Stagecoach to top forecasts

LONDON (Reuters) - Stagecoach Group (SGC.L) expects to beat analysts' earnings forecasts, driven by a strong performance in its rail operations, and will invest in more environmentally-friendly buses, it said on Monday.

Shares in the transport group surged as much as 7.1 percent to 237 pence in early trading.

Stagecoach said it now expected earnings per share before one-off items for the year ending April 30 to be about 20 pence.

This compares with a median forecast of 16.7 pence, within a range of 15.5 to 17.9 pence, according to a Reuters Estimates poll of 12 analysts.

Stagecoach said the outperformance was led by its rail businesses, including a strong start to East Midlands Trains, which it began operating on November 11.

Its Virgin Rail joint venture was also seeing strong revenue growth and had settled a number of contractual matters with rail network operator Network Rail, which added to profits, it said.

Cazenove analysts said they were likely to raise their 15.5 pence-a-share earnings forecast by about 30 percent and that the positive new could help further boost the transport sector after a similarly upbeat update from Go-Ahead Group (GOG.L) last week.

At 8:15 a.m. BST, Stagecoach shares were up 6.2 percent at 235 pence, valuing the business at about 1.7 billion pounds. Go-Ahead was up 1.8 percent at 1,686 pence and National Express (NEX.L) up 1.4 percent at 928.5 pence.

"We are encouraged by the current trading performance of the group and, whilst we are mindful of macroeconomic developments and of continuing cost pressures such as increased fuel prices, the outlook remains positive," Stagecoach said in a statement.