Will June be a good month for the Transurban share price?

a man in a shirt and tie holds his chin in thoughtful contemplation and looks skywards as if thinking about something while a graphic of a road with many ups and downs unfurls behind him.a man in a shirt and tie holds his chin in thoughtful contemplation and looks skywards as if thinking about something while a graphic of a road with many ups and downs unfurls behind him.

The Transurban Group (ASX: TCL) share price is falling today, currently down 1.93% at $14.23. However, it remains 0.57% in the green over the last month of trade.

There’s been somewhat of a tug-of-war at both ends of the Transurban investment debate in recent weeks, with brokers on each side of the fence chiming in with their outlook.

Meanwhile, in broad market news, the S&P/ASX 200 Industrials Index (ASX: XNJ) has glided down 1% from the open today, extending losses this year to date to 3%.

So what’s next for the toll road operator’s shares? Let’s see what the brokers are saying.

Consensus split on Transurban outlook

While market sentiment has pushed to bullish regarding Transurban, analysts remain split on its next moves.

Investors have rallied the Transurban share price from a low of $12.12 in February to its current levels, closing as high as $14.77 in that time.

However, analysts are split at 40% each for buy and hold calls on the stock, with the remaining 20% urging clients to sell, according to Bloomberg data.

Meantime, the Credit Suisse team recently downgraded its rating on the company to neutral from outperform.

Despite Transurban’s relatively stable and predictable cash flows, the broker reckons it lacks pricing power amid the latest inflation outlook.

That, and the company’s cost on its debt is an average floating 4%, meaning it is likely to rise as interest rates on corporate debt rise.

Rates sensitivity is likely to remain an issue for Transurban, Credit Suisse says, amid these higher rates. Estimates on debt refinancing increase “debt cost[s] by around 4%, around 10%, and 15% in FY23, FY24, and FY25 respectively”.

Meanwhile, analysts at JP Morgan remain constructive on the Transurban share price, gaining “increased comfort” from the company’s March 2022 traffic update.

“Although this rebound is in part due to economies reopening and mobility returning, some structural factors (including heavy/commercial vehicle resilience, private vehicles over public transport) are at play and likely to drive continued growth, in our opinion,” the broker said.

Unlike its counterpart at Credit Suisse, the JP Morgan team sees a high correlation in Transurban’s link to inflation, a bullish catalyst in the short-term:

We highlight TCL’s favourable concession profile (both tenure and terms) with escalators often rising at the higher of inflation or 4%. With inflation anticipated to breach circa. 5% for three quarters in CY22 with approximately two-thirds of TCL’s network raising tolls quarterly, we believe this is an incremental source of upside near term.

The consensus price target for Transurban is $14.19 per share, per Bloomberg data. At its current levels, the upside appears to be limited.

Transurban share price snapshot

In the last 12 months, the Transurban share price has flatlined and is the same as it was a year ago.

It is up by 2.15% this year to date and by 3% over the past six months.

The post Will June be a good month for the Transurban share price? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Transurban Group right now?

Before you consider Transurban Group, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Transurban Group wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/oUZsA2i

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s