Market report: Stagecoach gets a tow from upgrade after bumpy ride
Shares in buses and trains operator Stagecoach have not so much ground to a halt this year as slammed into reverse.
Unable to grow revenues in its bus division and hit by hefty charges from its East Coast rail franchise, it has seen investors steer clear of the shares, which are down 24% in three months.
While not overly bullish on the outlook, broker Liberum gave the beleaguered shares a jump-start today — they rose 7.44p, or 4.7%, to 166p — as it upgraded from Sell to Hold.
Analyst Gerald Khoo said: “Despite our concerns about earnings momentum, industry headwinds and bus re-regulation, we believe these risks are now better reflected in the current share price.”
One boost Stagecoach could get is from the East Coast franchise, he argues.
When it bid for the line, it paid a higher premium to the Department for Transport based on additional and enhanced capacity being made available in 2019 to “help generate significant revenue growth” — improvements Network Rail now looks unlikely to deliver on time.
“We believe this forms the basis for a variation to the East Coast franchise contract, to reflect the current reality of infrastructure capacity,” Khoo said.
Unable to grow revenues in its bus division and hit by hefty charges from its East Coast rail franchise, it has seen investors steer clear of the shares, which are down 24% in three months.
While not overly bullish on the outlook, broker Liberum gave the beleaguered shares a jump-start today — they rose 7.44p, or 4.7%, to 166p — as it upgraded from Sell to Hold.
Analyst Gerald Khoo said: “Despite our concerns about earnings momentum, industry headwinds and bus re-regulation, we believe these risks are now better reflected in the current share price.”
One boost Stagecoach could get is from the East Coast franchise, he argues.
When it bid for the line, it paid a higher premium to the Department for Transport based on additional and enhanced capacity being made available in 2019 to “help generate significant revenue growth” — improvements Network Rail now looks unlikely to deliver on time.
“We believe this forms the basis for a variation to the East Coast franchise contract, to reflect the current reality of infrastructure capacity,” Khoo said.
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