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Why Glencore Xstrata PLC, John Menzies plc And Faroe Petroleum plc Should Lag The FTSE 100 Today

Any hopes for a glimmer of light from the FTSE 100 (FTSEINDICES: ^FTSE) today have been dashed, with the index of top UK shares down another 40 points to 6,426 by mid-morning. The big miners are slipping back a bit after a recent rally, and the eurozone is looking a bit dodgy again as fears grow for yet another political crisis in Italy.

But there are individual shares doing worse. Here are three from the FTSE indices off to a bad start today:

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Glencore Xstrata

First-half results from Glencore Xstrata (LSE: GLEN) sent shares in the FTSE’s biggest miner down 11.5p (3.8%) to 290p this morning, after revenue fell 2% to $121bn and adjusted EBIT was down 28% to £3.18bn. Full-year forecasts currently suggest a fall in earnings per share (EPS) of around 30%, but a reported half-time fall of 39% in “Income attributable to equity holders pre significant items” may well have spooked the markets.

It’s still early days after the merger, of course, with chief executive Ivan Glasenberg saying “The synergies / cost savings from the merger will be materially in excess of previous guidance“, which is nice.

John Menzies

John Menzies (LSE: MNZS) announced two acquisitions at its aviation services division, Menzies Aviation, today, and the share price responded by dropping 23p (3%) to 736p. The targets are two ground-handling businesses in Australia and Colombia respectively — Skystar, bought for £7.7m, and Desacol, for up to £6.4m, both in cash.

Despite today’s fall, Menzies shares are still up nearly 20% over the past 12 months, even with a 5% fall in EPS forecast for the current year. The shares are on a relatively modest P/E of 11 with a 3.6% dividend yield expected.

Faroe Petroleum

Faroe Petroleum (LSE: FPM) shares have been recovering of late, but they took a 6.3p (4.7%) hit to 127p today in response to the company’s latest operational update. For the year to June, average economic production has been around 7,890 barrels of oil equivalent per day (boepd), but the firm expects average production for the full year to December to be at the lower end of the 7-9,000 boepd range given in earlier guidance.

Management of the firm’s production assets has apparently been a key part of Faroe’s strategy, with chief executive Graham Stewart saying that “We seek at all times to balance exploration cost exposure with reward, and with the farm-out of [Novus and Solberg] wells we have secured a good outcome“.

Finally, you can compensate for the day-to-day ups and downs of share prices by looking for reliable dividends. So how would you like a company that’s offering a 5% yield and which could be set for some nice share-price appreciation, too?

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> Alan does not own any shares mentioned in this article.

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