Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Access both platforms from your single Saxo account.
London Quick Take – 30 July - Earnings bonanza - BAE, GSK, HSBC, META, MSFT...stocks mixed as traders eye key 3 days of Fed/Earnings/PCE/NFP
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
“Historical defective workmanship” is being blamed for a hit to Taylor Wimpey’s profits. Something we can all relate to I suppose... Taylor Wimpey profits were hit by a £20mn remediation charge to fix old property, leaving it to cut full-year outlook for profits due to c.£424 million after half-year results showed a 21% decline in underlying profits to £148.1 million. Management are sticking to guidance for full year UK completions of between 10,400 to 10,800. Shares were off 5% early doors.
BAE Systems is not having this kind of problem, the company lifting full-year guidance after another strong trading period. Sales rose 11% with underlying earnings rising 13% in the first half. Given the strong operational performance and robust order intake management feel confident to list the sales and underlying EBIT guidance for the full year by 100bps each. Sales are now expected to increase in the range of 8% to 10% whilst underlying EBIT is expected to increase in the range of 9% to 11%. However, shares were down despite the guidance increase as management said the strength of the share price appreciation this year was resulting in fewer shares being bought back.
HSBC shares fell about 5% after its profits fell more than expected – lots of commentary about the macro outlook there too. Profits declined 29%, well ahead of the roughly 17% drop anticipated, and expenses rose 10% linked to the restructuring. First half revenue decreased by $3.2bn or 9% to $34.1bn compared with the first half last year. Concerns about the global economy saw it increase provisions for bad loans to $1.1bn from around $950mn expected by markets. Net interest income was down $100mn in the first half after Hong Kong rate cuts but the wealth management business rose 19% in the first half – signs of strength are evident and cost cuts and simplification yielding progress. Fresh $3bn share buback not enough to lift shares after the profit drop – YTD still +18%.
GSK’s second quarter sales beat estimates – some very good numbers here for Emma Walmsley with total Q2 sales of £8bn for the drugmaker. Specialty medicine sales were up 15$ to £3.3bn, with some strong support from cancer drugs, which rose 42% to £0.5 and vaccines up 9% to £2.1bn. Core operating profits rose 12% and core EPS +15% not enough to lift shares this morning though as broader risk sentiment remains contained.
Rio Tinto's first-half profit fell 16% to $4.8 billion amid stagnant commodity prices and Trump-triggered trade uncertainties. The company announced an interim dividend of $1.48 per share, highlighting demand challenges.
Aston Martin back to warnings on profits...Adidas and Porsche and Mercedes warnings on tariffs.
Key days ahead for US
We enter a key period for US markets in particular with the Fed decision today, inflation data tomorrow and the US jobs report due on Friday - as well as vital tech earnings.
The Fed won’t cut today but there is a lot on the line in terms of a move in September. Powell won’t be bowing down to Trump’s demands to cut rates though so expect the chair to instead lay some groundwork for December rather than September.
If they do need to move sooner than it will be because of the labour market – key US jobs numbers on Friday will be more important this week. So far the labour market data looks good but we can seen signs of weakness appearing.
Ahead of this is the PCE inflation report – signs of uptick in inflation need to be treated with caution. Today’s ADP report will be measured for signs of being a reliable indicator but often isn’t. Last month it showed a contraction of 33k jobs and a “hesitancy to hire and a reluctance to replace departing workers”.
The key thing the trade war doesn’t look scary right now but we are yet to see the real impact.
No one cares about trade: The S&P 500 has had its longest run trading above its 20-day moving average since 1964...volatility has been crushed. Records are meant to be broken but this is unlikely to persist.
Earnings Focus
Today the focus is on Meta and Microsoft which report numbers after the market close. Here’s from our preview on the tech names.
Microsoft: Azure-eyed investors are dialled into the cloud platform as the key to the investment thesis right now as it sits at the heart of its AI ambitions. MSFT is up around 20% this year and hit a record high coming into earnings week. CFO Amy Hood said on the April earnings call that she expects 34-35% quarterly revenue growth in this quarter from Azure and other cloud services, a slight tick down perhaps from the 35% growth in the last quarter. Wall Street is expecting sales and earnings growth of around the 14% mark for the business as a whole, with revenues of $73.8bn and EPS at $3.38 expected.
