Shares in pharmaceutical company AstraZeneca (LSE: AZN), and estate agent Countrywide (LSE: CWD) are sharp movers today after the two companies released results for the first half of the year. In AstraZeneca’s case, its update was warmly received by the market, with its shares rising by over 2%. However, Countrywide has slumped by as much as 8% — here’s why.
Countrywide
With the General Election creating considerable uncertainty, the first half of the year was very challenging for Countrywide. Transaction volumes fell by 12% as many potential buyers apparently put off purchases so as to wait and see how a forecast hung parliament would affect the housing market. This was the main reason for a fall in pretax profit from £37m in the first half of 2014, to £29m in the first half of 2015. That’s a fall of 22% even though total revenues for the period edged up by £4m to £338m.
Of course, with a clear election result, Countrywide expects an improvement in the second half of the year and, as such, is guiding towards a year-on-year rise in its gross profit. And, while rising interest rates could start to put off potential buyers and dampen demand for housing over the medium term, shares in Countrywide continue to offer good value for money at the present time. In fact, the company trades on a price to earnings (P/E) ratio of just 13.3, which indicates that there is a sufficient margin of safety so that even if the second half of the year does disappoint, Countrywide’s shares may not be hit all that hard.
Furthermore, with a dividend yield of 4.1% and half of its profits being derived independent of the UK housing transaction market (typically in property management and other services), Countrywide continues to be a top quality stock for the long term.
AstraZeneca
Meanwhile, AstraZeneca’s first-half results were very encouraging for long-term investors. Certainly, its pretax profit fell from $1.5bn in the first half of 2014 to $1.3bn in the first half of the current year. However, this was due to higher research and development costs and, furthermore, AstraZeneca has raised its full-year revenue guidance. It now expects sales to fall at a low single digit percentage rate this year, which is an improvement from the mid-single digit rate that had previously formed its guidance.
And, of further encouragement to investors is a reiteration that profit is expected to rise in the present year, which would be a major step forward for the company and could help to further boost investor sentiment.
As such, now seems to be a great time to buy a slice of the company. It remains good value for money, with it having a P/E ratio of 15.7 and, with its yield standing at 4.2%, it continues to be a very appealing income stock. Of course, its turnaround plan is still some way from being complete and, despite today’s positive update, challenges will inevitably lie ahead. But, with a top quality management team, sound strategy and an improving and evolving pipeline, AstraZeneca appears to offer considerable long-term total return potential.
