National Tyre & Wheel Ltd (ASX: NTD) shares soared nearly 20% to $1.13 at today's open after a strong trading update from the Aussie company. At the time of writing, the National Tyre share price has retreated slightly and is trading at $1.09, up 14.7%.
Why is the National Tyre share price surging?
The Aussie motor vehicle product distributor released a half-year trading update after the market close on Friday. Trading in the first half of 2021 (1H 2021) has "exceeded expectations" with all business units performing better than expected.
National Tyre said it had achieved record sales of agricultural tyres and 4-wheel drive wheels. That has contributed to a pick up in expected half-year earnings for the period ended 31 December 2020. Margins have also improved with less discounting and favourable foreign exchange rate movements.
The National Tyre share price has surged higher following the update and upgraded earnings before interest, tax, depreciation and amortisation (EBITDA) guidance. National Tyre is forecasting $15.0 million and $15.5 million of operating EBITDA for 1H 2021. That figure excludes $1.4 million of non-recurring and abnormal costs from the company's Tyres4U acquisition. It also excludes AASB16 adjustments and the five months of contributions from Tyres4U.
Shares in the Aussie motor vehicle distributor had previously surged back in November 2020. That came after another earnings guidance upgrade in which operating EBITDA was forecast to total $11.5 million and $12.5 million. That means today's upgraded figures represent a 24% to 30% increase on previous figures from the company.
On the balance sheet side, National Tyre said the group's financial position remains strong. The group reported $22.4 million of cash on hand and $18.0 million of net debt. Despite the positive update, management noted that it's "too difficult to say" if the first half results will be more indicative of second-half performance compared to prior guidance.
National Tyre is expecting to announce interim results (including any dividends) on or about 24 February 2021.
Today's jump means the National Tyre share price has now surged more than 150% in the twelve months since 28 January 2020.
