Equities Update: Analog Devices, Mobico, Antofagasta, Wood Group…

Mobico on the road to recovery?

Adam Vettese, Market Analyst at investment platform eToro, says: “Mobico shares have been on the slide for some time now with a combination of the pandemic decimating travel demand and inflation driving costs higher. This morning’s update has seen profits spike up 28% and the company maintained their guidance for the year. The focus now will be on cost cutting and deleveraging whilst cost-pressures begin to ease, and in turn Mobico will benefit from the inflation adjusted pricing in the second half.

“Investors may be cautious about this being the beginning of a huge redemption story as there is still some fat to be trimmed with the company actively looking to dispose of its North American School Bus division. Despite this, the update has been well received by the market albeit with no dividend to be paid still. Shares would have to appreciate over 50% to get back to their highest price of just this year and shares currently one eighth of the price of their pre-pandemic high.”

Analog Devices tops estimates, gives upbeat forward guidance

Adam Vettese, analyst at investment platform eToro, says: “Semiconductor maker Analog Devices’ results for its fiscal second quarter compare poorly to a year ago, with steep declines in operating income and revenue. But compared to expectations they look quite propitious – revenue came in higher than both the company’s own outlook and the consensus expectation of Wall Street analysts, while earnings were near the high end of guidance. The company is maintaining its dividend at a quarterly $0.92 per share, compared with the $0.86 per share it paid per quarter last year.

“Shares in ADI hit an all-time high in July, but suffered a correction earlier this month, along with other AI-related stocks. The promise contained in these numbers could help to allay concerns about valuations having got out of hand: CEO and Chair Vincent Roche expressed optimism that the company is at the beginning of a cyclical recovery and the company gave forward guidance for revenue of $2.4 bn for the fourth quarter, compared to the $2.27 bn forecast for Q3.

“Momentum in new orders bodes well for a potential growth cycle, and as customers find new applications for AI over time, it is not unreasonable to expect a secular demand for its products. The balance sheet is strong, with cash assets ballooning by close to $1 bn from six months ago. Shares in Analog Devices climbed 1% in pre-market trading on Wall Street and the company’s performance relative to expectations could be an interesting foreshadowing for Nvidia’s, which reports next week.”

Antofagasta profits up but shareholders will be hoping for copper demand surge

Mark Crouch, Market Analyst at investment platform eToro, said: “Antofagasta has reported a five percent increase in half-year profits this morning as higher copper prices drove performance in the first half of the year. However, after reaching a record high in May, the price of copper has since retraced nearly 20 percent. Not surprisingly, Antofagasta’s share price has moved in near identical fashion.

“Antofagasta shareholders might be asking themselves: is the bull run in copper over or is this just the end of the beginning? A leading economic indicator, Dr Copper, as the industrial metal is often referred to, could be diagnosing a period of queasiness ahead for markets following copper’s recent sell off. In June, the world’s largest consumer of the industrial metal, China, reported copper stockpiles at a four-year high.

“However, with cooling inflation giving way to Central Banks around the world cutting interest rates, a bump in economic activity could likely follow, at which point demand for copper is sure to ramp up again.” 

Wood Group wounded after failed bid

Adam Vettese, Market Analyst at investment platform eToro, said: “When global markets started selling off last week it was the worst possible time for a takeover bid to fall through and that’s exactly what happened to Wood Group. Investors will be licking their wounds as the price plummeted after Sidra decided to walk away from its planned acquisition citing geopolitical risk. 

“They were probably counting on a nice windfall, but shareholders have now seen the company post a 900m loss as a result of costs incurred by legacy acquisitions and winding down of large scale projects. Wood Group is focusing on becoming more nimble, ditching capital intensive construction and engineering to services and consulting. This switch in focus has helped to deliver 8.5% EBITDA growth which shows some progress despite the hefty exceptional items affecting the bottom line.

“Looking ahead, the firm has reaffirmed guidance but no doubt question marks will remain after another failed bid with shareholders seeking the opportunity for additional returns which has gone begging once again. The board will be under even more pressure to deliver.”