Shares in modular building and recreational vehicle provider Fleetwood Corporation Ltd [ASX:FWD] raced ahead by more than 3% today, outpacing a sluggish Australian stock market. This caps a strong month for Fleetwood, whose shares have bounced off multi-year lows since late May.
Fleetwood provided a trading update this morning, which showed mixed trends. The continued slowdown in the resources sector has weighed on the company’s earnings over the past six months. Fleetwood expects operational earnings before interest and tax to come in at $3 million, which is a significant slump compared to the previous six months.
More positively, Fleetwood reports that it is experiencing strong demand for its portable classrooms amongst education providers in Western Australia, Victoria and Queensland.
The market is choosing to focus on that positive trend, along with the earnings stability that will come with several contract extensions and wins. That’s what propelled the shares upward today.
This price action is telling us that investors believe Fleetwood has weathered the worst of the resources slowdown and that an earnings recovery could be in sight.
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Fleetwood spent most of the past ten years trading well above these levels, and it’s always risky buying a stock that’s fallen so far from grace. But if conditions stabilise for Fleetwood’s mining customers, and if the company can sell more products into the educator sector, this stock could be worth buying.
Tim Dohrmann+
Small-Cap Analyst, Money Morning