MENU

3 More FTSE 100 Shares With Fast-Improving Forecasts: GlaxoSmithKline plc, Smiths Group plc And Schroders plc

GlaxoSmithKline

In the last two months, forecasts for profits at GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) have increased from 114p per share to 116p. Combined with the recent share price falls, the stock now looks a combined value-income play.

From the current forecasts, GlaxoSmithKline is on a 2013 price-to-earnings (P/E) ratio of 13.6, falling to 12.3 times the 2014 estimate. Dividends for the year are forecast to hit 77.7p per share, equal to a 4.9% yield at today’s share price. The payout is expected to increase further for 2014, rising to 81.7p — a 5.2% yield.

With the shares down 9% in the last month, Glaxo looks a great opportunity to pick up a blue-chip share with a well-covered high yield.

Schroders

A fund management business will always be a geared play on the health of the financial markets. As equities surged in the period leading up to their May peak, analysts rushed to upgrade Schroders (LSE: SDR). In December, the City was expecting 111.6p of earnings per share (EPS) from Schroders in 2013. By May, this had reached 127.5p.

Despite the recent market setback, I still expect that the next year will see companies like Schroders experience a significant increase in demand.

However, much of that now seems to be in the price. Schroders shares are available today on 16 times 2013 forecasts, with a prospective yield of 2.5%. To justify today’s price, Schroders must meet these expectations. That leaves new buyers exposed to any future deterioration in market conditions.

Smiths Group

On the basic fundamentals, Smiths Group (LSE: SMIN) is the typical FTSE 100 share. The average forward P/E ratio for a UK blue chip is 13. Smiths trades on 13.1 times 2013 forecasts. The average expected yield from a FTSE 100 share is 3.5%. Smiths is expected to pay 3.2%.

The broad range of end markets served by Smiths has protected the business from the worst of the last five years. The oil-and-gas-facing John Crane business made a particularly strong contribution during that period. This helped ensure that the group was able to avoid losses and maintain/increase its shareholder dividend throughout.

A P/E of around 15 might be fairer, given how resilient Smiths Group has proved itself to be.

Buying quality shares at a reasonable price is one of Warren Buffett‘s best-known strategies. Mr Buffett has recently been buying shares in a different FTSE 100 company. To find out which company the world’s best investor has been stocking up on, get our free report “The One UK Share Warren Buffett Loves”. This report is totally free and will be delivered to your inbox immediately. Just click here to start reading today.

> David does not own shares in any of the above companies.