The Morning Call - Apple's earnings up but iphone sales disappoint

Highlights of the Day

Asian Markets

Asian markets were mixed, as gains on Wall Street overnight were offset by disappointment with Apple earnings, with traders looking ahead to the U.S. Federal Reserve meeting results.

U.S. Markets

U.S. markets were little changed as an Apple-led rise in the tech sector countered weakness in auto stocks and investors digested a heavy day of earnings reports. Ford shares dropped 4.2 percent and General Motors fell 2.9 percent, as major automakers posted declines in U.S. new vehicle sales for April.

Today's News

Apple’s earnings for the second quarter trumped Wall Street estimates; however, the tech giant’s quarterly revenues fell short of expectations due to lower-than-expected iPhone shipments. Apple sold 50.76 million iPhone units during quarter, generating $33.25bn in revenues, down from 51.19 million units last year. Wall Street analysts were expecting iPhone sales to be about 52 million. Apple’s bottom line continues to be buoyed by iPhone sales, as it contributes about two-thirds of Apple’s revenues and a major part of its profit.

Direct Line Group’s gross written premium for ongoing operations rose by 4.2% in the first quarter with Motor own brands increasing 11.2%. The group said its multi-brand and multi-channel approach helped successfully grow its Motor own brands in-force policies by 5.9% compared to Q1 2016, while Home own brands in-force policies grew by 2.0% compared to Q1 2016.

Imperial Brands forecast stronger second-half earnings and raised its goal for cost savings this year after first-half profit beat estimates. Efficiency measures will save £130m in the year through September, the maker of Gauloises and Kool cigarettes said in a statement Wednesday, boosting November’s forecast of £90m.

ITV Chief Executive Adam Crozier is stepping down after seven years at the helm of the broadcaster. The company’s finance director, Ian Griffiths, will step up to a new combined role of chief operating officer and finance chief and run the company for an interim period, while the chairman, Sir Peter Bazalgette, becomes executive chairman during that time.

Paddy Power Betfair said that first-quarter profit jumped 87% as currency gains lifted revenue, and said it continues to trade in line with expectations for the year. Revenue for the three month period ended 31st March, increased by 23% to £416m. This included a £23m benefit from the translation of non-U.K. revenue due to the weakness of sterling. On a constant currency basis revenue was up 15%, it said.

Sainsbury’s has posted a rise in sales but a slump in profits following a “pivotal” year for the supermarket chain and its £1.4bn takeover of Argos. Sales rose 11.6% to £26.8m in the year to 11th March, boosted by strong sales of electricals and toys at Argos, which offset the challenges within the food business. Like-for-like sales at its stores open for more than a year continued to be under pressure from food deflation and were down 0.6%.

Sage Group has posted a statutory H1 pretax profit of £180m, which was down from the restated £242m booked a year previous. CEO Stephen Kelly said the results were positive and in line with market views, and that there were clear signs Sage’s strategy was working. The business had strong momentum entering H2 2017. Revenue for the six-month period was £840m, which was down from the £1.4bn recorded previously. Dividend per share was 5.22p, up from 4.8p.

Halfords Group Chief Executive Jill McDonald has resigned to take up a position at UK100-listed retailer Marks & Spencer, Halfords said. McDonald will take up the new role of managing director for Clothing, Home & Beauty, Marks & Spencer confirmed, reporting directly to group Chief Executive Officer Steve Rowe. She will join the company in the autumn, with a start date to be confirmed.

Oil prices rebounded on, partially reversing further declines overnight, as an industry-group reading showed a sizable decline for last week in U.S. oil and gasoline stockpiles.

Gold held near a three-week low hit in the previous session on rising equities and a firmer dollar

Companies Reporting this week

Today:	Direct Line Insurance Group * Imperial Brands * J Sainsbury * Centamin * Sage Group * Indivior
Tomorrow:	HSBC Holdings * Randgold Resources * Lancashire Holdings * Next * Royal Dutch Shell * Inmarsat
Friday:	International Consolidated Airlines Group * Smurfit Kappa Group * Millennium & Copthorne Hotels

Early Market Movements

Market	Index	Change	% Change
UK 100	7,237.3	-12.8	-0.2%
UK 250	19,730.8	-74.5	-0.4%
GER 30	12,496.3	-11.6	-0.1%
FRA 40	5,293.1	-11.0	-0.2%
U.S. 30	20,949.89	+36.43	+0.2%
U.S. 500	2,391.2	+2.8	+0.1%
OIL (BRENT)	50.86	+0.40	+0.8%
GOLD	1,255.09	-1.67	-0.1%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
Intercontinental Hotels	4200	+87	+2.1%
JD Wetherspoons	1028.5	+18.5	+1.8%
Pearson	655.5	+10	+1.5%
Galliford Try	1359	-103	-7%
Ashtead Group	1568	-34	-2.1%
ITV	207.1	-4.4	-2.1%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
BP	Deutsche Bank	Buy	454.00	505.00
Direct Line Insurance Group	Peel Hunt	Hold	350.50	360.00
Imperial Brands	Whitman Howard	Buy	3,615.00	5,100.00
Just Eat	Deutsche Bank	Buy	549.25	725.00

Forthcoming Economic Data

Time/Date	Previous	Forecast	Outcome
8:30am: U.K. Construction PMII	52.2	52.1	–
9:00am: European Prelim Flash GDP q/q	0.4%	0.5%	–
12:15pm: U.S. ADP Non-Farm Employment Change	263k	178k	–
2:30pm: Crude Oil Inventories	-3.6m	-3.3m	–