Today I am looking at three blue-chip beauties ready to enjoy stunning earnings growth in 2015.
ARM
Fears of slowing tablet PC and smartphone demand in established markets has severely dented investor enthusiasm for chipbuilder ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) this year, and shares have conceded 18% from last December’s record high around 1,110p per share.
However, the record-breaking sales of Apple’s iPhone6 and iPhone6 Plus show that the popularity of premium handsets remains stronger than ever, defying many industry forecasts, which represents a positive omen for ARM’s royalties outlook. ARM is also diversifying into the growing server and networking markets to offset any weakness in its critical markets.
As a consequence, the Cambridge-based business is expected to follow a 14% earnings advance this year, to 23.7p per share, with a resplendent 23% rise in 2015 to 29.2p.
On paper, ARM still trades at relatively-expensive levels for next year, with a P/E rating of 31.4 times prospective earnings soaring above the benchmark of 15 times or below that generally represents decent value for money.
Still, it could be argued that ARM’s role as a key supplier to the world’s largest tech manufacturers — allied with the terrific growth potential offered by emerging markets — fully justifies this premium.
RSA Insurance Group
Following two years of colossal earnings drops, RSA Insurance Group (LSE: RSA) has embarked on an extensive restructuring package to reinforce the balance sheet and bolster earnings. This programme has seen the business divest businesses from China to Italy, Hong Kong to Poland, and most notably includes the $460m sale of its Canadian Noraxis division in April.
These measures are not a magic wand, however, particularly as the effect of these sales are hampering revenues. But following an anticipated 18% earnings decline this year, to 28.9p per share, RSA is predicted to punch a 25% bounceback in the following 12-month period, to 36.1p.
Consequently a rather unappealing P/E multiple of 16.4 times for this year predicted earnings falls to just 13.1 for 2015.
Sports Direct International
Trainers and tracksuits specialist Sports Direct (LSE: SPD) continues to ride the crest of a wave in the ‘affordable’ sportswear market. The business has invested heavily to boost its online presence, not to mention the acquisition and development of scores of household brands including Slazenger and Lonsdale, and is taking huge steps to expand its presence on the continent.
On the back of Britain’s sustained sports craze, Sports Direct has experienced five consecutive years of double-digit earnings growth. And the City’s number crunchers do not expect this trend to cease any time soon, with the firm expected to follow a 20% rise in 2014 — to 37p per share — with an additional 17% advance in 2015 to 43.3p.
These projections push Sports Direct’s P/E multiple from 17.4 times this year to a far more attractive 14.9 times in 2015. And the company’s attractive value is underlined by a price to earnings to growth (PEG) reading of 0.9 for next year — any figure below 1 is generally considered a bargain.