Elders share price lower following after-hours FY19 update

The Elders Ltd  (ASX: ELD) share price has dropped 2.63% lower this morning after providing an after-market FY19 earnings update on Thursday evening.

What was in the announcement?

Elders announced that despite challenging conditions experienced with the ongoing drought in the eastern states and northern Queensland flooding, it expects to deliver earnings before interest and tax (EBIT) to come in at $72-$75 million for the 12 months ending 30 September 2019. These numbers are based on publicly-available forecasts from the Australian Bureau of Meteorology and the Australian Bureau of Agricultural and Resource Economics and Science.

This is likely to come in slightly below the FY18 underlying EBIT of $74.67 million unless the figures are at the top-end of the range.

Management is forecasting underlying net profit after tax (NPAT) is expected to be within the $61-$64 million range compared to FY18 NPAT of $63.7 million.

Elders expects the first half 2019 (1H19) result for the 6 months to 31 March 2019 to be materially lower than the prior corresponding period (pcp) EBIT of $45.7 million. This result has largely been driven by lower wool volumes and increases in costs associated with footprint growth and continued Eight Point Plan investment.

Retail earnings for the first half are expected to be consistent with 1H18 with reduced summer cropping offset by growth initiatives including backward integration through Titan.

Is the Elders share price a Buy?

The Elders share price has fallen 16% so far this year to $5.92 per share, which is down 33% since November 2018 and nearing its 52-week low of $5.76 per share.

With a fully-franked 3% dividend yield and trading on a price-earnings (P/E) ratio of 9x, Elders looks particularly cheap from a relative value perspective. I’m not particularly bullish on agribusiness at this point in the cycle given the share price volatility seen in the likes of Costa Group Holdings Ltd (ASX: CGC) and Graincorp Ltd (ASX: GNC).

For those who are looking for growth outside of agribusiness, I’d check out these top growth shares that have been tipped as market beaters.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended Elders Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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