Today I am looking at three of the major movers and shakers in Tuesday trade.
BP
Fossil fuel play BP (LSE: BP) (NYSE: BP.US) has been one of the lesser-smacked stocks today as the Greek finance crisis rumbles on, with a recent 0.9% share price drop representing a better performance than much of the market. Still, with the travails in the Med adding to fears over a new economic crash — and a subsequent dive in the oil price — I think the London firm and its industry peers are extremely risky stock bets.
I have long argued that the chronic imbalance washing over the oil industry is likely to keep revenues at BP on the back foot for some time to come. Although Baker Hughes data last week showed the number of US drilling rigs fall to five-year lows last week, at 642, gushing output from the country’s most lucrative fields is still sending total production higher. And with output from the rest of the world also remaining resilient, and new purchases from major customers like China on the back foot, I reckon oil prices are due for a heavy comedown sooner rather than later.
Despite this backdrop, the City expects BP to punch stratospheric earnings growth of 91% in 2015, creating a P/E multiple of 17.3 times. Not only does this fall outside the watermark of 15 times that signals decent value for money, but I believe that the oil play’s perilous balance sheet is likely to put paid to its progressive dividend policy. Subsequently I believe investors should take a monster yield of 5.8% for this year with a huge pinch of salt.
Trifast
Bolt and screw manufacturer Trifast (LSE: TRI) was recently dealing 1.6% higher in Tuesday trade, the investment community shrugging off wider macroeconomic concerns and greeting the firm’s latest financial release with much enthusiasm. The business advised that its “impressive results in 2015 are stronger than originally expected,” with a 19.2% revenues rise helping to power pre-tax profit to £11.9m, up 33.6%.
Shares in the Uckfield firm have leapt an astonishing 22% during the past month alone, but I believe that decent value can still be eked out from the fastenings maker. The City expects Trifast to see earnings dip 7% in the year concluding March 2016, although a projected 5% bounce the following year pushes the P/E multiple from 15.1 times to just 14.4 times for 2017 as demand for its electronic and auto components surges.
And Trifast’s terrific outlook naturally bodes well for its progressive dividend policy, too. The business raised the full-year payment 50% last year to 2.1p per share, and although the number crunchers expect a similar payment this year and a reward of 2.2p in 2017, I reckon that today’s results will result in a heavy upgrading of these numbers, not to mention present earnings forecasts.
Thomas Cook Group
Not surprisingly the evolving eurozone crisis has dented enthusiasm for travel operator Thomas Cook (LSE: TCG), the stock recently dealing 1.8% lower in Tuesday’s session. These concerns have outweighed news that the London firm has inked a joint venture with China’s Fosun International “to develop domestic, inbound and outbound tourism activities for the Chinese market.”
China is one of the world’s fastest-growing tourism markets with a rising middle class poweri appetite for foreign travel, making Thomas Cook’s move a potentially lucrative one in the coming years. And in the meantime, steady economic growth in established markets is helping to drive passenger higher numbers across the industry. With extensive-cost cutting and an environment of low fuel charges providing extra support, I believe earnings at Thomas Cook should step comfortably higher looking ahead.
Indeed, the holiday provider is expected to bounce from a 2% earnings dip in the year ending September 2015 to punch a 28% leap the following year, pushing an exceptional P/E ratio of 12.2 times for this year to just 9.6 times for 2017. And this solid growth picture is expected to get dividends back on the table sooner rather than later — Thomas Cook is aiming to start shelling out rewards from next year, and the City is expecting a payout of 3.4p per share for 2016, creating a decent 2.5% yield.