Today I am looking at three FTSE fallers that should attract the glances of savvy bargain seekers.
Lloyds Banking Group
Banking colossus Lloyds (LSE: LLOY) have endured a torrid time during the past few months, and shares have shed 8% since the start of August alone. Although the ‘Black Horse’ has recovered some ground in recent days, I reckon Lloyds still provides plenty of value for those seeking quality at rock-bottom prices.
One of the causes behind reduced investor appetite during the summer was the shock £1.4bn charge suffered during the second quarter to cover PPI claims, a colossal charge that took the total cost of the scandal to more than £13bn. But as Investec notes, “Lloyds may, in part, have chosen to ‘go large’ in order to optimise its usage of the final window for tax relief against provisions for redress payments.”
And with the UK economy still ticking reliably higher — a factor that helped underlying profit advance 15% in April-June, to £4.38bn — the City expects Lloyds’ earnings to rise 5% in the current year alone, resulting in an ultra-low P/E multiple of 8.9 times. And with the bank’s capital strength also steadily improving, a total dividend of 2.6p per share is currently pencilled in, yielding a chunky 3.3%.
Reckitt Benckiser
The economic turbulence being witnessed in China has rocked demand for household goods leviathan Reckitt Benckiser (LSE: RB) in recent weeks — the firm has shed 6% of its value during the past month as a result. Still, I believe this presents a prime buying opportunity as the long-term forecasts for consumer spending in developing regions like China remain compelling.
Reckitt Benckiser, which sources a third of total revenues from emerging markets, saw like-for-like sales rise 5% during January-June, to £4.36bn, thanks to solid demand across the globe. The company has also doubled-down on innovation in brands like Durex condoms — the number one contraceptive label in China — to help push sales higher. Acquisitions like that of lubricant maker K-Y earlier this year have helped drive the top-line, too, while further earnings-driving purchases are expected in the near future.
The number crunchers expect Reckitt Benckiser to enjoy earnings growth of 3% in 2015 before accelerating thereafter, leaving the business dealing on a high P/E multiple of 24 times. But I believe the exceptional brand strength of Reckitt Benckiser’s products justifies this premium, enabling the business continue punching solid sales growth even in times of wider macro pressures. On top of this, a projected dividend of 122.2p per share creates a very handy yield of 2.1%, too.
AstraZeneca
Pills play AstraZeneca (LSE: AZN) continues to suffer heavily from revenues-crushing patent losses across key products. Renewed concerns over this issue have pushed share prices steadily lower since the spring and, despite a mild recovery more recently, the stock is currently 2% lower from levels printed at the start of August.
The pharmaceuticals giant has suffered three consecutive earnings losses thanks to stagnating revenues, and an additional dip — albeit by a much-milder 2% — is currently forecast for 2015 as generic competition to labels like Crestor and Nexium eats into the top line. Still, the business has invested vast sums into accelerating its pipeline and bringing out the next wave of sales drivers, while its vast lab-building programme across Europe and US promises to further enhance its development work.
Current earnings projections for 2015 leave AstraZeneca dealing on a P/E rating of 15.1 times, a decent entry point given AstraZeneca’s strong long-term earnings outlook. And when you throw in a predicted dividend of 280 US cents per share — matching the reward of the past four years but still yielding a handsome 4.4% — I believe the medicines maker provides plenty of bang for one’s buck.
