Interactive Investor

FTSE 100 winners include BT and Weir following City tips

These two blue-chip firms have attracted the attention of investors following comments from management and backing in the Square Mile. Here’s what’s driving the shares higher.

6th December 2023 15:39

by Graeme Evans from interactive investor

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The compounding growth potential of Weir Group (LSE:WEIR) drew in new investors today as the FTSE 100 company revealed its ambitions as a newly focused mining technology leader.

Chief executive Jon Stanton told City analysts this afternoon he wants an operating margin of 20% by 2026, which compares with the 17% forecast for this year’s results.

Shares rose 60.5p to 1,925p following the guidance, which Weir plans to deliver through a combination of operating leverage and an increased cost savings target.

Since completing its transformation in 2021 through the disposal of oil and gas and flow control operations, Glasgow-based Weir has been focused on delivering technology to help mining customers achieve productivity and sustainability goals.

This strategy has been supported by strong structural growth trends as demand increases for essential metals to aid economic development and the carbon transition.

The company is expected to deliver earnings of £458 million in the current financial year, with the City consensus for next year between £477 million and £525 million.

Peel Hunt’s preliminary forecasts for 2026 suggest earnings of £620 million and a per share figure of 163p, a “significant step forward” should Weir make the 20% margin target.

The broker noted Weir’s compounding potential, given that demand for spares and expendables has resulted in annual after-market growth of 7% since 2011.

It said: “We have highlighted that we see Weir as one of the most compelling compound growth propositions in the sector. Today’s announcement reinforces this confidence.”

Peel Hunt’s target price of 2,530p puts Weir on a valuation multiple of 20 times 2024 earnings, compared with Swedish mining and infrastructure equipment firm Epiroc AB Share B (OMX:EPI B) on 23x.

Weir, which rejoined the FTSE 100 index last year has risen by about 15% since falling to 1,675p at the end of October.

It was one of today’s best performing blue-chips, alongside BT Group (LSE:BT.A) as the telecoms business continues the improvement since Jeremy Hunt’s Autumn Statement made a previous tax break on business investment a permanent change.

The move previously announced in the 2023 Budget enabled BT to defer UK corporation tax in the 2024-26 financial years as it focuses on delivering a full-fibre roll-out target of 25 million premises by the end of 2026.

BT shares are up 14% to 135.4p in the past fortnight, with some recent favourable City commentary aiding its progress. This included Monday’s move by JP Morgan to sweeten its “overweight” recommendation through a new 290p target price, while Bank of America lifted its estimate from 187p to 195p earlier this week.

Other stocks on the FTSE 100 risers board included Anglo American (LSE:AAL), which lifted 69p to 2224p as investors positioned for the mining giant’s strategy update on Friday.

One area of focus will be a potential streamlining of Anglo’s portfolio, which Deutsche Bank said recently is too complex and diluting the value of the “world class” copper business.

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.

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