What drove the Transurban share price higher on Monday?

Let's check why the toll road operator's performance beat the ASX 200 on Monday.

| More on:
Many cars travell on a busy six lane road way with other cars in the background travelling in the opposite direction, going the other way.dway

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Transurban share price outperformed the ASX 200 on Monday
  • The toll road operator held an investor day to outline the latest insights into the business
  • The company reported traffic volumes are increasing as COVID-19 effects subside

The Transurban Group (ASX: TCL) share price outperformed the S&P/ASX 200 Index (ASX: XJO) on Monday. The ASX 200 fell 1.18% yesterday while Transurban shares managed a gain of 0.5%.

For readers who haven't heard of Transurban, it's a toll road business that builds and operates toll roads in Australia and North America. The weighted average concession life of Transurban's roads is around 30 years.

It aims to balance growth in distributions over time and investment in new opportunities to increase long-term value.

Transurban released an investor update with comments about the current operating conditions.

West Gate Tunnel project

Transurban told investors about the progress it has made on its West Gate Tunnel project in Melbourne. When completed, the tunnel will be an alternative route to the West Gate Bridge. It will feature around 70km of new traffic lanes and connect to CityLink, another road operated by Transurban.

It's expected to save up to 20 minutes per trip.

The first tunnel boring machine has excavated around 550m of the outbound tunnel. The second boring machine commenced tunnelling and excavated around 150m of the inbound tunnel.

More than 70% of the widening works on the West Gate Freeway have now been completed. The company also said that more than 600 metres of the new elevated roadway above Footscray Road has been built.

Transurban Traffic update

Transurban is expecting near-term and long-term traffic growth with the ongoing economic recovery after COVID-19 and new asset capacity. The lifting of the remaining government restrictions is expected to help.

Traffic changes can have an influence on the Transurban share price and profitability.

The company's traffic stats showed that Easter traffic in Sydney and Brisbane was higher than in 2019. Indeed, consistent growth has been seen in these two cities since the beginning of March 2022.

However, in 2022 so far, Melbourne and North American traffic has largely been lower compared to 2019.

Transurban noted that airport-exposed roads were some of the most COVID-impacted, including Transurban roads in Sydney and Brisbane.

However, there are expectations for traffic to recover on airport corridors with the return of domestic and international travel.

Commercial traffic has been resilient, according to Transurban, thanks to e-commerce and construction. Large vehicle traffic has been relatively steady.

Transurban also points to the benefit of the public's continued preference for private transport over public transport for daily use. The latest NSW public transport data shows public transport volumes down almost 60% compared to July 2019.

The company also said that a permanent and total shift away from the workplace is unlikely.

Fuel prices and inflation

There has been much market talk about the higher fuel prices. Transurban said that fuel price movements have "limited near-term influence on traffic volumes". The business said that there are other factors that have more influence such as population growth, the employment rate, wage growth, and tourism levels.

However, Transurban acknowledged that over the longer-term, higher fuel prices may have a flow-on effect on the broader economic growth.

The toll road operator said that the average toll spend remains a "small" proportion of typical household expenditure, though it noted the cost of living pressure.

Transurban noted that it has inflation-linked toll escalations, which provide "protection in a rising interest rate environment and would likely result in a net benefit over the near term".

Distribution

The Transurban FY22 distribution is expected to be in line with its 'free cash', excluding capital releases.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

A happy girl in a yellow playsuit with a zip gives the thumbs up
BNPL shares

Is this why the Zip share price keeps breaking records?

Zip shareholders have been enjoying a record breaking year. Is this why?

Read more »

A man and a woman sit in front of a laptop looking fascinated and captivated.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a volatile, but positive, day for ASX shares this Thursday.

Read more »

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Block, GQG, Neuren, and Sigma shares are racing higher today

These shares are rising on Thursday. But why?

Read more »

Happy shareholders clap and smile as they listen to a company earnings report.
Share Gainers

Why Brainchip, Cooper Energy, Core Lithium, and Neuren shares are roaring higher today

These shares are having a good time on hump day. But why?

Read more »

Unsure man analysing data on laptop.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors endured a rough day of trading this Tuesday.

Read more »

A mature-aged couple high-five each other as they celebrate a financial win and early retirement
Share Gainers

Why this ASX 300 stock is soaring 12% after a disastrous year

This company has had a dramatic reversal of fortunes this Tuesday...

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
Share Gainers

Why Core Lithium, Imugene, Lifestyle Communities, and Mineral Resources shares are charging higher

These shares are having a good session. What's going on?

Read more »

A young woman smiles as she rides a zip line high above the trees.
Share Gainers

4 ASX All Ords shares up 315% to 682% in a year!

Investors have sent these ASX All Ords shares flying higher. But why?

Read more »