ARB climbs wall of worry

ARB Corporation enjoyed it best one-day jump in 3½ years after posting stronger-than-expected earnings and reassuring investors that the demise of the local car industry would not impact earnings.

ARB Corporation (ARB) enjoyed it best one-day jump in 3½ years this afternoon after it posted stronger-than-expected earnings and reassured investors that the demise of the local car industry will not impact on earnings.

The stock jumped 6.8% to $11.53 at around 2pm AEDT as investors cheered the four-wheel drive accessory maker’s 1% uplift in sales to $148.5 million for the six months to end December as growth in its export market and the Australian aftermarket more than offset the decline in from local original equipment manufacturers (OEMs).

The OEM market is shrinking due in part to poor demand from mining industry customers for items like bull bars.

However, margins are under pressure, causing net profit to slip 3.6% to $20.2 million, but that is still slightly better than consensus estimates of $20.1 million. Management also lifted its interim dividend by half a cent to 13 cents a share.

A few brokers had downgraded the stock early this year on valuation concerns and the stock is still down over 7% on a 12-month basis despite today’s strong rally.

There will likely to be only modest changes to analysts’ earnings forecast from the group as management has given no guidance except to say that ARB is “well positioned to achieve on-going success”.

Check out this evening’s Eureka Report article on the wider consumer discretionary market.