London pre-open: Stocks to fall amid earnings deluge
By Michele Maatouk
Date: Thursday 27 Feb 2025
(Sharecast News) - London stocks were set to fall at the open on Thursday following solid gains in the previous session, as investors braced for a raft of earnings news and mulled results overnight from US chip maker Nvidia.
The FTSE 100 was called to open around 15 points lower.
Kathleen Brooks, research director at XTB, said: "Nvidia posted another monster set of results for Q4. It reported that revenue grew by a whopping $39.3bn, higher than the $38bn expected last quarter, and a 45% increase on the $22bn of revenue it reported a year ago. Net income, or profit, also jumped to $22.09bn, up from $19.36bn in Q3, and gross profit margin was in line with expectations at 73%. The forecast for future revenues, which is one of the most anticipated parts of Nvidia's results, also saw a decent uptick, the company expects revenues for this quarter to be $43bn +/- 2% for Q1.
"The stock whipsawed in the after-hours market. Initially rallying hard, Nvidia then sold off before staging another recovery. For now, this earnings report does not look likely to give the stock the boost that it needs to erode its year-to-date losses.
"Investors could be holding back for two reasons. Firstly, gross profit margin 'only' met expectations and the forecast for Q1 was 71%, below estimates. To put this into context, Microsoft managed gross profit margin of 68.7%, and chip maker AMD reported gross profit margin of just over 50% for Q4. Nvidia's profit margins hold up well against its peers, and there is also a good reason why gross profit margin is slowing, albeit from a high level: margins are being squeezed by bringing new and more complicated products to market, like the Blackwell chip. It's a tough crowd out there, but we do not think that a small drop in the profit margin is enough to call this a 'bad report', and investors may eventually look past the issue with gross margin forecasts.
"However, although the share price is now rallying, it has done so by less than average on results day for Nvidia. The question now is, will investors boost their enthusiasm for the stock on Thursday?"
In UK corporate news, Rolls-Royce lifted mid-term guidance and unveiled a £1bn share buyback as annual profits jumped, driven by its civil aerospace unit.
The company said it expects to deliver 2025 underlying operating profit of £2.7bn-£2.9bn and free cash flow £2.7bn-£2.9bn, two years earlier than planned. Annual operating profit last year surged to £2.9bn from £1.94bn.
Upgraded mid-term targets include underlying operating profit of £3.6bn-£3.9bn and free cash flow of £4.2bn-£4.5bn.
Taylor Wimpey posted a fall in annual revenues and profits but said it had seen a "robust" start to the new year as demand picked up.
The blue chip housebuilder completed 10,593 homes in 2024, down on the previous year's 10,848, while the average selling price fell to £356,000 from £370,000.
As a result, revenues eased 3.2% to £3.4bn, while operating profits fell 11.5% to £416.2m. Pre-tax profits were down 32.4% at £320.3m.
London Stock Exchange Group posted in-line full-year top-line growth, but its profit beat analysts' estimates.
Reported total income, excluding recoveries, was ahead by 6.1% at £8.49bn and by 5.7% to £8.85bn once recoveries are included.
In organic terms and at constant currencies, revenues were up by 7.7%. On an adjusted basis, earnings before interest, taxes, depreciation and amortisation jumped 9.8% to about £4.15bn, for a 12.2% rise in earnings per share to 363.5p.
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