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GUD (ASX:GUD) share price on watch after strong Q1 growth

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The GUD Holdings Limited (ASX: GUD) share price will be one to watch on Friday following the release of its first quarter trading update.

How did GUD perform in the first quarter?

When the products company released its full year results in late July, management revealed that FY 2021 had started positively.

At the time, the company advised that it had experienced double digit growth in Auto sales compared to the prior comparable period.

Management noted that this was being driven by a recovery of underlying demand and an unwind of reseller destocking.

At that point in time, the company expected this strong demand to moderate as major reseller restocking concluded and pent up end-user demand abated.

However, pleasingly for shareholders, that hasn’t been the case and its strong sales performance continued across both Automotive and Water divisions during the first quarter.

The Automotive business reported first quarter sales growth of almost 16% and the Davey business has delivered 10% revenue growth. The latter was driven by favourable agricultural conditions and rural demand in Australia. This has offset lower demand in New Zealand and notably slower sales to tourism dependent export markets.

As a result, first quarter group sales have increased approximately 14% over the prior corresponding period. This is despite government lockdown restrictions impacting sales in Victoria and the Auckland region.

Managing Director and CEO, Graeme Whickman, commented: “Our employees are focused on our businesses remaining compelling and resilient suppliers to our customers and ensuring GUD remains financially strong and thus well placed to respond to the opportunities such times may trigger – it’s clear that the operational costs and importantly incremental employee efforts have been notable, I’d like to go on record and thank them for their contribution through this challenging period.”

Outlook.

Due to the uncertainty caused by the pandemic, management warned that its first quarter sales performance cannot be extrapolated over the remainder of the financial year.

As a result, it believes it is inappropriate to provide half year or full year earnings guidance at this stage.

Incidentally, one broker that was pleased with this update is Goldman Sachs. This morning it retained its buy rating and lifted its price target to $14.75.

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Motley Fool contributor James Mickleboro 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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