Today I’m running the rule over three Tuesday newsmakers.
Capital returns
Outsourcing specialist Capita (LSE: CPI) topped the FTSE 100 in Tuesday trade, with its share price 6% higher after the release of a positive trading update.
Capita advised that “a combination of increased organic growth across our divisional businesses and the steady conversion of our bid pipeline provides us with greater visibility and confidence of achieving our target organic revenue growth of at least 4% this year.” The firm is on course to meet consensus expectations for the year, it added.
Capita has inked contracts worth £458m so far in 2016 and boasted a bid pipeline of £7.4bn as of February 25.
With its diversified operations across the globe – not to mention an acquisition drive – generating plump growth opportunities, the City expects earnings to rise 5% in both 2016 and 2017, resulting in attractive P/E ratios of 13.5 times and 12.8 times for these years.
And dividend yields of 3.4% and 3.6% for this year and next underline Capita as a compelling stock candidate.
Build bumper gains
Shares in Bovis Homes (LSE: BVS) were also rising on Tuesday, the stock 2% higher on the day following a positive AGM statement.
The construction giant advised that “housing market conditions remain positive with strong demand from home buyers who are benefitting from good access to mortgage finance.” Bovis added that weekly sales rates have improved in recent weeks, with 0.65 net private reservations per site in the year to date now matching levels seen last year.
Britain’s chronic supply/demand imbalance is not going to evaporate any time soon, in my opinion, a factor that should keep spiralling homes values higher.
My take is shared by the number crunchers, who expect earnings at Bovis to rise 16% in 2016 and by 14% next year, resulting in mega-low P/E ratings of 7.8 times and 6.9 times. And dividend yields of 5.2% and 6% for 2016 and 2017, correspondingly, make the housebuilder a splendid buy for value seekers.
Set to soar
Shares in low-cost airline easyJet (LSE: EZJ) have flown higher following a better-than-predicted trading update, the stock was 3% higher from Monday’s close.
The Luton-based flyer punched a pre-tax loss of £24m during October-March, it advised, swinging from profits of £7m during the corresponding period last year. The fall was prompted by terrorism-related events in Europe, easyJet advised. However, revenues crept 0.3% higher to £1.77bn in the period.
Still, easyJet’s performance topped broker estimates, and the company said it still expects to meet full-year expectations. It added that “easyJet is well placed to grow revenue and profit this financial year and deliver sustainable returns and growth for shareholders.”
Indeed, easyJet’s bullish outlook has prompted it to raise the dividend payout ratio from 40% to 50%, subject to shareholder approval. And the City certainly believes easyJet is heading for sunnier climes as demand for cheap plane seats continues to soar.
Earnings are expected to rise 4% and 15% in the periods to September 2015 and 2016 correspondingly, resulting in mega-low P/E ratings of 9.8 times and 8.4 times. And I expect today’s announcement to result in upgrades to dividend yields of 4.1% for 2016 and 5% for 2017, too. I believe easyJet is a bona fide bargain at current prices.
