SGH’s shaky earnings and soft FY27 guidance tanks stock 12%
SGH FY26 earnings were propped up by Boral, strip it out and things would have been ugly for the premium valued conglomerate.
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Mentioned
KEY POINTS
- Group EBIT rose just 1%, but almost all of it came from Boral, on dry east-coast weather. Strip Boral and WesTrac out and the rest of the group went backwards.
- FY27 guidance of flat to low single-digit EBIT growth undershot consensus of +3.7% and Macquarie's +5.2%, flagging a second straight year of near-flat earnings.
- The failed tilt at BlueScope left SGH with a $500m buyback instead of a deal, and a balance sheet with plenty of firepower for more.
SGH (SGH) hit its FY26 guidance and delivered its 30th consecutive dividend increase, but numbers fell shy of analysts' forecasts, across the board, sending shares down as much as 12% to $40.65 in early trade.
“The strong cash flow of our operating businesses supported reducing leverage to 1.8 times adjusted net debt to EBITDA … In FY26 we increased the full-year dividend to 64 cents per share, marking over 30 consecutive periods of stable or growing dividends,” said CEO Ryan Stokes.
SGH shares are now down 9.6% year-to-date and down 19% in the last 12months.
SGH 1-year price chart (Source: Market Index)
FY26 numbers
Revenue down 2% to $10.56bn vs. $10.72bn ests (1% miss)
Underlying EBIT up 1% to $1.55bn vs. $1.58bn ests (2% miss), but in-line with guidance
EBIT margin up 40 bps to 14.7%
EBITDA up 2% to $2.08bn vs. $2.10bn ests (1% miss)
Underlying NPAT flat at $920m vs. $949.4m ests (3% miss)
Final DPS of 32 cents fully franked, taking full-year dividends to 64 cents, up 3%
FY27 guidance is flat to low single-digit EBIT growth vs. ests of 3.7%
On-market buyback of up to $500m, commencing following the FY26 result
EBIT edged slightly higher, but all of it came from Boral, where earnings jumped 14%, along with a 1% rise at WesTrac. Strip those two out and the rest of the group went backwards, with Coates down 7%, Energy down 21% and Media down 30%.
Boral's outperformance came down largely to unusually dry weather on Australia's east coast, which gave the industrial company a more consistent run of construction work. So that leaves the market with a result where the strongest division may struggle to hold its gains, while the cyclically-exposed businesses, Coates in particular, are still going backwards.
SGH's failed tilt at BlueScope's non-North-American assets also weighed. The deal fell over in June 2026 after BlueScope knocked back SGH's offers as too low, and SGH declined to chase them higher.
Poor guidance
FY27 EBIT of "flat to low single-digit growth" is below market expectations, where consensus sits at 3.7% growth and Macquarie at 5.2%. For a company that grew EBIT just 1% in FY26, that guidance puts a second consecutive year of near-flat earnings firmly on the table. For a stock that’s trading around 19x adjusted earnings or 39x trailing, a soft guidance just isn’t good enough.
The bottom line: SGH is priced as a solid compounder, but between today's FY27 guidance, weather-flattered Boral gains and no M&A to fall back on, investors did what they do when growth flatlines. They hit sell.
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