The enthusiasm surrounding Balfour Beatty after last week's autumn statement could have been overdone, according to analysts.
In a note entitled Back on planet earth, Investec's Andrew Gibb repeated his sell recommendation on the infrastructure group, suggesting the impact of the UK government's proposals would take a while to filter through. He said:
The autumn statement has reignited the market's interest in Balfour Beatty, with the share price responding positively to last week's announcement (up 13%). However, in reality the government's commitments will have little
impact in the near term. The £5bn investment in infrastructure over the next few years equates to just 0.1% of GDP per annum, and detail around pension fund involvement remains very granular. We continue to see downside risks to numbers going forward.
The group's core markets are characterised by declining volumes and a negative near-term outlook. The latest ONS data for UK construction showed that the levels of new orders were the lowest for the third quarter since 1980, and with the US senate appearing unwilling to pass any significant stimulus packages, the US is likely to remain challenging during 2012. With few obvious positive catalysts, and the increasing potential for earnings disappointments ahead, we reiterate our sell and 185p sum of the parts-based price target.
Balfour's shares are currently down 4p at 254.8p, a 1.58% decline.
