The Austal Limited (ASX: ASB) share price rose more than 10% this morning after the company released FY19 and FY20 guidance after market close yesterday. Here’s what you missed.

About Austal

Austal is a shipbuilder and global defence contractor that designs and constructs advanced commercial and defence vessels. Austal is Australia’s largest defence exporter and the world’s largest aluminium shipbuilder.

In its 30 years of operations, Austal has constructed more than 300 commercial and defence vessels.

FY19 Guidance

In a statement today, Austal maintained previous its guidance for FY19 revenue of between $1.8 and $1.9 billion and now expects earnings before interest and tax (EBIT) of approximately $92 million. The video below explains what EBIT is.

These figures represent revenue growth of between 29.5% and 36.7% and EBIT growth of 41.5%. This is roughly in line with FY18 EBIT growth of 42.8%. An EBIT growth rate faster than the revenue growth rate suggests margins are improving and Austal is becoming more profitable.

FY20 Guidance

Austal does not typically release EBIT guidance, but they have chosen to do so for FY20, estimating EBIT of no less than $105 million. This represents a growth rate of no less than 14.1% over the estimated FY19 EBIT.

The growth is expected to be derived from Austal’s Australasia shipyards and strong performance in two major vessel programs for the US Navy.

Austal will provide a more detailed FY20 outlook with the release of its FY19 results on 30th August 2019.

Is It A Buy?

Austal shares are up more than 10% today and at a price of $3.95, they are up 106.8% year-to-date. The growth rates of revenue and EBIT are impressive, although it should be noted that the EBIT growth rate is expected to fall substantially in FY20 according to the company’s estimates.

As for the share price, it is difficult to judge whether shares are fairly valued or not as Austal is Australia’s only listed shipbuilder and as such there are no direct competitors on the ASX to compare it to.

Despite the growth rates, I would consider Austal to be outside of my circle of competence, so I’d personally rather invest in one of the companies mentioned in the free report below.


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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.