Why this $3.2 billion ASX 200 stock just crashed 19%

The ASX 200 stock is under heavy selling pressure on Wednesday. But why?

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S&P/ASX 200 Index (ASX: XJO) stock Eagers Automotive Ltd (ASX: APE) just crashed 19%.

Shares in the automotive retail group closed yesterday trading for $12.19, giving the company a market cap just shy of $3.2 billion.

In earlier trade, the ASX 200 stock crashed to $9.87 a share, down 19.0%. After some possible bargain hunting, shares are currently swapping hands for $10.42, down 14.5%.

For some context, the ASX 200 is up 0.2% today.

Here's what's happening.

ASX 200 stock crashes on reduced profit outlook

Shares in the ASX 200 stock are crashing to almost two-year lows following an FY 2024 year to date trading update.

Before revealing some medium-term subdued profit figures, Eagers Automotive CEO Keith Thornton tried to calm the waters, noting:

Eagers Automotive continues to be focused on what we can control rather than obsessing over external economic or market conditions. As a 110-year-old company we are acutely aware we will experience economic cycles, both good and challenging.

As you can guess by the crashing share price today, the current cycle ticks the challenging box.

Thornton added that, "We must not be distracted by near term conditions and continue to focus on the execution of operational excellence within our business and the implementation of our strategic priorities."

The crashing share price tells us that ASX 200 investors are not following Thornton's advice and are decidedly focusing on the near-term conditions.

Eager Automotive was said to be facing a number of macroeconomic headwinds.

Those include:

  • Cost of living pressures impacting retail consumer spending
  • Inflationary conditions increasing the cost of doing business
  • Current expectation we are at top cycle interest rate conditions
  • An increasingly competitive marketplace

Despite reporting revenue growth of 18.3% year to date April compared to the same period in 2023, the ASX 200 stock is crashing today after flagging a 15% decline in profit for the first half of 2024.

According to Thornton:

Given the current market and business dynamics, and with a cautious lens on consumer sentiment, we expect to achieve an underlying trading performance for the first half of 2024 that is approximately 85% of the underlying profit before tax for the first half of 2023.

On the positive front

Looking to what could boost the crashing ASX 200 stock, Thornton said, "The new car market remains on track for another record year as our order bank continues to be delivered supporting both revenue and margins."

The Federal government's extension to its Instant Asset Write Off in the 2024 budget and the rollout of Australia's New Vehicle Emission Standard on 1 January 2025 were both flagged as potentially boosting sales and profits in the second half of 2024.

Thornton added:

We remain on track to exceed our revenue growth ambition in 2024 and will continue to be relentless in the execution of our business transformation strategy, while using discipline to review increasing opportunities for accretive M&A activities.

Motley Fool contributor Bernd Struben 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 Eagers Automotive Ltd. 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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