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Aston Martin shares reverse as sales price declines cloud strong growth in third-quarter earnings, volumes

The recently-listed company saw its third-quarter adjusted underlying earnings (EBITDA) jump by 93% year-on-year to £54mln, with its EBITDA in the year-to-date up 32% to £160.3mln
Aston Martin
Aston Martin added that total wholesale unit sales of 1,776 were almost double the 891 shifted in the same quarter of 2017

Aston Martin Lagonda Global Holdings PLC (LON:AML) shares reversed on Thursday although the recently-listed luxury carmaker reported strong growth in third-quarter earnings as its volumes doubled, with a decline in average sales prices possibly causing some concern. 

The company saw its third-quarter adjusted underlying earnings (EBITDA) jump by 93% year-on-year to £54mln, with its EBITDA in the year-to-date up 32% to £160.3mln.

READ: Aston Martin shares drive higher as raft of brokers initiate coverage two months after flotation

The firm said its third-quarter revenue increased by 81% to £282mln, driven by continuing strong demand for its DB11 variants and the first full quarter of Vantage production.

Aston Martin added that total wholesale unit sales of 1,776 were almost double the 891 shifted in the same quarter of 2017, primarily driven by growth in the Americas and the Asia Pacific, including China.

The luxury brand, which last month became the first British carmaker in decades to float on the London Stock Exchange, said it expected full-year sales to come in at the top end of expectations at up to 6,400 vehicles.

Dr Andy Palmer, Aston Martin Lagonda president and group CEO, said: "These strong results give us confidence that we will meet our full-year targets with sales at the top end of the range.

“This will pave the way for future growth as we prepare to begin production of the breakthrough DBX model at our new plant at St Athan, and as we receive further orders for new models including the DBS Superleggera and special editions.”

The company also said that it was making progress towards opening its second British factory next year which will build its first sport-utility vehicle.

Business still overvalued

But, after gains earlier this week ahead of the numbers, Aston Martin shares reversed in mid-morning trading, losing 6.5% at 1,506.40p

Russ Mould, investment director at AJ Bell, commented: “Bullish sales guidance isn’t enough to convince investors that Aston Martin is a share to own. The stock now trades 20% below its 1,900p October IPO price as the market still clearly feels the business is overvalued.”

He added: “While solid three months’ trading is certainly encouraging, Aston Martin’s story from an investment perspective is all about a rapid increase in production, plus delivering a wider range of products.

“The stock has been pitched as a fast-growth story so Aston Martin HAS to deliver rapid growth in each set of financial results in order to live up to its own hype.”

Mould continued: “Investors may not like the news that its average selling price has fallen by 7% year-on-year, thanks to the launch of cheaper V8 editions of the DB11 and an entry-level Vantage.

“Significant investment will be needed to meet its growth ambitions so the market will be keeping a close eye on cash generation and its capacity to fund items like machinery upgrades across several production sites.

“Missing growth targets would be devastating to the share price and management credibility.”

 -- Adds share price, analyst comment --

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