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Keller Shares Surge on U.S. Construction Growth: London Mover

Keller Group Plc, the U.K. company that laid foundations for the CityCenter resort in Las Vegas, rose the most in more than a year after saying revenue growth in North America will beat the construction market as a whole.

The ground-engineering company’s shares surged 9.9 percent to 623 pence, the biggest gain since October 2011. It was the largest increase among the 11 companies on the FTSE All-Share Construction & Materials Index. About 3.7 million Keller shares traded, more than 27 times the three-month daily average.

“Key to the investment case has been the recovery potential in the U.S. and this is indeed now playing out,” Andrew Gibb, an analyst at Investec Securities with a buy recommendation on the stock, said in a note. “Momentum is with this stock,” Gibb said as he increased his share-price prediction to 710 pence from 500 pence.

Keller shares have more than doubled this year as the U.S. construction market recovers from years of declining spending. The London-based company, which gets about 40 percent of revenue from North America, said today it’s also performing well in Asia and that business is holding up in Europe and Australia although trading conditions remain challenging.

The company “performed strongly in the four months to the end of October, with results exceeding the board’s expectations,” Keller said in a statement.

Power Lines

There is “gradual improvement” in North America and the construction firm is benefitting from more work installing transmission lines, it said. Full-year revenue will probably rise almost 13 percent to 1.3 billion pounds ($2.06 billion), and profit before taxes will be “significantly above the current range of market expectations,” Keller said.

Gibb raised his earnings forecasts by 20 percent for this year and 8.5 percent for 2013.

“While concerns will resonate with the ongoing weakness in Europe and risks to the Australian resource sector, we believe Keller is well-placed,” Gibb said. “The balance sheet remains strong, the business is leaner and internal risk controls are stronger.”

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