The Coats Group (LSE: COA) share price has soared in midweek business following the release of fresh trading numbers. Broader UK share markets are struggling for momentum as persistent inflation fears plague investor confidence. But prices of this FTSE 250 company have just sailed to multi-month highs.
At 62.46p per share, the Coats Group share price rose to its most expensive since 23 March. It’s since settled lower at 62p but remains 5% higher on Wednesday.
Expectations upgraded
Coats Group — which describes itself as “the world’s leading industrial thread manufacturer” — said that its full-year performance is “anticipated to be slightly ahead of our previous expectations” following a strong start to 2021.
The FTSE 250 firm said that revenues were up 28% year-on-year between 1 January and 30 April, whilst on an organic basis sales were 26% higher. Coats Group noted that it has also returned to organic growth from 2019 levels, with sales using this measurement up 1% in the period.
The company has witnessed “improving momentum and recovery” at its Apparel and Footwear division. Organic sales here soared 30% year-on-year, with robust volume growth resulting in increased factory activity. Organic revenues were flat versus the same four months of 2019, though encouragingly, comparable sales at its threads sub-division were up 2% versus that period two years ago. Its threads operations account for almost nine-tenths of turnover at Apparel and Footwear. The recovery in its zips business has been slower, however.
Elsewhere, Coats Group said that organic revenues at its Performance Materials unit were up 14% year-on-year. They were also up 4% from the first four months of 2019. The business said that all segments here were “performing well”, except for Personal Protection. Trading here has been challenging due to staff availability problems, and particularly so at the US Yarns operation.
Finally, Coats Group said that “pricing and productivity actions are being successfully implemented to offset inflationary pressures… in the supply chain.” The FTSE 250 company has been facing rising labour, transport and raw materials costs recently.
Coats Group lauds improving momentum
Commenting on the firm’s recent performance, chief executive Rajiv Sharma said that “we are pleased to have seen recovery and positive momentum during the period, which resulted in a strong operational performance and a return to growth versus 2019.
“Whilst we remain vigilant around the ongoing Covid pandemic, given the improving end market sentiment, we anticipate that the recovery in our trading will continue and that our anticipated performance for the year will be slightly ahead of our previous expectations.”
City analysts think annual earnings at Coats Group will balloon 127% year-on-year in 2021. This results in a forward price-to-earnings growth (PEG) ratio of 0.1. Conventional investing wisdom says that a reading below 1 might suggest that a share is undervalued by the market. Coats Group’s dividend yield for this year, meanwhile, sits at 2.1%.
