Today I am looking at a handful of big-cap beauties packed with exceptional earnings prospects.
National Grid
I believe that transmission play National Grid (LSE: NG) (NYSE: NGG.US) is a great pick for those seeking reliable earnings growth in coming years. The business is aggressively bulking up its asset base in both the UK and the US — the power giant is set to increase regulated asset values in Britain by between 6% and 8.5% alone in the coming years — while new RIIO price controls should help it to wave goodbye to the earnings volatility of recent years.
As a result, National Grid is anticipated to bounce back from a predicted 15% bottom line decline for the year ending March 2015, with expansion of 4% and 3% pencilled in for 2016 and 2017 correspondingly. These projections leave the company dealing on P/E ratings of just 15.7 times prospective earnings for this year and 15.1 times for 2017 — any reading around or below 15 times is widely considered attractive value.
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Babcock International Group
In my opinion, Babcock International’s (LSE: BAB) diversified operations should enable it to hurdle problems in any one market — and particularly the effect of reduced expenditure from the oil sector — and punch steady growth looking ahead. The company noted in February that demand for its blue-ribbon engineering products continues to surge, driving the order book to a record £20bn as of the start of 2014. It also boasts a meaty bid pipeline of £13bn.
Babcock has a proud record of generating year-on-year earnings growth, although an expected 4% decline in the year concluding March 2015 is expected to put paid to this. Still, the London firm is expected to bounce back from next year with solid growth of 14% and 11% expected for 2016 and 2017 correspondingly. As a result, the engineer changes hands on a P/E ratio of just 12.9 times for this year and 11.7 times for 2017.
Travis Perkins
Bolstered by a strong long-term outlook for the UK construction sector — thanks in no small part to galloping housing demand — I believe that materials and tools specialist Travis Perkins (LSE: TPK) is on course to enjoy resplendent profits growth. On the back of this Travis Perkins has announced plans to open another 400 outlets stores during the next four years at a cost of £150m-£200m per annum, a move which should supercharge revenues still further.
As a result, Travis Perkins is expected to keep churning out double-digit earnings growth in the near-term at least, and the City predicts a 10% advance for 2015 to be followed with an extra 13% rise in 2016. These figures leave the construction specialists changing hands on a P/E rating of just 15.1 times for the current year, and which slips to 13.3 times for the following 12-month period.
Burberry Group
I believe that luxury goods giant Burberry (LSE: BRBY) is a great way to play rising disposable income levels across the world. While it is true that anti-extravagance measures have seen sales in Asia slow during the past year, its handbags, scarves and coats continue to fly off the shelves everywhere else — Burberry noted this week that underlying sales across the Americas, Europe, Middle East, India and Africa all grew at double-digit rates during October-March, boosted by exceptional digital trade.
Although Burberry is expected to record a rare 1% earnings decline for the year ending March, the bottom line is expected to swell by 11% in both 2016 and 2017. The fashion house currently deals on 21.2 times for 2015 and 19.5 times for next year, and while on paper these figures may appear slightly heady, I believe that Burberry’s exceptional sales progress across all regions merits this premium rating.