Meta: Ads are going great but to sustain the ascent Meta needs to make the case for AI returns to drive a multiple expansion. Revenues are expected at $44.8bn on a growth rate of about 14.5% in Q2, which would be the slowest rate of expansion for two years. EPS is seen around $5.87. Last quarter, Meta raised its full-year capex outlook to between $64 billion and $72 billion, from between $60 billion and $65 billion, as it piled on more data center investments in AI. More recently, CEO Mark Zuckerberg’s multi-billion dollar hiring spree has caught the attention of investors with a number of high profile moves by the likes of Scale AI’s Alexandr Wang and GitHub’s Nat Friedman. Zuckerberg last week said Meta would plough “hundreds of billions of dollars” into AI compute infrastructure.
Also reporting later are Ford, Etsy, Qualcomm and ARM Holdings.
Earnings Roundup
Novo Nordisk – absolute carnage with the stock down 21% after the Ozempic maker slashed full-year guidance and named a new CEO. Sales now seen +8% to +14% vs +16.6% est, previous guide was +13% to +21%. Operating profits +10% to +16%, previously +16% to +24%. US competitor Eli Lilly, which makes Mounjaro and Zepbound, declined more than 4% in sympathy with Novo citing "persistent use of compounded GLP-1s." Eli Lilly reports 7 Aug.
Never rains but pours: UnitedHealth shares dropped some 7.5% more after it said 2025 earnings would be even worse than expected on rising medical costs. The forecast to return to growth in 2026 hardly seems plausible given the multiple headwinds. This latest adds to a string of setbacks and just days after it confirmed it was cooperating with a Justice Department investigation into its Medicare billing – profit warnings rarely come alone.
Fellow Dow component Merck dropped as it announced plans to slash costs by $3bn...faces massive patent cliff with Keytruda exclusivity at the end of 2027. Quarterly numbers missed for the first time since 2021. Several peers are in the same patent cliff-edge situation in the next few years.
Boeing rose initially before notching a loss of over 4% after it cut quarterly losses and it delivered the most planes since 2018. Revenue beat expectations and the CEO touted its turnaround year...shares are up big this year as investors agree the worst is likely behind but the weakness in the stock post-earnings suggests lingering doubts. Revenue rose 35% to $22.75bn, while the loss per share narrowed to $1.24, well ahead of the $1.54 expected.
Spotify sank over 11% on a triple whammy of a Q2 loss, missed revenue expectations and softer-than-expected guidance for the current quarter. SPOT turned its first profit recently but 120% rally off the 2022 means optimism was well discounted...user metrics look much more secure than the earnings data indicates with Q3 monthly active users guided to 710mn, ahead of the 707mn forecast, after a rise of 11% year-on-year in Q2. Premium subs growth +12% and ad-supported subs +10% appears solid and supportive longer term even if near-term if looks to be suffering from margin pressures from the ads business failing to expand as quick as management would like.
P&G shares were flat after it beat on the top and bottom lines but issued flat guidance for 2026 and flagged a $1bn hit from tariffs...read across for Unilever which reports on Thursday.
Here’s a quick look at ULVR from our preview earlier this week:
Could see organic sales growth of more than 3.5% in the first half. In April management reaffirmed full-year guidance, saying they still expect underlying sales growth of 3-5%, and considered tariffs as managed. It reported underlying sales growth of 3.0%, with volume growth of 1.3% and price of 1.7%, though turnover was lower due to disposals. Ice cream business separation remains on track and buybacks continue. It was a positive update on the whole but nothing to set the pulses racing. Look to see whether the new CEO has a bold plan to divest the food business – one top shareholder has suggested Unilever look at selling its €13.4bn-revenue food business. That shareholder, Artisan Partners, led a successful activist campaign at Danone.
London Quick Take – 30 July - Earnings bonanza - BAE, GSK, HSBC, META, MSFT...stocks mixed as traders eye key 3 days of Fed/Earnings/PCE/NFP
Key Points
- HSBC slides as profits dip 29%, BAE Systems and GSK lift guidance
- META and Microsoft to report key tech earnings tonight
- Fed set to remain unchanged tonight but signal whether September is on for a cut
- Earnings picture is starting to show divergence
The FTSE 100 tracked about a third of a percent lower at the 9,100 level with another stack of earnings to digest and a key three days in the US likely to set the town. The S&P 500 slid 0.3% yesterday to snap a 7-day streak of record closes while the Dow fell further on some earnings misses among its heavier weights. The Fed rate decision is due tonight but there is no chance of a cut – markets will hang on every word from Jay Powell in the press conference. I can’t see Powell doing anything to bend the knee to Trump until the labour market cracks, so the real interest is probably in the jobs market report on Friday, which follows a key inflation report on Thursday from the US. Trade truce talks between the US and China ended with no agreement but we have time on that front. Starbucks rose on weak numbers, Visa fell on strength...
