Why the McGrath (ASX:MEA) share price is surging 8%

The McGrath Ltd (ASX: MEA) share price has rocketed higher this morning after a strong trading update from the real estate group.

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The McGrath Ltd (ASX: MEA) share price has jumped higher in early trade. That comes after the Aussie real estate group provided a trading update and its latest full-year profit guidance.

Why is the McGrath share price surging?

Shares in the real estate company have rocketed higher at the open after it reported a significant earnings uplift. McGrath expects underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $16.5 million to $17.5 million.

For context, McGrath’s FY2020 underlying EBITDA totalled just $3.7 million. The McGrath share price is responding positively following this morning’s update. It comes after a bumper half-year result and McGrath’s advice that it expects strong trading conditions to persist in the second half.

McGrath reported half-year underlying EBITDA of $6.6 million, up from $1.6 million in 1H 2020. The positive momentum behind that result has persisted in the third quarter, giving rise to the higher forecasts for McGrath’s full-year earnings.

A strong Aussie housing market has been a key factor in the significant earnings upgrade. McGrath said the residential property market has seen a number of positive indicators in recent times. Those include rising national home values, strong sales volumes and strong new household borrower commitments.

The McGrath share price has shot higher at the open following this morning’s update. McGrath CEO Eddie Law said, “The combination of improving business and consumer sentiment, record low interest rates and lower stock levels in the market, has driven strong price growth in recent months”.

Investors have clearly been buoyed by this morning’s news. Strong business performance and favourable conditions have shareholders buying strongly on Monday morning.

The McGrath share price has been charging higher in the last 6 months. Prior to this morning’s open, the Aussie real estate shares were up 140.7% to 65 cents per share since 27 October 2020. But today’s news has resulted in a further 7.69% gain to see the company’s shares currently trading at 70 cents.

Foolish takeaway

The McGrath share price is on the move after the company significantly boosted its forecast underlying EBITDA figures for FY2021.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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