Interactive Investor

FTSE 100 round-up: US inflation, Ocado, Informa, DCC

It’s been a bumper session for several blue-chips, but the wider FTSE 100 index is way off the pace after today’s US inflation beat. We run through the best performers.

14th November 2023 16:04

by Graeme Evans from interactive investor

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UK banks at night 600

Confidence-boosting US inflation figures today helped to reignite Wall Street shares and added more than £500 million to the value of London-listed technology stock Ocado Group (LSE:OCDO).

With October’s CPI reading of 3.2% fuelling bets that US interest rates have peaked, a flight to risk assets meant the Nasdaq Composite jumped by 2% and the S&P 500 index by 1.8%.

The more defensively positioned FTSE 100 index also improved in afternoon trading, but with the likes of Shell (LSE:SHEL), BT Group (LSE:BT.A) and BAE Systems (LSE:BA.) still in negative territory, the rise of 0.2% was significantly behind US and European benchmarks.

Some individual rate-sensitive stocks fared well, however, as Ocado put on 64.2p at 577p and warehouse logistics firm Segro (LSE:SGRO) rallied 49.8p to 817.2p. Anglo American (LSE:AAL) led the mining sector with a jump of 123.5p to 2155p.

The risers board also included impressive performances by business events and academic publisher Informa (LSE:INF), Dublin-based conglomerate DCC (LSE:DCC) and the medical products firm ConvaTec Group (LSE:CTEC).

Informa’s rally of 44p to 746p came after it gave a further boost to 2023 earnings expectations and extended its share buyback programme by another £150 million to £1.15 billion.

All major geographies are expected to exceed their pre-Covid trading levels this year, including China after a significant acceleration in the region’s performance during 2023. 

Shares have now risen by around a fifth this year as Informa continues to benefit from a focus on specialist B2B and academic markets rather than the business-to-consumer sector.

Revenues should be above £3.15 billion and adjusted profits at least £840 million, compared with previous guidance of £3.05billion and £790 million respectively.

Bank of America raised its price target by 5% to 1,050p following the update, adding that it regards the shares as “highly attractive” in the context of accelerated underlying growth versus pre-Covid and with good forward visibility over £1 billion of revenues in 2024.

The bank added: “Together with improving product quality, this supports the underlying growth outlook despite arguably heightened macro concerns. Additionally, we see scope for further buybacks in 2024.”

DCC has made over 350 acquisitions since its IPO in 1994, with the latest coming today following a deal targeting Europe’s largest energy market.

The £140 million move for Dortmund-based liquefied petroleum gas (LPG) distributor Progas is DCC Energy’s largest acquisition in the country and adds over 100,000 customers as part of a drive to grow its LPG offering by 50% by 2030.

The energy division’s profit growth of 28.9% was the driving force of today’s half-year results as DCC delivered a 12% rise in underlying operating profits to £247.6 million.

The Dublin-based company’s other operations spanning healthcare and technology traded below 2022 levels but the company still increased its dividend by 5% to 63.04p a share. It boasts a record of growing the payout ever since joining the stock market.

Despite significant headwinds from higher interest rates, tax rates and cost inflation, Davy analysts continue to see 2023/24 as another year of growth for DCC.

Shares jumped 576p to 5242p but Davy has a target price of 9000p, noting a strong growth trajectory and significant potential upside from a valuation of 5.5 times 2025 earnings.

Convatec shares rose by a more modest 9.4p to 218p after the medical products firm lifted its revenues guidance for the third time in relation to this financial year.

It now expects growth to be in the region of 6.75% and 7.5%, having reported an improvement of 6.7% for the 10 months to the end of October. High-single digit organic growth has been seen in advanced wound care and infusion care, with a mid-single digit performance in ostomy care and mid-to-high single digits for continence care.

Despite multiple periods of market beating performance, shares have pulled back from the bounce seen after half-year results. Numis Securities has a price target of 285p, believing the the stock represents good value for defensive, non-discretionary Medtech products.

Investec Securities, which is at 292p after leaving its forecasts unchanged today, said: “Notwithstanding inflationary pressure, we continue to believe there is scope for further margin improvement as a result of efficiency gains and positive mix change.” 

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