Are These 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 7.6% so far in 2013, I believe many London-listed stocks still have much farther to run, while conversely others are overdue for a correction. So how do the following five stocks weigh up?

Prudential
I am backing Prudential  (LSE: PRU  ) to record progressive earnings growth over an extended time horizon, generated by accelerating activity in emerging markets which should also push dividend payments higher.

The firm's operating profit leapt by a quarter in 2012, to 2.5 billion pounds, helped in part by a 26% increase in profits from its Asian operations, to 988 million pounds. In addition, net cash remittance from Asia jumped 66% on year to 341 million pounds, pushing group net cash remittance 9% higher to 1.2 billion pounds.

City analysts expect earnings per share to increase 6% in 2013, to 81 pence, before picking up traction and rising 11% next year to 90 pence. The insurer currently trades on a price-to-earnings (P/E) ratio of 13 for this year, representing a slight premium to a forward earnings multiple of 12.7 for the broader life insurance sector, although this is expected to fall to 11.8 in 2014.

As well as decent earnings growth, I believe that the Pru's generous dividend policy also provides exciting potential for income investors. It hiked last year's payout to 29.2 pence, a 16% annual jump, and analysts expect the dividend to come in at 31 pence and 33.2 pence this year and next.

Kingfisher
Although a slew of patchy consumer data statistics has prevented shares in Kingfisher  (LSE: KGF  ) from gaining traction, I believe that the company's extensive cost-cutting initiative should help to protect earnings while the top line remains under pressure.

The firm -- whose retail brands include B&Q and Screwfix -- saw group turnover fall 2.4% in the year ending Feb. 2013, to 10.6 billion pounds, which subsequently pushed adjusted pre-tax profit 11.4% lower to 781 million pounds.

However, Kingfisher has undertaken bold steps over the past year to help it weather continued sales weakness and build a platform for the future. The company also eliminated its net debt pile of 88 million pounds and ended the year with 38 million pounds in net cash.

City brokers expect earnings per share to rise 7% in 2014 to 24 pence, before rising 12% in 2015 to 27 pence. Kingfisher currently trades on a P/E rating of 12.2 and 11 for 2013 and 2014, correspondingly, providing a massive discount to a forward earnings multiple of 27.7 for the broader general retailers sector.

And the company is tipped to keep dividends moving higher, with an expected payout of 10.1 pence and 11.1 pence for this year and next, up from 9.5 pence in 2013. These carry yields of 3.4% and 3.8%, above the prospective 3.3% FTSE 100 average.

InterContinental Hotels Group
I expect shares in InterContinental Hotels Group  (LSE: IHG  ) to resume their march higher as the potential for further earnings growth helps to underpin its ultra-progressive dividend policy.

The company's turnover increased 4% in 2012, to $1.82 billion (1.19 billion pounds), which in turn pushed operating profit 10% higher to $614 million. Stellar RevPAR growth, allied to the addition of new room capacity, helped to drive fee revenues 6.8% higher from 2011 levels.

Broker Liberum Capital forecasts adjusted diluted earnings per share to rise from 139 U.S. cents (91 pence) in 2012 to 157 cents this year, a 13% advance, before rising an additional 8% to 169 cents in 2014. The hotel chain is currently changing hands on a P/E ratio of 18.6 and 17.2 for 2013 and 2014, respectively, signaling decent value as its U.S. peers currently trade on a figure north of 20.

InterContinental Hotels hiked its 2012 dividend 16% to 64 cents per share, and Liberum expects shareholder payments to rise to 69.8 cents this year and 75.1 cents in 2014. Although these provide yields below the FTSE 100 average, at 2.4% and 2.6%, the company is also throwing up lots of extra shareholder returns through its buyback scheme, which should roll on as asset divestment continues.

easyJet
I think that shares of easyJet  (LSE: EZJ  ) are primed for takeoff, with strong projected earnings growth set to be bolstered by accelerating market share grabs. With its major rivals shutting down some of their routes and reducing flight frequency on others, allied to lasting pressure on consumers' wallets, I reckon that budget airlines such as easyJet should enjoy rising popularity.

The operator said earlier this month that it expects revenues per seat to have risen 8.5% in the September-March period, beating a previously predicted rise of between 6% and 8%, and pushed higher by stronger-than-forecast late bookings in the run-up to the Easter holiday.

Although overall capacity rose 3.3% from the corresponding 2012 period, falling short of a projected 3.5% increase, this was caused by weather-related cancellations. It added that passenger numbers rose 5.3% last month.

Investec anticipates earnings per share to gallop 35% to 83.4 pence in the year ending Sept. 2013, before rising a further 12% to 93.1 pence in 2014. easyJet currently trades on a P/E rating of 13.6 for this year and 12.2 for 2014, providing good value for money compared with a prospective earnings multiple of 17.3 for the entire travel and leisure sector.

Babcock International
In my opinion, diversified engineer Babcock International  (LSE: BAB  ) is an excellent pick for investors seeking access to a quality stock with a track record of solid earnings growth and increasingly lucrative dividend prospects.

The company said earlier this month that it expects to have made "strong progress" in the year ending March 2013. Babcock International's order book has remained steady at 12 billion pounds, it said, while the bid pipeline has jumped to 15.5 billion pounds from 14 billion pounds as of the end of January, providing healthy earnings assurances for the medium to long term.

Earnings per share are set to rise 12% to 69 pence in 2013, according to analyst estimates, results for which are due on Tuesday, May 14. These are then anticipated to climb 4% this year to 72 pence before leaping 9% in 2014 to 78 pence. Babcock International was recently trading on a P/E ratio of 14.8 and 13.6 for this year and next, representing a huge discount to a forward earnings multiple of 21.5 for the wider support services sector.

And with the exciting dividend growth of recent years expected to roll on -- brokers are tipping the full-year dividend to rise to 25 pence in 2013 before leaping to 27.3 pence and 30 pence in 2013 and 2014, respectively -- I believe that the firm is deserving of a meaty upward re-rating.

Zone in on other sterling stocks
If you already hold shares in these companies, check out this newly updated special reportwhich highlights a host of other FTSE winners identified by ace fund manager Neil Woodford.

Woodford -- head of U.K. Equities at Invesco Perpetual -- has more than 30 years' experience in the industry and boasts an exceptional track record when it comes to selecting stock market stars. The report, compiled by The Motley Fool's crack team of analysts, is totally free and comes with no further obligation. Click here now to download your copy.

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