FirstGroup PLC (LSE:FGP) shares jumped early on after the rail and bus operator tipped full-year results would come in ahead of expectations on stronger-than-anticipated summer demand.
Adjusted operating profit should come in between £14 million and £20 million ahead of previously laid out guidance for financial year 2024, First said on Wednesday.
Expectations had been for a “sequential improvement” in bus operations, which generated an operating profit of £58.4 million in the year to March 2023, alongside a broadly flat performance in rail operations, following last year’s £124.8 million profit.
However, FirstGroup’s Lumo and Hull train divisions enjoyed a boost from increased leisure travel over the summer, the group explained.
New contracts with the Department for Transport have proven to be more valuable than last year, meanwhile.
In FirstGroup’s bus division, strong volumes and productivity improvements saw trading exceed expectations during the six months to September, the company added.
“Our updated outlook for 2024 reflects a strong performance in our rail division, which is a testament to [...] our teams,” chief executive Graham Sutherland commented.
Analysts backed FirstGroup following the profit upgrade, with Liberum and Peel Hunt both also pointing to likely savings from the firm’s move to end contributions to government pension funds.
“We are encouraged by the positive earnings momentum and we would not be surprised to see further upside,” Liberum commented after the update.
The investment bank raised FirstGroup’s share price target from 180p to 185p as a result, implying growth of 26% on Tuesday’s close.
Peel Hunt offered the same target price, reiterating backing for FirstGroup following what it described as a “clearly positive” update from the transport firm.
Shares in FirstGroup climbed to 152.30p on Wednesday, with the group set to unveil interim results on 23 November.