ARB Corporation (ARB) $21.51

ARB +13.87%: It’s been a horrible year for ARB on a number of fronts, however earnings have held up okay, and management were more optimistic on what FY27 could bring during today’s update.

 Key results:

• Revenue $702.0m, -3.8%, ~3% below consensus of $724.1m
• Statutory NPAT $92.4m, -5.2%, ~11% ahead of consensus of $83.2m
• Underlying NPAT $89.0m, -7.5%
• EBIT $125.0m, ~7% ahead of consensus of $117.0m
• EBITDA $160.7m, ~5% ahead of consensus of $152.4m
• Gross margin 57.6% versus 55.6% expected
• EPS $1.11 versus consensus of $1.00
• Final dividend 35cps, flat on last year

The standout was clearly margin performance. While revenue remained under pressure from softer 4×4 vehicle sales and ongoing macro uncertainty, gross margins expanded to 57.6%, driving EBIT and NPAT materially ahead of market expectations. That is important for ARB because the key debate has been whether weaker volumes would translate into meaningful earnings pressure – so far, management has done a good job protecting profitability.

The outlook also reads better than the FY26 sales line suggests. ARB says its order book remains healthy and daily order intake remains strong, while improved Toyota vehicle availability across key 4×4 platforms should provide a tailwind through FY27. New products from its engineering centre and the strategic investment in 4 Wheel Parts should also support growth over time, particularly in the US.

Consensus currently expects revenue to rebound around 9% in FY27 to $767m, with NPAT broadly flat at around $93m, before stronger earnings growth resumes in FY28. At the current share price, ARB is trading on around 19x FY27 earnings, falling to 17x in FY28 and less than 16x in FY29 — far more reasonable than the multiples investors were paying a few years ago.

 MM’s view: The revenue miss isn’t ideal, but this was a better quality result than the headline sales decline implies. Margins were strong, profit comfortably beat expectations, and the FY27 setup is improving as vehicle availability normalises and recent growth initiatives begin contributing. We like ARB here. It remains a high-quality business with a strong brand, attractive margins and genuine international growth potential, and after a substantial valuation reset, the risk/reward looks increasingly favourable.