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This mid cap share is smashing the All Ords today with a 9% gain

James Mickleboro

The All Ordinaries (Index: ^AXAO) (ASX: XAO) may be down a 0.4% to 5,899.8 points in early trade, but that hasn’t stopped the AP Eagers Ltd (ASX: APE) share price from zooming higher.

At the time of writing the auto retailer’s shares are up over 9% to $6.76.

Why is the AP Eagers share price smashing the All Ordinaries today?

This morning AP Eagers released its expectations for its upcoming FY 2018 results release.

According to the release, the company expects to report a statutory net profit after tax of $101.2 million for the 2018 financial year, an increase of 3% on FY 2017’s $98.2 million.

And while its statutory net profit before tax is expected to come in 1.4% lower than a year earlier at $133.7 million, this figure exceeds the profit before tax guidance range management gave in November of between $126 million and $130 million.

Why has AP Eagers outperformed expectations?

Given the tough trading conditions being faced by the company and rival Automotive Holdings Group Ltd (ASX: AHG), today’s update will no doubt be a pleasant surprise to shareholders.

Management explained that the outperformance has been delivered due to stronger operating net profit before tax for both its car and truck retailing businesses.

Both businesses achieved record operating results for the month of December, with its truck business also achieving a record operating net profit before tax for the financial year.

This helped to offset the previously flagged reduced gains on the sale of non-core operations and property and also a decline in returns from the company’s investments. The latter includes a reduced dividend from Automotive Holdings Group after it slashed its final dividend by over 28% in September.

Should you invest?

I’ve very impressed with the way AP Eagers has performed in FY 2018 considering the weakness in the auto retailing market.

If it can maintain this level of performance in FY 2019 then I think it could prove to be a good investment option, especially with its shares priced at just 13x earnings.

For now, I’m going to stick with other retail shares such as Bapcor Ltd (ASX: BAP) and Super Retail Group Ltd (ASX: SUL), but I’ll be keeping a close eye on AP Eagers.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Automotive Holdings Group Limited. 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019