Liberum lowers target price on Balfour Beatty

Analysts at Liberum lowered their target price on infrastructure group Balfour Beatty from 400.0p to 320.0p on Tuesday, despite seeing the group's most recent full-year results coming in ahead of expectations.

Liberum noted that it left its headline earnings estimates for the group unchanged at the time of its latest set of results. However, it now saw fit to reduce underlying earnings estimates by 1% to £213m reflecting the impact on profits from disposals of infrastructure investments.

Despite this, the analysts did leave their earnings per share estimates unchanged at 23.4p due to the share count and tax and also stated that they continue to expect a dividend per share of 7.8p, which represents a dividend cover of three times.

"Within the mix, we see margin progression at both US and UK Construction, although Gammon had a slow start to the year due to COVID-19," said Liberum. "We also expect further margin progression at Support Services, helped by the exit from Gas."

"At the results, we reduced our FY20 average net cash estimate from £397m to £300m due to the paydown of £112m of prefs, which are excluded from net cash. We also reduced our spot net cash estimate by £103m to £410m, although this tends to be less predictable."

Liberum highlighted that COVID-19 risks remained "hard to predict" and pointed out that there had been reports that Balfour had delayed a £200m buy-back due to the virus turmoil.