Today I am looking at the investment prospects of three of November’s FTSE-listed losers.
WM Morrison Supermarkets
It comes as little surprise, in my opinion at least, that battered retail play Morrisons (LSE: MRW) saw its share price concede a further 10% during the course of November. The company’s value has eroded more than a quarter since the spring’s highs, and I expect further slippage to occur as competitive pressures continue to whack the top line.
The Bradford business advised last month that underlying sales (excluding fuel) slipped 2.6% during August-October, intensifying from the 2.4% drop in the previous quarter. Morrisons simply doesn’t have what it takes to stem the ascent of the German discounters, and Kantar Worldpanel recently advised the combined market share of Lidl and Aldi now stands at a record 10%.
Morrisons’ woes are underlined by news yesterday that it is set to drop out of the FTSE 100 as part of the latest quarterly reshuffle, and it is hard to see the supermarket reclaiming its position amongst Britain’s elite any time soon.
A 16% earnings dip is forecast for the year to January 2016, creating a P/E multiple of 16.8 times. This is slightly heady on a conventional basis, and when you consider Morrisons’ ongoing travails, I reckon a further significant share price reduction from current levels is likely.
Unilever
I am far more optimistic concerning the earnings outlook over at Unilever (LSE: ULVR), even if shares in the business fell 2% last month. This does not mean that further stock price turbulence cannot be ruled out, however, as enduring fears over economic slowdown in emerging markets could weigh further on the stock.
Unilever’s pan-global presence means it currently sources around 60% of total sales from developing regions. But while macroeconomic pressures in Asia and Latin America may crimp near-term consumer spending levels, I believe the formidable pricing power of labels from Axe deodorant to Magnum ice cream should keep Unilever’s earnings sailing higher well into the future.
This view is shared by the City, and earnings growth of 14% is pencilled in for 2015 alone. Although this projection creates a high P/E ratings of 21.8 times, I believe that the formidable quality of Unilever’s product stable — not to mention its brilliant exposure to ‘new’ territories — means that such a rating is more than justified.
Premier Oil
I am much more bearish over the share price outlook over at Premier Oil (LSE: PMO), however. The fossil fuel producer saw its share value descend 1% during the course of November, and considering the steady flow of negative economic news streaming out of China, I reckon Brent prices — and with it Premier Oil’s stock market value — is likely to remain on the back foot.
Moreover, worrying oil inventory data provides an extra thorn in the side for the ‘black gold’ price, and further bearish news in November sent the crude price to within a whisker of fresh six-year lows around $42 per barrel. What is certain is that, until producers in the US and OPEC nations take a serious stance on scaling back crude production, the revenues outlook at Premier Oil and its peers is likely to keep on struggling.
The London business is expected to endure further losses in 2015, adding to last year’s dip into the red, and losses around 43 US cents per share are currently forecast. When you also factor in Premier Oil’s $2.3bn debt pile, I reckon the business remains a high-risk bet at the current time.