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Retailers also looking smart but travel and leisure stocks have been hit by Omicron
Thursday 09 Dec 2021 Author: Ian Conway

Our latest review of the best and worst earnings revisions across the FTSE 350 throws up a few surprises in terms of sectors and individual stocks, particularly in the light of their relative performance.

There are three distinct clusters of winners, split between investment, real estate and consumer discretionary companies.

Among the investment companies, Molten Ventures (GROW) – previously known as Draper Esprit – is the clear winner with an average 30% upgrade for the next two years after it raised its earnings guidance last week.

IP Group (IPO) and 3i (III) have average upgrades of 20.5% and 13.8% respectively.

In the property sector, there are steady upgrades for commercial real estate firms Big Yellow (BYG), British Land (BLND), Hammerson (HMSO), Land Securities (LAND) and Tritax Eurobox (BOXE), which tallies with their strong performance of late.

In the consumer sector, there are hefty upgrades for Marks & Spencer (MKS), Watches of Switzerland (WOSG) and AO World (AO.), which in the case of the latter look completely at odds with the recent 12-month low in its shares.

Individual stocks of note are equipment rental firm Ashtead (AHT), drinks firm Diageo (DGE), which has been making 12-month highs of late, and high street lenders HSBC (HSBA) and NatWest (NWG).

Following the discovery of the new Omicron variant there are sizeable earnings downgrades for several travel and leisure stocks.

Among the biggest casualties are low-cost airline EasyJet (EZJ) with an average 27% downgrade for the next two years, and bus and rail firms FirstGroup (FGP) and National Express (NEX) with average earnings downgrades of around 30% and 19% for the same period respectively.

More curiously, there are middling downgrades for several property firms, which seems at odds with the sector’s strong overall performance.

Private rented accommodation provider Grainger (GRI) has seen its earnings forecasts cut by an average of 15% for each of the next two years, while central London developer Great Portland Estates (GPOR) and mixed-use property owner UK Commercial Property REIT (UKCM) are suffering high single-digit downgrades for both years.

Ingredients firm Tate & Lyle (TATE) also features on the list with an average 17% earnings downgrade, but in this case, it is due to the firm’s decision to sell off a controlling stake in its Primary Products business and focus on Food and Beverage Solutions, which has better margins and higher growth prospects, but means it incurs a drop in revenues and profits.

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