5 stocks to watch in July

The business world tends to slow down in the summer, as temperatures rise and executives escape the city. There are plenty of updates to look out for, however. Companies with financial years that run from January to December tend to report their interim results in late July, meaning there are a wave of announcements on the horizon.  

Rolls-Royce

Half-year results: Thursday 30 July 

The turnaround at Rolls-Royce has been nothing short of extraordinary. Dogged for years by profit warnings and strategic missteps, the company’s fortunes have reversed under the leadership of Tufan Erginbilgiç, who took the helm in 2023. Profits and cash flow have surged, debt has fallen, costs have shrunk - and investors have been richly rewarded. Dividends were reinstated last year, and shares have climbed 13-fold since January 2023. 

The engine maker is due to report its half-year results at the end of July. Recent updates have been very positive. In February, Rolls-Royce boosted its mid-term targets and announced a £2.5bn share buyback programme for 2026. 

To understand the investment case, it helps to understand the business model. Rolls-Royce operates across civil aerospace and defence, meaning its engines power everything from jumbo jets to nuclear submarines. Selling engines is not very profitable in itself - indeed, large engines are often delivered at a loss because they are so expensive to make. The real value comes through after-sales services. This work is often high margin and long-lasting, as commercial aircrafts are typically used for 25 years.

Bullish analysts argue that the company restructure - which involved scrapping thousands of jobs and shutting production sites - has fundamentally improved Rolls-Royce’s earnings power. “Under CEO Tufan Erginbilgic’s leadership, Rolls-Royce has repositioned itself as a financially strong, high-margin, and cash-rich aerospace and defence leader,” Morningstar concluded. 

Others are wary of the market backdrop, however. The aviation industry is notoriously cyclical, and airlines often suffer more than the wider market. If energy prices stay high this year, or consumer confidence falls, Rolls-Royce shareholders could feel the impact.  

• More on Rolls-Royce

Lloyds Banking Group 

Half-year results: Thursday 30 July 

Banks have had a fabulous run since 2024 thanks to higher interest rates.

This might sound simplistic given how complicated the banking system is, but the big high street names still engage in a basic activity: they take deposits from savers and lend to borrowers. When interest rates are high, banks can charge more for mortgages and other loans. While they also have to pay savers more, those costs do not usually rise by as much, allowing banks to earn a juicy profit. 

At the start of the year, interest rates were on a downward trajectory. Conflict in the Middle East, however - which caused energy prices to shoot up - changed the game. In June, the European Central Bank increased interest rates for the first time since 2023, and traders think the Bank of England will also hike the base rate this year. 

This could be good news for Lloyds Banking Group, which is due to report its half-year results in July, alongside Standard Chartered and Barclays. However, if higher rates come at the expense of economic growth this could hurt demand for loans - and the ability of customers to repay them. Indeed, as the UK’s biggest high street lender, Lloyds is often viewed as a bellwether for the UK economy.

So far, the bank hasn’t noticed any signs of reduced customer activity or deterioration in credit quality linked to the Middle East conflict. It is still on track to hit its guidance for 2026 and managed to grow pre-tax profits by a third to £2bn in the first quarter of the year. 

Lloyds is due to publish a strategic update in July alongside its interim results. Media reports suggest the company will increase its focus on American corporate clients, as part of a plan to become less reliant on the UK interest rate cycle. 

Motor finance also remains front of mind. Lloyds has set aside £1.95bn to cover potential customer compensation and other costs linked to issues in the motor finance industry, following a long legal battle involving drivers, lenders and car dealerships. Many analysts do not expect this provision to increase further, but Lloyds has warned that “a number of uncertainties” remain.

• More on Lloyds Banking Group 

EasyJet 

Third-quarter update: Thursday 23 July

EasyJet shareholders have had a turbulent time lately. When fighting broke out in the Middle East in March, jet fuel costs surged and airline bookings faltered, causing shares to plunge.

May was another tricky month, with the budget airline reporting a half-year loss of £552m. This wasn’t entirely unexpected: EasyJet tends to lose money between October and March, before swinging back into profit in the summer. However, the loss was heavier than many analysts forecast and fuelled concerns about lasting damage caused by the Middle East conflict. 

Profits are expected to fall steeply in the 12 months to September before climbing again in 2027. 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.