Today I am looking at three FTSE favourites carrying exceptional profit prospects.
BT Group
Without question BT Group (LSE: BT-A) (NYSE: BT.US) has become one of the most reliable stocks on offer for those seeking solid earnings growth. And boosted by the surging success of its BT Sport sports channels and fibre-laying programme for its Consumer division, I expect profits to keep rolling higher as the company bolsters its retail product proposition.
City analysts expect BT to enjoy earnings growth of 6% in the outgoing 12-month period, and further meaty rises of 4% and 7% are expected in the years concluding March 2016 and 2017 correspondingly. These figures leave the telecoms giant dealing on a P/E ratio of 15 times prospective earnings — bang on the watermark which distinguishes decent value for money — and which drops to 14.3 times the following year and 13.5 times in 2017.
Although growth is expected to slow from recent years, as BT will have to continue shelling out vast sums to boost its firepower in the ‘quad-play’ entertainment sector to take on the might of Sky, I believe that BT’s market-leading services should see earnings growth accelerate looking further ahead.
ASOS
Online fashion house ASOS (LSE: ASOS) has pulled out all the stops to boost its sales outlook, improving its warehousing and distribution network in the UK and overseas as well as introducing ‘zonal pricing’ in key marketplaces. Such measures are already paying off, with total revenues surging 20% higher during December-February, to £298.3m, illustrating a rapid acceleration in recent months — sales rose by a more modest 14% during the entire six months to February.
Make no mistake: ASOS has seen earnings tank in recent years as problems in overseas territories have weighed. These dips have narrowed in recent years, however, and the company’s 51% slip in the year concluding August 2013 improved to an 11% drop the following year, and is anticipated to reduce yet again — to 7% — in fiscal 2015.
And the retailer is anticipated to race back into the black from August 2016, with a 27% advance currently pencilled in for that year. It is true that this reading leaves ASOS changing hands on an elevated P/E ratio of 64.5 times, but I reckon that improving retail conditions across its major markets — combined with the fruits of heavy restructuring — should underpin exceptional earnings growth in coming years.
Barratt Developments
I believe that housebuilding goliath Barratt Developments (LSE: BDEV) is in great shape to enjoy breakneck earnings growth well into the future. With the Bank of England unlikely to raise interest rates until some point in 2016 at the earliest, the stage is set for favourable lending conditions to continue to boost home sales. Indeed, data released just yesterday showed mortgage approvals rise for the third successive month in February, at 61,760. This was also a six-month high.
Against this backcloth, the City’s band of brokers expect Barratt to record a blockbusting 39% earnings improvement in the year concluding June 2015. And the business is expected to enjoy an extra 18% bounce during the following 12-months.
These projections leave Barratt changing hands on P/E multiples of just 12.4 times and 10.6 times for 2015 and 2016 respectively. As well, the ‘bricks and mortar’ play also carries ultra-low PEG multiples of 0.3 and 0.6 for these years — any reading below 1 is widely regarded as a steal. With Britain’s housing shortage likely to persist well into the future, I am convinced that Barratt and its industry peers should continue to enjoy robust revenues expansion.
