Today I am looking at the investment prospects of three headline-makers in Tuesday’s session.
ITV
British broadcaster ITV (LSE: ITV) greeted the market with positive half-year results in Tuesday business, and traders responded by driving the stock 2.4% higher on the day. The London firm advised that, despite a 4% ratings slip across its channels during January-June, that pre-tax profit galloped more than a quarter higher to £391m.
The business reported that revenues surged across all its major divisions, and with ITV having invested heavily in its ITV Studios arm and advertising sales roaring steadily higher, the broadcaster’s terrific growth record looks set to keep on trucking. The City expects the business to chalk up growth of 14% and 9% in 2015 and 2016 respectively, figures that leave ITV changing hands on P/E multiples of 16.9 times and 15.6 times correspondingly — any value around or below 15 times is widely considered excellent value.
And these brilliant earnings projections also bode well for ITV’s dividend policy, with last year’s payout of 4.7p per share anticipated to leap to 5.7p in 2015 and 7p in 2016. While it is true these numbers produce below-average yields of 2.1% and 2.6%, I fully expect yields to continue to detonate as revenues scream higher.
Royal Mail
The news was not so great over at courier Royal Mail (LSE: RMG) on Tuesday, however, as Ofcom announced wholesale price changes launched last January — but which have since been withdrawn — breached competition law. Consequently shares in the business were last dealing 2.8% lower, and although Royal Mail has naturally vowed to stage a “robust defence,” today’s findings hardly do the carrier any favours given the regulator already investigating its nationwide postal operations.
Of course the threat of a potential price cap in the event of an unfavourable conclusion should be taken seriously, but still, I reckon Royal Mail remains a solid growth pick considering that it has a stranglehold on the rising parcels market and restructuring is slashing costs across the business. So although a 22% earnings decline is currently expected in the period concluding March 2016, a 5% snapback is predicted for the following period, heralding a strong upward march thereafter.
Such figures leave Royal Mail dealing on P/E multiples of just 13.5 times and 13.2 times for these years, while projected dividends of 21.7p per share for 2016 and 22.6p for 2017 also provide plenty of bang for one’s buck — the courier yields an impressive 4.3% and 4.4% as a result.
Brammer
Like Royal Mail, industrial maintenance, repair and overhaul goods provider Brammer (LSE: BRAM) also suffered a chunky deficit in Tuesday’s session and was recently down 3.8% from the previous close. The company advised that profit before tax crumbled 19.4% in the first six months of 2015, to £14.1m, as the impact of a weak euro crushed the top line — revenues advanced just 0.4% during the period.
Although Brammer still has plenty of ‘self-help’ ammunition to offset further revenues weakness, the impact of a weak eurozone currency — combined with sales weakness from the beleaguered fossil fuel industry — threatens to keep the bottom line under pressure. Indeed, the firm’s Nordic operations saw organic sales per working day slip 15.9% during January-June due to its high exposure to the oil and gas sector.
Analysts expect Brammer to experience a 7% earnings slip in 2015, although a 15% rebound is anticipated for next year. Still, with this year’s projection leaving it dealing on a P/E rating of 17.4 times, the industrial specialist can hardly be considered a compelling pick considering the threat of prolonged currency and market headwinds. Meanwhile, predicted dividends of 11.1p and 11.8p per share for 2015 and 2016 respectively provide decent-if-unspectacular yields of 3.5% and 3.7%.