Eagers Automotive (ASX:APE) share price races higher after 440% profit jump

This auto retailer’s profits are swelling in FY 2021…

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The Eagers Automotive Ltd (ASX: APE) share price is racing higher on Wednesday morning.

At the time of writing, the automotive retailer’s shares are up a sizeable 5.5% to $16.59.

This means the Eagers Automotive share price is now up an impressive 23% since the start of the year.

Why is the Eagers Automotive share price charging higher?

The catalyst for the rise in the Eagers Automotive share price on Wednesday has been the release of a first half trading update.

According to the release, for the six months ended 30 June, Eagers Automotive expects to record an underlying operating profit before tax from continuing operations of approximately $218.6 million.

This will be a massive 442% increase on the prior corresponding period. Though, management acknowledges that FY 2020’s first half performance was materially impacted by the onset of the COVID-19 pandemic.

On a statutory basis, the company expects to report a net profit before tax from continuing operations of $267.4 million.

What is driving this strong performance?

The release explains that the Australian new car market continues to rebound from the pandemic. So much so, during the first half, the new car market grew 28.3% compared to the first six months of 2020.

Management advised that these market dynamics are further buoyed by demand continuing to materially outstrip supply.

In addition to this, Eagers Automotive’s underlying profit continues to be supported by the ongoing benefits of its material cost out program completed over the last 12 months and the ongoing synergies resulting from its transformative merger with AHG.

Nevertheless, the company continues to monitor the evolving COVID-19 situation and the associated effects of lockdowns in key markets nationally. As a result, it will manage the business with a balanced approach towards optimising all key stakeholder outcomes.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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