Breedon Aggregates (LON:BREE) had a bumper first half of the year and is tipped by broker Cantor Fitzgerald to continue outperforming.
The aggregates group saw exceptional performances in both England and Scotland as interim sales and profits surged ahead, and Cantor’s Ian Osburn sees nothing on the horizon to provide road bumps to Breedon’s progress.
The group sold 4.5mln tonnes of aggregates in the six months to the end of June (up from 3.6mln tonnes the year before), 0.9mln tonnes of asphalt (2014:0.7mln) and 0.4mln cubic metres of ready-mixed concrete (2014: 0.3mln).
Peter Tom, executive chairman, said: "Assuming that current trading conditions continue through the second half of 2015, we believe that market expectations for the year will be exceeded."
Cantor concurs with this view and even goes as far to say that, even after raising expectations for the year, Breedon should continue to beat consensus expectations so long as price competition does not become too fierce.
The broker has seen little sign thus far of that happening and so has felt confident enough to hike its earnings per share (EPS) forecast for the current financial year – 2015E in broker parlance – and for 2016E.
The EPS forecast for the current year is raised by 23% while next year’s is lifted by 15%, prompting a revision in the target price (TP) from 55p to 60p, which implies a little bit more than 15% upside from the current share price, thereby justifying Cantor’s ‘buy’ recommendation.
“We also note that closing acquisitions at the same rate as recent years could increase our TP by a further 8p or 13%,” investment analyst Ian Osburn said.
Breedon’s shares enjoyed a strong run ahead of the publication of the full-year results on 23 July, rising from 48.56p at the end of June to 52.5p the day before the results announcement, but have faded a little since then.