FTSE struggling, RBS fails to impress, IAG misses forecasts and Rightmove's underappreciated position

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“The UK stock market doesn’t seem to have the energy to recover all the ground lost at the start of the month.

“It is on track to end the latest week down nearly 1% at 7,237. That’s still more than 3% below the level at which the market traded before the global stock market sell-off began on 2 February.

“The latest reporting season continues across next week with many mid cap stocks issuing their financial results,” says AJ Bell Investment Director Russ Mould.

Royal Bank Of Scotland

“While much of the banking sector has repaired the damage caused by the credit crunch and financial crisis, Royal Bank of Scotland remains an exception. It did (just about) manage to post a profit for 2017, its first in 10 years and against expectations for material losses.

“However, it continues to be largely state-owned and faces an impending multi-billion dollar fine from the US Department of Justice over the mis-selling of mortgage-backed securities a decade ago. Many analysts had included a settlement with the DoJ in their 2017 forecasts.

“Until these issues are resolved, investors are likely to remain wary of the stock.

“There were some positives from the latest set of results. The company beat its cost-cutting target, but on at least one measure its performance has to be chalked up as a disappointment.

“The net interest margin, a key measure of a bank’s profitability, fell 5 basis points to 2.13%. That is a long way below the peer group average of around 3%. The company also continues to face big restructuring charges – with £2.5bn earmarked over the next two years.”

International Consolidated Airlines

“British Airways owner International Consolidated Airlines has missed earnings forecasts with its full year results. It reported €3.015bn operating profit versus consensus forecast of €3.046bn.

“Changes to employee bonus provisions in the fourth quarter are to blame for the operating profit miss.

“In the bigger scheme of things, the earnings miss was only minor and the business remains confident about its prospects, as reflected by guidance for 2018 operating profit to increase year-on-year.

“A new €500m share buyback also implies the company thinks its shares are too cheap at current levels.

“In general, companies with a large pile of cash surplus to their business needs either return money to shareholders in the form of special dividends or they undertake share buybacks. The latter only tend to be done if the management believe the shares are undervalued.”

Rightmove

“Online property portal Rightmove continues to produce positive financial results. In 2017 it managed to grow revenue by 11%, operating profit by 10% and the dividend by 14%.

“Some people may think that type of success isn’t repeatable in 2018 if the housing market starts to slow down. In reality, Rightmove may be more defensive than you think as its earnings are driven by the marketing of properties, not what they sell for.

“In a property market downturn, estate agents have to work harder to get their properties noticed by prospective buyers. They may choose to pay for extra services on Rightmove’s platform to stand out from the crowd.

“While Rightmove isn’t entirely immune from a property market slowdown, as a reduction in property volumes would be negative for its earnings, its fortunes don’t precisely follow the ups and downs of property prices.”

These articles are for information purposes only and are not a personal recommendation or advice.