Are Banco Santander SA, Imperial Brands plc and Reckitt Benckiser Group plc set to beat the FTSE 100?

With shares in Santander (LSE: BNC) having underperformed the FTSE 100 by 6% in 2016, it’s clear that investor sentiment in the global banking giant is rather weak. That’s understandable since challenges in the Brazilian economy (which is a key market for Santander) have caused its financial outlook to worsen.

In fact, in the current year Santander is expected to record a fall in its earnings of 4%.While disappointing, this may not be such a bad result given the difficulties the bank has faced. And with its shares now trading on a price-to-earnings (P/E) ratio of just 9.2, they seem to offer a wide margin of safety in case of further downgrades to the bank’s earnings outlook.

Looking ahead to next year, Santander is expected to return to growth, with its net profit forecast to rise by 10%. Although there’s scope for a downgrade, Santander remains a well-diversified, financially sound and high-quality investment that trades on a low valuation. Therefore, while its short-term share price performance may disappoint, in the long run it seems likely to outperform the FTSE 100.


While Santander has underperformed the FTSE 100 thus far in 2016, Imperial Brands (LSE: IMB) has beaten the wider index by around 4%. This level of outperformance could increase due to uncertainties in the wider market, with the EU referendum, US interest rate rises and the US Presidential election having the scope to cause global equity markets, including the FTSE 100, to pull back.

With Imperial Brands offering highly defensive and robust qualities, it’s likely to outperform its index peers in such a situation. And while there are pressures on cigarette volumes, increased pricing and the sale of a greater volume of e-cigarettes have the potential to pick up the slack over the medium-to-long term. As such, and with Imperial Brands forecast to increase its earnings by 12% this year, it looks set to continue to beat the FTSE 100 over the long run.

Emerging markets strength

Also having the potential to beat the FTSE 100 is Reckitt Benckiser (LSE: RB). That’s largely because of its exposure to emerging markets, where demand for consumer goods is set to soar over the coming years. And with Reckitt Benckiser having a hugely well-diversified product portfolio, it looks set to remain a relatively resilient business that may become popular among investors should the FTSE 100 continue to experience a highly uncertain future.

Certainly, Reckitt Benckiser is hardly cheap at the present time. It trades on a P/E ratio of 24.3, but with it forecast to deliver high-single-digit growth in each of the next two years and it having a beta of just 0.8, it’s likely to be viewed as a relatively appealing defensive growth play by a large number of investors. Therefore, it looks set to continue to beat the FTSE 100 after its 96% outperformance of the wider index over the last five years.

FTSE 100-beaters

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Peter Stephens owns shares of Imperial Brands. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.