Rail and bus operator Stagecoach plc (LON:SGC) can no longer be relied upon to beat estimates, says broker Shore Capital, which has downgraded the stock to 'hold' from 'buy'.
"Revenue growth remains elusive and negative earnings momentum persists," said analyst Martin Brown.
Last month, the firm revealed profits for the year to April 29 had plunged after it took an £84.1mln exceptional charge related to losses in the east coast rail franchise in which it has a controlling stake.
Pre-tax profits fell to £17.9mln from £104.4mln in the previous year.
"The group’s bus operations continue to struggle and while there is the possibility of winning further rail franchises, there would not appear to be an easy way for the group to turnaround its recent spate of downgrades, with volume and revenue growth remaining elusive at its UK bus operations, investors are unfortunately going to have to take a long term view," said the analyst.
Brown's sum-of-the parts valuation for the firm suggests 14% downside to the current share price, hence the decision to downgrade.
Shares today nudged 0.26% higher at 192.9p.