response to forecast-beating financials

Apple Inc (NASDAQ:AAPL, ETR:APC) investors found it hard to be moved by the iPhone maker’s third-quarter earnings – albeit last month’s big AI info-dump had left little room for surprises.

Revenue for the quarter was up 5% to a total of $85.78 billion, better than the $84.53 billion that was estimated by Wall Street analysts.

Net income was marked at $21.45 billion, whilst earnings per share was reported as $1.40 versus a market consensus estimate of $1.35.

In afterhours trading, Apple stock was up 0.3% priced at $219.14.

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Amazon stock slumped after revenue arrived short of market forecasts

Amazon.com Inc (NASDAQ:AMZN) stock dropped around 7% in afterhours trade after revealing second-quarter revenue below market expectations.

Revenue for the quarter totalled $147.98 billion, rather than the $148.56 billion predicted by Wall Street analysts. Earnings per share (EPS) stood at $1.26, beating a market consensus of $1.03.

Amazon pitched guidance for its third-quarter sales in a range of $154 billion to $158.5 billion, which would be an improvement of 8-11% from the previous range – but was shy of a consensus mid-point estimate of $158.24 billion.

In afterhours trade, Amazon stock gave up $12.98 or 7.05% priced at $171.09 – it extended a 1.5% decline in the regular session.

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Snap stock slumped as revenue disappointed three ways

Snap Inc (NYSE:SNAP) shares collapsed in afterhours dealing, losing close to 20%, after the social media app disappointed thrice on revenue.

Revenue in Snap’s second quarter was reported at $1.24 billion which was slightly short of Wall Street estimates of $1.25 billion.

Average revenue per user was reported at $2.86, below the $2.91 pencilled in by analysts.

Then, new guidance for the third quarter sees revenue between $1.335 billion and $1.375 billion, versus a prior ‘mid-point’ analyst consensus of $1.36 billion.

It comes, according to market commentators, as Snapchat continues to find tough competition for advertising dollars in a marketplace dominated by TikTok and Meta’s Instagram.

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Rolls-Royce soared after strong financials signalled a return to dividends

Rolls-Royce Holdings PLC (LSE:RR.) shares soared on Thursday, closing more than 9% higher, after the British engineer reinstated its dividend, for the first time since COVID.

At one point on Thursday, Rolls-Royce shares touched a new all-time high – trading up to 503p.

Revenue for the first half increased to £8.2 billion, from £7 billion in the same period last year.

Underlying profit rose to £1.1 billion. Meanwhile, guidance for the full year was set, above prior expectations, between £2.1 billion and £2.3 billion.

It marks an upgrade of some £300 million on the last estimate provided by the engineer, back in February.

Crucially, for the investment case the company is now committing to shareholder returns via dividend for full-year 2024, with the payment expected to equate to 30% of underlying profit after tax.

On the other side of the ledger, the British company said it was planning around 2,500 job cuts across its global workforce, with a view to improving cost efficiencies.

"Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity,” chief executive Tufan Erginbilgic said in a statement.

He added: “These results and our increased financial resilience give us the confidence to raise our 2024 guidance and reinstate shareholder distributions in respect of the full year 2024 results."

In London, Rolls Royce shares finished Thursday 42.28p or 9.4% higher, at 491.88p.

Barclays pulled lower as UK bank values dented by BoE rate cut

Barclays PLC (LSE:BARC) shares closed Thursday 3.6% lower, irrespective of its quarterly financials, as the UK banks all lost value after the Bank of England cut base interest rates – by a quarter point, to 5%.

The prospect of tighter interest margins dented investor sentiments.

Whilst Barclays dropped, the fall was quite modest compared to high street banking peers Lloyds and Natwest which gave up more than 17% and 6% respectively on Thursday afternoon.

Putting the spotlight on Barclay’s financials, released this morning, shows an improved performance driven mainly by its investment banking operations, and a reduction in writedowns compared to last year.

Barclays reported a 1% rise in second-quarter income to £6.3 billion, whilst net profit attributed to shareholders came in at £1.2 billion which, whilst less than last year’s total, was ahead of consensus market expectations of £1.03 billion.

Barclays announced a new £750 million buyback and a 2.9p dividend, with the bank confirming it is targeting £10 billion in shareholder returns by 2026, mainly through buybacks.

In London, Barclays shares ended Thursday’s dealing down 3.63% at 225.32p.

Next shares boosted by “marvellous” trading update

Next PLC (LSE:NXT) shares rose more than 8%, closing Thursday’s trading at 9,830p thanks to an overall strong second-quarter trading update, which triggered an upgrade to profit guidance.

The retailer’s profit target for its 2025 financial year is now pitched at £980 million, with Next anticipating both higher sales and lower costs.

It said full-price sales were up 3.2% in its second quarter, and the half-year rate was 4.4%, driven by notably strong online overseas sales (which were up nearly 20%).

Whilst overall online sales grew by 8.1%, retail sales declined some 4.7% with the company noting ‘tough weather conditions’ which kept footfall down in the quarter.

“We are maintaining our guidance for full price sales in the second half to be up +2.5% versus last year.  This might seem cautious when compared with the performance in the first half, which was up +4.4%,” the company said in a statement.

Retail sector analysts at stockbroker Shore Capital were notably bullish, in reaction to the update.

“Next's Q2 trading statement carries a little bit more weight than perhaps is normally the case as it is a direct commentary on the UK apparel trade through what has been a quite challenging market, especially in spring against tough comparatives,” analyst Clive Black said in a note.

“So, to beat its own expectation for sales by 3.5%, to deliver positive sales YoY and so raise its FY25 PBT guidance by £20m, is a very pleasant surprise to us and a marvellous achievement.”

BAE’ impressive financials were only as great as investors expected

BAE Systems PLC (LSE:BA.) shares were down, closing nearly 1% lower, despite this morning reporting a 13% increase in revenue for the first half of the year, to a total of £13.4 billion.

At the same time the UK’s leading aerospace engineer upgraded its full-year guidance for sales growth to 12-14%, up from the previous estimate of 10-12%, and, similarly, BAE lifted its profit growth forecast to 12-14%, up from 11-13%.

BAE’s interim dividend was increased 8% to 12.4p per share.

The company pointed to increased demand for its products amid ongoing geopolitical tensions, as well as a boost from its strategic acquisition of Ball Aerospace which completed in February to expand the company’s capabilities in the space sector.

Order intake was said to have reached £15.1 billion in the quarter, taking its total order backlog to a company record of some £74.1 billion.

Whilst on the face of it, the results were impressive – it’s the sort of impressive the market has come to expect from BAE in the current climate of increasing defence spending, and as such was pretty much “in-line with expectations” according to market commentators.

Chief executive Charles Woodburn, meanwhile, commented: “we delivered a strong operational and financial performance in the first half of the year, giving us confidence to increase our year-end guidance across all our key metrics."

In London, BAE shares closed 0.93% lower at 1,285p.