AstraZeneca aims for the stars, retail companies tread water including Kingfisher and Shoe Zone, Greencore feasts on corporate turnaround

“Investors want the Federal Reserve to say inflation is comfortably on track to hit its 2% target and that interest rates will undergo a series of cuts. However, the central bank is loathed to make such a commitment and so we’ve got underlying uncertainty in the market even though data points are supportive to this line of thinking,” says Russ Mould, Investment Director at AJ Bell.

“Comments from Fed Vice Chair Philip Jefferson at a conference in New York triggered a sense of nervousness in the market as he played down talk of imminent rate cuts. European markets weren’t impressed and opened Tuesday mostly in the red.

“The FTSE 100 fell 0.4% to 8,392, with healthcare the only key sector in positive territory. Futures prices implied a lacklustre session on Wall Street when US markets open later today.”

Astrazeneca

“Having stepped up to the plate and delivered on its $45 billion revenue goal set a decade earlier, AstraZeneca is now reaching for the stars with a new target to hit $80 billion revenue by 2030. The market liked the bold ambition, sending the shares to the upper part of the FTSE 100 leader board.

“An easy way for AstraZeneca to achieve such a goal would be to go on a spending spree and buy up rival companies. However, AstraZeneca implies it will hit the goal through organic means which would be all the more impressive.

“Chief executive Pascal Soriot is no stranger to controversy over the scale of his pay packet so perhaps he is trying to justify the large renumeration with the new growth plan. Achieving the goal would imply significant value generation for shareholders and no doubt himself given that part of his bonus scheme will be based on company performance.

“Developing new medicines is not an easy task as the success rate is unpredictable. Even when something is approved for commercial sale, there is always the risk of copycat products once patents expire. AstraZeneca needs to spin multiple plates at the same time as it cannot go ‘all in’ on one area, in case of failure or setback.”

Retail sector: Kingfisher, The Work, Shoe Zone, Topps Tiles

“It’s tough to be a UK retailer given current fragile market conditions. Despite all the talk of a potential interest rate cut around the corner, consumers are still in shock from the current high interest rate environment and continue to watch every penny.

“When combined with ongoing cost pressures, corporate earnings in the retail sector remain fragile and that is keeping management awake at night.

“Updates from Kingfisher, The Works, Shoe Zone and Topps Tiles are nothing to write home about. They are treading water in a difficult market, although that’s about the best you can expect under the circumstances.

“The focus is as much about finding new ways to cut costs as it is to keep the tills ringing. Higher wage bills and supply chain disruptions rearing their ugly head are two areas that have caught Shoe Zone off guard and triggered a profit warning.

“The wet weather for much of 2024 to date hasn’t helped the retail sector, meaning company bosses are keeping their fingers crossed for a knock-out summer to encourage people to venture outside.

“Whether that’s going to the shops or doing activities like DIY which would benefit Kingfisher, there is a lot riding on the next three months to help inject some much-needed oomph into the sector.”

Greencore

“The pandemic was catastrophic for companies who relied on large numbers of office workers to buy their products. As one of the country’s biggest sandwich makers, Greencore saw demand shrivel up and its business knocked sideways. Since then, it’s been on a mission to get things in order.

“Fortunately, Greencore has been able to accelerate its recovery plan as life returns to normal. Its core bread and butter has benefited from more people returning to the office as well as major retailers eager to invest in product innovation as they compete for the lunchtime crowd.

“Behind the scenes, Greencore has exited contracts which delivered sub-optimal returns while winning new ones that can take advantage of existing manufacturing capacity.

“Half-year results show a business which has been rearranging the furniture with great success, reallocating resources while at the same time moving forward with new developments. The market likes what it sees, hence the share price jumping 15% on the news and extending a rally that’s been in place since last October.

“The announcement of a new share buyback programme has been enough for many companies to enjoy a share price spike in recent months, but Greencore has delivered both a new buyback and a big improvement in earnings. This double decker bit of news has served up a meal that investors have devoured with a big smile on their face.”

These articles are for information purposes only and are not a personal recommendation or advice.