Wednesday share tips: First Group, Dairy Crest

15th Jul 2015 19:22

(ShareCast News) - First Group lost two rail franchises last year and failed to replace them, setting the company up for a tough year. UK Rail was the biggest contributor to the company's top line but it is now expected to be approximately £900m lower as a result. Compounding matters, less expensive fuel means travellers in the US may increasingly opt to use the car and 90% of the firm's fuel usage is hedged at almost $90 a barrel. Raise fares? That could hurt volumes. So while returns may improve eventually, and despite the shares now standing 50% below 2010 levels, the lack of any dividend or earnings growth means "there's no rush to catch this bus," says The Financial Times's Lex column.Dairy Crest is set to go on a low lactose diet, permanently. If the Competition and Markets Authority gives its blessing the company will hive off its milk activities to Germany's Muller for £80m, leaving the company looking very differently come year end. That unit lost almost £16m over the past financial year. Its disposal would leave Dairy Crest with four leading brands produced from modern facilities, those require less investment and are therefore more cash generative. Then there is the potential from plans to make ingredients that go into baby powder at the Davidstow creamery. "Buy for the long-term," says The Times's Tempus.