Stagecoach shares rise as it lifts earnings forecast after UK rail businesses beat expectations

Shares in Stagecoach have risen this morning after the company raised earnings forecasts following stronger growth in its rail businesses.

The transport operator said the better-than-expected performance of its UK rail division would lead to an annual profit boost.

In May last year the government stripped Stagecoach of its Virgin East Coast contract for trains between London and Edinburgh.

Read more: Stagecoach to sell off struggling US division for $271m

Excluding the Virgin East Coast route, like-for-like revenue growth rose 1.4 per cent in the 40 weeks to 2 March, up from 0.4 per cent in the first half of the year.

Like-for-like revenue in Virgin Rail, in which Stagecoach holds a 49 per cent stake, also climbed 6.7 per cent.

The firm’s regional UK bus operations also enjoyed strong revenue growth of 3.4 per cent over the same period, and Stagecoach expected that to grow as market share increases.

Shares have jumped almost six per cent to 163.7p this morning after the company reported “strong trading and positive progress” in its UK rail business so far this year.

In December the company said it expected profit to be 18.3p per share for the year to April but that forecast has now been raised in today’s trading update.

Read more: Government strips Stagecoach of Virgin East Coast franchise

“Stagecoach seems to be getting its house in order as it tries to make the business leaner and meaner. At the same time trading in its rail arm is improving, all helping the share price to chug higher,” AJ Bell analyst Russ Mould said.

“Management are having to work hard to ensure the trimmed down business still makes money, clearly giving up the dream of mass scale in preference of making positive earnings from a smaller, more manageable base,” he added.