Over 40 years’ heritage
185,800 clients worldwide
Over 15,000 markets

Balfour Beatty battling on

The construction company will announce its first-half results on 12 August, and traders are still awaiting a turnaround.

Balfour Beatty
Source: Bloomberg

Balfour Beatty has shaken off its warning from July, and the share price has more than recovered from the spike lower, but there is still a long road to recovery for the construction company. As I previously stated, Balfour Beatty has issued a number of profit warning since the start of 2014, and there have been three changes of CEO’s in the same time period. The company is still suffering from construction projects during the downturn, and the competition was so tough it ended up running into the red on a number of UK based projects.

Leo Quin is the CEO and it seems that he is battling issues which begun before his time at the firm. Mr Quin helped turn around Qinetiq, and also oversaw the return to private ownership of De La Rue. He was parachuted into Balfour Beatty to turn its fortunes around. Mr Quin has halted the company dividend, which will be beneficial in the long-term, and has stated there are no ‘short-term fixes’.

When Balfour Beatty reveals its first-half results, the market is expecting revenue of £3.94 billion, and that compares with the second-half profits from last year of £2.41 billion. The firm reports its full-year results in March 2016, and the dealers are expecting revenue of £7.86 billion and net adjusted income of £27.3 million. These forecasts represent an 8.6% drop in revenue and a 149% jump in net adjusted income.

Investment banks are bullish on Balfour Beatty, and out of the 12 recommendations, five are buys, six are holds, and one is a sell. The average target price is 256p, which is 6.6% above the current price. Equity analysts are even more bullish on Carillion, and out of the 13 ratings, eight are buys, four are holds, and one is a sell. The average target price is 385p, which is 11% above the current price.

Balfour Beatty has been trading lower since 2007, and the bounce back in July could provide new opportunities to sell in to the rally. The 240p level is providing support, and a move below it will bring 200p in to sight. If that mark is taken out 150p will be on the radar. If 240p is held, the resistance at 260p will be brought in to play, and the next level of resistance will be 320p.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.