Royal Dutch Shell
Shares in oil giant Royal Dutch Shell (LSE: RDSB)(NYSE: RDS-B.US) today trade just 3% above their low for the last year.
It seems strange that Shell has made so little progress, given the substantial global economic recovery that has been taking shape in recent months. Tensions in Syria have also led to a significant rise in the oil price, yet Shell shares continue to wallow.
This suggests that the market has concerns over Shell’s long-term earnings ability. A recent trading statement reported rising extraction costs and significant upheaval at its key Nigerian operations.
The analyst community is now forecasting only modest earnings growth from Shell this year and next.
The shares trade on a 2013 P/E of 8.8, with the prospect of a 5.4% yield.
Imperial Tobacco
Shares in cigarette manufacturer Imperial Tobacco (LSE: IMT)(NASDAQOTH: ITYBY.US) have rallied in recent days. However, only two weeks ago the shares hit their lowest price since September 2011.
Big tobacco firms are fighting on many fronts. Improved customer awareness makes it tougher to sell their product. Sales regulations (health warnings, plain packs) undermine brand appeal. High taxes have led to a substantial increase in smuggling and counterfeiting. The decline in sales volumes has removed economies of scale and damaged margins.
This time last year, analysts were forecasting 215p of earnings per share (EPS) from Imperial Tobacco for 2013. That figure is now 209p. A big dividend rise is forecast however. The shares trade on a 2013 P/E of 10.9, with the prospect of a 5.1% yield.
Antofagasta
Shares in big resources firms have faltered in recent years on fears over the strength of the Chinese economy.
The share price of copper miner Antofagasta (LSE: ANTO) demonstrates this. The shares have been in steady decline since the beginning of 2011. The shares hit a low 784p in July, more than 50% below their price at the end of 2010.
As the price of copper on the global markets has declined, earnings forecasts at Antofagasta have fallen hard.
One year ago, the market was expecting Antofagasta to make $1.52 of EPS. Today, that figure is $0.85. The forecast dividend yield of 2.4% and 2013 P/E of 15.9 provides little protection against further falls.