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.