Today I am looking at the investment prospects of three of the FTSE’s newsmakers.
The road to brilliant returns
Highways maintenance specialists Hill & Smith (LSE: HILS) greeted the market with a cheery update in Tuesday trading, sending shares in the business 3.6% higher. The Solihull firm advised that “trading during [July-October] has continued to be robust,” noting that its broad geographical and market spread continues to give it strength.
Accordingly Hill & Smith affirmed its full-year guidance for 2015, and I expect the company — which provides gantries, barriers and an assortment of other road-related hardware — to continue to enjoy strong sales growth as the UK government doubles-down on roadbuilding. In addition to this, the purchase of signbuilder Tegrel this month drastically improves Hill & Smith’s supply chain and thus ability to service the needs of Highways England.
Against this backcloth the City expects Hill & Smith to follow an anticipated 8% earnings bounce this year with a 7% improvement next year, pushing an already-attractive P/E rating of 13.2 times to just 12.4 times. On top of this, projected dividends of 19.9p per share for 2015 and 21.7p for 2016 produce chunky yields of 3.1% and 3.4% correspondingly.
Plenty of hard work ahead
Things over at DIY play Kingfisher (LSE: KGF) are not so rosy, however, and yet another troubling update left the retailer dealing 0.3% lower from Monday’s close. Despite positive British retail conditions pushing domestic like-for-like sales 4.6% higher in August-October, conditions on the continent remained a problem and French underlying sales edged just 0.1% higher.
As a result Kingfisher — which operates the B&Q and Screwfix chains in the UK — reported a profit of £223m, missing broker forecasts by some distance. And although the retailer advised that restructuring is rattling along nicely, I believe soft trading conditions in France continue to cast a pall over the company. To add to Kingfisher’s overseas woes, adverse currency movements during the period dented non-sterling profits by a chunky £17m.
The number crunchers expect Kingfisher to report a 3% earnings advance in the year to January 2016, and an 11% rise is forecast for 2017. These figures leave the retailer dealing on reasonable P/E ratings of 16.3 times and 14.7 times for these periods, while estimated dividends of 10.2p and 11.1p for 2016 and 2017 respectively produce handy yields of 2.9% and 3.2%.
Still, I do not find these levels particularly attractive given the huge obstacles Kingfisher faces on the continent.
Neither shaken nor stirred
Movie and munchies play Cineworld (LSE: CINE) was recently dealing 0.2% in deficit in Tuesday despite releasing yet another bubbly trading statement. The picture house saw box office revenues leap 10.8% between January and mid-November and, helped by the enormous popularity of Bond flick SPECTRE, the business advised that the fourth quarter has got off to a strong start.
Furthermore, with The Hunger Games: Mockingjay Part 2 and Star Wars: The Force Awakens slated for release in the coming weeks, Cineworld said it remains confident that it will meet its full-year profit forecasts.
With Cineworld also continuing its bold expansion plans — the business has opened a further three sites in the UK in the second half, and seven in Central and Eastern Europe and Israel — and a bulging list of blockbusters scheduled for next year and beyond, I fully expect revenues to carry on surging.
This view is shared by the ‘Square Mile’, and anticipated earnings growth of 15% and 10% for 2015 and 2016 correspondingly leave Cineworld dealing on P/E ratios of 19.2 times and 17.4 times for these years. I believe the company’s stunning growth outlook justifies this slight premium, while anticipated dividends of 15.5p and 17.1p for 2015 and 2016 correspondingly — yielding 2.9% and 3.2% — sweeten the investment case.