February looks like being another packed month for company updates. Among those reporting are FTSE 100 laggards BP (LSE: BP), GlaxoSmithKline (LSE: GSK) and BT (LSE: BT.A). Could we finally see their share prices recover? Here’s my take.
FTSE 100 recovery stock?
Oil giant BP kicks off the new month by releasing Q4 and full-year numbers on February 2. And what a year it’s been!
BP’s shares tumbled like everything else back in March’s coronavirus-induced stock market crash, Despite rising 50% since the end of October, they’re still far below where they were 12 months ago. And Covid-19 might not be entirely to blame. BP’s decision to focus more on renewable energy going forward is sound, but will also take time… and lots of cash.
Perhaps I should be more positive. After all, a 5.5% dividend yield isn’t to be sniffed at. Moreover, we could see a revival of oil prices in 2021 as vaccine programmes are rolled out and the global economy emerges from its enforced slumber. As such, I think a confident statement on BP’s outlook from management might see the shares recapture their mojo.
Even so, it’s hard to look beyond the fact that the firm is very dependent on something beyond its control. With its substantial amount of debt, I currently consider BP a risk too far.
Hot on the heels of BP, pharmaceutical firm GlaxoSmithKline issues its Q4 and full-year results to the market on February 3. Like its FTSE 100 peer, Glaxo has hardly impressed lately.
Over the last year, the shares have fallen 20% in value. In fact, they now fetch almost exactly the same price as they did five years ago! Investing may be a long-term endeavour but I wouldn’t begrudge any holders from feeling disgruntled, especially given how other top-tier stocks have performed in recent times.
Then again, it might be argued that those invested in the company care little for what happens to the share price, at least in the short term. On the income front, Glaxo doesn’t disappoint. An expected 80p per share cash return gives a yield of 5.7% at the current share price. And unless next month brings some unexpected news, this payout looks likely to be covered sufficiently by profits.
Trading at 12 times FY21 earnings, I continue to mull over snapping up GSK for my portfolio.
BT’s recent share price performance is arguably the most depressing of all three stocks. The communications giant’s valuation has been drifting steadily lower since 2016. Last year, it underperformed the FTSE 100. Unfortunately, I’m not so sure next month’s Q3 trading update on February 4 will reverse this trend.
As an investor, I can forgive a company experiencing issues if I’m being compensated for my patience. On this front, however, BT currently disappoints. With a pension deficit to plug and further infrastructure investment required, dividends have been suspended.
It’s not all bad. A P/E of just 7 times earnings suggests a huge amount of bad news is already priced in. This valuation also looks seriously cheap considering BT has the largest market share of internet broadband suppliers.
Notwithstanding this, I can see the share price moving sideways even if revenues come in better than expected. Recent news that the firm faces a £600m lawsuit alongside strike action from Openreach staff, isn’t exactly the run-up to results day management will have wanted.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.