Today I am looking at four London leviathans poised to deliver outstanding bottom-line growth.
HSBC Holdings
Banking beast HSBC (LSE: HSBA) remains under pressure as a combination of fears — from concerns over rising legal bills through to uncertainty concerning the future of its UK base — have soured investor appetite. While these issues are likely to remain a problem for a little while longer, in the long-term I believe the firm’s pro-Asia focus should deliver resplendent gains in the years ahead. Indeed, HSBC saw underlying profits from Hong Kong alone surge 14% in January-June, to $2.4bn.
With The World’s Local Bank also enjoying the fruits of improving economic conditions in its European and North American marketplaces, I believe revenues should continue to charge. And my optimism is shared by the number crunchers, who expect HSBC to record earnings growth of 20% in 2015 and 2% in 2016. Consequently the business changes hands on ultra-low P/E multiples of 10.9 times and 10.5 times for these years.
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Cineworld Group
I believe that screen chain Cineworld (LSE: CINE) is a terrific selection for those seeking robust earnings growth year after year. A trip to the movies is of course one of life’s regular pleasures, and the Chiswick firm’s site expansion drive is helping to deliver solid sales growth — revenues grew 11.2% during the first six months of 2015, and a steady stream of blockbusters over the next year and beyond should keep the top line swelling.
Additionally, Cineworld’s decision to drive into Central and Eastern Europe through its £500m acquisition of Cinema City is paying off beautifully, and the business saw admissions grow in all its major territories bar Slovakia. Against this backcloth the City expects the company to punch earnings growth of 12% in both 2015 and 2016, driving a P/E multiple of 18.3 times for the current year to just 16.4 times in 2016.
Ashtead Group
I reckon that power generator supplier Ashtead (LSE: AHT) should enjoy the fruits of a buoyant construction market and continue punching brilliant earnings expansion. Of course troubles in the oil and gas sector is likely to hamper demand somewhat, but I believe the improving outlook for the building market on both sides of the Atlantic — combined with market share gains for its Sunbelt and A-Plant divisions — should more than offset these problems.
This viewpoint is shared by the calculator bashers, and Ashtead is anticipated to keep on punching double-digit earnings growth — the business has seen the bottom line rise at a compound annual growth rate of 41.2% during the past three years alone. For the year concluding April 2016 Ashtead is expected to see earnings grow 25%, producing a P/E rating of 12.1 times. And this figure falls away to 10.5 times for 2017 amid forecasts of a 17% bottom-line bounce.
Prudential
With life insurance leviathan Prudential (LSE: PRU) expanding its tentacles across the globe, I am convinced that earnings should continue to track comfortable skywards in the years ahead. The result of a rising middle class in emerging markets in particular are helping to provide handsome rewards, and The Pru saw new business profit in Asia surge 22% in January-March to £309m.
And with surging business inflows helping to deliver brilliant cash generation — operating cash flows leapt to £1.8bn last year from £1.3bn in 2013 — I expect Prudential to make further bolt-on purchases to boost growth still further. The City currently expects the financial giant to punch earnings growth in the region of 13% and 11% in 2015 and 2016 correspondingly, producing exceptional P/E ratios of 13.7 times and 12.2 times.
