FTSE 100 Worst Performers in July: Ready for a Turnaround?

The recent rise in the has been relatively broad-based, but some companies have been left behind. A few of them might have a chance at staging a comeback if they overcome specific hurdles.

FTSE 100 Firms That Fell Over 10% in the Last Month

• Taylor Wimpey (TW) -10.2%
• Mondi (MNDI) -11.7%
• Croda (CRDA) -14.2%
• ConvaTec (CTEC) -14.6%
• WPP (WPP) -23.3%

Is Recovery Possible?

WPP Facing Advertising Slump

The advertising group WPP (WPP) reported earnings on Thursday that were mainly in line with the trading update it had issued in July. Client spend was down, with overall over the last year. While the environment remains challenging as businesses hold back on marketing investment, the company's loss of certain large accounts, such as Mars and Paramount, has hurt the bottom line. Investors are now waiting to see what former Microsoft exec and new CEO at WPP, Cindy Rose, will do to turn things around when she takes the top job at the end of the month.

Pending those changes, the company affirmed its guidance for the year, expecting LFL revenue to fall 3-5%. A solid turnaround initiative to halt the declines in margins, , as well as recover clients and market presence, could convince investors to come back to the firm. With the company's share price down almost 50% this year, its PE ratio has fallen to just 8.2x, making it attractive if it can manage to stem the bleeding.

Taylor Wimpey Most Hurt Amid House Builders

The are well known, with buyers under pressure from rising prices and higher interest rates. Although there have been some signs of green shoots as the BOE gradually and cautiously lowers rates. Some homebuilders have managed to start to rebound, but that doesn't include Taylor Wimpey (TW), whose share price is down 17% since the start of the year. And it took a tumble after reporting earnings at the very end of July.

Unlike its rivals, Taylor Wimpey from £356K a year ago. Its operating margin also fell by 9.7% from 12.0% in the same period. Clearly, the company is not yet capturing the upswing in the housing market. But that could change if the BOE keeps lowering rates and makes mortgages more affordable. An expected pick-up in the housing market later this year could start giving Taylor Wimpey a boost. And there might be some signs already that it is starting to see improvement. Its orderbook rose slightly to £2.12 billion from £2.01 billion a year ago. 

easyJet Faces Costs and Stiffening Competition

The share price of budget airline easyJet (EZJ) hasn't fallen as much as the others in July (down just over 5%), but it could offer an interesting case to study. While its rivals Wizzair and Ryanair saw substantial gains (the latter posting record earnings), easyJet has struggled to keep up. The company posted earnings in mid-July, reporting , in line with what the company had guided previously.

The issue might lie in comparison to other airlines, with easyJet reporting a 2.0% increase in passengers, while rival Wizz saw a 10.0% increase in passengers, . However, the situation might not persist, as both Ryanair and Wizz are seeing their costs (CASK) rising, while easyJet's costs are falling. Part of that can be attributed to hedging policy, with easyJet's rivals locking in a higher percentage of fuel needs for this year. A drop in crude prices as OPEC continues production could help easyJet cut costs as it expects increased passenger numbers later in the year.

The General Outlook

The FTSE 100 has managed gains lately on earnings and Recent optimism around trade wars has faced obstacles as US President Donald Trump applies large tariffs on specific industries, including pharmaceuticals. However, markets seem to have shaken it off. The UK's lower tariff rate puts it in a preferred position to do business with the US, which could help British firms in the medium term.