Why the Australian Clinical Labs (ASX:ACL) share price is up 10% to a record high

Australian Clinical Labs is having a strong half…

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The Australian Clinical Labs Ltd (ASX: ACL) share price has hit a record high on Tuesday morning.

At the time of writing, the pathology services provider’s shares are up 10% to $5.47.

Why is the Australian Clinical Labs share price charging higher?

Investors have been bidding the Australian Clinical Labs share price higher this morning after it upgraded its guidance for the first half of FY 2022.

According to the release, the company expects its first half revenue to be between $497.3 million and $517.2 million. And on the bottom line, Australian Clinical Labs’ net profit after tax (NPAT) is expected to come in at between $116.3 million and $128 million.

As a comparison, the company’s previous guidance was revenue of $437.5 million to $454.9 million and NPAT of $86.3 million to $94.9 million.

At the mid-point of all ranges, this represents an upgrade of 13.7% for its revenue guidance and 35% for its NPAT guidance.

What drove the upgrade?

Management advised that the revenue guidance upgrade reflects continued strong demand for COVID-19 testing, particularly in VIC and NSW, as well as a sustained resilient performance of the non-COVID-19 business.

Whereas the profit guidance upgrade was driven by a combination of revenue growth and expanding margins from increased scale and operating leverage.

Positively, while the company has not provided guidance for the full year, management appears confident demand for testing will remain strong in the second half.

Australian Clinical Labs’ Chief Executive Officer, Melinda McGrath, commented: “We anticipate heightened volumes of COVID-19 testing to continue during the remainder of FY22 due to the impact of new variants and outbreaks, the lifting of travel restrictions and increased demand for both commercial and travel testing.”

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 recommended Australian Clinical Labs Limited. 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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