Financial Trading Blog
Stock of the day 28/06/2016 – Stagecoach Group PLC
Following its 15% plunge at the end of 2015 Stagecoach had a lot of work to do in 2016. Sadly, it hasn’t proved up to the task, slumping from a starting price of £2.99 to a current, Brexit-inspired, near 5-year low of £2.10 (IT-Finance.com, 27/06/2016).
Stagecoach’s East Coast franchise, taken over in 2015, has become the main issue for the company, as outlined in a March downgrade from HSBC. The broker claimed that the franchise, a joint venture for Stagecoach with Virgin, is already showing signs of weakness, a sentiment reiterated by rail union RMT, which reported rumours that ‘serious losses [were] mounting up’ on the East Coast.
(Source: IT-Finance.com 28/06/2016)
Matters weren’t helped by the fact that the company itself confirmed an overall weaker rail outlook with its April update. Stagecoach pointed to a bevy of reasons for the slowdown, including the impact of increased terrorism concerns (the main catalyst for its sharp December drop), lower fuel prices causing customers to opt for their own transport and a general downturn in real earnings preventing people for travelling as much.
In terms of its full year figures on Wednesday, analysts are expecting the East Coast to remain the most pressing concern for Stagecoach’s investors, with full year revenue growth slipping to 4.9% for the region. The company did, however, claim it was on track to meet adjusted earnings expectations back in that April update. Investors will also be keen to here Stagecoach’s assessment of the Brexit, something that may well exacerbate the issues the company was already dealing with.
Stagecoach Group PLC has a consensus rating of ‘Hold’ with an average target price of £3.10.
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