5 stocks to watch in March

Next, Rentokil and Admiral are among the FTSE 100 companies due to report annual results in March. Others include Reckitt, the maker of Cillit Bang and Strepsils, and Persimmon, the housebuilder. We summarise what investors can look forward to below. 

This article is not a recommendation to buy or sell these investments; it is purely insight into some of the companies that announce results over the next month. 

Next  

Next seems to have no official corporate slogan but it could almost be ‘under-promise, over-deliver’. In its first trading update of the financial year to January it said it expected to make pre-tax profits of £960m in that year. In the second update three months later it increased its forecast to £980m. When the interim results were published in September the estimate rose again, to £995m, then again to £1,005m in a trading statement in October, then once more in a post-Christmas update to £1,010m, 10% more than it achieved in the previous year. 

When the annual results appear in about a month’s time investors will naturally be hoping that the actual figure is higher still.  

The company also forecast last month that pre-tax earnings per share for the year just ended would be 11.4% higher than the previous year. This rise exceeds the expected 10% increase in the total profit figure because there will be fewer shares among which to distribute the profits as a result of Next’s programme of repurchasing its own shares. As we have often noted in these articles, many London-listed companies are using some of their profits to buy back their own shares at present, partly because British shares are widely seen as cheap. 

We shouldn’t, however, expect many surprises when the annual results are published because, by the time of Next’s post-Christmas trading statement, 11 of the 12 months of the financial year had already elapsed. In that statement it forecast annual group sales of £6.3bn and post-tax earnings per share of 635.4p. At the current share price of about £100, that would make the price-to-earnings ratio 15.7. City analysts forecast a dividend of about 228p, which would put the shares on a yield of 2.3%. Please note this yield is not guaranteed. 

Investors will also want to see whether the company increases its profit forecast for the current financial year, to January 2026, which stands at £1,046m. 

Next’s annual results are on 27 March. 

More on Next 

Reckitt  

Last year the new bosses of Reckitt, famous for cleaning products such as Cillit Bang, decided that their business could do with a spring clean of its own and announced plans for a far-reaching transformation. A number of household brands deemed ‘non-core’ would be moved into a separate division with a view to a sale while another division, the Mead Johnson Nutrition arm, was also designated non-core and would be considered for ‘all strategic options to maximise shareholder value’.  

The slimmed-down business that would result would consist of ‘powerbrands’ – market leaders that offered better growth prospects and higher profit margins.  

An update on the reorganisation of the business has been promised with the full-year results next week. It’s possible that we’ll also hear about a sale of the non-core household products, for which three private equity buyers have reportedly been shortlisted, although, according to City analysts, a disposal of the nutrition arm will probably have to wait for the resolution of legal cases over allegedly harmful baby formula sold by Reckitt, which was formerly known as Reckitt Benckiser. 

Analysts at Barclays wrote a few weeks ago: ‘We welcome Reckitt’s decision to transition to a simpler and faster-growing portfolio. And, since they started in their roles 12-18 months ago, we have been impressed by the executional grip on the business that [chief executive] Kris Licht and [finance director] Shannon Eisenhardt have demonstrated, together with their commitment to shareholder value creation.  

‘Reckitt’s share price is essentially unchanged for a decade, which is a powerful argument that change is necessary. Leadership can sometimes be about taking difficult decisions, and, together with new chair Jeremy Darroch, Reckitt’s management team have demonstrated that they are willing to do just that.’  

However, the analysts estimated that the planned sales of the non-core divisions would lead to essentially flat earnings per share until 2027, which made Reckitt’s stock, on 15 times expected 2027 earnings, ‘not as cheap as it seems’ by comparison with rivals. They also warned that transforming the business would be ‘highly challenging’. Barclays cut its rating on the shares to ‘hold’. 

Reckitt’s annual results are on 6 March. 

More on Reckitt 

Persimmon  

Surprises are likely to be in short supply when Persimmon announces its annual results on 11 March because the company published a trading update in mid-January, after the end of the financial year to which the results relate. In that update Persimmon, one of Britain’s largest housebuilders, said it expected pre-tax profits to be towards the upper end of the range £349m to £390m. It said it had built 7% more homes in 2024 than in the previous year at unchanged profit margins. Average selling prices and the number of sites under development also rose. 

The chief executive said that the company had ‘performed well through 2024’ and that ‘customer enquiries and sales rates have been consistently ahead of the prior year since the spring selling season’. Analysts at UBS, the bank, said operational performance had ‘stabilised’ and Persimmon ‘appears to be performing better again’. 

