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National Express buoyed by overseas earnings

The rail and bus operator is growing its international business, much to the market's delight
February 24, 2017

Bus and rail operator National Express (NEX) is deriving more of its income from outside of the UK, which has arguably helped fuel a substantial rise in the share price over the last 12 months. Last year the group did well in North America, Spain and Morocco, with revenue up by 14 per cent for the former and 5.7 per cent across the latter two, all at constant currencies. Overall, group numbers comfortably beat market expectations. Including the now-discontinued UK rail operations, adjusted pre-tax profit of £175m came in nearly £10m ahead of consensus forecasts, while EPS of 27.3p beat estimates by 1.5p.

IC TIP: Buy at 351p

Much of the group's overseas growth has been fuelled by acquisition. In total, National Express completed 11 deals last year, all of which are expected to be earnings accretive within the first 12 months. Management says it is more than willing to consider more transactions this year, particularly in light of the additional resources provided by the sale of the c2c rail franchise.

Analysts at Liberum expect pre-tax profit of £189m for the year ending December 2017, giving EPS of 28.7p, compared with £175m and 27.3p in 2016.

NATIONAL EXPRESS (NEX)
ORD PRICE:351pMARKET VALUE:£1.8bn
TOUCH:350.9-351.1p12-MONTH HIGH:379pLOW: 255p
DIVIDEND YIELD:3.5%PE RATIO:15
NET ASSET VALUE:216p*NET DEBT:78%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121.8369.811.89.5
20131.8964.411.19.8
20141.8766.511.610.3
20151.7512320.911.3
20162.1013623.012.3
% change+20+11+10+9

Ex-div: 27 Apr

Payment: 19 May

*Includes intangible assets of £1.55bn, or 303p a share