Must read: FTSE 100, BP, Diageo, Greggs 

GLOBAL MARKETS 

After the FTSE 100 closed higher on Monday fuelled by rate cut hopes, the UK blue-chip index is giving back some of those gains, underperforming other European indices like the DAX and the CAC. Earnings are in full focus with Diageo (LSE:DGE) leading the losses following disappointing full-year results. 

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It is a big week for UK investors as markets brace for the Bank of England’s rate decision on Thursday which is going to be a close call – the Monetary Policy Committee might cut rates for the first time since 2020, or it might make traders and investors wait another month so that it is more closely aligned with the Federal Reserve stateside.

BP

BP (LSE:BP.) reported second-quarter earnings (underlying replacement cost profit) of $2.76 billion, ahead of analysts’ forecasts for $2.54 billion, partly thanks to strong downstream fuel margins. That’s up slightly from $2.7 billion in the previous quarter, sending shares into the green today. 

Meanwhile, the oil giant is trying to drive shareholder support by upping its dividend by 10% and extending its share buyback programme, committing to buying back $3.5 billion in the second half of the year in a sign of confidence from BP. However, it warned that it expects upstream production to be lower in the current quarter compared to the previous three months.

After the energy crisis in 2022 fuelled by Russia’s invasion of Ukraine which sent oil giants’ profits soaring, BP and its rivals have been getting used to a more normal period for energy earnings. 

Murray Auchincloss who took over as CEO at the start of the year has been cutting back on BP’s green energy plans, shifting the focus back towards oil and gas. Biofuel and wind projects have been either scaled back or paused. Instead, BP gave the green light to the Kaskida project in the US Gulf of Mexico, a major new oilfield development set to start in 2029. 

In the most part, shares in BP enjoyed a strong start to 2024, rallying until the highs in April. However, since then the stock has reversed gains, shedding around 14% from the peak, and is now nursing a year-to-date loss, echoing similar price action seen by underlying oil prices which have also been weakening since the peak in April. 

A combination of above-expectations earnings and the announcement of plans to return cash to shareholders have provided a welcomed boost to the stock today.

DIAGEO 

Diageo reported a 4.8% drop in annual profit, missing analysts’ expectations for a drop of 4.5%, while group net sales fell by 0.6%, its first annual sales fall since the pandemic. These results signal more pain for the spirits giant after it issued a profit warning in November last year. 

Sales in Latin America and the Caribbean were particularly problematic, sliding 21.1%, worse than the company’s guidance for a drop of 10-20%. CEO Debra Crew said downtrading in scotch and tequila hurt trading in Mexico. The outlook also remains uncertain – Diageo said the consumer environment will remain challenging in 2025 and said it is hard to call when medium term guidance will be reached. 

Cost-of-living pressures have prompted consumers in certain markets like Latin America to switch to cheaper, unbranded substitutes to Diageo’s labelled, often more premium offering. Even in North America, where the economic backdrop has been relatively resilient, Diageo said it has struggled with a ‘cautious consumer environment.’ 

Shares have plunged to the lowest level since November 2020, shedding more than 8% today, bringing its 2024 loss to over 17%, sharply underperforming the wider UK market.

GREGGS 

Greggs (LSE:GRG) reported a 16.3% rise in first-half profit to £74.1 million on total sales up 13.8% to £960.6 million and it kept its full-year earnings outlook unchanged. Like-for-like shop sales also grew by 7.4%, all allowing the bakery to raise its dividend by 18.8% to 19p. Greggs continues to expand its footprint, opening 51 new shops over the six-month period. 

Greggs has successfully managed to navigate pressures from squeezed household budgets amid the cost-of-living crisis thanks to its competitively priced no-frills offering, which continues to spur demand from hungry customers on the go. Building upon its regular in-store success, Greggs has managed to grow sales by boosting deliveries and extending its opening hours. Its innovative menu has also helped to increase sales with strong demand for pizza deals and over-ice drinks. 

Investors have been backing Greggs this year too, with shares rallying around 15% so far in 2024. The stock has been on a (sausage) roll since the trough in October last year and shares are extending gains this morning.