Negative reaction to Balfour Beatty PLC (LSE:BBY)’s interim results could be excessive, according to Liberum analysts.
Following Balfour’s interim update last Wednesday, which showed a 6% fall in pre-tax profit to £80 million and 7% reduction in order book value, shares in the construction giant closed down 11%.
“We can see why the price fell, but the fall looks overdone,” Liberum said in a note.
Shareholder returns in the region of £208 million will likely put “upward technical pressure” on Balfour’s stock, the investment bank explained.
Lower margins than its peers leaves Balfour with scope for improvement meanwhile, while the likes of energy infrastructure contracts in the UK could also offer upside.
Backing the construction firm, analysts reiterated a share price target of 475p – up 51.6% on Friday’s closing price.
“We continue to believe that Balfour’s balance sheet strength is a source of competitive advantage,” Liberum continued, pointing to the company’s own expectations that full-year net cash will sit between £650 million and £700 million.
“The order book remains robust,” the bank added, “there is still plenty of work to go for.”