Today I am running the rule over three Wednesday headline makers.
Box up a beauty
Packaging specialists Smurfit Kappa (LSE: SKG) furnished the market with consensus-beating numbers in Wednesday’s session, news which sent the firm’s shares spiralling 15% higher from Tuesday’s close.
The Dublin-based business — which also advised today that it is seeking a premium listing on the London Stock Exchange — saw pre-tax profit leap 58%, to €599m, during 2015, even though revenues only moved marginally higher to €8.11bn.
And Smurfit Kappa believes it has built a robust base upon which to “deliver good earnings growth in 2016,” the firm having splashed out €380m in acquisitions last year alone and an additional €450m to improve its existing asset and project quality.
The City certainly believes Smurfit Kappa has plenty left in the tank, and a predicted 17% earnings increase this year leaves the stock dealing on an ultra-low P/E rating of 9.2 times. And when you factor in a projected dividend of 73 euro cents per share — yielding a handy 2.9% — I believe the Irish packagers are a great long-term selection for value seekers.
Animal magic
Veterinary care provider Animalcare (LSE: ANCR) has not fared as well on Wednesday after releasing choppy half-year numbers, and was last dealing 2% lower on the day.
Animalcare saw total revenues advanced 2.7% between July and December, to £7.11m, with strong growth at its Licensed Veterinary Medicines unit shrugging off the problem of tough comparatives. This solid top-line performance was not enough to stop pre-tax profit sinking 12.9% during the period to £1.53m, however.
Still, I believe investors in Animalcare still have plenty to be excited about. The York-based business has invested huge sums to improve its sales teams and marketing strategy to facilitate future revenues growth, while its bubbly product pipeline is anticipated to enhance earnings from 2017.
In the meantime Animalcare is expected to chalk up a 7% earnings dip in the year to June 2016, resulting in an slightly-elevated P/E rating of 20 times. But I believe the firm’s growing position in a rapidly-expanding market should deliver solid earnings expansion in the longer term.
Bank heading lower
Market appetite for the banking sector has imploded in recent weeks, as fears concerning firms’ exposure to worsening commodity markets — combined with concerns over the financial health of emerging markets — have intensified.
Global banking giant Santander (LSE: BNC) has seen its share price fall to fresh multi-year troughs in February, and the firm has shed 40% of its value since during the past 12 months alone. And further pain could well be on the cards as the Brazilian economy continues to flail and the real sinks in value — Santander sources a fifth of total profits from the country.
And Santander’s precarious growth outlook, combined with a flimsy balance sheet, is casting doubt on the firm’s ability to generate market-beating dividends.
The outlook is far from catastrophic at the present time, however, and the City expects Santander to enjoy a 5% earnings uptick in 2016, resulting in an ultra-low P/E rating of 6.8 times. And predictions of another 20-euro-cent-per-share dividend creates a very-decent yield of 5.7%.
But I believe downgrades to these forecasts could be on the horizon as conditions in the bank’s key marketplaces keep deteriorating.