Earnings growth could be more difficult to come by as Brexit talks drag on, which is why I’m focusing on the outlooks of Diageo plc (LON:DGE) (DGE.L), Next plc (LON:NXT) (NXT.L), Whitbread plc (LON:WTB) (WTB.L), HSBC Holdings plc (LON:HSBA) (HSBA.L) and British American Tobacco plc (LON:BATS) (BATS.L).
Diageo has a bright future in my opinion. The company is focused on improving its efficiency through a variety of measures. They could lead to rising profitability as well as a higher share price. Diageo has exposure to a wide range of markets which may reduce its overall risk level if one region experiences a difficult 2018. Therefore, I’m optimistic about its investment outlook.
Next faces a difficult future in my opinion. I feel consumer confidence was already relatively weak in the UK before the EU referendum, and it has now worsened. I wouldn’t be surprised if Next’s sales come under more pressure in the short run – particularly in its physical stores as individuals cut back on spending. However, in the long run I feel it offers good value on a P/E of 11.
Whitbread is a business with significant international growth potential in my eyes. The company has a good position from which to grow in Germany, as well as significant growth potential in China. As well as this, its position in the UK remains appealing, with Whitbread’s customer loyalty levels being relatively high. This could provide it with more resilience than the stock market is currently pricing in.
British American Tobacco is one of my top picks in the FTSE 100 at the moment. The company is investing heavily in reduced risk products and it estimates that around £5 billion of sales will come from next generation products by 2022. This could catalyse the company’s EPS and dividends, thereby making British American Tobacco a potential growth as well as defensive stock for the long term.
HSBC’s strategy appears to be sound. The company has a diverse set of operations, but is focusing on areas such as Asia, where growth potential seems highest. A P/E of around 14 may not be the lowest in the banking sector, but there could be significant growth potential ahead for HSBC as it seeks to become more efficient. Therefore, I’m optimistic about its long term potential.