Balfour Beatty's (LSE:BBY) first-half performance was "excellent", that's according to a note from Deutsche Bank, which pointed to power growth running ahead of its forecasts and an improving contribution from US construction.
The construction and infrastructure group raised its full-year guidance following the update, with underlying profit from its earnings-based businesses up 42% to £153 million.
DB analyst Jonathan Coubrough repeated a Buy rating and lifted its price target to 1,100p, from 990p, an increase of 11% and implying substantial upside on the last close of 865.5p.
The broker also flagged the completion of the compliance monitorship at Balfour Beatty's US military housing subsidiary as a significant positive, arguing it removes a cost overhang and could allow more value to be realised from that part of the portfolio.
Deutsche Bank has lifted its earnings-per-share forecast by 5% and raised its cash projections, feeding through into an updated sum-of-the-parts valuation behind the higher target.
Coubrough said he expects Balfour Beatty to continue delivering "one of the best" total shareholder returns in his coverage, forecasting a 9% three-year compound annual growth rate in pre-tax profit alongside a 7% distribution yield.
The upgraded outlook builds on guidance the company had already flagged in a May trading update, when it pointed to strong demand and a forward order book in line with year-end levels; the group has since raised full-year guidance for earnings-based business profit growth to a low double-digit percentage, ahead of its previous high single-digit forecast.
