Merlin Entertainments and Babcock International are the most likely names to be axed from the FTSE 100 index in next week’s reshuffle, according to research from The Share Centre.
Engineering support services company Babcock International has been in the relegation zone for some time.
A trading update this week showing higher revenue and earnings over the first half of the year did little to reassure investors.
The shares subsequently retreated amid concerns over its growth targets for next year and continued pressure on the sector as a result of Brexit and contract delays.
Babcock International shares have lost nearly 30% over the past year.
Merlin Entertainments, the owner of theme parks Alton Towers and Legoland, is another candidate for the drop, with worries over terrorism and unfavourable weather conditions having taken a toll on the shares.
Merlin has also cited concerns over higher wage pressures.
“Investors are likely to have reacted negatively to disappointing forward-looking guidance the group provided in October, as the expectation is now that like-for-like growth is likely to be in the low single digits. Merlin was hovering above the relegation places last quarter so it’s unsurprising to see it feature more prominently this time round,” said Helal Miah, investment research analyst at The Share Centre.
Merlin shares have slumped by around 33% since June.
Other names potentially on the brink of relegation next week include global private hospital group Mediclinic International, which has issued disappointing forward-looking guidance, said The Share Centre.
On the up
Prime candidates to take the place of the troubled names include plastic packaging company DS Smith, online food ordering company Just Eat and hazard detection and life protection products producer Halma.
DS Smith has been experiencing strong revenue and earnings growth, mainly driven by rising online sales.
Just Eat looks primed for further rapid growth, especially as its takeover of rival Hungryhouse has just been granted regulatory approval.
Halma had likely benefitted from the recent focus on safety regulations in the UK, said The Share Centre.