The last month has been hard workformost stocks, but a month of real miseryfor some. The FTSE 100 is down 3.5% over the last month but these threecompanies are nursing share price falls of up to 15%. What went wrong and can they rediscover their good cheer soon?
AstraZenecas Drugs Problem
Pharmaceutical giant AstraZeneca (LON: AZN) is down 9.18% over the past month, a shockfor investors in what is often described as a defensive sector. Full-year results published this week led to glum faceswith news of a 1% fall in product sales (32% for heartburn treatment Nexium to $2.5bn), which knocked 4% off the shares in early trading. Thepatent on its anti-cholesterol drug Crestor expires in May in a majorblow to2016 profit forecasts, given that it is AstraZenecas big boy, with global sales of $5bn last year.
Chief executive Pascal Soriot will hope his much-vaunteddrugs pipeline starts paying its keep soon. Things have lookedpromising on that front for some years but now that promise needs to fulfilled.AstraZeneca has been struggling to scale itspatentcliff for years and some investors mayfind the uphill battlerather wearing. If so, a forecast 9% drop in earnings per share (EPS) this year will add to the gloom. I wouldnt buy AZN at todays surprisingly highvaluation of 14.2 times earnings although I wouldhold and try to convince myself that todays 4.6% yield isworth the pain.
Still A Prudential Investment?
Asia-focused insurer Prudential (LSE: PRU) has beenone of my portfolios happy stocks but Im not smiling now. Itis down nearly 15% in the last month as Asia weakens and the feather in Prudentials cap starts to look like a millstone around its neck.
The Pru has been further hit by reports thatthe Chinese foreign exchange regulator willtighten restrictions on purchases of overseas insurance products in a bid to stem capital flight. That knocked8% off its shares on Tuesday although Barclays has since come to Prudentials rescue, sayingconcerns are misplaced given that 96% of affected sales shouldbe well below the rumoured cap, whileHong Kong represents only 3% of group earnings anyway. Prudentialwas due a rough patch and here it is, but it has knockedthe valuation to a more reasonable 13.2 times earnings. With EPS forecast to rise 9% this year now could be a buying opportunity.
Rolls-Royce Catches A Flat
Engine-makerRolls-Royce Holdings (LSE: RR) has backed itself into a corner, falling 7.5% in the last month and 41% over the year. News of a 1.9bn order from Norwegian Airlines has donea little to revive sentiment. Rolls-Royce was hit hard last month whenStandard & Poors cut its debt outlook to negative on weaker business prospects, ascivil aerospace margins are being squeezed by the switchto less-profitable engine models and lower demand for business jets, while the marine business is hit by fallingdemand.
Its troubles are reflected in its valuation of just eight times earnings but a forecast 43% drop in EPSthis year suggests tricky times lie ahead, especially withthe global economy slowing. It could be some time before Rolls-Royce hitsescape velocity.
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Harvey Jones holds shares in Prudential. He has no position in any other shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
