NRW share price leaps 11% on guidance upgrade for FY22

It's been a stellar day on the ASX for the construction and mining contractor.

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Key points

  • The NRW Holdings share price closed 11% higher on Thursday
  • The company's FY22 guidance update reported a record order book and higher than expected earnings
  • Over the last 12 months, the company has outperformed the benchmark index by 28%

The NRW Holdings Limited (ASX: NWH) share price surged on Thursday after the company released a solid FY22 guidance update

The construction and mining contractor's shares closed at $2.13 apiece, a 10.94% increase on yesterday's closing price. By comparison, the S&P/ASX 200 Index (ASX: XJO) slipped 0.01% into the red.

Let's take a closer look at what excited investors today. 

EBITA above guidance

The NRW Holdings share price received a boost after the company confirmed revenue is expected to come in at around $2.4 billion, in line with its previous guidance.

Of that, the company reported an unaudited earnings before interest, tax, and amortisation (EBITA) of $157 million. That's above its previous guidance range of $150-$155 million.

What's likely attracted investors today though is the company's record order book, valued at $5.2 billion.

NRW currently holds $219 million in cash. That covers its total long-term liabilities of $210 million, according to the company's HY22 results

NRW management buoyed by results

Managing director and CEO Jules Pemberton said:

We will obviously provide more detail on the results when we release on the 18th August but clearly the business has performed very well despite the significant headwinds we have had to navigate caused by Covid, labour shortages, inflationary pressures and significant 1 in 100 year weather events.

NRW share price snapshot

Over the last twelve months, the NRW share price has gained 23% and more than 20% year to date.

It's outperformed the S&P/ASX 200 Index (ASX: XJO) which has fallen by around 7% in the last year.  

NRW has a current market capitalisation of $956 million. 

That puts the company's price-to-earnings (P/E) ratio at 13 times, which is around its average PE multiple since it was listed on the ASX in 2007. 

My takeaway 

NRW's business is largely dictated by the performance of the minerals and mining sector. As such, investors ought to be mindful of the unprecedented price levels for commodities over the last six months. This is illustrated below by the Reserve Bank of Australia's (RBA) Index of Commodity Prices, released on 2 August. 

In the last few months, commodity price levels have started to taper, resulting in significant share price falls across the mining and minerals sector. Should this continue, this could prove to be a major headwind to the NRW Holdings share price. 

Personally, I find it difficult to time such cyclical businesses so, for me, this stock falls into the too hard basket. 

Motley Fool contributor Raymond Jang 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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