Buy FirstGroup despite 'bumps in the road', says Investec

2nd Apr 2014 11:19

Investec continued to recommend investors to 'buy' shares of transport firm FirstGroup but has admitted there are 'bumps in the road'.In a trading update on Wednesday ahead of its full-year results, the FTSE-250 firm said overall operating profit is in line with expectations for the year, excluding the £14m impact in the fourth quarter of severe weather conditions in the US on First Student, its school buses business, and the Greyhound intercity buses.Investec Analyst John Lawson said that the weather issues had been expected. He also pointed out that FirstGroup has reviewed its treatment of exceptional items, in particular costs associated with UK Rail bids and certain property disposals, which are now being taken "above the line".Lawson has put his target price for the stock under review and said he is likely to take 3% off his full-year earnings per share forecast, from 9.6p to 9.3p, before exceptional adjustments."The underlying message is still broadly consistent with previous updates, however, and whilst there are bumps in the road (with Student remaining the key risk), we remain hopeful that management will be able to turn the business around. That said, the stock might trade a little lower today," Lawson said.The shares were down 1% at 137.6p by 11:18.BC