Why is the GrainCorp share price leaping 6% today?

This broker is bullish on GrainCorp’s earnings.

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Key points

  • The GrainCorp share price is soaring on Monday, gaining 5.98% to trade at $9.74
  • It comes after the stock gained 5.75% on Friday on the release of an earnings upgrade
  • A broker has given a positive outlook on the company, noting it expects GrainCorp to report $1.52 of earnings per share for FY22

The GrainCorp Ltd (ASX: GNC) share price is back in the green on Monday, launching 6% higher.

The agribusiness company’s stock soared 5.75% on Friday on the release of a guidance upgrade. That’s reportedly encouraged one broker to upgrade its outlook for GrainCorp’s financial year 2022 results.

At the time of writing, the GrainCorp share price is $9.74.

For context, the S&P/ASX 200 Index(ASX: XJO) is also in the green today, having currently gained 0.12%.

Let’s take a closer look at what could be driving the GrainCorp share price on Monday.

Is this boosting the GrainCorp share price today?

The GrainCorp share price is in the green amid reports the company’s recent guidance upgrade has bolstered bullish sentiment from one broker.

The company told the market it expects Russia’s invasion of Ukraine will bolster its earnings on Friday.

The conflict has dampened supply of grain in the Northern Hemisphere, increasing demand for Australian products.

Additionally, Australia has revelled through a bumper grain season and expects good things from the rest of the year.

GrainCorp now expects to report earnings before interest, tax, depreciation, and amortisation (EBITDA) of between $590 million and $670 million.

It also expects its underlying net profit after tax (NPAT) to come to between $310 million and $370 million.

What did the broker say?

As a result of GrainCorp’s guidance upgrade, Wilsons has reportedly increased its earnings expectations for the company. According to the Australian Financial Review, the broker noted:

While global demand is unlikely to diminish quickly, new crop grain price spreads will depend on the size of the Australian winter crop and exporters’ ability to secure supply chain access.

The outcome of this dynamic will likely have a significant impact on [financial year 2023] earnings. While we continue to assume volumes and margins normalise, GrainCorp’s balance sheet will benefit from the significant cash flow, with core net cash forecast at $333 million in [financial year 2023].

In what sounds like good news for its share price, the broker believes that happening will see GrainCorp with plenty of cash for investments or acquisitions.

Wilsons also expects the company’s financial year 2022 to come to $1.52 of earnings per share (EPS) . It also predicts GrainCorp will offer 62 cents per share of dividends.

Though, it’s reportedly expecting financial year 2023 to bring EPS of 61.9 cents and dividends of 36 cents per share.

Wilsons is said to have a $7.80 price target on GrainCorp’s shares.

Motley Fool contributor Brooke Cooper 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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