Metcash shares push higher on trading update

Metcash Ltd (ASX: MTS) shares are pushing higher on Tuesday.

In morning trade, the wholesale distributor’s shares are up 1.5% to $3.87.

Why is the Metcash share price rising?

Investors have been buying the company’s shares today after responding positively to the release of a trading update at its investor day event.

According to the release, total group sales for the ten months to 25 February increased 0.9% compared to the prior corresponding period.

This was driven by growth in Liquor (+1.6%) and Hardware (+2.4%), with Food (including tobacco) sales flat on the prior corresponding period. Though, it is worth noting that if you exclude tobacco, food sales were up a solid 5% for the 10 months.

In light of this, management has been pleased with the performances of both the Food and Liquor pillars, which have been underpinned by improved competitiveness and differentiated value proposition.

And while Hardware demand has remained subdued, the business continued to perform better than the market. The highlight was its Total Tools business, which reported a 16.9% increase in sales.

Pleasingly, management believes this side of the business remains ideally placed with leading market positions to capitalise on an improvement in consumer confidence and activity levels.

What about earnings?

There was no update on Metcash’s earnings. However, management highlighted its continued strong focus on costs, interest, and working capital.

It also spoke positively about its outlook, noting that it remains well positioned for future growth and strong returns through the cycle with a resilient and diversified business portfolio.

Are Metcash shares a buy?

The team at UBS is feeling positive and has a buy rating on Metcash shares.

However, with a price target of $4.00, the upside is limited from here. Though, it’s possible that the broker could adjust its valuation once it has digested today’s update.

The post Metcash shares push higher on trading update appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 recommended Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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