Rolls-Royce Holdings PLC (LSE:RR.), easyJet PLC and Tesco PLC (LSE:TSCO) have received backing from UBS analysts in the bank’s list of top stock picks for 2024.
Following a stellar year of gains last year as new chief executive Tufan Erginbilgic implemented a turnaround plan, UBS suggested investors could expect even more positivity ahead from aircraft engine maker Rolls-Royce.
This should be driven by an “underappreciated” market tailwind from the recovery of the long-haul aviation sector, which UBS explained was largely skewed to China and Asia.
“Now that quarantine restrictions have been lifted this headwind is abating,” the bank said.
Like Rolls-Royce, easyJet also should continue to benefit from a return to pre-pandemic flying trends, which in UBS’ view will keep aiding profitability after the milestone was reached last year.
Existing deals for new aircraft will sustain volume growth, UBS said, with pricing on jets likely to fall in easyJet’s favour, given delays and resultant compensation from manufacturers.
“The easyJet holidays division has seen material growth in volumes,” UBS added, “we expect the profitability of the division to more than double over the medium term”.
More top UBS picks
Prospects don’t just appear strong in the aviation sector though, with UBS highlighting the likes of Tesco, Whitbread PLC (LSE:WTB), BP PLC (LSE:BP.) and Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB) among its picks.
Suggestions that easing inflation could see supermarkets fall back from strong profits in recent years are likely unfounded with Tesco, as per UBS, which should continue a run of “consistently strong execution”.
A shift in trends across the hotel sector could aid Premier Inn owner Whitbread all the while, as UBS sees holidaymakers trading down on accommodation as pockets remain squeezed.
Squeezed pockets will unlikely be an issue for Just Eat in UBS’ view though, given its well-established, “substantially undervalued” core business spanning Europe and the UK.
“With losses subsiding in the weaker areas of the portfolio, we believe Just Eat’s outsized core territory strength is set to drive accelerating and sustainable profitability,” the bank said.
BP stands to benefit from its ongoing deep-rooted core business too, in oil and gas operations, which UBS pointed out were expanding through increased production capacity this year.
Tobacco firm Imperial Brands PLC (LSE:IMB) was also among those placed in the spotlight by UBS, driven by its vape and nicotine products, while Intertek Group PLC (LSE:ITRK), GSK PLC (LSE:GSK, NYSE:GSK), ConvaTec Group PLC (LSE:CTEC), Beazley PLC (LSE:BEZ) and Anglo American PLC (LSE:AAL) made up the rest of its UK-listed picks.