The FTSE 100 closes up after full-year results from leading UK firms – are they buys?

Earnings season brings about a lot of ups and downs for the FTSE 100. Yesterday had some particularly good releases, but are they shares I should buy?

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The FTSE 100 index closed up 22 points yesterday (22 February) after full-year results from leading UK firms  Rolls-Royce Holdings (LSE:RR.), Mondi (LSE:MNDI) and Lloyds Banking Group (LSE:LLOY).

This has been a busy week for results in both the UK and abroad. Yesterday, tech giant Nvidia hit new highs and helped boost US markets in the wake of knockout earnings.

Meanwhile, back home, a shock £3bn charge for HSBC announced Wednesday sent the FTSE tumbling. But yesterday’s results helped ignite a moderate recovery.

The sky’s the limit

The UK’s favourite jet engine manufacturer Rolls-Royce just keeps making gains. It’s share price jumped a further 10% yesterday on the revelation that profits more than doubled in 2023. The extra boost puts the share price up by a massive 170% since last year’s FY results.

This is despite the fact the company still has negative shareholder equity. Its £34.7bn in liabilities casts a dark shadow over only £29.7bn in assets. The £5bn deficit should pose a significant risk for the firm but investors seem unshaken.

It’s hard to imagine the stock can keep climbing but that’s exactly what I thought a month ago. I’m just glad I didn’t sell because now I’m beginning to think that the sky truly is the limit for Rolls-Royce. I will be holding my shares for now.

Paper profits

Paper and packaging manufacturer Mondi may not boast the most exciting business model but its products are clearly in demand.

Last year’s full-year results wiped 30% off the Mondi share price, with the following 12 months doing little to restore investor confidence. But it looks like hard work has since helped turn the company’s fortunes around. 

CEO Andrew King outlined improvements in order books and plans to increase prices across several products. The report also noted the 4.9% dividend yield will remain in place, with forecasters predicting further increases in the coming years.

The Mondi share price jumped briefly on the news but closed only 0.6% up at 1,393p. One issue that could be keeping investors wary is a higher than average price to earnings (P/E) ratio. At 9.2 times, it’s above the industry average of 8.2, suggesting the shares could be overvalued.

For now I’m going to wait and see how things pan out before making a definitive decision to buy.

Renewed interest

Major high street bank Lloyds’ share price rose 6% yesterday after FY results revealed profits increased by 57%. Add to that a dividend yield increase to 15% and a £2bn share buyback programme and I can see the reason for excitement. 

Keep in mind that much of this profit was on the back of rising interest rates – the same interest rates that could spell trouble for the bank. While fears of another recession continue to plague the UK market, banks will be the ones to take the brunt.

Another key revelation was the £450m Lloyds has put aside for the ongoing car financing probe that could shake the UK banking sector. The amount reveals just how serious the issue could be. This will certainly be a case to keep an eye as details unravel. 

But for now, the share price is cheap and the dividends are good, so I think Lloyds has potential for decent returns. I will consider adding it to my portfolio if there is further indication of interest rates dropping in the near future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Mark Hartley has positions in Rolls-Royce Plc. The Motley Fool UK has recommended HSBC Holdings, Lloyds Banking Group Plc, Nvidia, and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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