With the FTSE 100 falling in recent weeks, I’m taking a look at the prospects of Interserve plc (LON:IRV) (IRV.L), Royal Mail PLC (LON:RMG) (RMG.L), AstraZeneca plc (LON:AZN) (AZN.L), Whitbread plc (LON:WTB) (WTB.L) and WM Morrison Supermarkets PLC (LON:MRW) (MRW.L).
Interserve has experienced a rollercoaster ride in the last year, with its share price being highly volatile. In my view, the company could deliver a successful turnaround as its efficiency measures begin to have an impact. But with high debt levels and what I see as a challenging support services sector, I’m not looking to buy the stock just now. For me, Interserve’s risks still outweigh its potential rewards.
Royal Mail’s performance has been mixed in recent years. There is a persistent downtrend in demand for sending letters in the UK, while its parcels performance has been stronger. However, the real growth opportunity is in its international operations in my view. They generated double digit growth in its most recent update. This could be a potential growth catalyst for the Royal Mail share price in future.
AstraZeneca is one stock that I think could make a successful comeback. Sure, I’ve been saying this for a few years and it hasn’t happened as yet, with its EPS continuing to fall. But with further investment in its pipeline and the financial strength to sustain more acquisitions, I feel upbeat about its future. With a dividend yield of 4% that seems sustainable, I think AstraZeneca could have high total return potential.
Whitbread’s difficulties could continue. Its UK divisions may be hurt by the persistent wage growth which is putting its margins under pressure. Coupled with this is the reduced footfall which may be a result of higher levels of inflation. In contrast, its international divisions could post improved performance, with the potentially lucrative Chinese market having the prospect of being a catalyst for Whitbread in the long run.
Morrisons remains one of my top picks in the retail sector. Although UK-focused and operating in a competitive sector, I feel the company has a good strategy to generate improving EPS growth. Its focus on capital-light growth opportunities such as convenience stores and online could lead to improved performance. With net debt falling, I believe Morrisons has an appealing risk to reward ratio.