Eagers Automotive Ltd (ASX: APE) shares are in focus today after giving an update showing the recovery is driving forward.
What is happening?
Eagers Automotive decided to give guidance for the 12 months to 31 December 2020.
The company expects to deliver underlying operating profit before tax from continuing operations in the range of $195 million to $205 million, compared to $100.4 million in the prior corresponding period.
This guidance reflects the first full year of trading for the enlarged company after acquiring Automotive Holdings Group (AHG).
How’s the car market going?
Eagers said that vehicle sales have continued to rebound strongly from the historical lows experienced during April and May 2020 when national COVID-19 restrictions were in place.
Management revealed that customer orders have continued on a strong trajectory and supply constraints caused by global manufacturer closures during the June quarter have started to ease as demonstrated by the 12% uptick in national vehicle deliveries recorded during November by VFACTS.
The industry’s tight inventory position, combined with the company’s cost reduction initiatives implemented after the merger with AHG, and in response to COVID-19, have driven Eagers Automotive’s strong underlying trading performance.
Summary thoughts
For Eagers shareholders, it’s good to see that the company and industry is recovering strongly. I’m not sure how long this will last, it’s not normal for car sales to grow this strongly over a shorter-term timeframe.
But there are other ASX growth shares that could be an even better turnaround idea such as A2 Milk Company Ltd (ASX: A2M).
