Trending tickers: Microsoft, McDonald's, Greggs, Diageo

LaToya Harding

Traders will be looking to Microsoft’s fiscal fourth quarter results after the US close on Tuesday evening as tech earnings are underway. Microsoft’s report follows Google parent Alphabet’s (GOOG, GOOGL) earnings announcement last week.

Analysts tracked by FactSet expect fourth-quarter sales to rise 14.6% year-on-year to $64.4bn (£50bn) and earnings per share to increase 9.3% to $2.94. This compares to Microsoft recording $56.2bn in sales and $2.69 in earnings per share a year ago.

The fiscal year numbers look even brighter, with analysts expecting sales to rise 15.5% to $244.8bn with earnings per share up 20.6% to $11.83.

Cloud revenue is expected to come in at $36.8bn with Intelligent Cloud revenue, which includes Azure, set to hit $28.7bn.

Truist’s Joel Fishbein wrote in a note: “We believe Microsoft is set to outperform across most enterprise categories, particularly Cloud, AI Services and Copilot adoption.”

Shares of Microsoft were up 13% year to date on Tuesday.

McDonald’s reported its first year-on-year decline in like-for-like sales since 2020 during the pandemic, the fast food chain revealed, as customers cut back on spending.

Sales fell 1% in the April to June period compared with a year earlier.

Demand at its restaurants fell in the US and France, while price wars in China also weighed on sales.

McDonald's has been facing a backlash from customers after raising prices significantly during the COVID-19 pandemic. It was also boycotted over the Israel-Gaza war.

Boss Chris Kempczinski said the weak results forced the fast food chain into a "comprehensive rethink" of pricing. He told investors last night that the firm would lean on discounts in a bid to stop the sales decline.

Read more: Shop inflation steady in July as clothing and footwear prices drop

Executives pointed to recent promotions, such as the $5 happy meal in the US and a campaign in the UK where diners can select three items for £3.

McDonald's has increased prices on key items faster than its peers, said Bank of America analyst Sara Senatore.

"Consumers are savvy, aware of that," she said. "The $5 meal that they have launched may be starting to change perceptions, but we are not seeing a trend change yet in terms of transactions and that's what they're going to need to see."

Shares rose 3.7% on the back of the update.

Greggs was on a roll on Tuesday as summer drinks and pizza deals boosted sales. Shares surged more than 6% in London as like-for-like sales climbed 7.4% with underlying pre-tax profits hitting £74.1m for the six months to 29 June.

The Greggs App saw participation increase to 18.3%, close to doubling last year’s 10.6%, which is expected to drive higher purchase frequency going forward due to the loyalty scheme on offer.

The high street bakery chain added that sales were helped by new menu options, with iced drinks such as its mango and strawberry cooler and the strawberries and cream refresher now available in 500 shops, and with plans to roll out to a further 200 shops this year.

Roisin Currie, chief executive, said: “Greggs has made good progress in the first half of the year, further broadening our range of on-the-go food and drink whilst making it more accessible to more customers.

“Our cost outlook for 2024 remains unchanged and we continue to trade in line with our plan. The board remains confident in the long-term growth strategy, and we are investing to support that growth.”

Greggs said it remains committed to its long-term aims to have “significantly” more than 3,000 shops across the UK, having opened 99 new shops and closed 18 to reach 2,524 in the first half.

Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, said: "Management has reiterated its outlook, with trading in line with expectations and cost inflation expected to moderate within the range of 4-5% as previously guided.

"Greggs has unique growth opportunities and a compelling value proposition, which puts it in a strong position particularly in this tough consumer landscape."

Diageo shares were down 10% after annual results revealed a 1.4% drop in sales and a warning that challenging conditions have continued.

Sales declined for the first time since 2020 as the London-listed drinks firm, which owns Smirnoff and Johnnie Walker, wrestled with falling demand in Latin America and the Caribbean. It also posted a 2% dip in sales in North America.

Unsold inventory in Mexico and Brazil led to a profit warning and a loss of market share in the United States, its biggest territory.

Meanwhile, European sales rose 12% while in the UK they were particularly strong, with a rise in demand for Guinness of nearly a third.

The company said: "The consumer environment continues to be challenging with conditions we saw towards the end of fiscal 24 persisting into fiscal 25.”

RBC Capital analyst James Edwardes Jones said this was "not reassuring" given comments from other consumer companies, which have warned US consumer confidence is under pressure.

"We expected these results to be grim, and so they were," he said.

Analysts had expected a 4.5% fall in annual operating profit. Diageo had previously said sales in Latin America and the Caribbean would fall by between 10% and 20%.

Overall, group net sales were also slightly worse than forecast, declining 0.6% organically.

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