ARB’s half year 2026 results
ARB just dropped its half-year 2026 results, and if you only looked at the stock price as – down 13 per cent by the close of 24 February 2026 – you’d think the wheels had fallen off the 4WD. But as any off-road enthusiast knows, sometimes you have to gear down to get through the mud. In fact, ARB is up by 14 per cent today (25 February 2026).
While the headline numbers from their report reflect some “short-term pain,” the underlying story suggests the “long-term gain” remains on track.
The numbers
Revenue landed at $358 million, essentially in line with January’s market update. However, Underlying Profit Before Tax (PBT) fell 16.3 per cent to $58 million compared with the previous year.
The main culprit was margins. Gross margins compressed to 56.1 per cent (down from 58.6 per cent). Management wasn’t blindsided, though; they’d already flagged the headwinds of a weaker AUD/THB (Thai Baht) exchange rate and factory under-recoveries. The good news is this might be the trough. With the Thai Baht now nearly fully hedged at better rates for the second half, margins should stabilise.
Over in the USA
If there’s a crown jewel in this report, it’s the U.S. export business. Exports surged 26.1 per cent across the board. More importantly, the ORW (Off Road Warehouse) turnaround is transitioning from plan to reality.
- Profitability: ORW swung to a USD $3.5 million PBT profit.
- Expansion: The “store-in-store” strategy is rolling out, with two pilots validated and six more coming by May.
- Infrastructure: A new 8,100 sqm distribution centre in Norco, California, is replacing the old Seattle site, which should drive significant freight savings.
Essentially, ARB is moving from being a niche Australian exporter to an integrated player in the massive US 4×4 market.
Domestic speed bumps
Back home, the Australian aftermarket was “soft,” with sales down 1.7 per cent. It’s not a demand issue – the order book is actually 5 per cent higher than last year, and daily intake is near record highs. The problem is twofold: vehicle supply (Toyota can’t get HiLuxes onto dirt tracks fast enough) and fitting constraints.
To fix the latter, ARB is getting creative with fitter incentives and recruiting international talent (specifically from the Philippines) to clear the backlog.
The verdict?
ARB’s share price is down 60 per cent from its 2021 high, down 55 per cent from its 2024 high and down 47 per cent from last year’s high. Much of the decline from 2021 is due to the unwinding of ARB’s status as a pandemic ‘darling’ with a price-to-earnings (P/E) ratio of 40 times. As travel reopened and interest rates began to climb, the stock “de-rated,” with investors unwilling to pay a high multiple for the same earnings, especially as growth slowed from “extraordinary” back to “normal.”
Last year, the stock rallied back toward $41 on the back of excitement surrounding the Toyota USA partnership and the U.S. expansion strategy (Off Road Warehouse (ORW), 4 Wheel Parts (4WP)). However, the latest results showed that while the U.S. is growing, the rest of the business is under pressure, with margin compression a major issue. ARB manufactures heavily in Thailand. The Thai Baht (THB) has been strong while the AUD has been weak, making production more expensive.
The 13 per cent haircut on 24 February 2026, feels like a classic case of punishing a “miss” that was already largely pre-released. ARB has derated to roughly 19x FY27 P/E, which, for a company with a $59.4 million net cash position and a deepening global partnership with Toyota, doesn’t look overly demanding.
Keep in mind the “Toyota Halo” is real, with the partnership expanding into Asia with ARB-branded gear on FJ Cruisers in Japan and HiLuxes in Thailand.
HY26 might just be the trough. If margins are at their floor (the Thai Baht has been hedged) and the U.S. engine is finally firing on all cylinders, 2H26 could see a material business turnaround.
Disclaimer:
The Montgomery Small Companies Fund owns shares in ARB Corporation. This article was prepared 24 February 2026 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade ARB Corporation, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
