Stock of the day 02/06/2015 – WH Smith PLC/Brown-Forman Corp

It’s books and booze on Wednesday, as the markets react to the latest news from WH Smith PLC and Brown-Forman Corp.

The book and stationery chain WH Smith will hope it can avoid remaining, well, stationary when it announces its latest trading statement on Wednesday. The steady growth WH Smith has been seeing in the past few years hasn’t let up in 2015; if anything, it has accelerated. After growing from £10.05 to £13.47 across 2014, WH Smith initially looked fairly limp in the New Year, sliding to just above £13 by the start of April. However, an ‘outperform’ rating from RBC Capital pushed the stock to £14 before its half-year results in the middle of that month. And whilst not the unequivocal success WH Smith would have liked, these figures were good enough to keep the gains going, with the stock currently trading at an all-time high of £15.45.


(Source: IT-Finance.com 02/06/2015)

To go back to those half-year results, WH Smith posted a 4% increase in profits to £72 million even with sales falling 5% on the high street during the same period. Not that those sales were down across the board; its airport and train station locations (i.e. its ‘travel’ division) saw 7% growth. The discrepancy between tumbling sales and increasing profits is due to WH Smith’s thorough cost cutting measures, which saw £6 million saved in the half-year ending in February, with a forecast £5 million to come in the second half of its fiscal 2015.

As the holiday season heats up over summer those ‘travel’ sales should only grow, with its high street figures likely benefiting from the warmer weather as well. Investors will also be interested in the progress of its cheap card stores project ‘Cardmarket’, somewhat of a rival to Card Factory, which WH Smith slowly began to roll out last October.

Despite narrowly missing out on being voting the worst shop in Britain by a Which? survey (only EE stores ranked any lower), WH Smith has a consensus rating of ‘buy’ with an average target price of £14.58.

It’s been a bit of a stagnant, if still positive, year for Jack Daniel’s and Southern Comfort owner Brown-Forman Corp, which announces its Q4 2015 earnings release on Wednesday. Big gains at the start of 2014, from $75.40 to $96 towards the end of June, couldn’t be sustained for the rest of the year, and it entered 2015 at $88. Since then the New Year has been fairly steady for Brown-Forman, spending most of the year in an $88 to $93 trading bracket before breaking out of this range in the middle of May. The stock is currently trading at $93.66 after having reached $94.45 at the end of the month.


(Source: IT-Finance.com 02/06/2015)

The company’s third quarter results back in March were largely in line with expectations, managing the currency headwinds to post a 5% increase in net sales and a 7% jump in operating income. Jack Daniel’s, rather unsurprisingly, was its main driver of growth as the whisky posted an 8% increase in net sales with an impressive 32% growth for its Tennessee Honey brand.

There were issues however, largely with its clear spirits, as Finlandia vodka sales fell by 9% due to a mixture of new tax laws in Poland and falling sales in Russia due to the Great Bear’s own currency woes. And whilst revenue grew 1.4% to $1.09 billion, analysts had been expected $1.12 billion, something that perhaps contributed to the muted market reaction following Brown-Forman’s results.

Ahead of its fourth quarter results the company has a consensus rating of ‘buy’ with an average target price of $100.14.

Tuesday’s stock news:

Despite the post-election bump received by the property sector, as the Tories ready the extension of their controversial ‘right to buy’ scheme, Foxtons fell by over 5.5% this Tuesday following a sell rating from Peel Hunt. The reason given by the broker’s analysts is that Foxtons’ ‘sales commission rate [is] likely to come under pressure from lower priced competitors’ and that ‘[Foxtons] is still largely exposed to the highly cyclical nature of housing transactions.’

Online domestic appliance retailer AO World has had a similarly disappointing day, falling around 3% following a less than spectacular full year earnings release. Whilst revenues grew by 24%, in line with expectations, these expectations are the result of a profit warning back in February, when the company stated that its sales weren’t going to match the IPO publicity-boosted figures that it saw last a year ago.