Why the Emeco share price surged 22% higher today

Emeco Holdings Limited (ASX:EHL) share price has been the biggest mover on the ASX 200 index on Wednesday. Here's why…

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The best performer on the ASX 200 index on Wednesday has been the Emeco Holdings Limited (ASX: EHL) share price.

The shares of the leading provider of equipment leasing to the earthmoving industry rocketed as much as 22% higher to $2.01 in morning trade.

They have since pulled back a touch but are still up 16% to $1.91 at the time of writing.

Why did the Emeco share price rocket higher?

This morning Emeco released an operational update which revealed that market conditions continue to be positive.

So much so, management advised that it expects to deliver operating EBITDA in the range of $211 million to $213 million in FY 2019. This will be an increase of almost 40% on FY 2018's result.

This impressive growth has been driven by strong demand in the Eastern Rental region, particularly in the coking coal market. The company has taken advantage of this increasing demand by placing its growth assets in the region.

In the Western Rental region the company has noted a significant increase in bidding activity, which has led to Emeco winning new contracts. It is also awaiting the award of several additional major projects. In addition to this, the company advised that it has not been impacted by recent issues at certain gold projects in the region.

FY 2020 outlook.

Looking ahead, management has revealed that its outlook for FY 2020 remains strong, with total material movement continuing to increase and equipment supply remaining tight.

Furthermore, Emeco's growth capex from the recent purchase of high-utilisation assets is forecast to come in below the budgeted $90 million expenditure, and is on target to generate $25 million EBITDA in FY 2020.

Elsewhere in the resources sector today, the shares of BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and Rio Tinto Limited (ASX: RIO) have all stormed higher following another positive night of trade for base metals.

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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