This ASX 200 stock is rocketing 10% after a surprise profit update

Metcash Ltd (ASX: MTS) shares are racing higher on Monday after the wholesale distributor released a much stronger earnings update.

At the time of writing, the Metcash share price is up 10.22% to $3.02.

Today’s rally gives shareholders some relief after a weak stretch for the stock. Metcash shares remain down around 8% in 2026 and about 9% over the past year.

Here’s what the company said.

Profit guidance comes in stronger

According to the release, Metcash expects to deliver underlying net profit after tax (NPAT) of between $268 million and $270 million for FY26.

The company said the result was helped by a stronger second half and continued discipline in costs, capital spending, and working capital.

Revenue growth was positive, although fairly modest at the headline level. Metcash expects group revenue to rise 0.7%. Excluding tobacco, revenue is expected to increase 3.8%.

That gap is worth watching because tobacco continues to weigh on the Food division. Without tobacco, the rest of the business looks in better shape.

Food revenue is expected to come in at $10.5 billion, down 0.6%. But excluding tobacco, Food revenue is expected to rise 5.4%.

Liquor revenue is expected to increase 1% to $5.4 billion, while Hardware & Tools revenue is expected to rise 4.3% to $3.7 billion.

The numbers are still preliminary and unaudited, with Metcash due to release its full-year results on 22 June.

Hardware sales start to recover

Metcash said sales momentum improved in the second half, reflecting the pricing and range initiatives already in place.

Total Tools sales grew 6.7%, while Hardware sales rose 3.7%.

While trade market conditions remain soft, Metcash said the recovery has taken a little longer than first expected.

The company also said earnings in Hardware & Tools were affected by margin pressure, particularly in Victoria and Tasmania.

Cash flow gives investors another boost

Metcash also pointed to stronger cash flow and tighter spending across the business.

The company expects cash realisation to exceed its 80% to 90% 3-year target range. Debt leverage is expected to sit at the lower end of its 1 to 1.75 times target range.

Capital spending has also been reduced to about $170 million. That is around $30 million below guidance.

Management said this included active management of working capital and about $80 million of precautionary inventory related to supply chain uncertainty.

Metcash has also started additional cost initiatives. These are expected to deliver at least $25 million in annualised savings in FY27.

Foolish Takeaway

Metcash has given investors a better update than many were expecting.

Profit guidance looks solid, cash flow is strong, and its Hardware & Tools division is showing some improvement.

The full result in June will give a clearer picture, but today’s share price reaction shows the market is regaining confidence.

The post This ASX 200 stock is rocketing 10% after a surprise profit update appeared first on The Motley Fool Australia.

More reading

• Sell alert! Why this expert is calling time on Metcash and A2 Milk shares
• Metcash shares: FY26 earnings highlight portfolio resilience and cost discipline
• Here are the top 10 ASX 200 shares today
• These 4 ASX 200 shares have slumped to fresh 52-week lows: Buy, sell or hold?
• Nervous investors turn to ASX 200 defensives as global energy shock drags on

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.