Why the Inghams (ASX:ING) share price is racing 10% higher

The Inghams Group Ltd (ASX:ING) share price is racing higher on Friday after the release of its guidance for FY 2021…

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The Inghams Group Ltd (ASX: ING) share price is on course to finish the week with a very strong gain.

In early trade, the poultry producer’s shares are up 10% to $3.46.

Why is the Inghams share price racing higher?

Investors have been bidding the Inghams share price higher today following the release of a trading update and its guidance for FY 2021.

According to the release, based on its assessment of consensus estimates, and taking into account its current operating performance, management believes its forecast EBITDA may exceed, and forecast statutory NPAT may materially exceed, the market’s expectations in FY 2021.

This could be bad news for short sellers. The Inghams share price has consistently been among the most shorted list on the ASX this year. At the last count, 8% of its shares were held short.

What is Inghams forecasting?

For the 12 months ending 25 June, Inghams is forecasting statutory EBITDA of $438 million to $448 million and statutory net profit after tax of $80 million to $87 million. This is based on a post AASB16 basis.

On an underlying pre AASB16 basis, the company expects to report EBITDA of $203 million to $213 million and net profit after tax of $96 million to $103 million.

Management advised that this has been driven by the benefits derived from operational efficiencies implemented throughout the year. It also notes that trading conditions have improved since COVID-19 restrictions eased over the last six months.

However, it has warned about the consensus estimates that it is judging its performance against.

It advised: “The Company has formed its view on consensus based on a review of the most recently available analyst research. The Company also notes that analyst estimates available through recognised third-party data providers and systems appear to incorporate forecasts for the Company based on a mixture of both pre and post AASB16 estimates, and therefore may not be reliable indicators of market expectations.”

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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. 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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