Interactive Investor

Best and worst: a FTSE 100 stock the world needs

24th November 2021 13:27

Graeme Evans from interactive investor

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A recovery appears to be under way at this testing firm, but a mid-cap stock is having trouble with Chinese pig prices.

One of the FTSE 100's leading companies for dividend growth brightened an otherwise dour blue-chip session today as its boss declared the “world needs Intertek (LSE:ITRK) more than ever”.

Andre Lacroix's bullish view on prospects contributed to a 7% rally for shares, as the testing and quality assurance firm highlighted demand for its work helping customers to navigate supply chain challenges or meet disclosures on their carbon footprints.

The FTSE 100-listed stock has de-rated in recent weeks, but showed a return to form after 5% revenue growth in the July to October period, higher than the 4%-4.5% forecast in the City.

Guidance for the financial year was left unchanged, but Intertek's reassurance that it will achieve like-for-like revenues growth and margins progress prompted UBS to reiterate its price target at 7,000p, which compares with today's level of 5,503p.

The update also pointed to a strong cash performance, which will raise hopes that Intertek can resume dividend growth after leaving the payout unchanged in the last financial year.

Intertek was the FTSE's leading company in terms of dividend progression between 2003 and 2019, having recorded compound annual growth of 17%.

The pandemic interrupted the momentum, but Lacroix expects the $250 billion global quality assurance market to grow faster post-Covid.

As well as supply chain disruption highlighting the case for risk-based quality, safety and sustainability assurance, he said companies are having to analyse the way they reduce their carbon footprints through verified disclosures, transparency and greater accountability.

The company said: “Society has changed. We are in the 'new normal' and are observing new trends and behaviours and demands for products and services that didn't exist prior to the pandemic.

“Consumers want more sustainable products, supply chain simplicity, visibility and traceability of goods, new solutions for hygiene, health and well-being, as well as lower carbon emissions.”

The rebound for Intertek shares and a 2% rally for housebuilders Persimmon (LSE:PSN), Barratt Developments (LSE:BDEV) and Taylor Wimpey (LSE:TW.), helped offset more pressure on travel stocks as fears grow over the impact of rising Covid-19 case numbers in Europe.

The FTSE 100 index was close to its opening mark, having initially been as much as 0.5% higher.

The UK-focused FTSE 250 index lost more than 100 points, with animal genetics firm Genus (LSE:GNS) the biggest faller as it continues to count the cost of this year's slide in Chinese pig prices.

It said: “While pig prices have improved in China in the past month, prices need to improve further and be sustained for producer confidence to return and lead to improved demand for porcine genetics.”

Shares fell 14%, or 750p to 4,500p as Genus forecast full-year profits moderately lower than previous hopes, despite continuing to trade well in other areas of the business.

Genus continues to have the support of analysts at Liberum based on new target price of 5,740p.

House broker Peel Hunt added: “The long-term prospects remain exciting. The company currently has a 5% share of the Chinese market, and a reasonable medium-term target is to increase share to the same level as the global share of close to 25%.”

One of the better performances in the FTSE 250 index came from Britvic (LSE:BVIC) after the Robinsons, Tango and J20 drinks maker increased its total dividend by 12% to 24.2p a share on the back of a strong balance sheet and robust trading outlook. The final dividend of 17.7p worth £47.3 million will be paid to shareholders on 2 February.

Adjusted earnings per share rose 2.5% to 44.3p in the year to 30 September and Britvic is confident of revenue, profit and margin growth in 2022 despite inflationary cost pressures.

The shares rose 6.5p to 884.5p in the FTSE 250, but Peel Hunt has a “buy” recommendation and 1,100p target price after praising today's “solid” full-year results.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Related Categories

    UK shares
    Industrials
    Consumer goods and services
    Health care
    Biotechnology

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