Should You Buy WM Morrison Supermarkets plc and BT Group plc following today’s updates?

Royston Wild discusses the latest results from WM Morrison Supermarkets plc (LON: MRW) and BT Group plc (LON: BT-A)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I’m running the rule over two FTSE 100 headline makers in Thursday trade.

Going stale

Another financial update, another illustration of the enduring travails facing Britain’s ‘Big 4’ supermarkets.

Today it was the turn of Morrisons (LSE: MRW) to update the market. On the plus side, the company saw like-for-like sales (excluding fuel) rise 0.7% during February-April, a result that builds on the 0.2% rise posted during the previous quarter.

Morrisons had failed to record any quarterly growth in the four years prior to this, so this news signals that the company may finally be in recovery.

Indeed, chief executive David Potts lauded the effort the firm is putting in “to improve the shopping trip and save customers every penny we can,” adding that “customers are responding and satisfaction levels remain ahead of last year.”

Still, news that deflation clocked in at 2.6% underlines the strain Morrisons is facing to stall the galloping progress of Aldi and Lidl. And the supermarket said that it expects prices to keep on failing as it invests in further rounds of price slashing.

This is likely to play further havoc with earnings, of course. So while Morrisons may have thrown the kitchen sink at costly rebranding, store refits and closures and loyalty scheme revamps in recent times, these measures are unlikely to light a fire under profits while the so-called ‘price wars’ continue to rumble.

And with Morrisons dealing on an elevated P/E rating of 18.6 times, I reckon the supermarket remains far too expensive given its muddy growth outlook.

Ring up sterling returns

Telecoms giant BT (LSE: BT-A) also furnished the market with fresh trading numbers on Thursday, and its latest update certainly made for welcome reading.

BT advised that revenues leapt 6% in the 12 months to March 2016, to £18.9bn, as demand for its broadband and television services surged. This performance helped propel pre-tax profit 15% higher to more than £3bn.

The acquisition of exclusive live broadcast rights for UEFA Champions League and Europa League football propelled audiences for the firm’s BT Sport channels up 45% year-on-year, it advised. And the firm’s long-running broadband investment scheme continued to deliver the goods, with 25m homes now connected to its fibre network.

And BT plans to keep this number rising, the company also unveiling on Thursday plans to spend £6bn over the next three years on extending its super-fast broadband and 4G coverage. The telecoms titan is aiming to cover 95% of the UK with these services by the close of the decade.

The City expects BT to endure a rare earnings dip in the period to March 2017 as this colossal investment weighs. Still, I believe a consequent P/E rating of 14.6 times represents a great level to latch onto the firm’s terrific long-term growth prospects.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »