UPDATE 2-FirstGroup outlook hampered by U.S. weakness

* Predicts moderate earnings growth in 2010-11

* Analysts had forecast 2010-11 growth of 15 percent

* Sees in-line 2009-10 results despite bad weather hit

* Shares down 5.5 percent

(Recasts, adds company, analyst comment, shares, detail)

By Rhys Jones

LONDON, March 31 (BestGrowthStock) – British transport operator
FirstGroup (FGP.L: ) said it expected moderate earnings growth in
2010-11, with its underperforming U.S division likely to
continue to weigh on the business, sending its shares down.

“Looking ahead to the new financial year the global economic
outlook remains uncertain and in particular we expect to see
continued pressure on public spending budgets in North America,”
chief executive Moir Lockhead said on Wednesday.

“Against this backdrop we expect moderate earnings growth.”

“The market was looking for growth of around 15 percent,
which does not appear to come under the category of moderate,”
Arbuthnot analyst Gerald Khoo said.

FirstGroup shares were down 5.5 percent down at 353.6 pence
by 0800 GMT, their lowest level for six weeks and valuing the
business at around 1.7 billion pounds ($2.6 billion).

FirstGroup said sales at its U.S. Greyhound bus business
would be down 14 percent down for the year to end-March due to
the continued weakness of the North American economy, while
revenues at its U.S. contract division, which includes school
bus services, had not improved on last year.

It also expects to take a 16 million pound hit from recent
severe weather in Britain and North America, although it still
expects to meet full-year earnings targets.

“Since the third quarter, underlying performance has been in
line with our expectations and the group is on course to achieve
its earnings and cash targets for the year,” said Lockhead.

FirstGroup said underlying sales at its British rail
business, which includes the Great Western franchise running
into central London, had grown in the past three months and
would be 2.1 percent up for the year, while annual British bus
revenues would be 1.8 percent up.

Market expectations for 2009-10 pretax profit are in a
197-272 million range, with an average of 244 million, according
to Thomson Reuters I/B/E/S.

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(Editing by Victoria Bryan; Editing by Dan Lalor)
($1 = 0.6635 pound)

UPDATE 2-FirstGroup outlook hampered by U.S. weakness