Below expectations
Industrial components builder Brammer (LSE: BRAM) has seen its stock value plummet 51% in midweek trade, following a shock profit warning. Brammer advised that “we have seen a significant slowdown in sales” since its last update on May 13th, advising that sales per working day had cooled across both the U and Europe.
And these travails have extended into June, Brammer added, advising that its UK division “has experienced a particularly weak performance over the last few days.” The engineer now expects pre-tax profit for the first half to fall below expectations, at £5m, bringing it close to its net debt/EBITDA bank covenant.
The impact of the UK’s Brexit decision is clearly hampering the outlook for many of the Footsie’s stocks, and Brammer does not appear to be immune to this. And with the business dealing on a P/E rating of 12.6 times, I believe the firm’s high risk profile is far from factored in at current share prices.
Services star
Diversified services provider Bunzl (LSE: BNZL) gave the market more reason for cheer, however, with an upbeat trading statement sending its share price 4% higher from Tuesday’s close. Bunzl said that it expects group revenues to have trotted 9% higher during January-June, thanks to the impact of M&A activity.
And the company — which provides everything from rubber gloves and helmets to cutlery and hygiene wipes — gave further cause for optimism with news of two new acquisitions in the UK and Belgium.
While last week’s vote has changed the game for the vast majority of companies, I am confident that Bunzl can keep its terrific growth story rolling, thanks to the indispensable nature of its products, not to mention broad diversification by both industry and geography.
Consequently, I reckon Bunzl is a shrewd stock pick, even on an elevated P/E rating of 20.2 times.
Bank hits back
Shares in Shawbrook Group (LSE: SHAW) remain extremely volatile following Tuesday’s hair-raising update, the stock recently dealing 23% higher from the close.
The challenger bank shocked markets yesterday by advising that it expects to book £9m worth of impairments during the second quarter due to “irregularities” in lending activity at its Asset Finance department. The news prompted Shawbrook’s chief finance director Tom Wood to fall on his sword.
Shawbrook advised that these issues have now been rectified. But I believe the wider problems facing the British economy following last week’s referendum makes the bank a risk too far at present. Indeed, at 172p per share, Shawbrook’s stock is still well below last Thursday’s closing price of 295p.
While some may argue that a forward P/E rating of 7.7 times more than bakes in concerns of a domestic downturn, I am not so sure, and reckon investors shouldn’t be swept up by the renewed appetite for Shawbrook’s shares.
