SGC.L Share News (SGC)

(Sharecast News) - Analysts at Jefferies downgraded transport group Stagecoach from 'hold' to 'underperform' on Friday as it reflected on the changing perimeter of the business.Given the short-dated nature of Stagecoach's contracted rail franchises, Jefferies said it was "keeping a close eye" on the group's non-rail metrics.The analysts emphasised that Stagecoach's bus operations were now driving the group's long-term value debate, explaining that, given the short-term profile of Stagecoach's rail portfolio, as well as the volatility associated with rail earnings, and the ongoing political uncertainty regarding the future of rail franchising in the UK, investors should focus more on the remaining bus businesses as an indicator value and potential growth.Jefferies believes Stagecoach's less well-positioned regional bus portfolio risks lower top line growth, which when combined with ongoing cost inflation pressures, led the broker to apply a 15% valuation discount versus its base case multiple, resulting in a 125p target priceWhen discussing ongoing concerns in the company's UK bus business, Jefferies cut its EBIT forecasts for Stagecoach by 3% for its regional operations and 17% for its London-based unit to reflect its more cautious view on the sustainability of top line growth in the company's regional operations, given regional positioning and volume declines, as well as wage and fuel cost inflation headwinds."On a Group level, we lower our FY21E adjusted EPS estimates by 9%, reflecting the above ongoing headwinds in bus. We maintain our SOTP valuation method, applying a discount to our sector 'base' EV/EBIT multiple to reflect the above challenges," concluded Jefferies.