BT Group plc and Standard Chartered plc: do latest results make them a buy?

Bilaal Mohamed asks whether it’s the right time to buy BT Group plc (LON: BT.A) and Standard Chartered plc (LON STAN).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I’ll be taking a closer look at telecoms giant BT Group (LSE: BT.A), and multinational banking firm Standard Chartered (LSE: STAN). Is it the right time to invest in these FTSE 100 companies?

Infrastructure upgrade

Telecoms giant BT announced its annual results yesterday for the full year to the end of March and there was plenty of good news. It reported a 15% rise in pre-tax profits to £3.03bn, compared to £2.65bn for fiscal 2015. Revenues also came in higher at £19.04bn, a 6% improvement on the £17.98bn reported last year. The group also outlined plans for a three-year investment programme of around £6bn to upgrade the network for its newly-acquired EE business and Openrecach infrastructure arm, including the laying of ultrafast fibre optic broadband lines to around 2m premises.

The outlook for the next couple of years is mixed though, with analysts talking about a 7% dip in underlying profits for the current year at around £3.1bn, followed by a solid 10% rise to £3.4bn for fiscal 2018. The company has a good history of dividend growth and this is expected to continue with 15.66p per share forecast for this year, increasing to 17.41p for 2018, giving prospective yields of 3.5% and 3.9% over the next two years.

BT trades on 14 times forecast earnings for this year, falling to 13 for the year ending March 2018. In my opinion, the shares are trading at fair value and don’t offer much in the way of capital growth over the medium term, but income hunters will no doubt be interested in the well-covered dividends, which offer plenty of scope for future growth.

Troubled bank

International banking giant Standard Chartered updated the market with an interim management statement last week for the first quarter ended 31 March. The Asia-focused bank reported a 59% fall in pre-tax profit to $589m, compared to $1.4bn for the same quarter in 2015, with operating income at $3.35bn, 24% lower year-on-year.

Yet the medium-term outlook looks more promising, although earnings are expected to remain flat this year, analysts are talking about 154% growth next year to £1.24bn. The shares currently trade on an expensive-looking 29 times forecast earnings for this year, falling to a more reasonable 14 times for the year ending December 2017.

If the bank manages to achieve the optimistic growth forecasts for 2017, it would still leave the shares trading on an average-looking P/E rating. But if the numbers fall short, the shares would be exposed to a massive sell-off. Not a risk worth taking in my opinion.

The verdict

BT shares looks to be fully valued at the present time, but nevertheless could be appealing to income hunters looking for solid dividend growth. The company offers yields of almost 4%, with plenty of scope for further growth in years to come.

Standard Chartered shares will be trading at fair value if the massive growth forecasts are delivered, anything short of that will lead to a market correction making them far too risky at present levels. Sadly, there’s not much in the way of dividends to temp income investors.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »