Will Investors Want To Get On Board Following Stagecoach Results?
Spreadex | Nov 29, 2018 11:27
The transport group has struggled to build up any momentum in 2018. Opening at £1.65, it has spent the year trying, and failing, to get beyond that level, instead spending a good chunk of the first half loitering between £1.55 and post-financial crash lows of £1.25.
The stock has performed a bit better since the summer. At one point it rallied to £1.70 in August, though it admittedly didn’t last long at those 8 month highs. Stagecoach Group (LON:SGC) now sits at a current trading price of £1.58.
Posting its first quarter figures in September, Stagecoach revealed that its regional UK bus division saw a very healthy 3.2% jump in like-for-like revenue, the company benefiting from the warm weather and the use of additional buses to replace train services in and around Derby. It was more hesitant about the year as a whole, however, saying it only expects ‘moderate’ growth from the business.
While it saw success regionally, in London its buses were looking rather ropey, with a 2.2% drop in like-for-likes due to the impact of lost contracts in the prior year. It was even gloomier about the division’s performance going forwards, warning of an increased rate of revenue decline as it lamented its poor showing in the recent Transport for London contract tenders.
Elsewhere the firm saw a 2.1% increase at UK Rail (excluding the now-departed Virgin Trains East Coast franchise) and a 5.3% surge at Virgin Rail Group (of which the company owns 49%) countered by a 3.8% slump in North America.
In terms of Wednesday’s interim results, investors will want to see Q2 like-for-likes not fall too far from 3% in the UK regional bus arm, alongside signs that Stagecoach are finding ways to combat the problems in London and the US. Its half year profit will also be of interest given that it complained about higher than budgeted operating costs in the capital back in September.
Stagecoach Group has a consensus rating of ‘Buy’ alongside an average target price of £1.69.
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