Next month will naturally be dominated by more political wrangling as we approach the official date of our EU departure. That said, it’s still worth keeping one eye on companies scheduled to report to the market. Here are three examples from the FTSE 100.
Road to recovery
Having endured a pretty awful 2018, holders of advertising beast WPP (LSE: WPP) must be relieved that the share price has stabilised somewhat in 2019. Assuming there have been no nasty surprises over the last few months, I suspect the next update on trading – due 25 October – could see more investors return to the stock.
Back in August, the £13bn market cap logged better-than-expected organic sales over the second quarter of its financial year. The 1.4% dip surprised analysts, who had forecast a 3% fall. As a result, full-year guidance of a drop somewhere between 1.5% and 2% was maintained.
It’s still early days, but for a company that some believed would crumble without the influence of founder Sir Martin Sorrell, the strategy of his successor, Mark Read, appears to be doing rather well.
The stock looks reasonably priced at 12 times earnings and those comfortable enough to invest at this level should be in line for some decent dividends – WPP yields almost 6% right now.
Return to growth
Consumer goods firm Reckitt Benckiser (LSE: RB) reports next month too. Like WPP, the owner of brands such as Durex and Cillit Bang has seen its share price stabilise over 2019, although it’s still way down from the highs seen back in May 2017.
Those already holding the stock will be looking for signs of a return to growth now that Laxman Narasimhan has taken the reins after Rakesh Kapoor resigned from the board, and particularly after comments made by the company earlier in the year.
At its half-year results in July, Reckitt revealed disappointingly flat like-for-like performance, but went on to say that it expected the second half to show a return to its “more normal level of growth“. We’ll get some indication of whether this is the case when a trading statement arrives on 22 October.
A current price-to-earnings (P/E) ratio of 19 times forecast earnings makes Reckitt cheap relative to its five-year average on the metric (22.5). At 2.6%, the dividend yield is adequate but clearly not as attractive as that offered by WPP.
Less inviting
A third top-tier business reporting next month is Premier Inn owner Whitbread (LSE: WTB). Interim results are due on 22 October.
Having sold the highly successful Costa Coffee chain to Coca-Cola, Whitbread is now focusing on expanding its Premier Inn brand into Europe, specifically Germany. Since 74% of market share is still held by independent operators, it’s no surprise that the £6bn company has been drawn to the country. Only last week, it announced the purchase of three independent hotels (bringing its total estate to six) with the view to relaunching them early next year.
Personally, I wouldn’t be a buyer right now. Considering the potential for consumer confidence to dip further in the coming months as a result of ongoing political turmoil, not to mention huge competition from the likes of Airbnb, Whitbread doesn’t boast an attractive risk-return tradeoff.
On 21 times forecast earnings, it’s also the most expensive (and, at 2.1%, offers the smallest yield) of the three discussed here. Any hint of underperformance next month could see the shares slide.
