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Investing.com - UBS upgraded ARB Corp Ltd (ASX:ARB) from Sell to Neutral and raised its price target to AUD35.00 from AUD31.00, citing moderated downside risk.
The upgrade follows a re-basing in forward margin expectations, lowered sell-side earnings forecasts, short-term stabilization in domestic new vehicle sales, and accelerated U.S. cost investment, which UBS notes bullish investors view as a positive.
Over the past 12 months, consensus profit before tax (PBT) margins for ARB have been cut by approximately 190 basis points for fiscal year 2025 estimates, from 20.8% to 18.9%, while medium-term consensus PBT has been reduced by approximately 12%.
UBS believes these adjustments have reduced the risk of a material negative surprise at ARB’s upcoming financial results, though the firm remains 5% below consensus estimates and believes an underwhelming result has been priced into the stock despite its recent bounce.
The investment bank notes ARB’s price-to-earnings ratio has de-rated by 11%, underperforming both the ASX Small Industrials index (-5%) and ASX200 Consumer sector (+9%), but at 28 times FY26 estimated P/E, UBS doesn’t see compelling valuation appeal yet, citing considerable uncertainty around U.S. tariffs, trading conditions, and broader strategy.
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