Which stocks are changing places?

With this Tuesday’s closing prices to determine the latest quarterly FTSE 100 (^FTSE) reshuffle, we look at which stocks are likely to make it to the benchmark index and which companies are on their way out.

There are two stocks for whom relegation is guaranteed. Royal Mail (RMG.L) is set to drop out of London’s leading share index as shares in the postal services group have fallen by more than 43% over the past year.

“Having narrowly avoided relegation in March, Royal Mail will not escape the axe this time around. Standing at number 124, the shares have declined by 35% so far this year after a volatile bout of trading,” Interactive Investor’s head of markets Richard Hunter said.

“Any progress on its transformation and parcel volumes has been more than offset by inflationary cost pressures, ongoing pay talks with the unions, tougher comparatives and, of course, steeply declining letter volumes.

“The company had regained its place in the FTSE 100 in June 2021, having previously been relegated in December 2018.”

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Broadcaster ITV (ITV.L) is also facing demotion, while Centrica (CNA.L), which owns British Gas is set to be promoted from the midcap FTSE 250 (^FTMC) to the top 100.

“ITV is currently languishing at number 136 in the market cap listings, well below the 110th spot required to remain. Having returned to the FTSE100 in the reshuffle of June 2021, the shares have declined by 47% over the last year.

“It most recently unsettled investors in March by announcing an investment of £180m ($227m) into its new streaming service at a time of intense competition and inflationary pressures crimping the discretionary spend of the consumer,” Hunter said.

Centrica’s share price was up on Tuesday, reinforcing expectations that it will secure promotion back to the FTSE 100 index when the latest quarterly reshuffle is determined based on tonight’s closing prices.

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Student housing firm Unite (UTG.L) is set to join Centrica in the top flight, at the expense of Royal Mail and ITV.

“For the latter, rising energy prices have played into the hands of utilities in general, although progress has been hampered of late by the possibility of a windfall tax spreading to the sector. Centrica’s promotion would mark a return to the top table after a two-year absence, having previously been relegated in June 2020,” Hunter said.

He said there could be a third change, with Harbour Energy (HBR.L) in danger of making a swift exit after just a month as a blue-chip company.

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“Currently teetering on the edge of relegation is Harbour Energy, formerly known as Premier Oil. Its relegation would mark one of the shortest stays on record in the FTSE 100, since the company was only admitted to the premier index this month following Ferguson moving its market listing to the US.

“Its relegation would then open the door for the stock currently standing at 95th in the overall listings, namely the medical products business originally spun out of Bristol-Myers Squibb, ConvaTec Group (CTEC.L). Its share price has risen by 13.5% in the year to date, pushing the group into promotion contention.”

The second FTSE 100 reshuffle of 2022 will be announced after the close of play on Wednesday 1 June, based on the closing prices from this Tuesday evening. The changes will then take effect on Monday 20 June.

FTSE 100 constituents are switched up four times a year, in March, June, September and December, to ensure it remains the 100 biggest UK firms by market capitalisation.

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