British high-street bank Barclays PLC (ADR) (NYSE:BCS) continues to endure a torrid time in the press, as its implication in the LIBOR-rigging scandal — combined with PPI misselling practices and news of jumbo bonuses to its top brass — has bashed its valued reputation.
Still, I believe the firm provides ripe investment opportunity moving forward. The company’s U.K. retail operations have enjoyed a decent start to the year, while plans to significantly boost its exposure in the opportunity-rich regions of Africa should help to boost growth. Barclaycard is also revving up, with customers rising to 28.8 million in 2012 from 22.6 million in 2011.
Barclays is also stepping up cost-cutting measures in order to ease the burden on its balance sheet. EPS is forecast to rise 6% in 2013 before picking up speed to jump 20% the following year. The bank currently trades on a respective P/E of eight and 6.6 for these years, which represents bargain-basement territory — the broader banking sector currently trades on a forward reading of 12.4.
I think uncertainty over Aviva Plc (ADR) (LSE:AV)‘s dividend policy should tempt investors to stay their hands for the time being. The life insurance giant is currently undergoing radical transformation following its recent financial difficulties, but until earnings turn around, future payout cuts could be on the horizon.
Projected dividend yields of 6.5% and 6.7%, respectively, for 2013 and 2014 are way ahead of the average yield for the U.K.’s 100 largest-listed firms, but Aviva’s decision to slash last year’s dividend to 19 pence from 26 pence in 2011 has made income investors jittery.
City forecasters expect EPS to fall again in 2013 to 44.2 pence from 44.7 pence last year. Aviva is trading on a P/E ratio of 6.7 for 2013 and 6.3 for 2014, down massively from a forward earnings multiple of 12.9 for the life insurance sector. However, the firm’s recent record of slicing dividends — it has cut the payout three times this century — coupled with a cloudy earnings outlook makes the firm’s cheap rating fully justified, in my opinion.
AstraZeneca plc (ADR) (LSE:AZN)
AstraZeneca plc (ADR) (LSE:AZN) reached a settlement last week with Actavis Inc (NYSE:ACT) in its patent infringement case in the U.S. over its Crestor cholesterol drug, but I believe the issue of ongoing patent expiries and lack of a meaty product pipeline should continue to squash revenue over the medium term.
Patent issues caused group revenue to collapse 17% to almost $28 billion in 2012, pushing pre-tax profit 38% lower to $7.7 billion. Following last year’s colossal 12% EPS drop, City analysts expect this to worsen in 2013, with an 18% fall penciled in. A further 3% drop is expected in 2014.
Significant restructuring work is under way to address the lack of new product streams, but clearly this will not lead to potentially blockbusting results until the longer term. AstraZeneca plc (ADR) (LSE:AZN) trades on a P/E rating of 9.6 this year and 9.8 next year, which compares favorably to a gargantuan forward reading of 32.8 for the wider pharmaceuticals and biotechnology sector.
Although the firm currently offers chunky dividend yields of 5.4% this year and 5.5% next, just less than twice covered, bouts of fresh near-term pressure could put shareholder payouts in jeopardy.
The article Are These FTSE 100 Shares a Buy? originally appeared on Fool.com is written by Royston Wild.
Fool contributor Royston Wild has no position in any stocks mentioned. The Motley Fool recommends GlaxoSmithKline and Tesco. The Motley Fool owns shares of Tesco.
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