Here’s why the Eagers share price is sliding today

Investors don’t appear to be satisfied from the company’s announcement.

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Key points

  • Eagers Automotive provided a market update on its progress for the half year ended June 30 2022 
  • The company outlined pre-tax profit projections that are set to fall behind the prior corresponding period 
  • In the last 12 months, the Eagers Automotive share price has slipped more than 20% into the red 

Shares in Eagers Automotive Ltd (ASX: APE) have sunk from the open today and now trade more than 3% down at $11.52 apiece.

Investors might be selling off Eagers Automotive shares today in response to (ASX: APE) have sunk from the open today and now trade more than 3% down at $11.52 apiece." target="_blank" rel="noreferrer noopener">the company’s market update for the half year ending June 2022.

In wider market moves, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) index has spiked 80 basis points into the green.

What did Eagers release?

Eagers gave commentary of its performance during the half to date and noted that market mechanics or the used car market continue to show bullish signs.

“The underlying performance of the business continues to benefit from a strong market where demand for new vehicles continues to materially exceed supply,” the company said.

“This has resulted in an increase in our record new car order book of more than 25% since 31 December 2021.”

On this backdrop, “new car margins” have also been supportive of sales growth, whereas the company says its finance performance is above industry levels.

What does Eagers expect moving forward?

The company notes there will be an impending slowdown in its core business due to softening output of new vehicles delivered in 1H FY22.

Despite the continuing strength of our underlying business, positive operational metrics and record order book, an anticipated reduction in the number of new vehicles delivered to customers in the first half of 2022 is expected to impact our half year financial performance.

This is due to the supply of new vehicles being impacted by multiple global events, largely attributable to the on-going effects of semi-conductor shortages in the industry and compounded by the both the Ukraine conflict and China’s on-going COVID lockdowns.

Consequently, Eagers is projecting underlying operating profit before tax (OPBIT) to land in the range of $183 million–$189 million.

This compares to underlying OPBIT of $214.8 million for the prior corresponding period (pcp) on a like for like basis, it says.

Similarly, Net Profit Before Tax (NPBT) for the half year is expected to be in the range of $225 million–$240 million, down from $267.4 million for the pcp.

“The forecast results in this update are subject to external audit review which will be conducted
following completion of the half year on 30 June 2022,” Eagers concluded.

Eagers Automotive share price snapshot

In the last 12 months, the Eagers Automotive share price has slipped more than 20% into the red, having clipped a 14% loss this year to date.

Motley Fool contributor Zach Bristow 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 Scott Phillips.

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