The market is still concerned over the impact of ongoing Brexit negotiations on business confidence, and consequently on demand for the services of outsourcers like Bunzl. And these concerns are certainly valid — just this week Mitie Group issued yet another profit warning, its third in less than six months, as it advised that its “property management and technical FM divisions have been impacted by client deferrals and investment plan delays.”

While not totally immune to these troubles, Bunzl isn’t solely dependent on the UK economy to drive revenues owing to its broad geographic imprint. Indeed, the company advised in December that new business wins had caused revenues to pick up during the fourth quarter of the year, prompting the company to affirm its sales growth projections of 14%-15% for 2016.

And I believe a similarly-positive full-year statement (scheduled for Monday, February 27) could send Bunzl’s share price rising.

The City certainly remains upbeat about Bunzl’s outlook in the coming years and expects the company to follow a predicted 11% earnings rise for last year with rises of 8% and 4% in 2017 and 2018 respectively.

While a prospective P/E ratio of 19.5 times may slide above the FTSE 100 forward average of 15 times, I believe Bunzl’s broad territorial spread and appetite for acquisitions should deliver splendid earnings expansion well into the future.

Make smoking returns

I also reckon cigarette giant British American Tobacco (LSE: BATS) should remain a reliable earnings generator in the years to come.

The company’s long string of market-leading labels like Dunhill and Lucky Strike continue to defy the impact of rising legislative action and changing smoker habits on the wider tobacco industry, factors that are driving aggregate global sales steadily lower. Indeed, British American Tobacco saw volumes of these so-called Global Drive Brands rising 9.8% during January-September.

And like the case of Bunzl, I believe signs of further sales momentum inside the firm’s full-year financials (currently slated for Thursday, February 23) could see stock pickers piling in again.

Moreover, recent acquisition news also provides reason to be hugely optimistic about British American Tobacco’s bottom-line prospects. The business advised this week that its $49.4bn takeover approach for US giant Reynolds had been accepted, the firm acquiring the 42.2% of the company it didn’t already hold and boosting its position, not only in the US but across the globe.

The number crunchers remain positive about the firm, and have chalked-in earnings rises of 15% this year and 7% in 2018, following on from an anticipated 18% rise for 2016.

And I reckon a subsequent forward P/E ratio of 16.5 times, allied with a 3.8% dividend yield, represents terrific value given British American Tobacco’s ever-improving market position.

The post 2 FTSE 100 stocks I’m tipping to take off in February appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Tobacco titan British American Tobacco grabbed the headlines last week after announcing plans to tie-up its operations with those of its North American partner Reynolds for $47bn. The deal will see it suck up the 57.8% of the US giant it does not own at present.

The planned accord sums up the huge potential for rampant revenue growth across the Atlantic, and is something that rival Imperial Brands (LSE: IMB) is no stranger to. The Bristol-based company sucked up a number of market-leading US brands like Winston and Maverick last year following the merger of Reynolds and Lorillard.

Imperial Brands noted late last month that “we have delivered strong growth in reported tobacco net revenue for the year driven by the US acquisition and the benefit of currency translation.” As well as benefitting from solid demand for its traditional products, the business also tapped into the fast-growing ‘vapour’ sector by picking up blu in 2015, one of the United States’ biggest e-cigarette labels.

With demand for Imperial  Brands’ market-leading labels also rising in other core territories, the firm is expected to follow a 15% earnings surge in the year to September 2016 with a chunky 14% advance in the present period. This results in a forward P/E rating of 14.2 times, making the cigarette star great value for growth chasers — the FTSE 100 average stands at 15 times.

And Imperial Brands also smashes its blue chip peers in the dividend stakes, too. A predicted 170.9p per share reward for fiscal 2017 yields 4.4%, well ahead of the FTSE 100 average of 3.5%.

Brand beauty

Like Imperial Brands, Unilever (LSE: ULVR) also reaps the benefit of terrific pricing power, with products from Flora margarine and Axe deodorant to Dove soap on the top of shoppers’ lists in developed and emerging regions alike.

These defensive qualities have made Unilever a reliable earnings generator year after year, and the City does not expect this pattern to cease any time soon. Indeed, bottom-line expansion of 5% and 9% is chalked in for 2016 and 2017 respectively.

But scores of value hunters will no doubt give the household goods giant short shrift based on these figures. Indeed, Unilever trades on P/E ratios of 21.3 times and 19.5 times for this year and next.

And income seekers will no doubt be disappointed, too. An anticipated dividend of 122 euro cents for 2016 yields 3.1%, lagging the big-cap average by a little distance. And a predicted 130 euro cent reward for next year would raise the yield to 3.4%.

Still, I believe stocks of Unilever’s quality are deserving of such premiums. There are plenty of high-yielders like oil giant Shell and banking colossus Lloyds, stocks that carry gigantic yields but whose earnings — and subsequently dividend — outlooks can hardly be described as cast-iron, thanks to a variety of industry and macroeconomic factors.

Unilever is no such stock, however, and I expect the firm to provide reliable shareholder returns long into the future.

The post IMB and ULVR – pukka picks for growth AND income chasers? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Imperial Brands. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The deal will be funded partly through cash of $24.13 per share and partly through equity of 0.5502 shares in British American Tobacco per share. As always, there’s no certainty that the merger will proceed since it’s in its very early stages. The board of Reynolds has only very recently been notified of the news, but British American Tobacco must go public due to US securities regulations.

As with the vast majority of mergers, the deal will create synergies and should allow the combined group to become more efficient, as well as having a size and scale advantage over its rivals. It will provide greater financial firepower through which to develop more innovative products such as e-cigarettes as tobacco users become increasingly health conscious. As such, it seems to be a sound long-term move that should be earnings accretive in the first full year.

And the other news?

The deal perhaps … no, definitely… overshadows British American Tobacco’s third quarter trading update that was also released today. But it shouldn’t. The update shows that the company is making excellent progress. Unlike many of its sector peers, British American Tobacco has been able to grow tobacco volumes in the first nine months of the year by 2.2%. This shows that its pricing and growth strategy is working extremely well, which should provide a sound platform for future growth.

Furthermore, British American Tobacco grew revenue by 8.1% at constant exchange rates, with sales up 10.2% on a reported basis thanks to weaker sterling. The company should gain further benefits from that weaker sterling since the pound seems likely to endure a difficult medium-term outlook.

The tobacco giant is forecast to grow its bottom line by 17% in the current year and by a further 13% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.3. For a major global tobacco company, this is excellent value for money since the stability and resilience of its earnings profile is high. British American Tobacco also offers a yield of 3.3%, which is covered a healthy 1.5 times by profit.

As such, British American Tobacco makes for a top notch investment whether or not the merger with Reynolds progresses to completion. It offers good value for money, relatively low risk and healthy income potential. It also has significant growth prospects within the e-cigarette space, which should deliver double-digit growth over the medium-to-long term.

The post Should you buy British American Tobacco plc after its proposed merger with Reynolds? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of British American Tobacco. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.