National Express Group (LSE:NEX) — a well-recognised coach company delivering services in the UK, Continental Europe, North Africa, North America and the Middle East — is flying low, with its shares currently sitting around 230p, more than 50% down from their soaring heights before Covid.
The latest half-year results were ahead of expectations, which is surprising when you consider the UK March lockdown. Profits are not yet back up to pre-pandemic levels but National Express has historically shown resilience, and (largely due to £100m worth of cost savings) it has managed to show a half-year operating profit of £54m. I believe it’s only a matter of time before it demonstrates how recoverable it is, and I believe that end-of-year results will support this prediction. I consider this a potential recovery stock.
The case for
Understanding that the world into which we’re emerging will not be the same one we left behind a couple of years ago, a world into which our increasingly ageing population are travelling more cautiously, and perhaps do not yet feel ready to venture abroad, gives me confidence in National Express shares. Also air flight is environmentally unpopular and will probably never return to what it once was. Maybe this is a good thing (unless you hold shares in the likes of IAG).
The phrase ”staycation“ was pinned to everyone’s lips last summer, and is likely to stay there for a few summers to come, so coach travel may become the preferred option for many.
Merger with Stagecoach
It’s an ambitious company too. Its restlessness in regards expansion is clear, most recently through the proposed merger with Stagecoach Group announced on 21st September. Both companies’ share prices shot up at the time it was announced, but have since drifted. Now a new deadline has been set for 14th December in order to make clear and final their intention to merge. Such a merger has clear advantages i.e. cutting down on duplicate routes, office space and staff, and adding buying clout for future expansion plans.
Case against
There are potential negatives of course. Firstly the upward travel of the price of fuel, which some expect to reach above $100. There is the potential for another lockdown, which would clearly have an impact on all travel companies, including National Express. Then, even without the lockdown, there is still the chance that people are just more reluctant now to travel by shared means, sitting next to strangers.
Aside from my fond memories of student journeys up the M1, getting home for Christmas for under a tenner, I like this share. It’s a safe buy for my portfolio in my opinion, and if the merger does happen it could trigger a good recovery.
Alex Crisp has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
