Are Any of These 5 FTSE 100 Shares a Buy?

LONDON -- I have recently been evaluating the investment cases for a multitude of FTSE 100 companies

Although Britain's foremost share index has risen 7.4% so far in 2013, I believe many London-listed stocks still have much further to run, while conversely others are overdue for a correction. So how do the following five stocks weigh up?

British American Tobacco
Cigarette manufacturer British American Tobacco (LSE: BATS  )  has proved itself as a solid defensive play down the years.

Its four "Global Drive Brands" -- Lucky Strike, Dunhill, Pall Mall, and Kent -- have considerable pricing power, allowing the company to raise prices and maintain margins without loss of market share.

This global company is sharply ramping up its exposure to Latin America and Asia, home to the vast majority of the planet's tobacco smokers, and announced in recent days plans to boost production at its Philippines business via a $200 million, five-year investment plan.

City analysts predict a 9% increase in earnings per share in 2013 to 206.5 pence, with a further 10% rise anticipated in 2014 to 224.5 pence.

But it is BAT's progressive dividend yield that is particularly addictive to investors -- a yield of 4.6% during 2013 is forecast to leap to 5.1% next year. I feel an earnings multiple of 14.5 for 2013 is respectable against those numbers.

Diageo
Similar to cigarette companies, alcohol producers are a reliable source of dependable earnings growth during tough economic times, and Diageo (LSE: DGE  )  -- through its premium stable of brands including GuinnessSmirnoff, and Johnnie Walker-- can lay claim to delivering constant growth even during lasting difficulties in the global economy.

Earnings per share are predicted to advance 9% to 102.6 pence during the year ended June 2013, with an 11% rise to 113.7 pence penciled in for the following year. The profit-growth dependability justifies a forward P/E rating of 18.1, encouraged by a forecast 2.5% dividend yield.

It's true that pressure on consumer spending has caused growth in Diageo's traditional Western markets to stall, but rapid expansion within developing economies is more than mitigating for this fact.

Operating profit from Latin America and the Caribbean rose a whopping 19% last year. And Africa and Asia-Pacific saw profit grow a decent 16% and 10%, too. Diageo is ramping up M&A activity in these areas, which should support future growth.

Melrose Industries
I expect shares in industrial engineer Melrose Industries (LSE: MRO  )  to experience pressure as the year progresses as concerns of a cyclical slowdown abound.

Earnings per share are expected to drop 13% within next month's results, according to the City consensus, with an 8% rise expected in 2013.

But signs of decelerating activity across Melrose's businesses in recent months could crush even these modest estimates -- November's interims highlighted stalling revenues in the group's Lifting subsidiary, and Melrose expects reduced demand within its Energy division.

A P/E ratio of 13.8 for 2013 is too high for me when turnover is at peril of taking a severe battering and prompt the shareholder payouts to come under the microscope -- a 3.3% and 3.7% dividend yield is earmarked for 2013 and 2014, respectively, although cover is expected to collapse back toward 2.04 this year from 2.93 in 2011, a worrying omen for future dividend rates.

Whitbread
I reckon the shares of Whitbread (LSE: WTB  )   should continue rising as the firm's portfolio of hotels, restaurants, and coffee outlets continues to build momentum.

The valuation here comes at a hefty premium, with a P/E ratio of 15.9 and 14.4 forecast for 2014 and 2015, respectively. However, I believe that a higher multiple is justified in Whitbread's case considering the company's excellent earnings potential.

Whitbread plans to juice up the size of its Costa Coffee division -- in which revenues jumped 26% during quarter three -- to 3,500 globally from 1,500 at present. As well, earnings from its Premier Inn hotel chain should head higher as prolonged difficulties in the U.K. economy maintain demand for budget accommodation.

In the meantime, earnings per share are forecast to rise 11% this year and the next.

Petrofac Limited
Oil equipment and services specialist Petrofac Limited (LSE: PFC  )  remains a good bet to rise, in my opinion, given its enviable history of project wins and execution rates -- not to mention its heavy presence in the oil-rich hunting grounds of the Middle East.

According to analysts, earnings-per-share growth of 12% in 2012, to 113.5 pence, is expected to be followed by growth of 14% in 2013 to 128.8 pence, and 15% in 2014 to 148.4 pence.

These forecasts mean the firm's P/E ratio drops from 14.3 for 2012 to 12.6 and 10.9 for 2013 and 2014, respectively. 

Petrofac's Integration Energy Services business, which brings new oil fields on tap and improves output at existing sites, is ready to underpin substantial earnings growth as project numbers accelerate and key contract milestones are hit. 

As well, a host of new opportunities in Russia, West Africa, and Indonesia should ensure long-term growth.

Zone in on other sterling stocks
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