Stagecoach driving higher

The international transport group will announce its full-year numbers on 24 June, and the new joint venture with Virgin Rail will keep the company’s profits on track.

Commuters
Source: Bloomberg

Stagecoach shares have recently registered another record high, and the East Coast trainline franchise which began in March will add ‘significant’ value next financial year. The tie up with Virgin has got off to a good start, but the rewards won’t be seen until 2016.

In April, the company revealed a 9% rise in group revenue for the 48 weeks until 29 March. The West Coast train franchise registered a 7.6% growth over the period, and the company hopes to replicate the performance on the East Coast line. The bus operation is also going strong — the London division posted an 8.15% growth rate — meanwhile the regional services trailed with a 2.4%. The Megabus service is being rolled out to continental Europe, and even though the German business announced a loss it was to be expected with the new start-up costs.

The market is expecting revenue of £3.11 billion, and net adjusted income of £144 million when Stagecoach reports its annual figures. These forecasts represent a 6.15% rise in revenue and a 3.3% fall in adjusted net income. In the first half of the year revenue rose by 4.8% to £1.54 billion, and the market was expecting £1.57 billion, but adjusted net income came in at £86.5 million while dealers were anticipating £81 million.

Equity analysts are very bullish on Stagecoach, and out of the 16 ratings, 11 are buys, three are holds, and two are sells. The average target price is 402p, which is current price of the stock. Investment banks are bullish on FirstGroup, and out of the 17 recommendations, six are buys, ten are holds, and one is a sell. The average target price is 127p, which is slightly higher than the current price.

The 400p level is acting as support, and if it is held then 414p will be the initial target which will bring 420p into sight. If the stock drops below 400p the next level of support will be found at 380p.

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