Financial Trading Blog
Stock of the day 01/10/2015 – FirstGroup PLC
2014’s slump had left FirstGroup to start the New Year at £1.05, a long, long way from the £8 peak it reached at the end of 2007, and the first few months of 2015 did nothing to improve that situation. Despite a 7% jump to the £1.10 mark towards the end of January, following a Q3 2015 report that saw passenger revenues increase by 2.7% and 7.3% in its UK bus and train divisions respectively, and the fact that its Great Western rail deal was extended to 2019, the stock had fallen to a 21 month low of 89p by the end of March.
(Source: IT-Finance.com 01/10/2015)
Things turned around somewhat at the start of April, however, with a trading update that, regardless of the continued blight that is the company’s US Greyhound bus di vision, saw a 2.3% jump in its UK bus revenue alongside a 6.6% increase in its UK train division, helping FirstGroup to re-cross the £1 mark. Pre-UK election jitters briefly took the stock away from that level, only for the Tory win to send it to £1.20 by the middle of June. Those gains culminated in FirstGroup’s 2015 (and 11 month) high of £1.30, spurred on by its preliminary full year announcement that saw the company post a 13.3% rise in full year profit to £303.6 million despite a 9.9% drop in reported revenue to £6.05 billion.
However, the stock couldn’t hold onto this high for long. The company had fallen back to £1.16 by the middle of July, where FirstGroup used its first quarter update to warn that, due to the multiple rail franchises it lost last year (including First ScotRail and First Capital Connect), its rail revenues would be ‘substantially lower’ in 2015.
The price-eroding chaos of August then dragged FirstGroup even lower, with a near uninterrupted decline that extended into September taking it to a current trading price of 99p (IT-Finance.com, 01/10/2015).
The past few quarters have seen healthy growth from FirstGroup’s UK sector; however, the aforementioned impact of FirstGroup’s rail franchise losses may finally be felt in Friday’s second quarter results. To combat this, analysts are expecting the company to announce its plans to boost its bus division, as well as an update on its struggling Greyhound brand in the US.
FirstGroup has a consensus rating of ‘Hold’ with an average target price of £1.31.
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