Broker snap: Improving revenue trends at Go-Ahead

6th May 2011 12:07

Nomura nudges up its forecasts for rail and bus operator Go-Ahead, but keeps a 'neutral' stance on the stock noting that its new target price only has a potential upside of 0.3%.Estimated 2011 earnings (before interest, tax, depreciation and amortisation) have been upgraded by 7% due to better revenues in both UK bus and UK rail, the broker said. However, earnings per share forecasts are raised by a lesser extent (5%) due to slightly higher interest, as well as the minority interest associated the rail earnings.Nomura highlights the group's accelerating revenue growth in the third quarter, with deregulated bus's underlying revenues up by 8%, compared with a 5.4% seen in the first half, despite specific cost increases (from higher insurance claims). "Management still remain mindful of the uncertain economic outlook, although in general a continuation of third quarter revenue trends could provide some upside to our forecasts," the broker said.The target price is raised to 1,500p, from 1,425p.---BC