Interactive Investor

Three stocks leading FTSE 100 fightback

After a wobble this week, buyers are picking up cheaper stock on Thursday. City writer Graeme Evans looks at a trio of blue-chips that are in demand.

18th April 2024 13:14

by Graeme Evans from interactive investor

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Strong backing for Standard Chartered (LSE:STAN), an earnings upgrade at National Grid (LSE:NG.) and a reassuring update by Segro (LSE:SGRO) today boosted the trio’s shares during a robust FTSE 100 session.

London’s top flight reached lunchtime in positive territory as global stock market sentiment showed signs of steadying after the interest rate jitters of recent days.

National Grid shares rallied after the dividend stalwart’s year-end update revealed a change in earnings per share guidance from moderately below 2022-23 levels to a performance in line.

Jefferies said the upgrade pointed to an underlying figure of 69.7p compared with market forecasts closer to 69p, driven by an improved performance in the regulated businesses.

In addition, National Grid disclosed it will now report underlying earnings excluding deferred taxes. Jefferies said this implied an 8p or 11% increase for 2023-24’s overall figure to 77.7p when the company reports annual results on 23 May.

The shares rose 18p to 1,031p but the bank sees further upside to 1,330p. It noted National Grid currently traded on 12.8 times 2024 earnings compared with the sector at 13.4 times.

It has previously said National Grid’s decade-high growth outlook justifies the electricity and gas transmission and distribution company being on a much higher multiple.

Jefferies said in February the stock market had overlooked the game-changing impact of the UK's plan to overhaul its transmission grid to facilitate more offshore wind connections.

Together with momentum in the United States, the City bank expects the next 12 to 24 months to dramatically increase visibility on National Grid’s “highly compelling” investment case of 10% a year regulated asset base growth up to 2030.

Urban warehouse business Segro provided reassurance for UK investors after an update yesterday left the S&P 500-listed shares of ProLogis 7% lower.

City bank UBS said the solid update by Segro, whose portfolio includes trading estates at Heathrow, Slough and in seven countries outside the UK, illustrated the difference between the health of the US and European markets.

Segro signed £29 million of new rent in the first quarter, which it achieved by capturing uplift on lease renewals and rent reviews and £17 million of new pre-let developments.

Chief executive David Sleath said: “Market data is showing that industrial and logistics asset values are stabilising and potentially reaching a turning point.”

Segro said it disposed of £159 million of land and standing assets so far this year at prices above December 2023 book values.

It also believes its existing portfolio and land bank offer the potential to grow passing rents by more than 50% over the next three years through rent reversion, leasing vacant units and developing new space.

And having recently raised £907 million from shareholders, it has the capacity to pursue further growth opportunities through development and asset acquisitions.

Sleath added: “This gives us confidence in our ability to deliver further compound growth in earnings and dividends during 2024 and beyond.”

The shares, which were trading at an 11% discount to net asset value before today’s session, rose 7.8p to 835.4p. UBS has a price target of 1,045p, noting the resilience of the core European logistics business.

Other big movers in the FTSE 100 included Standard Chartered after analysts at Jefferies strengthened their “Buy” stance with a new price target of 1,300p. That compares with 1,050p previously and the 661.2p seen after today’s improvement of 18p.

The US bank said it regarded the Asia-facing bank, which is due to post a first-quarter trading update on 2 May, as a stock “rich in optionality”.

Its latest modelling points to the potential for $8.7 billion (£7 billion) of capital returns to shareholders through to 2026, equivalent to 42% of market value and much higher than company guidance.

The bank’s forecasts assume a progressive dividend built on a 3% yield for 2024 and with the remainder of the capital return via buybacks.

While it sees a compelling investment case, the bank said a re-rating depended on the delivery of lower volatility results as well as more ambitious guidance on capital returns and improvement in investor communication.

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.

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