Shares in J Sainsbury jumped on Wednesday in response to an upbeat trading update, gaining 14% on the day to end at 260p (for an overall 11.5% rise in 12 months). But is Sainsbury unique in bucking the supermarket trend, or is the whole sector set for a return to health?
We should know more next Wednesday, 7 October, when rival and market leader Tesco (LSE: TSCO) is due to bring us its first-half results. The Sainsbury news already seems to have had a knock-on effect on Tesco, with a 7% rise on the same day taking the price to 183p, although it’s dropped back a few pennies since then — Tesco shares are now up around 1.7% in 12 months.
For the quarter to 30 May, Tesco reported a slowing of its like-for-like sales decline, to a drop of just 1.3%, with like-for-like volumes actually up 1.4% and price deflation accounting for the income fall. Current forecasts suggest Tesco’s earnings slide is coming to an end, with a 6% fall this year followed by a 20% recovery next. Is it finally time to pick Tesco’s bottom? It just might be.
Tasty calories
The recovery at high-street baker Greggs (LSE: GRG) has been going impressively well, with a 43% rise in EPS reported for the year ended January 2015 after a couple of years of falling earnings. That’s led to an 81% share price gain over the past 12 months, up to 1,080p, but the resurgence has gone off the boil a little of late and the price has been pretty much flat since the end of April.
Will the company’s next trading update, due on Tuesday, 6 October, provide fresh impetus for the upwards march? A continuation of a first-half performance that saw a 6.4% rise in sales with diluted EPS up 50% would be nice, and full-year forecasts suggest another 20% will be added to earnings this year. But with forward P/E multiples of around 20 and dividends set to yield less than 3%, I think the good news is already in the share price.
Bums on seats
The meteoric share price rise at easyJet (LSE: EZJ) might have slowed to only 27% in the past 12 months, but investors sitting on a five-bagger to 1,780p in just four years should be feeling pretty pleased with themselves.
It’s all about getting those aeroplane seats filled, of course, and next Tuesday we’ll be seeing September’s traffic statistics. August saw the budget airline enjoying a load factor of 94.4%, which was a new record for the firm, thanks to strong summer trading — and though easyJet’s operations had been subject to some disruption, that performance was apparently more than enough to offset it.
The shares are on a forward P/E of 13, dropping to 12 based on 2016 forecasts, with dividend yields expected to top 3%. If you’re happy with the risks of investing in airlines, that still looks reasonable value to me.
