National Express (GB: NEX) recently posted its half-year results for FY 2022. The group’s revenue stood at £1.32 Billion, up 33% year-over-year. Earnings improved 54.3% from the same quarter last year to £197.8 Million.
NEX posted an operating profit of £42.3 Million against a loss of £26.1 Million last year. The losses were a result of nationwide travel restrictions that led to the disruption of many services.
Meanwhile, revenues were driven by the company’s coach business, especially in the UK and Spain, where airport transfer services are operating in full swing.
National Express’ Spanish subsidiary, ALSA, has also shown good progress in HY 2022 in terms of revenues and profits. ALSA operates buses across Spain, Morocco, Switzerland, Portugal, and France. Its revenues stood at £444 Million, up from £287.3 Million in HY 2021. Operating profits jumped to £50 Million from £17 Million a year ago.
Overall, the stock is trading down 33% in the last year.
Promising outlook
The company’s outlook looks promising as public transport is back in action due to high travel demand. In the medium term, the company expects its bus business to gain more momentum, triggered by high inflation and cost of living.
National Express has a huge bidding pipeline of £2.1 Billion and has won around 16 contracts from which it expects £150 Million in revenues. These contracts are spread over its services under ALSA and its North American shuttle business.
The shuttle business in North America witnessed revenue growth of 28% and nine out of 16 contracts in its kitty. However, the driver shortage in the region poses some headwinds and could impact profits. The hiring of more drivers in the region is a top priority for the company. With an average wage increase of 12%, it is hopeful to overcome this problem and serve the contracts with full force.
Ignacio Garat, group chief executive, said, “The path ahead will not be without challenges. We believe, however, that we are well positioned in an inflationary environment; resilient to slowing economic growth; and are taking all the steps we can to mitigate the industry-wide shortage of school bus drivers in the US. Whilst mindful of these challenges, we maintain our full year guidance and continue to anticipate reinstating a full year dividend in respect of FY 2022.”
View from the city
According to TipRanks, National Express stock has a Strong Buy consensus rating based on four Buys.
NEX’s average price forecast of 306.3p represents a 69.6% change in the price from the current level. The price target has a low and a high forecast of 240p and 350p, respectively.
Owen Shirley at Berenberg Bank, who has a Buy rating on the stock, has recently cut his price target from 300p to 240p.
Concluding thoughts
The rising fuel prices, which come with mounting inflation, will force travellers to use more buses and trains. This makes an attractive case for the company’s future revenue growth. Meanwhile, the bidding pipeline and contract wins provide more confidence to the stakeholders of the company.
Read full Disclosure
