Greggs delivers the goods, BP records bumper profits and FTSE in 'consolidation mode'

“The FTSE 100 was in consolidation mode on Tuesday morning, trading broadly flat but avoiding the falls seen in Asia overnight,” says AJ Bell Investment Director Russ Mould.

“As if the market needed something new to worry about, there is now renewed concern about relations between the USA and China as Nancy Pelosi is primed for a visit to Taiwan.

“Despite tight household budgets people still seem to have enough in their pocket to grab a can of their favourite fizzy pop. After strong numbers from Coca-Cola and PepsiCo, Irn-Bru maker AG Barr has followed suit. The company remains confident in its full-year forecast, despite the pressures from higher input costs, as a hot summer and a recovery in out-of-home trade help to lift sales.

“A £20 pizza may feel like a rather less affordable treat to many people, however, and there were some signals in Domino’s latest numbers to worry shareholders.

“Rising costs took a slice out of first half profits and the company is upping marketing spend in the second half to generate more custom.

“There is always a slightly concerning situation if a company finds itself needing a strong second half to meet full year forecasts, often the recipe for an eventual profit warning.”

BP

“While the connection between UK households’ soaring energy bills and BP’s mega profits may be tangential at best – the disparity still isn’t a great look.

“Like its rival Shell, BP has benefited substantially from soaring prices for oil and gas resulting from the invasion of Ukraine.

“The fact it produced its highest quarterly profit in 14 years, even though oil prices have been higher during that period than they are now, suggests BP is a more efficient machine than it was previously. It is also notable that the results are significantly ahead of what analysts had pencilled in.

“BP has to balance several competing interests at this point as it continues to operate, as its chief executive Bernard Looney infamously observed last November, like a ‘cash machine’.

“How much capital does it allocate to investing in the energy transition, and projects which help improve energy security in the West, and how much does it return to shareholders?

“Investors in BP shares had to put up with a big cut to the dividend during the pandemic and they will expect to be rewarded for their patience in sticking with the company.”

Greggs

“Budget food-to-go chain Greggs’ proposition seems to be holding up well amid cost-of-living pressures.

“Clearly its relatively cheap offering is resonating with cash-strapped consumers who are perhaps trading down from more expensive options.

“The danger for Greggs is that people make their own packed lunches at home rather than grabbing food and drink on the go but there is little sign of that shift happening at any scale just yet.

“Today’s results were a good start for Roisin Curry after succeeding Roger Whiteside earlier this year. Curry was left the dubious legacy of some pretty ambitious medium-to-long-term growth targets.

“New openings are progressing at pace – even if Greggs was refused the somewhat hubristic plan to create a 24-hour venue in Leicester Square – and it sees opportunities to reach customers in the evenings by extending opening hours and delivery service through Just Eat.

“Profits are flat but that is probably not a huge concern for investors in the short term. Cost inflation was a factor but of more significance was the one-off reversal in VAT and business rate breaks offered during the pandemic.”

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