Transurban Group's (ASX:TCL) fiscal 2026 proportionate earnings before interest, taxes, depreciation, and amortization and revenue growth were both below market expectations, but the company's cost performance remains strong, Jefferies said in a Thursday note.

The company issued fiscal 2027 distribution guidance of AU$0.72 per share, above the fiscal 2026 distribution of AU$0.69.

It also disclosed that free cash coverage is expected to be slightly below the normal 95% to 105% target range due to the M5 West ownership changes, indicating that management is focusing on distribution per share growth during a transitional earnings period, the equity research firm said.

Group average daily traffic increased 2.2% with North America being a standout market. Sydney remained subdued but did show an improvement in momentum through June and July, Jefferies said.

"Transurban still has a solid growth pipeline, but the challenge remains the ability to deliver stronger free cash flow growth to maintain the current security price," it added.

Jefferies maintained a hold rating on Transurban Group with a price target of AU$13.69.