Transport group Stagecoach has accelerated more than 4% after a positive trading update.
The company said like for like revenue in its UK rail business rose 6.5% in the twelve weeks to 21 July, while its Virgin Rail joint venture with Richard Branson's conglomerate saw a 5.8% increase. Regional buses, which account for around 60% of group profits, saw revenues climb 4.5%, up from an estimated 2% increase in a weather hit fourth quarter. In its US business, which includes Megabus.com, revenues rose 5.7% in the three months to the end of July.
It said trading continued to be good and its prospects remained positive.
Stagecoach shares are currently 12.5p higher at 319.9p, and analyst John Lawson at Investec said:
Another solid performance from Stagecoach [and] it is notable that the group is highlighting that it expects to grow its operating profits in North America significantly in 2014. In effect, the group is slowing down the rate of expansion in this region, so start-up costs should be lower and the true profitability of Megabus.com can be seen. We make no
forecast changes today and keep our add with a target price of 325p (previously 320p).
Joe Spooner at Jefferies pointed to some disappointment with Megabus:
Overall there's no change to group 2014 earnings per share expectations, so consensus forecasts are unlikely to see material change. However, Megabus growth in the US looks on the lighter side to us, which takes shine off positive UK regional bus trading.
Revenue up 21.8% at Megabus is a slowdown from 27.5% over the second half of 2013 and already trending below our 25% 2014 assumption, despite the launch of the Texas (June 2012) and California (December 2012) hubs that should have fed more strongly into the period. It's worth noting that at FirstGroup, Greyhound was also the soft feature of its trading over the first quarter when its like for like fell 6% year on year.
