Why the ARB (ASX:ARB) share price is charging 6% higher today

The ARB Corporation Limited (ASX:ARB) share price is charging higher on Tuesday. Here's why investors are buying its shares…

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The ARB Corporation Limited (ASX: ARB) share price has been a strong performer on Tuesday.

In morning trade the 4×4 accessories company's shares are up 6% to $33.57.

This leaves the ARB share price trading just a touch short of its all-time high.

Why is the ARB share price charging higher?

Investors have been buying the company's shares this morning after it released an update on its expectations for the first half of FY 2021.

According to the release, ARB achieved unaudited sales revenue of $284 million for the first half. This represents a 21.6% increase on the prior corresponding period.

In respect to profits, based on preliminary and unaudited management accounts, the company expects to post a profit before tax within the range of $70 million to $72 million. This is inclusive of $9.8 million of non-recurring government benefits.

Even excluding the one-off COVID support, this would still be a massive increase on the prior corresponding period. In the first half of FY 2020, ARB recorded a profit before tax of $34.4 million on revenue of $234.1 million.

No explanation was given for the outperformance. However, a strong Australian dollar (versus the Thai baht) is likely to have helped with its manufacturing costs.

What about the full year?

No guidance has been provided for the remainder of the financial year. However, management notes that the short term looks positive.

It commented: "The Company maintains a positive short-term outlook based on a strong customer order book and another record sales month in December 2020."

Though, it has warned investors not to get carried away with its impressive first half performance.

"The Company's first half performance should not be used as an indicator for the second half of the financial year, for which no guidance can be provided, as it remains far too uncertain to predict in the current economic climate," it warned.

Further details on how it is performing early in the second half are expected to be given with its half year results release on 16 February.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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