National Express boosted by Nomura upgrade

The bank said National Express has outperformed its peers in UK Regional Bus, while UK Coach is a fundamentally attractive business, with a good returns profile and quality brand/trading platform.

“On this basis, with raised forecasts (principally UK Bus and supportive forex) and what we see as limited downside risk to our new target price, we upgrade the stock,” it said.

Nomura said National Express, as a “more nimble and impressive operator” in the US, has had a far stronger revenue trend development than Firstgroup, with solid organic and M&A-driven top-line growth.

Despite a clear margin downturn in 2009, the group has also performed admirably on costs, albeit well down on the pre-macro crisis margin levels achieved prior to 2008.

The bank cuts its price target for Firstgroup to 110p from 125p, Go-Ahead to 2,700p from 2,850p and Stagecoach to 390p from 410p, highlighting general caution around UK Bus volumes.

It rates Firstgroup at ‘neutral’ and the other two stocks at ‘buy’.

With a total share return on Stagecoach relative to its new target price of 56%, versus Go-Ahead at 29%, Nomura moved its key sector pick from Go-Ahead to Stagecoach, also supported by the ongoing issues negatively affecting Go-Ahead on the Thameslink rail franchise.

At 0923 GMT, National Express shares were up 3.3% to 292.10p, Firstgroup was up 1.9% to 87.50p, Stagecoach was up 1.8% to 261p and Go-Ahead was 0.5% higher at 2,189p.