Dublin-headquartered distribution specialist DCC (DCC) reports half year results next week (10 Nov) with analysts looking for a steer on full year profit currently pitched at £244 million pre-tax.
Shares in DCC have gained 53% year-to-date including dividends after strong operating performance and investor enthusiasm for its €464 million (£338 million) acquisition of French liquefied petroleum gas distributor Butagaz.
Downstream activities in the oil and gas industry, notably in distribution where DCC specialises, have been one of the few bright spots for the energy industry this year because of falling input prices.
As well as its strength in fuel, DCC has niche business lines distributing health and consumer electronics which together represent around one-third of profit.
‘In its seasonally quiet first half, DCC has delivered strong profit growth in energy, healthcare and environmental, partially offset by softness in UK tablet and mobile phone sales,’ writes analyst Justin Jordan at investment bank Jefferies.
‘DCC remains on track for significant 2016 profit growth.’
Operating profit in the six months to 30 September is expected to gain 24% to £283 million, according to Jordan’s estimates, versus an average broker forecast of £273 million.
Underlying earnings per share (EPS) for the full year is forecast at 244p for a forward price-to-earnings ratio of 22.
EPS share growth could bring that rating down over time, Jordan says, with forecast growth rates of 10% a year out to 2018 or 19% with additional mergers and acquisition (M&A) activity.
M&A opportunities in energy distribution look good as oil majors like [BOLD] Royal Dutch Shell (RDSA) are trying to shore up their balance sheets in a tough oil and gas market. DCC bought Butagaz from Shell and also purchased an unmanned petrol station network from Esso in 2014.
Shares in DCC are up roughly in line with the market over the last month, gaining 7.3% to £53.80.