IMI (LSE: IMI) found itself backsliding in Thursday trading after a less-than-enthusiastic response to Q1 trading numbers. The FTSE 250 share was last dealing 6% lower on the day.
The business — which provides a range of engineering products and services for the control of fluids — declared: “Results in the first quarter of 2018 reflect a continuation of the improved trading experienced across the group through 2017, albeit with continuing uncertainty in some segments.”
While it added that trading remains consistent with expectations at the moment, investors have taken fright over the uncertain outlook for some of its segments.
But this was not the only item of concern as guidance around the issue of severe foreign exchange tailwinds also prompted some to cash out. IMI said that, should sterling’s value against the euro and US dollar stand at the average rate seen during January-March, this would create an exchange rate headwind of some 4% for both sales and profits in 2018.
Self-help scheme on track
The news from the Birmingham firm was not all worrying, however. Organic revenues in the three months to March were up 2% year-on-year, prompting IMI to comment that sales on a comparable basis should still be up for the first half of the year from the corresponding 2017 period.
What’s more, the engineer continued to laud the impact that its self-help measures are having, commenting: “Our new product pipeline is developing well, the operational performance of our manufacturing facilities has further improved and the new systems and processes we are putting in place are enabling us to do business more efficiently.”
It added that “reorganisation activities across the business are progressing well and according to plan.”
Sure, the outlook in some of IMI’s markets may remain patchy for a little while longer, but I believe this is reflected in the company’s low forward P/E rating of 15.1 times, a multiple created by expectations of a 7% earnings rise in 2018 (a 9% profits advance is forecast for 2019 too).
And with its raft of operational improvements clicking through the gears nicely, I reckon this low ratio provides plenty of upside in the years to come.
Predicted dividends of 40.6p and 42p for this year and next, figures that yield 3.9% and 4% respectively, add a very tasty sweetener.
In the fast lane
National Express Group (LSE: NEX) is another FTSE 250 bargain I’d be happy to splash out on today.
With earnings expected to keep booming at double-digit percentages — a 10% advance is forecast for 2018 — the transportation titan can be picked up on a forward P/E ratio of 12.5 times. What’s more, a predicted dividend of 14.9p per share, yielding a chubby 3.7%, gives share pickers further reason to invest.
An extra 4% profits rise is estimated for next year, while an anticipated 16p dividend moves the yield to 4%.
As I commented recently, National Express’s rolling expansion programme abroad is really delivering the goods, and revenues in its North American and Spanish ALSA divisions rose by a chunky 10.1% and 3.6% respectively last year. I am confident that the bus giant is on course to deliver strong shareholder returns long into the future.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended IMI. 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.