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Why I Would Buy International Consolidated Airlines Grp And Shire PLC But Sell Enquest Plc

Today I am running the rule over three of the movers and shakers in Monday’ trading session.

International Consolidated Airlines Grp

Shares in International Consolidated Airlines (LSE: IAG) have leapt 5% in start-of-week business, boosted by speculation that the firm is about to snap up Irish airline Aer Lingus. Such a move would see the company ramp up the number of landing and takeoff slots at its critical London Heathrow hub, although this latest bid — valued at €1.4bn and the third approach since December — still needs approval from the Irish government as well as Ryanair to pass.

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Regardless of the outcome, I believe that the British Airways and Iberia operator remains a terrific stock selection for growth hunters. The company has seen transatlantic business surge in recent times, underpinned by its weighty presence in London, while it is also set to benefit from a collapsing oil price.

Following on from an anticipated 90% earnings advance for 2014, City brokers expect International Consolidated Airlines to keep this strong momentum rolling with growth of 54% and 25% pencilled in for 2015 and 2016 respectively. These readings leave the carrier trading on P/E multiples of 12.1 times for this year and 9.5 times for 2016 — any reading below 10 times is generally considered too good to pass up on.

And the fruits of extensive restructuring across the business are expected to facilitate the board’s plans to ramp up shareholder returns in the near future. Indeed, International Consolidated Airlines is expected to raise the total payout from an estimated 1.5 euro cents per share in 2014 to 10.8 cents this year, driving the yield from 0.2% to 1.5%. And a further hike in 2016, to 18.2 cents, pushes the yield to 2.5%.


Phamaceuticals giant Shire (LSE: SHP) has received a shot in the arm in Monday trade and was last up 0.6% on the day. The business has been boosted by news that the US Food and Drug Administration (FDA) had approved NPS Phamaceuticals’ Natpara, a product which is used to treat the hormone disorder hypoparathyroidism.

Shire is in the process of acquiring NPS for $5.2bn, a canny move given the commercial potential of the product which is set to launch in the second quarter. And Shire had further good news today as it announced its Idursulfase-IT drug — used to treat neurocognitive decline associated with Hunter Syndrome — is to be fast-tracked by the FDA.

The number crunchers expect Shire to see earnings shoot 11% higher in 2015, maintaining its strong momentum after a predicted 32% advance in the last year. And an extra 14% rise is chalked in for 2016.

These projections push a P/E multiple of 19.1 times earnings for this year to a far more palatable 16.7 times for 2016, just above the benchmark of 15 times which represents attractive bang for one’s buck. And I believe that the company’s promising drugs pipeline should keep earnings galloping higher in the years ahead.


Oil exploration play Enquest (LSE: ENQ) has been swinging up and down like a yo-yo during the past month, and the business was last trading 6.8% lower on the day. Broadly speaking, however, the business remains locked on a horrendous downtrend, and has shed three quarters since the summer on the back of an eroding black gold price.

The business rose by almost a quarter last week after it revealed the successful renegotiation of lending terms with its main creditors. It also announced a significant scaleback in capital expenditure for 2015, to $600m, assuaging immediate concerns over the strength of the balance sheet.

Still, signs that the global economy continues to decelerate is doing nothing to improve forecasts for the oil price, and TD Economics now estimates that West Texas Intermediate will average $41 during the first half of 2014. The benchmark struck its cheapest for almost six years at $44.20 per barrel earlier this month, exacerbating doubts over Enquest’s profits outlook.

The City’s band of brokers expect Enquest to follow an anticipated 62% earnings decline last year with an additional 77% drop in 2015. These forecasts drive an elevated P/E multiple of 23.8 times for this year to 8.6 times for 2016, but I believe that the perilous state of the oil market still makes Enquest a perilous pick, with further earnings downgrades remaining a very real possibility.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.