The final FTSE 100 reshuffle of 2019, and of the decade, is set to see budget airline easyJet PLC (LON:EZJ) re-join the blue-chips while insurer Hiscox Ltd (LON:HSX) is facing a demotion to the mid-caps.
With the decision to be made after next Tuesday’s close, easyJet’s market cap has risen above the automatic entry point for the FTSE 100 to around £5.2bn, while Hiscox has fallen below the exit threshold to £3.9bn.
The promotion for easyJet will mark a return to form following its exit from the top table in June, with analysts pointing to the firm’s cost cutting efforts in order to offset forecasts of weaker passenger growth and a rising fuel bill as one of its advantages in a more turblulent market.
Meanwhile, the year has been a bumpy ride for Hiscox, with extreme weather events including Typhoon Faxai, Typhoon Hagibis, and Hurricane Dorian blowing a hole in its bottom line.
In a third quarter trading update earlier this month, the group reported a US$165mln hit to its earnings in the period, while profits for its full year are also expected to fall by US$25mln.
Analysts at Hargreaves Lansdown said that while insurance premiums were expected to grow, this was unlikely to offset short-term headwinds caused by the increase in claims.
Third time lucky for Just Eat?
However, the group has garnered a reputation for short stays in the blue-chips, lasting just a year after its first promotion and then only seven months after its second in March when it was booted out to make room for M&G PLC (LON:MNG) following its spin out from Prudential PLC (LON:PRU).
If Just Eat is upgraded, the third stay could be shorter still depending on the outcome of a two-way bid battle between Dutch group Takeway.com and investment group Prosus, which is backed by South African e-commerce giant Naspers.
No sparks for M&S
The latest reshuffle will hold no promise for previous stalwart Marks & Spencer Group PLC (LON:MKS), which in September was ejected from the FTSE 100 for the first time despite being a founding member when the index was set up in 1984.
The 135-year old retailer has embarked on a radical transformation programme to address its falling sales, particularly in its lacklustre clothing business.
“To get back into the FTSE 100 M&S needs to radically improve profitability and there's no sign of that, as they seem to be running up a down escalator”, said independent retail analyst Nick Bubb.
“Food trading has improved a bit through price-cutting, but the business lacks the range and the car parking to be a convincing weekly shop… By trying to be all things to all men (and women) in the mid-market M&S Clothing is doomed to struggle, handicapped by a burdensome store portfolio and unconvincing Online operation”, he added.
C&C to toast mid-cap promotion, Condolences for Card Factory
The firm is predicting double-digit earnings growth in its current year following what it dubbed in a July trading update the “transformational” acquisitions of drinks distributor Matthew Clark and wine merchant Bibendum in its last financial year.
“C&C’s focus on cider…does make it interestingly distinct from other alcohol manufacturers, while still benefitting from the strong brand loyalty that underpins the attractiveness of all consumer goods groups”, said Hargreaves’ analysts
Gift retailer Card Factory PLC (LON:CARD), meanwhile, is heading out of the index for the small caps as its efforts to open more stores and bolster sales have struggled in the face of weak consumer spending.
In a third quarter update earlier this month the group’s like-for-like (LFL) revenues declined 0.3% in the three months to the end of October, cutting overall LFL growth so far this year to 0.9% in what it said remained “a challenging UK high street environment”.
With the tradition of posting paper cards on the decline, the group has had to shift attention towards its other products such as wrapping paper and gift boxes, although analysts are not expecting investor interest to return until the wider sector improves.