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Reece share price surges higher on profit guidance

The Reece Ltd (ASX: REH) share price has surged 3.53% higher on the ASX this morning, following yesterday’s profit guidance announcement.

What did Reece announce yesterday?

Reece provided its Q1 2020 sales update headlined by an 8.8% increase in sales revenue to $1,501 million. This translated to 4.9% quarterly sales growth on a constant currency basis for the Aussie plumbing group.

Reece’s earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be in-line with guidance for 1H 2020.

CEO Peter Wilson cited the “moderating environment” in Australia as the company grows sales in-line with expectations in the United States.

The Reece share price edged 0.4% higher yesterday following the afternoon announcement, before rocketing in early trade today.

What else is moving the Reece share price?

Reece also released the results from its 2019 Annual General Meeting (AGM) after yesterday’s close.

Chairman Alan Wilson noted record sales revenue up 103% to $5.5 billion with normalised EBITDA up 38% to $522 million for the year. Worsening economic conditions have failed to bite just yet as normalised net profit after tax (NPAT) climbed 6% to $238 million for FY19.

Given today’s share price climb, investors seem pleased with the company’s direction following the AGM.

How have Reece shares performed this year?

It’s been a rollercoaster year for Reece shareholders with the company’s share price particularly volatile in 2019.

Reece shares are trading at $10.27 at the time of writing, having climbed 5.33% higher throughout the year.

That represents a significant underperformance against the S&P/ASX 200 Index (INDEXASX: XJO), which is up 20.05% so far this year.

Foolish takeaway

Despite the volatility in 2019, the company’s shares look to be rebounding solidly this morning on the ASX.

If you’re interested in buying Reece shares, here are a few factors you might want to consider before diving in.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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