Weakness in groundworks specialist Keller’s (KLR) share price looks overdone. With the constructor’s core markets still at an early stage of recovery, half-year results on 4 August should reveal the strength of underlying trading at the £648 million cap.

On a geographical breakdown, North America accounts for the majority of Keller’s revenues making up around 45% of earnings before interest and taxes (EBIT) Broker Investec expects continued strength in this market, beating the first half of 2013 by around 18%. This will be driven by ongoing positive momentum in the residential sector and growing momentum in the non-residential space. Though the broker warns that investors should expect some US operating margin attrition in the first half owing to weather disruption.

Because of the cyclicality of Keller’s business and the fact that the sector is still in the early stages of recovery, broker Liberum maintains that ‘plausible three to five-year margins scenario analysis illustrates earnings could recover a further 60%.’

Currency headwinds remain a concern and the appreciation of sterling against the dollar has had a translational impact on Keller’s earnings; a situation which is likely to persist in the second half. However, given the group’s pre-close update at the end of June flagged up no significant changes to the underlying trading picture, the 9% decline in the share price over the past three months to 919p looks unwarranted and puts Keller on an competitive price to earnings (PE) ratio of 12.6.

We agree with the bullish consensus that Keller could be an interesting recovery play.