Today I am looking at three headline makers in end-of-week business.
Insurance play Beazley (LSE: BEZ) gave the markets a shot in the arm in Friday business following a bubbly trading release, and the company was last dealing 4.3% higher on the day. The London firm advised that pre-tax profit leapt 16% in January-June, to $154.5m, underpinned by terrific premium growth of 25% in the US.
Indeed, Beazley’s brilliant exposure to the high-growth North American — not to mention broad diversification across numerous product lines and niche segments — should continue to deliver resplendent gains, in my opinion. The City currently expects the insurance play to record earnings declines of 10% and 2% in 2015 and 2016 correspondingly, although today’s consensus-beating numbers could prompt a sharp revision of these numbers.
And these projections still create ultra-attractive P/E multiples of 12.7 times and 13 times — any reading below 15 times is widely regarded terrific value. And predicted dividends of 15.1 US cents per share in 2015 and 16.1 cents next year create chunky yields of 3.1% and 3.3% respectively.
Retail-and-office-space provider Hammerson (LSE: HMSO) also exceeded market expectations with its latest financial update, although its shares were dealing up by a much milder 0.3% from Thursday’s close. Helped by the impact of an improving UK economy on shoppers’ spending habits, the company saw net rental income advance 8.6% during the first six months of 2015, to £159.5m.
Hammerson confirmed that profit before tax dropped 9.2% during the period, to £329.4m, although this was prompted by profit revaluations that boosted earnings in the corresponding 2014 period. And boosted by a solid development pipeline — the business is on course to open four new schemes this year alone — I expect demand for Hammerson’s mall space to keep heading higher.
This view is shared by the calculator bashers, and earnings expansion of 10% and 8% is currently pencilled in for 2015 and 2016 correspondingly. Although these numbers create elevated P/E ratios of 25.2 times and 23.6 times for these years, a chunky dividend outlook softens the blow in my opinion. A predicted payment of 22.1p per share for 2015 results in a decent 3.3% yield, and an expected hike to 23.7p next year shoves this to 3.6%.
Unlike the two stocks I have mentioned, Scottish drinks institution A.G. Barr (LSE: BAG) gave a more worrying update in Friday’s session and traders have responded by sending the stock 4.1% lower. The Irn Bru manufacturer advised that a combination of poor weather and tough comparatives in the prior year are likely to push sales 5% lower during February-July, to £128m.
Although A.G. Barr advised that an expected revenues pick-up during the second half of the year should enable it to meet full-year expectations, the business warned that “market conditions have remained competitive with ongoing deflation across the soft drinks market and continued high levels of price promotion.” And today’s update should lead to brokers taking the red pen to their current earnings forecasts — growth of 8% and 5% is currently predicted for the periods ending January 2016 and 2017 correspondingly.
And given that A.G. Barr is already changing hands on high P/E multiples of 20.5 times and 19.2 times for these years, it could be argued that the drinks maker’s share price still fails to reflect the extreme market pressures looking ahead. And projected dividends of 13.4p per share through to end-2017 fail to offset this price issue, either, yielding just 2.2%.
Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Beazley. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.