However, the bank acknowledged how exposed Persimmon and other builders were to factors beyond their control, especially house prices and interest rates. It published a striking graph that shows the close correlation between housebuilders’ share prices and ‘swap rates’, the key wholesale interest rates that determine much mortgage pricing. When swap rates rose from 1% to more than 5% in the first 10 months of 2022 as inflation soared, shares in the sector halved. Already this year we have seen turmoil in the government bond markets, which underpin borrowing costs, and a tense international situation suggests that further volatility there cannot be ruled out. 

On the other hand, Persimmon and UBS both expressed optimism about the new government’s efforts to boost the number of homes built by liberalising the planning rules.  

Shares in the company have fallen by almost a third since a peak in October and UBS said their valuation was now ‘more compelling’. It upgraded the stock to a ‘buy’ and set a price target of £15.40, compared with a current share price of £11.68. 

Persimmon’s annual results are on 11 March. 

More on Persimmon 

Admiral

The insurer committed the cardinal sin, at least in the eyes of income investors, when it cut its dividend in the 2022 and 2023 financial years. But there are promising signs of a return to growth in the 2024 payout when it announces full-year results next week.  

Admiral has already declared an interim dividend of 51.3p, a 35% rise relative to the 38p paid in 2023, with a 19.7p special payment on top, and analysts forecast that the final payment will bring the annual total to about 160p, including specials.  

That would be the highest total since 2021, when a big special of 158.9p took the total to 279p. The company’s policy is to pay 65% of after-tax profits as a normal dividend and to pay a further special divi comprising earnings not required for solvency, buffers or buying shares for employee share plans. 

The increased interim dividend reflected promising progress at the halfway stage. Turnover was 43% higher than at the same point the previous year at £3.2bn and pre-tax profits were 32% higher at £310m, while return on equity, a measure of how much the company makes for each £1 worth of assets, was 6 percentage points better at 45%. Customer numbers grew by 12% to 10.5m and robust financial strength was indicated by a ‘solvency ratio’ of just under 200%. 

Milena Mondini de Focatiis, the chief executive, said: ‘We have delivered a strong set of results in the first half … demonstrating our resilience and agility in changing market dynamics … Looking ahead, we remain well positioned for continued success.’ 

Analysts at Bank of America echoed these positive sentiments in early February in their preview of the annual results. ‘We expect Admiral to highlight the group’s strong market positioning in UK insurance (particularly motor),’ they said. ‘Admiral has demonstrated excellent cycle management over many years. However, inflation in the UK is proving to be stickier and price decreases could lead to a challenging market dynamic near-term.’  

Despite such challenges they said they expected Admiral to demonstrate ‘solid profitability’ and forecast profits before tax of £694m, a 57% rise compared with the previous year. The bank’s rating is ‘buy’ and its price target is £30; the shares trade at £28.55. 

Admiral’s annual results are on 6 March. 

More on Admiral 

Rentokil Initial 

When Rentokil, the pest control company, announced the takeover of an American rival called Terminix in late 2021 some observers warned of the dangers of acquisitions declared by the buyer to be ‘transformational’. Such a description, they said, was often used as a cover for overpaying, while big business combinations had a habit of proving tricky. Subsequent events at the enlarged Rentokil tend to suggest that they were right.  

The shares stood at 624.4p just before the takeover was announced but now trade at about 400p. In the interim the company has reported a string of problems at the enlarged American business: one update in October 2023, which warned of flagging US sales, resulted in a 32% share price fall over the subsequent days; another, in September last year, when the company said profits in North America were being hit by higher costs, was followed by a 22% share price slump. 

There was a more positive reaction to a further update on 17 October, when the company reported sales growth in the third quarter of 3.6% relative to a year previously and said plans to increase North American organic growth and rebalance the cost base ‘have been strengthened since the September trading update’.  

The market barely reacted when a month ago Rentokil announced a change of leadership in North America and organic revenue growth there of 2.3% in the fourth quarter relative to the previous year. Reassuringly, it said the group had traded in line with market expectations for the year to the end of December. We will hear full details of that year’s performance when the annual results appear next week. 

Analysts at UBS said in late January: ‘Rentokil remains in the middle of a challenging post-Terminix restructuring of its North American pest business. Although the most recent growth trends have improved marginally, and the shares are 40% below mid-2023 highs, we remain cautious as the most testing period could still be ahead.’ Their rating of the shares is neutral and their price target of 400p coincides with the current price. 

Rentokil’s annual results are on 6 March. 

More on Rentokil 

Other companies due to report soon include Schroders (6 March), Legal & General (12 March), M&G (19 March) and Prudential (19 March). 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.