Lend Lease shares have gained 9.6 per cent since July 1 when they were trading at $8.15. Now Citigroup analyst Guy Robinson recommends investors buy stock in the engineering and construction company.
The 21 per cent drop since May 14 in Lend Lease shares is overdone, says Robinson. He reckons Australian non-mining construction is improving while a US recovery spells better earnings for Lend Lease in the world’s biggest economy.
Lend Lease has $21 billion in contracts. The company’s earnings, says Robinson, will improve from 2015. Still, there is a possibility asset sales by Lend Lease will not reach its target of $170 million in 2013, while a higher tax rate in 2014, 20 per cent versus 6 per cent in 2013, combined with a slow down in Australian engineering work will work against profit growth in 2014.
The stock is trading at about 9.4 times Citigroup’s 2014 forecast earnings, making it cheap, says Robinson.
At 1011 AEST Lend Lease shares were up 13 cents, or 1.5 per cent, to $8.96.