Goodman share price drops despite beating FY22 earnings guidance

Goodman beat its upgraded guidance in FY 2022…

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Key points

  • Goodman shares are on the slide following the release of its full year results for FY 2022
  • The industrial property company had a fantastic year and delivered strong earnings growth ahead of guidance
  • However, its FY 2023 guidance appears to have underwhelmed the market

The Goodman Group (ASX: GMG) share price is falling on Tuesday following the release of the company's full year results.

In morning trade, the integrated commercial property company's shares are down over 3% to $19.95.

Goodman share price falls despite guidance beat

  • Revenue up 35.6% year over year to $5,156.4 million
  • Operating profit up 25.3% to $1,528 million
  • Operating earnings per share up 24% to 81.32 cents
  • Full year distribution flat at 30 cents per share
  • Total assets under management (AUM) up 26% to $73 billion
  • Development work in progress (WIP) up 28% to $13.6 billion

What happened in FY 2022?

For the 12 months ended 30 June, Goodman reported a 25.3% jump in operating profit to $1,528 million and a 24% increase in operating earnings per share to 81.32 cents. The latter was ahead of the company's upgraded guidance of 23% growth.

Management advised that this reflects the strong demand for industrial space in its markets. It notes that its customers' need for more productivity and sustainability from their supply chains continues to drive demand. This underpinned a portfolio occupancy rate of 98.7% and like-for-like net property income growth of 3.9%.

It also allowed the company to pay a 15 cents per share final distribution, which brought its full year distribution to 30 cents. This was flat year over year.

Management commentary

Goodman's chief executive officer, Greg Goodman, was pleased with the 12 months. He said:

Goodman Group delivered a strong result for FY22, reflecting the strong demand for industrial space in our markets. Our customers' need for more productivity and sustainability from their supply chains continues to drive demand. By focusing our portfolio and $13.6 billion development workbook on key infill locations, we have had seen accelerating market rental growth, significant valuation uplift and subsequent outperformance of our Partnerships.

Assets under management have grown 26% to $73 billion, with an average total return of 21.4%6 for our Partnerships. Capital management activity has continued across the Group and Partnerships, where we raised $1.8 billion in third party equity and completed $8.5 billion of debt refinancings over the year. As a result, the Group's balance sheet remains well positioned with low gearing at 8.5% and $2.8 billion of available liquidity and $18.1 billion available across the Partnerships.


The company's outlook appears to be what is weighing on the Goodman share price today.

Goodman is guiding to operating earnings per share of 90.3 cents in FY 2023, which represents an 11% increase on FY 2022's earnings.

As a comparison, the team at Citi has been forecasting operating earnings per share of 97 cents in FY 2023. And while it is worth remembering that Goodman is traditionally conservative with its initial guidance, some investors appear to believe it could be too much of a stretch to reach Citi's estimate.

In addition, despite Goodman's earnings per share growth guidance, the company is expecting its distribution to remain flat again at 30 cents per share. This is to help fund the company's significant development workbook and is in line.

Greg Goodman commented:

Demand is currently exceeding supply in our markets, supporting our development-led growth strategy and producing well-located assets for the Group and our Partnerships. In addition to strategic site acquisitions, the opportunities for regenerating existing assets support our future development workbook by providing value add opportunities, while reducing our environmental impact. Our production rate, depth of customer demand and strong margins are supporting the outlook for development earnings into FY23.

We have made a strong start to FY23 with a significant development workbook underway, continued underlying structural demand from customers, and a robust capital position across the Group and Partnerships. We believe the Group is positioned to continue to deliver growth notwithstanding risks associated with current market volatility and we expect FY23 operating EPS growth to be 11%.

The Goodman share price is now down 25% in 2022.

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 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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