Broker snap: Nomura scales back earnings estimates for FirstGroup

17th Aug 2011 12:11

While Nomura has kept hold of its current-year numbers for transport firm FirstGroup, the broker has scaled back its medium-term earnings estimates and in turn the target price, from 363p to 345p.Following the company's decision not to activate its extension period, the Great Western rail franchise is due to expire in April 2013. Capital Connect will run to September 2013. Meanwhile, the firm announced on 5 August that the Department for Trade has decided to extend the Trans Pennine Express (TPE) from January 2012 to April 2015, "less than the potential full extension period to 2017", notes Nomura."Under the terms of this agreement, profitability will be lower from January 2012 to April 2015, although some of this impact at the net level is lessened by the 45% minority interest. Our forecasts assume no new rail franchise wins," the broker said.Forecasts for the year ended 31 March 2012 have been left unchanged, but 2013 and 2014 earnings per share estimates are cut by 2-3%."Our revised lower price target [...] now incorporate the cash outflow due on expiry of the Great Wester and Capital Connect franchises, as well as TPE ending in April 2015 and not the January 2017 that we had previously assumed."A neutral rating is maintained.Shares fell 1.04% to 344.20p at 12.11pm.BC