The GUD Holdings Limited (ASX:GUD) share price is on the move on Thursday following the release of a trading update…
The post Why the GUD (ASX:GUD) share price is pushing higher today. appeared first on The Motley Fool Australia. –
In morning trade the GUD Holdings Limited (ASX: GUD) share price is pushing higher.
At the time of writing, the diversified products company’s shares are up 1% to $13.34.
Why is the GUD share price pushing higher?
Investors have been buying the company’s shares following the release of a trading update after the market close on Wednesday.
According to the release, the company’s performance during the third quarter has been in line with expectations.
The Automotive business has experienced strong workshop end user demand, which has underpinned year to date organic sales growth of 15%.
Management also revealed that it could be adding to the business in the near future. It advised that there is no shortage of aftermarket acquisition opportunities. Though, it will maintain its disciplined approach, with adherence to clearly defined acquisition and pricing criteria.
Things aren’t quite as positive for the Water business. Its year to date organic sales are up 4% over the prior corresponding period. However, management notes that COVID lockdown impacts are continuing as production ramps to meet a sales backlog with associated incremental costs.
This includes shift penalties, outwards/export air freight, partial factory closure, which are impacting margins. Positively, though, management advised that the company has a strong inventory position to support demand.
One concern for investors, which is likely to be holding back the GUD share price a touch today, is that its cost inflation is slightly above levels flagged with its first half results. This is being driven by freight costs and supplier price rise requests, which are under negotiation
Despite this, management has positively narrowed its FY 2021 underlying earnings before interest and tax (EBIT) guidance to $98 million to $100 million. This compares to its previous guidance of $95 million to $100 million. The company has also retained its cash conversion target of ~80% to 85%.
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Motley Fool contributor James Mickleboro 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 Bruce Jackson.