Equities Update: Balfour Beatty, Aviva, Marshalls…

Balfour Beatty laying the groundwork for future growth

Mark Crouch, Market Analyst at investment platform eToro, said: “While Balfour Beatty has not been able to totally avoid the economic pressures burdening the construction industry, they have been able to deliver robust and progressive earnings in spite of them.

“With projects overseas progressing well, Balfour’s geographically diversified portfolio means the business is delivering sustainable profits and cash generation, a significant proportion of which has been returned to shareholders. Balfour confirmed another hike in their dividend and are over halfway through a £100m share buyback programme.

“The UK however remains Balfour’s strongest market with the company recently winning several lucrative contracts in transport, energy and defence, with the potential to significantly drive future earnings growth.

“With a relatively small market cap of £2bn, Balfour generates revenues significantly more than that, so the scope for extensive growth is clear to see. The challenge however is for Balfour to widen their margins. Rising material costs have compressed margins to low single digits, which, if inflation were to creep back into the economy, would leave the company with little to no wiggle room.”

Aviva ahead of analysts’ profit expectations

Adam Vettese, Market Analyst at investment platform eToro, said: “Aviva has beaten analysts’ profit estimates, helped by insurance premiums rising 18% in the UK and Ireland. This won’t be too much of a surprise given the inflationary environment we have been in. The insurer’s cash position is strong and has also nudged up the dividend after completing a £300m share buyback. Given topical concerns over volatility and macro factors perhaps injecting some uncertainty back into the market, Aviva seems like a pretty solid place for investors to shelter from such conditions with shares up 13% so far this year.

“Aviva is looking to achieve £2bn operating profit by 2026 which could be a punchy target if premium growth starts to level off. Investors may then look to the retirement sales numbers which came in lower than last year to rebound in order to pick up the slack.”

Lightning doesn’t strike twice for jobs data

Sam North, Market Analyst at Investment platform eToro, said: “Following a significant wobble in the US jobs report at the beginning of the month, eyes were on the UK’s report to see how contagious it was. The weaker-than-expected report out of the States spooked the market, which contributed to the big sell-off last Monday, but those wanting to see similar headlines out of the UK were left disappointed. 

“We are off to a good start in a week full of UK data. The jobs data sparked a strong market reaction, driven by a significant drop in the unemployment rate and a notable increase in employment figures. This robust labour market performance has more than compensated for slightly softer wage growth, which was influenced by the previous year’s NHS bonus payments. As a result, we saw GBP/USD gain momentum, lifting from 1.2779 to a session high of 1.2801, underscoring market confidence in the UK’s economic resilience. The focus will now move to tomorrow’s inflation report, with the Bank of England hoping to see a number steady at around 2%.”

Marshall’s revenues fall as building supplier battens down the hatches

Mark Crouch, Market Analyst at investment platform eToro, said: “Marshall’s shares have performed well this year, up over fifteen percent. This morning’s earnings update however indicates the Yorkshire construction firm is under mounting pressure with demand for UK housing floundering and inconsistent.

“Marshalls, which supplies building, roofing and landscaping materials is facing a precarious set of circumstances, falling revenues and rising costs, in an industry struggling to get going and in desperate need of a kick start.

“To their credit Marshalls has not stood still, taking decisive action, cutting personnel and slashing shareholder returns in a bid to improve efficiency and lower the company’s debt, which despite the challenges facing the business, they have been successful in doing.    

“Marshalls anticipates a recovery into the second half of the year, however current trends indicate that is by no means nailed on with demand still weak. It was hoped that recent rate cuts would do the trick, however it’s too early to tell whether this will pave the way for Marshalls’ recovery.”