Weekly Reports | 10:00 AM
The challenges being confronted by investors from higher inflation and energy costs as well as AI-disruption are creating both unlikely opportunities and possible threats.
- A record pipeline of contracts for Acrow
- Eagers finds upside to an energy crisis as EV sales soar
- AI an ever present challenge and opportunity for Catapult
By Danielle Ecuyer
This week’s quote comes from John Authers, Bloomberg
"Wednesday's rally is a straightforward reaction to the big reduction in “left-tail risk,” meaning the worst possible outcomes are much less likely.
"But the rates market shows a belief that costs have increased, and will likely rise further as a result of the extremely murky compromise that has brought the ceasefire.
"That points to lower profit margins ahead."
Acrow's outlook just picked up
Analysts have been stressing the importance of the upcoming earnings reports and quarterly updates for any indications of changes in the outlook, post the start of war in the Middle East.
Investors took heart from the recent market update and confirmation of FY26 revenue and earnings (EBITDA) guidance from management at Acrow ((ACW)), who noted an improving trend in construction activity across Australia.
The sales pipeline stands at a record $256m; sufficient for management to give a heads up to initial FY27 guidance with revenue of $335m-$350m and earnings (EBITDA) of $88m-$98m.
This compares to FY26 revenue guidance of $315m-$325m and earnings (EBITDA) of $80m-$84m or, in Shaw and Partners' words, “implying solid growth year on year”.
Over March, the contractor secured hire contracts worth $14.3m, which is the highest monthly value of contract wins in the company’s history, well above the previous record of over $2.5m.
The wins boosted the pipeline as noted, representing a gain of 34% on the prior year.
The improvement in trading conditions has been particularly noteworthy in the Queensland formwork business. Shaw points to the highest level in over a year, placing Acrow in a solid position for momentum being retained into FY27.
A slight downgrade has been applied to the FY27 revenue forecasts of -2.8% to align with guidance, but earnings (EBITDA) estimates remain unchanged.
Target price $1.25. Buy.
EVs rev up Eagers' sales momentum
As investors sift through the multiple macro scenarios against a backdrop of rising inflation, an energy crisis, higher interest rates and ongoing uncertainty, brokers are adjusting to another heightened period of volatility with some counterintuitive ideas, or are they?
Jarden and Canaccord Genuity were both on the front foot when it came to updating their take on Eagers Automotive ((APE)).
March new vehicle sales data showed a decline of -2.6% y/y, but are still up 15.5% on a sequential basis, albeit, as highlighted by Canaccord, it is the fifth negative month over the year past.
This reinforces a view as described by Jarden as “the current macro looks tough for auto dealers”.
Rising interest rates, falling consumer confidence, as highlighted by the ANZ-Roy Morgan Australian Consumer Confidence survey, which lifted from its record low last week but, at 62.3pts, is at its second-lowest level since records began in 1973, on top of higher fuel prices are hardly conducive to higher value discretionary purchases.
However, as noted by both analysts, consumers are showing robust demand for fuel efficient vehicles, think hybrids and EVs, and demand surged in March, with Eagers’ two largest OEMs (original equipment makers) estimated to have represented 50%-plus of new car sales revenue.
Canaccord believes Eagers retains an 80%-plus market share for BYD sales, while Toyota, which is generating softer volumes due to supply constraint issues, is expected to generate stronger volume momentum from 2Q2026 onwards due to the robust order book.
Jarden expects volumes in EV and Plug-in EV (PHEV) brands to “surge” in the coming months and notes the key to sales is the doubling of these vehicle brand volumes from Jan-Feb to be continued for the balance of the half year.
Canaccord points to industry feedback that BYD sales are expected to be very strong over the next three months, with demand assessed as “substitution to battery EVs” rather than overall industry growth.
The rise in EV and PHEV brand sales has the scope to offset the profit decline elsewhere in the portfolio.
Regarding earnings, Eagers continues to retain a 2H skew, which is anticipated to be higher this fiscal year (2026), with also the CanadaOne acquisition and the delay in completion timing to the current quarter, meaning a full contribution for 2H2026 and three months in the first half.
BYD’s luxury brand Denza added around 300 units per month in the last two months and Canaccord anticipates this number will advance over 2H2026.
Jarden upgrades Eagers to an Overweight from Neutral, while trimming its target to $25.25 from $26.10 on EPS cuts of -6% and -7% for 2026 and 2027 predominantly due to the CanadaOne adjustment.
Canaccord retains a Buy rating and $32 target price.
FNArena’s daily monitored brokers have a consensus target of $30.433 with five Buy-equivalent ratings and one Hold.
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