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Another FTSE 100 share I’d sell alongside Lloyds Banking Group plc & Centrica plc

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A murky outlook for the UK economy in 2018 and beyond, fuelled by fears of the economic and political instability caused by Brexit, would encourage me to sell out of Lloyds Banking Group (LSE: LLOY) immediately.

City analysts are expecting earnings at Lloyds to have exploded again in 2017, a 172% advance currently on the scorecards. But reflecting the likelihood of tougher trading conditions from here, a 7% fall is forecast for 2018. And profits are expected to flatline next year.

Lloyds saw the number of bad loans on its books surge in the third quarter, and of course, aggressive streamlining in the wake of the 2008/09 financial crisis means that the business cannot look to foreign shores to offset the probability of home troubles.

On top of this, of course, Lloyds is likely to face a steady escalation in PPI-related costs in the run up to the 2019 claims deadline. Combined, these pressures could very possibly see hopes of abundant dividends go up in smoke (the business currently sports a 6.3% yield for 2018), even if ongoing cost-cutting provides the balance sheet with some support.

Such a scenario would prove havoc for the bank’s share price, even if the firm deals on an undemanding prospective P/E ratio of 9.7 times.

Cash out?

The steady erosion of the customer base at British Gas would make me sell Centrica (LSE: CNA) too.

The company’s latest trading statement showed another 823,000 consumers running out of the door in the four months to October. And latest industry data suggests that things are not about to get better any time soon as a record 5m households switched supplier in 2017, according to trade association Energy UK.

Reflecting the slow car crash affecting Centrica’s retail operations, City analysts are expecting a fourth successive annual earnings drop for 2017, a 25% drop currently being predicted.

The number crunchers may be predicting a 9% rebound in 2018, but given the increasing strain on British households’ budgets, I am not optimistic that this projection actually is realistic. A low forward P/E ratio of 10.4 times may not be enough to stop Centrica’s share price from slumping, as we have seen in previous years, and this would  encourage me to shift out as soon as possible.

Out of balance

To complete the set for today, another Footsie share I am concerned about in 2018 and beyond is diversified mining giant BHP Billiton (LSE: BLT).

The digger has its finger in many pies but its reliance on the iron ore segment is of particular concern to me. BHP generates 45% of total profits from sales of the steelmaking ingredient but floods of new supply from South America and Australia are entering the market.

However, iron ore is not the only one of BHP’s key commodities where predictions of significant and enduring material imbalances are casting a doubt over prices down the line. And this makes the company far too risky right now.

City analysts are forecasting a 25% earnings rise at the Australian firm for the period ending June 2018. But a 17% reverse is anticipated for fiscal 2019 thanks to predictions that the recent iron ore rally will fizzle out.

A forward P/E ratio of 13.9 times may look nice on paper, but this would not stop the share price bolting lower should the outlook for commodity markets get darker. Like Centrica and Lloyds, I would shift out of BHP today.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.