Today I am looking at the earnings outlook for three FTSE superstars.
Banking colossus Barclays (LSE: BARC) confirmed one of the market’s worst-kept secrets on Wednesday by announcing the installation of former JP Morgan exec Jes Staley as new chief executive. The move confirms the board’s desire to pump fresh life into its controversial Investment Bank, even though Staley has reiterated plans make the division “less capital intensive” than in previous years.
In a letter to staff Staley made specific reference to Barclays’ hot growth drivers — the new man commented that “our business in Africa gives us exciting opportunities in fast growing economies,” while he also vowed to continue supporting growth at the company’s Barclaycard division.
Of course Barclays’ decision to resurrect its investment banking proposition marks a huge divergence from previous CEO Antony Jenkins’ emphasis on ‘less risky’ High Street operations, and could present significant earnings turbulence further down the line.
But in the nearer-term, expectations of steady growth in the British economy is expected to keep earnings rising. Indeed, Barclays is expected to follow a 33% rise in 2015 with a 21% jump in 2016, resulting in a P/E ratio of just 9 times for next year.
I am convinced that CRH’s (LSE: CRH) acquisition-led growth strategy should undergird splendid bottom-line expansion this year and beyond. The business made headlines earlier this year when it snapped up the cement assets of Lafarge and Holcim’s for €6.5bn, and since then has shelled out $1.3bn to purchase California’s C.R. Laurence, one of North America’s largest glazing specialists.
And CRH certainly has the firepower to carry out even more transactions — cash and cash equivalents clocked in at €5.2bn as of June, while net debt crumbled by two-thirds — to €1.2bn — thanks to an earlier capital raising and effective portfolio management. Indeed, the firm is well on the way to divesting between €1.5bn and €2bn worth of assets and to reallocate the capital into hot growth sectors across the globe.
Consequently the City expects CRH to enjoy earnings growth of 54% in 2016, following an anticipated 35% advance in the current period and resulting in an attractive P/E ratio of 14.9 times — any reading around or below 15 times is widely considered terrific value for money.
Like CRH, broadcasting giant ITV (LSE: ITV) remains locked on a path of bolt-on purchases to deliver strong earnings growth in the years ahead. Just this month the London acquired the TV operations of UTV Media for £100m, giving it access to Northern Ireland’s most popular television channel, as well as the group’s UTV Ireland channel launched in the Republic in January.
ITV has been busy bulking up its presence in international markets for some time now, particularly in the explosive areas of reality television and North America. The business also boasts a weighty presence in Australia, Europe and Scandinavia, and I expect surging demand for ITV’s solid stable of programmes — from Coronation Street and The X Factor to The Only Way Is Essex — combined with surging advertising revenues to keep the bottom line growing.
This view is shared by the numbers crunchers, and ITV is expected to keep its proud record of double-digit earnings growth rolling with expansion of 16% in 2015. And a further 10% rise is predicted for 2016, creating a tasty P/E rating of just 14.6 times.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.