Are these the best UK shares to watch in May 2024?

In spring 2024, the UK’s economic landscape continues to deliver a mixed outlook. After the country slipped into a technical recession at the back of end of last year, the UK economy has expanded for the second consecutive month, giving economists hope the recession may be at an end.

The economy grew by 0.1% in February, according to the Office for National Statistics, after recording growth of 0.3% in January. Inflation also fell to 3.2% in March from 3.4% in February, driven by falling food prices. This is down from a high of 11.1% in October 2022.

Meanwhile, Deputy Bank of England Governor Dave Ramsden said at a conference in Hong Kong in April that inflation could stay around the central bank's 2% target for the next three years instead of increasing, as previously said in the Bank's latest forecasts, due to lower energy prices. The Bank of England previously expected inflation to rise to 3% later this year.

Of course, both monetary and fiscal predictions are not guaranteed, especially after the global shocks experienced since 2020.

Best UK shares to watch

Considering these issues, here are five UK shares we think are worth watching. These shares have been selected for recent market news. Always do your own research. Past performance is not a guide to future performance.

1. BAE Systems
2. Currys
3. AstraZeneca
4. NatWest
5. Centrica

BAE Systems

BAE Systems' recent results saw the FTSE 100 defence company sales for the past year rise by 9% to £25.3 billion, driven by growth in the United States. Accordingly, underlying profits before interest and tax hit £2.7 billion.

Shares in most weapons manufacturers have risen over the past two years, driven by Russia’s invasion of Ukraine which has seen political priorities surrounding defence spending shift rapidly. This has been compounded by the Israel-Hamas War, and subsequent surge of hostility in the Red Sea.

CEO Charles Woodburn expects ‘sustained growth in the coming years’ and argues that ‘instability in Europe, the Middle East and other parts of the world brings into sharp focus the vital role that we play in protecting national security.’

Currys

Currys recently rejected two unsolicited £700 million takeover offers from the UK arm of US-based activist investment firm Elliott Advisors worth £682 million and £750 million. Chinese online retail titan JD.com was also interested in pursuing a counterbid but, in the end, decided not to.

Frasers Group’s Mike Ashley was also speculated as a potential bidder, as the group has built up a 6% stake in the retailer, although no bid transpired. Elliott offered 67p per share in its renewed bid, but Currys rejected the offer as ‘significantly undervalued.’

Peel Hunt analysts previous said that no offer under 80p per share or £900 million would be seriously entertained. The bigger story, of course, is that after Mars’ takeover of Hotel Chocolat, other UK retailers may become buyout targets in the near future.

Meanwhile, Curry's recently reported strong sales in its latest trading update, and expects pre-tax profits to be in the region of at least £115 million for the full year. Previous guidance from the company was of profits of £105 million to £115 million.

AstraZeneca

AstraZeneca shares rose sharply recently after potential blockbuster new drug Tagrisso (osimertinib), with the addition of chemotherapy, was approved in the US for non-small cell lung cancer. This followed successful clinical trials where patients who received the combination saw their risk of death or disease progression from non-small cell lung cancer fall by 38% per cent compared to people who just took Tagrisso.

Tagrisso sales increased by 9% at constant exchange rates last year to $5.8billion due to strong growth across the US and emerging markets. Indeed, it was AstraZeneca's highest-selling product behind Farxiga in 2023.

This development may secure long-term revenues for the drug developer. Meanwhile, chief executive Pascal Soriot recently defeated an investor revolt over his £19 million pay package.

NatWest

NatWest recently posted record profits at £6.2 billion, a 20% increase year-over-year. It also confirmed Paul Thwaite, a long-time employee, as permanent CEO — a decision Shore Capital noted removed ‘a key uncertainty’ from the stock.

On the other hand, NatWest changed its medium term guidance for return on tangible equity to just 12.4% in 2024 and 13.2% by 2026 — down from between 14% and 16% previously.

However, the government has also sold a further 1.4% of the bank’s shares, taking its stake down to 33.56%. With a full sale to the public perhaps coming as early as June, the stock may soon rise to accommodate.

Centrica

Centrica's results saw adjusted operating profit fall by 17% year-over-year to £2.75 billion, which excludes the disposed Spirit Energy Norway assets in 2023, and the impact of unrealised hedging losses in 2022.

Positively, Centrica still generated free cash flow of £2.2 billion, and this included £200 million in working capital inflow compared to the £700 million outflow of 2022.

It also now boasts a strengthened balance sheet compared to last year — with a closing net balance of £2.7 billion, some £1.5 billion more than in 2022. And the full year dividend was hiked by 33% to 4p per share, while the £1 billion share buyback programme is expected to run until July 2024.

However, there may be some political risk as its British Gas division saw profits rise tenfold to £751 million, with some of this profit derived from government support for bills. In an election year, the company may feel like a politically easy target.

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Top shares to watch summed up

The above five companies are just a small selection of top stocks to watch. Remember that any company can also fail and always do your own research.

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*Based on revenue excluding FX (published financial statements, October 2021).