Best-performing share since Trump win does it again

Shareholders have done very well out of Hill & Smith. It's a ten-bagger many times over, and third-quarter results have just triggered another 9% surge in the share price.

In fact, the maker of road safety barriers, street lights and pipe supports is the best performing FTSE 350 share since Donald Trump's shock election victory, up 19%, and the likelihood of further colossal infrastructure spend in the US is creating excitement at the Wolverhampton-based firm.

HILS made over 40% of operating profit in the US during the first half of 2016, and it would clearly hope to get a slice of the $1 trillion (£800 billion) Trump has promised to spend on improving roads, bridges, airports and dams.

Management now thinks full-year results will be at the top end of market expectationsAlready thriving over the pond, HILS is making a fortune converting all those dollars earned back into much weaker pounds.

Underlying revenue rose 15% to £185 million in the four months to 31 October, with sterling's crash chipping in over £9 million. Strip out £12.7 million from acquisitions and a £6.8 million restructuring impact, and organic revenue growth was £9.2 million, or 5%.

Management now thinks full-year results will be at the top end of market expectations, causing a stampede among analysts to upgrade profit forecasts Thursday.

Jon Lienard at N+1 Singer rewrites estimates for adjusted pre-tax profit in 2016 to £67 million from £64.4 million, for 2017 to £73.4 million from £70.6 million, and up to £76.3 million for 2018. That gives adjusted earnings per share (EPS) of 64.6p, 70.8p and 73.6p, respectively.

Of course, the shares aren't exactly cheap on traditional valuation metrics - a forward price/earnings (PE) ratio of just under 18 for 2017 drops to a still-generous 17 on 2018 estimates. Last year it was more like 12-15 times.

However, commitments to major infrastructure projects both here and in the US make even these new forecasts vulnerable to upgrades as further details emerge.

Ahead of final results on 8 March, upbeat chief executive Derek Muir says: "Overall, conditions in many of our infrastructure end markets remain favourable and we continue to expect the Group to report good progress for 2016."

Across the business, the roads division - permanent and temporary road safety barriers, street lighting columns, bridge parapets and gantries - is benefiting from the UK government's £15 billion "road investment strategy". HILS said in September it was adding a further 10,000 metres of temporary barriers to meet demand in the second half of 2017.

Henry Carver, industrials analyst at Peel Hunt, ups his price target 50p to 1,370pIn the US, growing acceptance of HILS's steel temporary safety barrier helped improve results at the roads business there.

Transmission substation business is booming, too, demand from gas power plants beefed up profits at the American pipe supports operation, and the galvanizing unit picked up a "significant" number of smaller infrastructure jobs.

At around 1,257p, City analysts are largely bullish, undeterred by the lofty valuation multiple. Investec Securities upgrades its price target from 1,200p to 1,385p, Singer's Lienard sticks at 1,362p, while Henry Carver, industrials analyst at Peel Hunt, adds 50p to 1,370p.

"We continue to see HILS as a strong performer despite having enjoyed a strong run," writes Carver. "It continues to grow in strong, visible, infrastructure-related markets in the UK and the US and we see upside to our 2017 numbers."

Square Mile veteran David Larkam also likes the company's stable earnings and attractive fundamentals, although the valuation is "high enough for now," which explains his 1,100p price target.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.