Here’s why the ARB Corporation share price is plunging 10% today

The market’s responding poorly to the company’s latest update.

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Man with his hand on his face looking at a falling share price chart on a tablet.

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Key points

  • The ARB share price is plummeting on Wednesday, slipping 10.8% to trade at $33.75 
  • Its tumble follows the release of an update on the company's performance for the first 9 months of financial year 2022 
  • While the company's revenue and order book – as well as its full year guidance – appear to be strong, it has reported higher expenses and notable macro challenges 

The ARB Corporation Limited (ASX: ARB) share price is tumbling on the release of a trading update.

The S&P/ASX 200 Index (ASX: XJO) company outlined its performance for the financial year to date as of 31 March this morning to the apparent disappointment of the market.

At the time of writing, the ARB share price is $33.75, 10.82% lower than its previous close.

Let’s take a look at today’s news from the 4X4 accessories manufacturer and distributor.

What’s weighing on ARB’s stock today?

The ARB share price is in the red after the company updated the market on its performance for the financial year so far. And while its revenue appears to be strong, it’s battling numerous challenges.

ARB is struggling against commodity prices and shortfalls, a global shortage of new vehicles, global logistics and pricing, a labour and skills shortage, and exchange rate volatility.

Despite such trials, the company is expecting to report approximately $700 million of revenue for financial year 2022. That’s nearly 12% more than it brought in last financial year.

Though, its expenses are also forecast to increase. It’s expecting to report expenditure of $57 million this financial year – up from $33.1 million in financial year 2021.

That’s been boosted by costs associated with its factories, as well as upgrades to its retail stores and manufacturing equipment.

Back to more positive news, ARB’s sales revenue has increased 18% over the 9 months ended 31 March compared to the same period of 2021.

It reached $525 million over that time frame, driven by a 28.4% increase in revenue from ARB’s exports market.

The ARB share price might also be suffering on news its Australian new vehicle sales have remained lower than pre-pandemic levels.

Additionally, sales of Toyota Landcruiser wagons – previously one of the company’s most popular vehicles ­– fell considerably. ARB states the drop was due to the changeover from the model’s 200 series to the 300 series.

Still, the company states that its order book remains high, it’s increased its inventory levels to protect against extended lead times, and impacts from new vehicle models haven’t flowed through yet.

ARB also noted it’s working on emerging partnerships with major customers and the development of new products.

ARB share price snapshot

The ARB share price has been struggling in 2022.

Today’s slump included, it has fallen 38% since the start of the year. It’s also 10% lower than it was this time last year.

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 recommended ARB Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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