Stagecoach share price climbs on solid results, growth opportunities

on Dec 11, 2013
Updated: Oct 21, 2019
Listen, Wednesday, December 11: Shares in Stagecoach Group (LON:SGC) rose this morning after the UK public transport company posted a small growth in half-year earnings, raised its interim dividend payout by 11.5 percent to 2.9p and said it sees “a number of exciting opportunities for growth ahead”. Stagecoach’s share price rose 3.3 percent to 373.53p as of 10:27 UTC, the fourth biggest gainer in the FTSE 250 mid cap index, which was up 0.2 percent at that time.

**Half-year results**
Stagecoach posted a pre-tax profit of £98.5 million for the six months to the end of October, up 1.8 percent year-on-year and largely in line with market expectations. Operating profit edged up 0.5 percent to £120.1 million and adjusted earnings per share rose 2.8 percent to 14.6p. Revenues grew five percent to £1.47 billion, while net debt was reduced by £43.4 million to £494.6 million.

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The improved earnings and sales performance was driven by robust growth in the group’s operations in the US and Canada. The North American unit, which includes yellow school bus services and the Megabus budget coach operation, posted a 42 percent growth in operating profit to £19.6 million and a 19.3 percent rise in revenues to £238.3 million. The company’s regional bus operations in the UK delivered a largely unchanged operating profit of £76.9 million and a 3.3 percent rise in revenue to £504.3 million. Its London bus operations made an operating profit of £9.6 million, up 15.7 percent y/y despite a one percent decline in revenue to £115.4 million, while profit at the UK rail division, which contributes the most to group revenue, fell 2.7 percent to £18 million despite a 3.3 percent growth in revenues to £619.5 million.

**Expansion opportunities**
Stagecoach said it sees room for expansion of its intercity bus services in the UK and Europe and is investing in the growth of its Megabus network, which already covers 40 US states and two Canadian provinces. The company said it is on track to deliver a significant year-on-year increase in operating profit from its North American operations for the full year.

“We are positive about the outlook for the rail sector in the UK where the franchising programme is again moving,” CEO Martin Griffiths said in a statement. “There is a pipeline of new opportunities in addition to the planned extensions to the duration of the rail franchises operated by our existing high quality train companies.”
**Analysts on Stagecoach**

In analyst notes issued today, Investec and Panmure Gordon maintained a ‘buy’ recommendation on Stagecoach, with Investec raising its price target on the stock to 370p from 350p, while Panmure reiterated its 380p price target. Stagecoach has a consensus rating of ‘hold’ and an average target price of 339.34p according to a survey of 14 analysts published by Analyst Ratings Network.
**As of 10:29 UTC buy Stagecoach shares at 373.60p.**
**As of 10:29 UTC sell Stagecoach shares at 373.10p.**
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