Why Earnings Are Set To Ignite At AstraZeneca plc, Imperial Tobacco Group PLC, Old Mutual plc And Mondi Plc

Royston Wild discusses the delicious growth potential of AstraZeneca plc (LON: AZN), Imperial Tobacco Group PLC (LON: IMT), Old Mutual plc (LON: OML) and Mondi Plc (LON: MNDI).

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Today I am looking at the growth prospects of four blue-chip beauties.

AstraZeneca

Medicines play AstraZeneca (LSE: AZN) cheered the market this week after lifting its revenues and earnings guidance for 2015, news that reflects the hard work the firm has put into turbocharging its drugs pipeline. The London firm now expects full-year sales at constant currencies to match 2014’s levels, while earnings are predicted to rise by a “mid-to-high single digit percentage,” up from a previously-predicted “low single-digit” advance.

Sure, the problem of patent expirations is expected to remain a challenge in 2016, particularly for its sales-driving Crestor cholesterol treatment. But AstraZeneca’s focus on hot growth areas like diabetes, cardiovascular and respiratory treatments, combined with ongoing success in new regions — Chinese sales rose 11% during July-September — should deliver strong returns in the years ahead. An expected 1% earnings decline for 2015 leaves the business trading on a P/E ratio of just 15.1 times, great value in my opinion given the firm’s robust growth prospects.

Imperial Tobacco Group

Like AstraZeneca, I believe the surging financial might of developing regions should power sales at Imperial Tobacco (LSE: IMT) higher in the years ahead. Emerging markets, and particularly those of Latin America, have long been earnings drivers for the cigarette industry thanks to more favourable attitudes towards smoking compared with those of the West. And I believe improving spending power in these places should propel demand for Imperial Tobacco’s brands steadily skywards.

The business announced this week that volumes of its its earnings-driving ‘Growth Brands’ like West and Davidoff leapt 10.7% during the 12 months to September 2015, a result that pushed operating profit 2.4% higher to £3.1bn. And Imperial Tobacco’s decision to hike investment in these brands should keep earnings moving skywards in my opinion — indeed, the City has pencilled in a 10% leap for 2016 alone, resulting in a very-reasonable P/E ratio of 14.8 times.

Old Mutual

Thanks to its broad spread across Africa, I am convinced insurance leviathan Old Mutual (LSE: OML) should deliver resplendent shareholder returns in the coming years. The company announced this week that gross sales surged 31% during July-September, to £8.1bn, while net inflows hit £2.3bn in the period, representing a record quarterly performance.

Furthermore, sales at its Old Mutual South Africa business leapt by 28% in the third quarter, while demand rose almost a third across the rest of its continental operations. And helped by its ambitious acquisition drive, not to mention legislative changes in the UK, Old Mutual saw pension sales rocket 71% in the period.

So although the firm warned of foreign exchange headwinds ahead, not to mention enduring challenges in emerging markets, the City expects Old Mutual to enjoy 11% and 5% earnings upticks in 2015 and 2016 respectively, resulting in mega-low P/E ratings of 10.5 times and 10.1 times.

Mondi

Helped by its bubbly acquisition strategy, I am convinced that paper play Mondi (LSE: MNDI) should enjoy terrific earnings expansion in the years ahead. Just this week the business snapped up flexible packaging builder KSP, a specialist in the food and beverage sectors, in a move that bolsters Mondi’s position in the high-growth US and Asian marketplaces.

On top of this, Mondi is touting around €500m worth of improvements to its existing facilities in Eastern Europe, including adding 300,000 tonnes of capacity in Slovakia for new products and to reduce bottlenecking. Thanks to this bullish attitude to pursuing new opportunities, the City expects Mondi to follow earnings expansion of 26% this year with a 9% rise in 2016. And these readings produce very-decent P/E multiples of 15.5 times and 14.2 times respectively.

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 owns shares of Imperial Tobacco Group. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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