Equities Update: Dominos, Persimmon, Balfour Beatty, Deliveroo, Hochschild, Trainline…

Domino’s gets sales boost, expansion continues

Adam Vettese, market analyst at eToro, says: “Domino’s Pizza Group has seen profits grow by 4% as it looks to take an even bigger slice of the home delivery market. The company has followed up their acquisition of Shorecal in Ireland with further investments in the country as well as expanding into Eastern Europe with DP Poland. This aggressive expansion is costly and can rack up debt levels, which is a risk. However, the firm seems to have got borrowing within their desired range and still managed to hike the dividend, which should put shareholders more at ease.

“Domino’s has a sales target of £2bn by 2028, which won’t be easy given how competitive the space is. They’ll hope the successful trial of a loyalty programme being rolled out further will be a catalyst for further sales growth.

“Shares have dipped in early trading as investors digest the numbers, now 10% down since the start of the year.”

Persimmon delivers earnings beat but is it just papering over the cracks of a shaky housing market?

Mark Crouch, market analyst at eToro, says: “Persimmon’s latest results will be met with open arms by investors who have had a rough time of it of late. The housebuilder posted a 10% jump in annual profits, as new home completions were up 7% from 2023 while average new home selling prices increased by 5%.

“It is still too early to tell whether this will be the catalyst to restore sustainable growth and repair damage to Persimmon’s severely dented share price, which is down over 60% post-COVID, or if these results are just papering overing cracks in what is a housing market under significant strain.

“As inflation and unemployment have begun to rise in the UK, further interest rate cuts risk runaway inflation, and the alternative is no less severe, should an interest rate hike have to be considered. Either way the knock-on effect for people’s affordability to buy a home does not look good.

“Like the Dutchman in the dike, Persimmon are plugging one hole only for another to appear, and with much being pinned on Labour’s ambitious housing plan to add 1.5m new homes, market forces might make that target difficult.”

Balfour Beatty bumps up payouts after strong year

Adam Vettese, market analyst at eToro, says: “Infrastructure group Balfour Beatty has seen profits up 7% as its order book continues to swell with new projects. The company behind HS2 will increase its dividend by 9% and return a further £125m to shareholders via buybacks. Despite some weakness in the US due to some construction delays, the UK operations have more than offset this as investors see shares tick up this morning on the open.

“Shares had a strong 2024, gaining 36% and hitting a record high earlier this year. Shareholders will hope that todays strong update is a platform to challenge that level again and kick on further.”

Hochschild earnings dazzle investors and precious metals shine

Mark Crouch, market analyst at eToro, says: “Hochschild Mining posted a dazzling set of results this morning, reporting its best financial performance in thirteen years as profits for the precious metal miner almost tripled in 2024. Perhaps not unexpectedly Hochschild has been cashing in on the extraordinary gold rush that has been taking place over the last year, with gold prices surging nearly 50% percent in 2024 and silver not far behind.

“Financial discipline had been a concern for investors in the past, not to mention challenging currency conditions, however Hochschild looks to have got all their financial ducks in a row, while adding some key mineral resources to their portfolio. The Mara Rosa Mine in Brazil stands out as a key growth asset in Hochschild’s portfolio, with the potential to double the company’s cash flow.

“Though Hochschild shares doubled in 2024, the shares are still trading significantly below their 2011 levels, despite gold prices being nearly twice as high today. This gap presents an intriguing risk-reward opportunity for investors, and with precious metal prices on an upward trajectory, investors might be eyeing up the stock for its upside potential.”

Deliveroo finally turns a profit

Adam Vettese, market analyst at eToro, says: “The name of the game is to make money and Deliveroo has finally done that by turning a profit for the first time. Considering the wild ride shares have been on since its IPO flop, this is definitely a major milestone. Peeling back the layers, the question will be can they build on this sustainably: gross transaction value is up a respectable 6%, but for only a 3% bump in revenue. This suggests margins are being squeezed on customer incentives and other costs. Inflation is coming down so we may see consumers start to loosen the belt a little, but discounting to keep customers ordering can only go so far.

“Deliveroo’s exit from Hong Kong demonstrates just how tough this space is and they have plenty of competitors breathing down their neck in the core UK market. Leaning into grocery is a smart move and starting to make a meaningful contribution to the overall cohort of orders.

“Shares are down this morning as it seems it will take more to convince the market than just turning a profit. Deliveroo needs to build on this without sacrificing too much margin to prove it is thriving as opposed to just surviving.”

Is Trainline running out of steam as government-backed rival threatens to derail momentum?

Mark Crouch, market analyst at eToro, says: “Investors in Trainline will be hoping the online ticket operator is not running out of steam. Despite reporting record net ticket sales for the third year in a row, recent ticket sales have shown signs of slowing down. While adoption of digital ticking has seen revenue and consumer sales continue to grow, this was at the lower end of guidance. The announcement of a £75m share buyback this morning will hopefully add some fuel to the furnace for the share price.

“Threatening to further derail Trainline’s momentum is government plans to launch a state-backed rival to the online ticket operator. Exactly how much of a threat this might pose to Trainline is still up for debate. Trainline’s track record of delivering efficiency and value to customers are fundamental to its success – traits not typically associated with government services. Nevertheless, investors are weary, and after this morning’s underwhelming update, they have good reason to be.”