Elsewhere, sterling bounced after hitting its lowest in two months as the dollar firmed across the board, with the euro seeing two sharp days of reversals before trying to fight a rearguard today. Reversals of the crowded USD trade were always going to be brutal. Crude prices are sharply higher again with Brent above its 200-day SMA and traders eyeing a potentially volatile week amid US threats to Russia about a peace deal in Ukraine, China-US trade talks, the Fed decision and a strengthening US dollar.
UK reporting season kicks hits peak
Elsewhere, sterling bounced after hitting its lowest in two months as the dollar firmed across the board, with the euro seeing two sharp days of reversals before trying to fight a rearguard today. Reversals of the crowded USD trade were always going to be brutal. Crude prices are sharply higher again with Brent above its 200-day SMA and traders eyeing a potentially volatile week amid US threats to Russia about a peace deal in Ukraine, China-US trade talks, the Fed decision and a strengthening US dollar.
UK reporting season kicks hits peak
“Historical defective workmanship” is being blamed for a hit to Taylor Wimpey’s profits. Something we can all relate to I suppose... Taylor Wimpey profits were hit by a £20mn remediation charge to fix old property, leaving it to cut full-year outlook for profits due to c.£424 million after half-year results showed a 21% decline in underlying profits to £148.1 million. Management are sticking to guidance for full year UK completions of between 10,400 to 10,800. Shares were off 5% early doors.
BAE Systems is not having this kind of problem, the company lifting full-year guidance after another strong trading period. Sales rose 11% with underlying earnings rising 13% in the first half. Given the strong operational performance and robust order intake management feel confident to list the sales and underlying EBIT guidance for the full year by 100bps each. Sales are now expected to increase in the range of 8% to 10% whilst underlying EBIT is expected to increase in the range of 9% to 11%. However, shares were down despite the guidance increase as management said the strength of the share price appreciation this year was resulting in fewer shares being bought back.
HSBC shares fell about 5% after its profits fell more than expected – lots of commentary about the macro outlook there too. Profits declined 29%, well ahead of the roughly 17% drop anticipated, and expenses rose 10% linked to the restructuring. First half revenue decreased by $3.2bn or 9% to $34.1bn compared with the first half last year. Concerns about the global economy saw it increase provisions for bad loans to $1.1bn from around $950mn expected by markets. Net interest income was down $100mn in the first half after Hong Kong rate cuts but the wealth management business rose 19% in the first half – signs of strength are evident and cost cuts and simplification yielding progress. Fresh $3bn share buback not enough to lift shares after the profit drop – YTD still +18%.
GSK’s second quarter sales beat estimates – some very good numbers here for Emma Walmsley with total Q2 sales of £8bn for the drugmaker. Specialty medicine sales were up 15$ to £3.3bn, with some strong support from cancer drugs, which rose 42% to £0.5 and vaccines up 9% to £2.1bn. Core operating profits rose 12% and core EPS +15% not enough to lift shares this morning though as broader risk sentiment remains contained.
Rio Tinto's first-half profit fell 16% to $4.8 billion amid stagnant commodity prices and Trump-triggered trade uncertainties. The company announced an interim dividend of $1.48 per share, highlighting demand challenges.
Aston Martin back to warnings on profits...Adidas and Porsche and Mercedes warnings on tariffs.
Key days ahead for US
We enter a key period for US markets in particular with the Fed decision today, inflation data tomorrow and the US jobs report due on Friday - as well as vital tech earnings.
The Fed won’t cut today but there is a lot on the line in terms of a move in September. Powell won’t be bowing down to Trump’s demands to cut rates though so expect the chair to instead lay some groundwork for December rather than September.
If they do need to move sooner than it will be because of the labour market – key US jobs numbers on Friday will be more important this week. So far the labour market data looks good but we can seen signs of weakness appearing.
Ahead of this is the PCE inflation report – signs of uptick in inflation need to be treated with caution. Today’s ADP report will be measured for signs of being a reliable indicator but often isn’t. Last month it showed a contraction of 33k jobs and a “hesitancy to hire and a reluctance to replace departing workers”.
The key thing the trade war doesn’t look scary right now but we are yet to see the real impact.
No one cares about trade: The S&P 500 has had its longest run trading above its 20-day moving average since 1964...volatility has been crushed. Records are meant to be broken but this is unlikely to persist.
