Australia | Jan 30 2008
By Chris Shaw
With sub-prime and credit market issues and fears of a US economic slowdown impacting on global growth the scene is set for an important profit reporting season in Australia, so for the optimists it was a good start thanks to a better than expected result from GUD Holdings ((GUD)).
The company announced normalised interim earnings of $23.5 million, a result up more than 36% from the previous corresponding period and almost 20% above the forecast of Credit Suisse.
The broker attributed the better than expected performance to increased market share, particularly from the Sunbeam division, and improved margins thanks to solid cost control across the group’s businesses.
The one disappointment according to both CS and JP Morgan was the water division, the latter suggesting that market may have peaked for the time being especially given recent solid rain.
To top things off management now expects EBIT (earnings before interest and tax) growth for the full year to be at the upper end of its previous guidance range of an increase of 10-15%, to which a number of brokers have reacted by lifting forecasts.
UBS has upped its FY08 EBIT forecast by 2.9% and in FY09 by 4.8%, putting its earnings per share (EPS) forecasts at 72c this year and 78c in FY09 compared to 60c in FY07.
Similarly JP Morgan has lifted its EBIT estimate for the current year by 4% and now has EPS forecasts of 62c and 76c, while 5% and 9% increases to estimates in FY08 and FY09 leaves ABN Amro forecasting EPS of 70.7c and 74.7c respectively.
While this is a positive it has not been reflected in changes to ratings as the FNArena database shows the stock as now scoring six Hold ratings, the only change being ABN Amro neutralising what had previously been a Sell rating given the improved margin outlook and support from an attractive dividend yield.
UBS has cut its price target to $10.00 from $11.90 to reflect a contraction in global peer multiples given the recent equity market volatility, this change bringing down the average price target on the stock according to the FNArena database to $10.29 from $10.78. By way of comparison Thomson One Analytics had a pre-result median price target on the shares of $10.50.
Shares in GUD today are stronger as the market reacts positively to the result and as at 11.05am the stock was up 10c at $9.93.