Today I am looking at three headline makers in midweek business.
Reckitt Benckiser Group
Shares in household goods manufacturer Reckitt Benckiser Group (LSE: RB) bumped 2.1% higher in Wednesday trading thanks to yet another positive trading update. The business advised that like-for-like revenues chugged 7% higher during July-September, to £2.2bn, and representing an acceleration from the 5% advance in the prior quarter.
Reckitt Benckiser experienced “continued broad-based growth throughout our European and North American ‘Powermarkets‘, and double-digit growth in developing markets,” it advised, driven in no small part by so-called ‘Powerbrands’ like Durex condoms and Finish dishwasher tablets. And Reckitt Benckiser hiked its underlying sales target for 2015, to 5%, on the back of its strong recent performance.
And I believe the terrific pricing power of Reckitt Benckiser’s brands, combined with rising consumer spending power across the globe, should continue delivering robust revenues growth well into the future. The City expects the company to deliver a 3% earnings bounce in 2015 alone, resulting in a slightly-heady P/E ratio of 25.1 times. But I believe the standout quality of Reckitt Benckiser’s products, not to mention stirring progress across the globe, fully merits this premium.
Merlin Entertainments
Theme park specialists Merlin Entertainments (LSE: MERL) have had a tough year thanks to the fallout of the Alton Towers rollercoaster tragedy in the summer. The business has suffered from lower footfall as thrillseekers have stayed away from its attractions, and like-for-like revenues at its Resort Theme Parks sunk 2% during January-June as a result.
I have previously championed the long-term prospects of Merlin Entertainments thanks to its leading position in a fast-growing industry, however. And the firm’s promising outlook was given a further boost in Wednesday trading following news it has inked an accord with China Media Capital to build one of its highly-successful Legoland amusement parks in Shanghai. The business has previously touted Asia as a strong growth lever for the years ahead.
Shares in Merlin Entertainments were recently 4.4% higher in midweek business, and I believe further strength can be expected as earnings gallop steadily higher. A 1% bottom-line decline is anticipated for 2015 thanks to the Alton Towers accident, but a solid 15% bounceback is predicted for the following year. Consequently a P/E ratio of 21 times for the current period slips to a much-improved 18.3 times for 2016.
Fidessa Group
Trading systems provider Fidessa Group (LSE: FDSA) also joined the party in Wednesday trading and was last 5.1% higher from Tuesday’s close. The firm advised in a bubbly trading update that it has witnessed “customer markets entering a new phase of recovery as the impact from regulatory and structural changes strengthens,” boosting new business activity since July as well as increasing the investment pipeline.
This increasingly-encouragingly outlook, combined with strong cash generation and a lack of debt, prompted Fidessa to announce that it expects to shell out another special dividend at the time of its preliminary results in February.
The news will come as music to the ears of dividend hunters — the business is already expected to produce dividends of 84.5p per share in 2015 and 87.2p the following year, producing chunky yields of 4.6% and 4.7% correspondingly. Fidessa is expected to overcome a 3% earnings dip in 2015 with a 5% rise in 2016, and although P/E ratios of 24 times for 2015 and 22.6 times for 2016 are hardly exceptional, I believe the tech play’s improving market outlook and chunky dividends more than compensate for these readings.
