From Morningstar: 2024-09-05 05:49:00

Second-quarter earnings for UK-listed stocks reviewed by Morningstar analysts have been a mixed bag, leading to Fair Value Estimate (FVE) revisions for several well-known brands. The average FVE change as of August 30 was 4.3%, with Schroders (SDR) having the largest fair value cut due to decreased profits in challenging market conditions. Key brands like Burberry Group (BRBY), Melrose Industries (MRO), WPP PLC (WPP), and BP PLC (BP.) had significant FVE cuts, indicating potential shifts in company fortunes.

Morningstar analysts believe that large changes in fair value estimates can signal changing company prospects, specifically noting Schroders and Burberry as attractive for long-term investors despite trading below their fair value. Schroders’ was heavily hit, with a 16% decrease in FVE while Burberry experienced a 15% cut due to sales slow-down in the luxury sector. Melrose Industries, despite its strong results in the first half of 2024, saw its FVE decrease by 14.9%, driven by supply chain issues and capacity constraints.

WPP PLC’s fair value estimate was cut by 12.7% due to a revised full-year revenue growth outlook and concerns about the company’s ability to meet its medium-term goals. BP PLC saw a 12.5% decrease in its fair value estimate, mainly due to changes in production plans as the company transitions to an integrated energy entity. Various companies are currently trading below their FVE, indicating potential opportunities for investors looking for undervalued stocks.



Read more at Morningstar: 5 Stocks With the Largest Fair Value Estimate Cuts…