Jefferies downgrades Balfour Beatty on 'diminished upside'

Jefferies downgraded its stance on shares of construction group Balfour Beatty to ‘hold’ from ‘buy’, citing "diminished upside" with the shares now back at pre-Covid levels.

"Construction sites continue to reopen and the strong US/UK order book should help reassure on the near-term outlook," the bank said, adding that comments at the company’s first-half results in August will be key for FY21/22 earnings.

"We lower our estimates slightly to reflect FX changes, while our underlying estimates remain largely unchanged," Jefferies. "However, with limited upside to our price target on circa 15x price-to-earnings 2020 estimates, we downgrade to hold."

Jefferies said that while construction sites are reopening, productivity concerns persist. It noted that in May, 83% of construction sites were open and said this should increase to more than 90% by the end of June, with disruption from availability of labour or materials set to diminish since the May update.

"However, we still forecast 1H20 group sales down 22% year-on-year and earnings down 30% with no disposals from the investment portfolio," it said.

At 0925 BST, the shares were down 3.4% at 251.20p.