Earnings Focus
Today the focus is on Meta and Microsoft which report numbers after the market close. Here’s from our preview on the tech names.
Microsoft: Azure-eyed investors are dialled into the cloud platform as the key to the investment thesis right now as it sits at the heart of its AI ambitions. MSFT is up around 20% this year and hit a record high coming into earnings week. CFO Amy Hood said on the April earnings call that she expects 34-35% quarterly revenue growth in this quarter from Azure and other cloud services, a slight tick down perhaps from the 35% growth in the last quarter. Wall Street is expecting sales and earnings growth of around the 14% mark for the business as a whole, with revenues of $73.8bn and EPS at $3.38 expected.
Meta: Ads are going great but to sustain the ascent Meta needs to make the case for AI returns to drive a multiple expansion. Revenues are expected at $44.8bn on a growth rate of about 14.5% in Q2, which would be the slowest rate of expansion for two years. EPS is seen around $5.87. Last quarter, Meta raised its full-year capex outlook to between $64 billion and $72 billion, from between $60 billion and $65 billion, as it piled on more data center investments in AI. More recently, CEO Mark Zuckerberg’s multi-billion dollar hiring spree has caught the attention of investors with a number of high profile moves by the likes of Scale AI’s Alexandr Wang and GitHub’s Nat Friedman. Zuckerberg last week said Meta would plough “hundreds of billions of dollars” into AI compute infrastructure.
Also reporting later are Ford, Etsy, Qualcomm and ARM Holdings.
Earnings Roundup
Novo Nordisk – absolute carnage with the stock down 21% after the Ozempic maker slashed full-year guidance and named a new CEO. Sales now seen +8% to +14% vs +16.6% est, previous guide was +13% to +21%. Operating profits +10% to +16%, previously +16% to +24%. US competitor Eli Lilly, which makes Mounjaro and Zepbound, declined more than 4% in sympathy with Novo citing "persistent use of compounded GLP-1s." Eli Lilly reports 7 Aug.
Never rains but pours: UnitedHealth shares dropped some 7.5% more after it said 2025 earnings would be even worse than expected on rising medical costs. The forecast to return to growth in 2026 hardly seems plausible given the multiple headwinds. This latest adds to a string of setbacks and just days after it confirmed it was cooperating with a Justice Department investigation into its Medicare billing – profit warnings rarely come alone.
Fellow Dow component Merck dropped as it announced plans to slash costs by $3bn...faces massive patent cliff with Keytruda exclusivity at the end of 2027. Quarterly numbers missed for the first time since 2021. Several peers are in the same patent cliff-edge situation in the next few years.
Boeing rose initially before notching a loss of over 4% after it cut quarterly losses and it delivered the most planes since 2018. Revenue beat expectations and the CEO touted its turnaround year...shares are up big this year as investors agree the worst is likely behind but the weakness in the stock post-earnings suggests lingering doubts. Revenue rose 35% to $22.75bn, while the loss per share narrowed to $1.24, well ahead of the $1.54 expected.
Spotify sank over 11% on a triple whammy of a Q2 loss, missed revenue expectations and softer-than-expected guidance for the current quarter. SPOT turned its first profit recently but 120% rally off the 2022 means optimism was well discounted...user metrics look much more secure than the earnings data indicates with Q3 monthly active users guided to 710mn, ahead of the 707mn forecast, after a rise of 11% year-on-year in Q2. Premium subs growth +12% and ad-supported subs +10% appears solid and supportive longer term even if near-term if looks to be suffering from margin pressures from the ads business failing to expand as quick as management would like.
P&G shares were flat after it beat on the top and bottom lines but issued flat guidance for 2026 and flagged a $1bn hit from tariffs...read across for Unilever which reports on Thursday.
Here’s a quick look at ULVR from our preview earlier this week:
Could see organic sales growth of more than 3.5% in the first half. In April management reaffirmed full-year guidance, saying they still expect underlying sales growth of 3-5%, and considered tariffs as managed. It reported underlying sales growth of 3.0%, with volume growth of 1.3% and price of 1.7%, though turnover was lower due to disposals. Ice cream business separation remains on track and buybacks continue. It was a positive update on the whole but nothing to set the pulses racing. Look to see whether the new CEO has a bold plan to divest the food business – one top shareholder has suggested Unilever look at selling its €13.4bn-revenue food business. That shareholder, Artisan Partners, led a successful activist campaign at Danone.
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