Market thinks little of Johns Lyng's earnings guidance upgrade: Is there value on offer here?

After a disastrous month, which saw the share price tumble -33% from $8.94 early May – after an earnings outlook fell short of investor expectations - Johns Lyng Group (ASX: JLG) attempted to regain some lost ground by today upgrading its earnings guidance.

However, revelations that full year revenue is likely to come in 8% higher than its February forecast at $867m - up 52.5% on the previous financial year – did little to reignite investor interest, with the insurance builder’s share price down -1.76% at noon today.

Forecast earnings has been upgraded by $4.3m to $83m, representing a 5.4% increase on earlier guidance of $78.7m provided in February 2022.

This represents earnings growth of 57.8% year-on-year from FY21.

Heightened CAT activity

There are no surprises that today’s upgrade represents ongoing demand for the group’s core Business as Usual (BaU) services, plus heightened catastrophe (CAT) activity during FY22, due to the impact of floods in northern NSW and south-east Qld.

CEO Scott Didier noted that CAT-related activity continues to boost returns to shareholders, due to an increasing frequency of major weather events.

“We are very busy assessing the impact of the recent extreme weather events on our business which is expected to be materially positive and multi-year in nature,” Didier said.

No inflation or supply chain issues

“Johns Lyng is in the fortunate position to have not been materially impacted by inflationary or supply chain issues," Didier also noted.

The company was recently selected as the managing contractor for a $142m government funded program to provide free structural assessments of eligible flood impacted properties.

Management plans to provide further guidance on FY23 when the group delivers its final FY22 results late August.

Investors should take particular note of any update on the CAT work in hand which while continuing to grow, remains unquantified.

Johhs Lyng Group: 12 month share price movement.