Stock of the day 09/06/2016 – FirstGroup PLC

After spending much of the year just getting back where it started, will FirstGroup be derailed by its full year figures next week?

FirstGroup will be desperately trying to forget about the first 6 weeks of 2016. Having crawled towards £1.10 by the end of 2015 (a far cry from the £8 highs seen back in 2007) FirstGroup immediately began to fall as the New Year began. Admittedly much of that was down to the wider market turmoil, with the transport firm sinking to 95p after 3 weeks before jumping to £1.02 as January began to wrap up.

Yet whatever nascent recovery FirstGroup had embarked soon went up in flames as the company revealed its third quarter update. Revealing a wince-worthy 9.5% fall in revenue the stock plummeted over 11% in a single day, FirstGroup blaming ‘terrible’ weather for its own terrible performance. The killer was FirstGroup admitting this weather-woe would impact its full year operating profit, explaining the violent reaction from investors.


(Source: IT-Finance.com 09/06/2016)

The company’s misery didn’t end after that Q3 update, and by the middle of February FirstGroup had fallen all the way to an all-time low of 79p. However, from this point onwards things began to pick up; just as the wider turmoil dragged it down at the beginning of the year the market-wide recovery in the back end of February saw the stock climb to 95p by the start of March. The stock stayed at that level until the end of the month, lifting back to the £1 mark for much of April and the start of May.

The stock then built up a real head of steam in the second half of May, investors jumping aboard as FirstGroup announced that from 2021 it will provide a London to Edinburgh rail service that rivals both budget airlines and Virgin Trains’ East Coast operation in price and speed. This news, the first unmitigated chink of light in a while, helped the stock graze £1.10, its best showing since the end of last year. FirstGroup sits at a current trading price of £1.07 (IT-Finance.com, 09/06/2016).

The fear now is that the company’s full year figures next Tuesday will halt the climb it has been on since the middle of February. The post-results reaction will likely hinge on the extent of the damage those aforementioned weather woes have done to the company’s operating profit, and whether FirstGroup has managed to sufficiently mitigate those costs in the final quarter of its fiscal year.

FirstGroup PLC has a consensus rating of ‘Hold’ with an average target price of £1.22.