The Eagers Automotive Ltd (ASX: APE) share price will be on watch today after revealing its profit is racing higher.
What was in Eagers’ update?
The car dealership business said it expects to achieve a record underlying operating profit before tax from continuing operations for the three months to 31 March 2021 of approximately $98 million.
On a statutory basis, the net profit before tax from continuing operations for the quarter is expected to be $105 million.
Why is the company making so much profit?
Eagers explained that unusually strong market dynamics, where demand is outstripping supply, combined with the ongoing benefits of its strategy of reducing costs, has helped this result.
Anything else?
The above numbers don’t include the announced sale of its Daimler Truck Operations and Milperra property for $108 million. The transaction is on track for completion in the first half of 2021.
This sale will be an important step in simplifying its business, delivering an estimated profit before tax of $32 million to $36 million, subject to adjustments.
Summary thoughts
Eagers is doing really well in the current environment. But it’s very hard to say how long this will continue, particularly with government stimulus ending and the vaccine rollout being delayed.
It’s in a strong market position and generating good growth. But I don’t know what is a good share price to buy Eagers is with different potential outcomes.