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Crash test for AA earnings

Crash test for AA earnings

It’s been a bumpy ride for shareholders of roadside recovery firm AA after its £1.4bn IPO over a year and half ago.

18-month chart of  AA plc

(source CMC Markets, 31/3/16)

Shares have dropped as much as 40% in the last 12 months with the latest leg lower taking place after the half-year update in September. Shares bottomed not long after at just above its IPO price of 250p and have been struggling to make headway since. The all-time low rests at 236p, hit not long after the IPO.

A lot rests on the AA putting its household name to the best use in the digital age. The company has lost out to breakdown competition but cross-selling new products through its revamped website and smartphone apps bring new opportunity.

Full year earnings are forecast to fall by 10% so the only chance for investors to get rescued comes from positive guidance for the year ahead. Expectations in the the city are for earnings growth of 16% in 2016 and 15% for 2017.

The AA is expected to pay a 9p dividend for the full-year ending January 2016, rising to 10p for the following year offering a yield of 3.2% then 3.6%.

 

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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.